How a Firm Can Be Killed By Its Culture

If the lawyers have sufficient power and can attract other supporters, the firm must move toward meeting their needs.

As a firm begins to sort through its options to improve the current situation, it confronts issues that require it to change the very way it operates. The nature of market competition means that there is constant testing of all participants, and those who adapt to fit constantly changing requirements will win. Firms who are losing this battle typically have the following culture:

• Lawyers do not work as many hours (a 'lifestyle' firm);
• Partners are making 'comfortable' incomes, have become complacent and do not realize that the market has moved and they are falling behind;
• Older partners dominate the firm's management (and often compensation) and seek to protect their status and incomes and avoid risk; and
• Recruiting is weak or nonexistent, resulting in a firm that lacks an influx of talent, initiative and ideas.

The solution is simple. To get themselves out of their steadily deepening rut, the lawyers will need to work harder, work for the institution instead of only for themselves, learn and execute new skills like marketing, and, quite likely, change their practice and give up status and possibly income to others. It is unlikely that these suggestions will be adopted quickly.

At this point, the firm's culture will tend to stop it from changing. Success depends on the level of fear and greed, as well as on the power of key leaders to push ahead. And it is at this point that the fear of culture change is more powerful than the actual change itself. When specific changes are proposed and the future is not yet clearly defined, one is likely to question the efficacy of the proposal. This is particularly true when there are personally significant, negative short-term consequences.

Lawyers who are underproductive, complacent or lazy oppose change on the basis that the ambitious partners are 'greedy.' Older leaders oppose change because they fear that their compensation will be cut or their status reduced. Many other members are generally supportive of the change but are concerned that the opponents will become angry and will leave the firm. And they begin to ask: 'If we need to change the culture to save the firm, and some old members become angry and leave the firm, have we saved the firm or destroyed it? What is 'the firm' anyway?'

Too many people confuse a law 'firm' with a law 'organization.' A law 'firm' is a group of people working together to make the 'firm' stronger and more valuable than the pieces of its individual members. They put the power of the institution ahead of themselves. It is dynamic and growing, so must take calculated risks. It is not stagnant because firms that don't grow, die. A 'firm' is not an office where lawyers work next to each other and split the overhead. It is not a hotel for lawyers.

It is quite common for members of a firm to fail to realize that their firm isn't really the same 'firm' anymore. Typically, 50% of the shareholders of mid-sized and larger firms are laterals and the firm's culture is already an amalgam of several other cultures.

The answer then to the question of 'have we saved the firm or destroyed it?' is, if you have changed a stagnant, self-protective, complacent, aging and uncompetitive organization into a dynamic, supportive, growing and diverse one, you have saved a 'firm' that will be more attractive to the kind of people that will keep it alive. To get the support for this, you will need to demonstrate that an alternative future is better than the status quo. Even then, there will always be a few individuals who will try to torpedo the movement toward this future because they perceive that it will cost them power or wealth. They will be angry because they realize that their individual power was not as great as they had anticipated and they suffered a political defeat. Some will eventually leave and the remaining members will accept their departure as a price that must be paid for the good of most of the members of the firm.

To avoid the frequent debates that accompany the introduction of any new strategic change, it will help to have prepared some guidelines of the overall direction and desires of the firm. For example, the following are statements from a strategic plan:

• 'Over the long-term, the firm is ill suited to provide services to clients requiring lawyers at low rates. The size of the firm, its changing client base and composition of lawyers and its downtown locations, require a higher level of overhead than these rates can sustain.'
• 'To project the depth and breadth of skills that attract desirable clients and lawyers, we can and should expand into other geographic locations and other practices, provided they meet basic criteria established by the firm.' (List of specific criteria)

These two statements clearly show the firm's expectations for growth in other geographic areas and also in the types of rates and overhead they anticipate. These are a far cry from the typical mission statement that describes how 'We are going to practice excellent quality law in a supportive work environment and be highly compensated because we provide superior value.'

When firms first recognize they need to change in order to be more competitive, it appears that they have a seemingly infinite array of options. Cost-cutting, increasing billable hours, starting a marketing program and hiring a rainmaker are usually at the top of the list, but it often seems as though everyone in the firm has their own solution to the problem. In reality, there are only a few key steps that are appropriate and necessary for most firms. The real problem is that execution of these tactics is a long-term effort, not a 1-year program. Mounting a sustained effort requires a change in the behavior of the members of the firm and therefore a change in the culture of the entire firm. However, there are forces at play in every firm that act to prevent these changes. This article discusses how the culture of a firm locks it into place and prevents it from changing. Solutions for moving past these issues are also identified.

Preserving a firm's culture is an overriding consideration of most law firms. This seems to be true no matter what the particular culture is: work hard vs. hardly work, quiet respect vs. public tantrums, egalitarian vs. hierarchical, easy-going Californians vs. hard-driving New Yorkers. This is true not only of law firms, but of all organizations. We tend to believe that our personal behavior and group culture are what have brought us whatever success we have had.

There are several actions that can trigger the need for a culture change in a law firm. Almost all begin with the realization that the firm is not making enough money to pay its lawyers what they think they deserve. This can happen for several reasons:

• The firm is not getting as much work from clients as it has in the past;
• Its lawyers are not working as hard as they used to;
• Its lawyers are working hard but they have not raised their rates
  sufficiently to keep up with cost increases; and
• Key lawyers have left the firm and taken good client work with them.

Identification of this problem can occur slowly, as the firm's position gradually deteriorates, or it can occur precipitously, for example when ambitious laterals issue an ultimatum that they will not tolerate the current situation any longer. Typically, such lawyers see an opportunity to expand their practice, attract larger clients and thus gain increased compensation and power as well as the ability to perform more complex work.

If the lawyers have sufficient power and can attract other supporters, the firm must move toward meeting their needs.

As a firm begins to sort through its options to improve the current situation, it confronts issues that require it to change the very way it operates. The nature of market competition means that there is constant testing of all participants, and those who adapt to fit constantly changing requirements will win. Firms who are losing this battle typically have the following culture:

• Lawyers do not work as many hours (a 'lifestyle' firm);
• Partners are making 'comfortable' incomes, have become complacent and do not realize that the market has moved and they are falling behind;
• Older partners dominate the firm's management (and often compensation) and seek to protect their status and incomes and avoid risk; and
• Recruiting is weak or nonexistent, resulting in a firm that lacks an influx of talent, initiative and ideas.

The solution is simple. To get themselves out of their steadily deepening rut, the lawyers will need to work harder, work for the institution instead of only for themselves, learn and execute new skills like marketing, and, quite likely, change their practice and give up status and possibly income to others. It is unlikely that these suggestions will be adopted quickly.

At this point, the firm's culture will tend to stop it from changing. Success depends on the level of fear and greed, as well as on the power of key leaders to push ahead. And it is at this point that the fear of culture change is more powerful than the actual change itself. When specific changes are proposed and the future is not yet clearly defined, one is likely to question the efficacy of the proposal. This is particularly true when there are personally significant, negative short-term consequences.

Lawyers who are underproductive, complacent or lazy oppose change on the basis that the ambitious partners are 'greedy.' Older leaders oppose change because they fear that their compensation will be cut or their status reduced. Many other members are generally supportive of the change but are concerned that the opponents will become angry and will leave the firm. And they begin to ask: 'If we need to change the culture to save the firm, and some old members become angry and leave the firm, have we saved the firm or destroyed it? What is 'the firm' anyway?'

Too many people confuse a law 'firm' with a law 'organization.' A law 'firm' is a group of people working together to make the 'firm' stronger and more valuable than the pieces of its individual members. They put the power of the institution ahead of themselves. It is dynamic and growing, so must take calculated risks. It is not stagnant because firms that don't grow, die. A 'firm' is not an office where lawyers work next to each other and split the overhead. It is not a hotel for lawyers.

It is quite common for members of a firm to fail to realize that their firm isn't really the same 'firm' anymore. Typically, 50% of the shareholders of mid-sized and larger firms are laterals and the firm's culture is already an amalgam of several other cultures.

The answer then to the question of 'have we saved the firm or destroyed it?' is, if you have changed a stagnant, self-protective, complacent, aging and uncompetitive organization into a dynamic, supportive, growing and diverse one, you have saved a 'firm' that will be more attractive to the kind of people that will keep it alive. To get the support for this, you will need to demonstrate that an alternative future is better than the status quo. Even then, there will always be a few individuals who will try to torpedo the movement toward this future because they perceive that it will cost them power or wealth. They will be angry because they realize that their individual power was not as great as they had anticipated and they suffered a political defeat. Some will eventually leave and the remaining members will accept their departure as a price that must be paid for the good of most of the members of the firm.

To avoid the frequent debates that accompany the introduction of any new strategic change, it will help to have prepared some guidelines of the overall direction and desires of the firm. For example, the following are statements from a strategic plan:

• 'Over the long-term, the firm is ill suited to provide services to clients requiring lawyers at low rates. The size of the firm, its changing client base and composition of lawyers and its downtown locations, require a higher level of overhead than these rates can sustain.'
• 'To project the depth and breadth of skills that attract desirable clients and lawyers, we can and should expand into other geographic locations and other practices, provided they meet basic criteria established by the firm.' (List of specific criteria)

These two statements clearly show the firm's expectations for growth in other geographic areas and also in the types of rates and overhead they anticipate. These are a far cry from the typical mission statement that describes how 'We are going to practice excellent quality law in a supportive work environment and be highly compensated because we provide superior value.'