William C. Cobb is often quoted on issues involving law firms and CPA firms in such periodicals as Legal Economics, The American Lawyer, The National Law Journal, The New York Times, Wall Street Journal, Of Counsel, Legal Times, Fortune, The Recorder, Of Washington Magazine, CPA, as well as The Houston Business Journal, The Houston Chronicle, The Texas Lawyer, and Dallas Morning News. Mr. Cobb is on the editorial boards of the American Lawyer’s Small Firm Business, Law Firm Partnership & Benefits Report, and Strategic Selling and Service Excellence Report.
Anchoring the Firm Culture in Solid Rock
Quote: “Things that count can’t always be counted and the things that are counted do not count.” Albert Einstein
Abstract. Over the years of my consulting practice, I have seen many formerly great law firms fail and go under. The reason? They lost their way and became unanchored to their core values and then started drifting to into issues and concerns that eventually destroyed them from within. Here, I try to lay out what can be done to keep the anchor holding.
In the September, 2004; Law Firm Partnership & Benefits Report carried an article titled “Producing Benefits Through Firm Culture” in which I discussed the problems that occur when and Executive Committee get confused about its decision priorities. Here, I want to take it in a different direction to focus on the firm and its underlying culture. As industry and service organizations have discovered in the past few years, their internal culture can and will be brought to bear in legal action against them e.g. lack of focus on safety. In the same way, I think law firms are going to be held accountable for their culture, or lack thereof, in fending off law suits against them.
Many firms while drifting away from their anchor “live in the day before.” Because they have been successful in counting hours worked and books of business, they forgot about what made them successful. Having lost their anchorage, unsuccessful firms, in most cases, cannot get out of their drift and the way they counted success while drifting.
What is the anchor? Look back at the culture that made the firm successful before the firm became adrift. What was the short vision statement of the firm that summarized value added by the firm? What are the core values of the firm? What was the mission of the firm and how did it get so diffused? The definitions will be covered later but let’s first look at the false models that deal death blows to law firms.
Slave to short-term income. In a rush to fund current obligations some firms like Dewey LeBoeuf recruited high profile partners with big books to supplement their revenues and then provided high guarantees to get these lawyers to come over to the firm.
See no evil. Some firms refused to recognize the rise of sharks in the firm and their greed. One example I can remember is Finley Kumble where the New York Times in 1990 looked at the firm as a shark tank filled with greed. They founded their firm on money and not values that serve clients and, of course, it failed.
Overdosing on risk. Some firms started borrowing to make the year-end, guaranteed distributions. That was the downfall of both Dewey and Finley.
Dysfunctional Executive Committee. Many executive committees are composed of partners trying to protect their own compensation. They are not concerned about understanding the vision of their firm and connecting between meetings to discuss who should be forming strategy, who should be supported and trained as future leaders, engaging in critical projects for the future of the firm, and knowledgeable enough to ask tough questions about the trends affecting the firm.
Softened by success. Such firms, blinded by their success, do not recognize trends in client demands, and do not see a new era coming. They cling to the “hours times billing rate equals value added” model. I have witnessed several firms which fail to recognize the clients’ need for a fixed fee for their work and eventually get fired because another equally powerful law firm stated that they would handle all matters at a fixed fee.
Strategy de jour. What are other firms doing and replicate it. A firm in Boston copied a firm I was working with to move to a non-equity partnership program that took over five years to implement. They saw that it worked and instituted it immediately and lost some of their best associates. They were not willing to go through the five-year process set up for the change. By the time a firm reads about some great strategy in the American Lawyer, the firm needs think about how to transition from the present situation to the future situation.
Acquisition lust. I see mergers going on all the time. Some are good and some are bad. The good ones are when a law firm with great culture and values takes over a firm that is adrift and inculcates its values into the new firm. Others are firms of terrible culture taking over a firm with great culture and destroying that culture. There is an interesting story of Howrey took over a practice that had strong cultural values and those that kept the values left before the merger. The rest of the acquired partners had to deal with the dissolution.,
Fearing the big rainmakers. Sometimes the rainmakers make the rules. In a recent article I spoke of how a firm let the rainmakers set the rules. But in many cases the people in the firm that do the heavy lifting are the most important. The fact that someone “owns” a client has nothing to do with the relationship with the client. Who are the partners, associates, and staff in the firm really working with the client and training and mentoring the future client relationship people? They must be recognized and rewarded.
Dangerous culture. If the culture and values of the firm are drifting, there is no culture and no value system. Without a cultural set of values, the firm will drift and go to the least common denominator to set the rules of success. Counting hours worked, leverage attained, and the book of business have little to do with the success of a law firm. Return on the time invested and teamwork are much more important.
Death spiral due to lack of credibility. I have dealt with firms that have to deal with major PR problems when clients have sued them. Their culture failed them. They cannot show how their core values would have prohibited such an issue. For example, look at Author Anderson’s demise after Enron.
So how does a law firm sustain its culture (Its Anchor) over time? Have one or create one! Does the firm have a list of its core values and does it refer to them in every decision? Does the firm have a short vision statement that indicates how the clients and the community should see the firm? Does the firm have a mission that supports those values? Does the mission include the type of clients the firm will serve, what services will be provided, where the firm will serve those clients, how those services will be provided, and how the firm will measure its success? Then every leader in the firm must “walk the talk” and live it out.
A sustainable culture will require the leadership to reinforce the values and mission through education, compensation, and support. Sustaining a culture will require leaders to make some tough decisions about people. More than a few law firms have had to fire partners because they did not act like partners and/or never adopted the core values of the firm. If “team” is a byword for a firm and a lawyer keeps trying play the lone ranger, he or she obviously does not belong in the firm. Keeping the culture alive through all forms of communication is critical. Partners in an Alabama firm constantly retell the stories of the culture of the founders and how they made the firm great in the eyes of the clients and the community.
Of course, there are many benefits to having a strong culture. Productivity increases because people feel safe in taking on innovative approaches to delivering legal services. The culture focuses people on the right things instead of the things may be counted but don’t really count. People will see a clear path to career enhancement and how they can make a difference through an organization that is constantly learning and refining their processes for delivering services.
Management becomes more effective and efficient because everyone understands the rules and reinforces the right behavior in others. Management becomes more focused on the needs of the future. The managing partner in a Boston firm brings the core values and the mission into every meeting on poster boards. When the conversations starts to get off track, she points to the boards and asks: “So how will what you are saying move us toward these targets?” The result is, of course, long-term growth and profitability. Of course the world changes around law firms every day, so at least once per year leadership should reevaluate the mission. Core values should not change very much over time.
The bottom line is not lose the anchorage that made the firm safe and successful. With a strongly anchored firm in the core values, trust within the firm will improve the decision process. Decisions will become better and faster and people will want to follow them because they know the base upon which the decisions were made.