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How a Firm Can Be Killed By Its Culture

By Carl Peters
October 31, 2006

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.

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