Anchoring the Firm Culture In Solid Rock

Things that count can't always be counted and the things that are counted do not count. ' Albert Einstein

Over the years of my consulting practice, I have seen many formerly great law firms fail and go under. The reason? They lost the anchor to their core values, and then started drifting into issues and concerns that eventually destroyed them from within. Herein, I try to lay out what can be done to keep the anchor holding.

Decision Priorities

In the September, 2004 issue of our LJN sibling, Law Firm Partnership & Benefits Report , I published an article titled “Producing Benefits Through Firm Culture,” in which I discussed the problems that occur when an Executive Committee becomes confused about its decision priorities. This time, I want to take it in a different direction, and 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 lawsuits 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 certain 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 greedy sharks in the firm. One example is defunct law firm Finley Kumble. A 1990 article in The New York Times looked at the firm as a shark tank filled with greed. The article indicated that Finley Kumble was founded 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 firms and connecting between meetings to discuss who should be forming strategy, who should be supported and trained as future leaders, and what should be the critical projects for the future of the firm. They are not knowledgeable enough to ask tough questions about the trends affecting the firm.

Softened by Success

Such firms, blinded by their own 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 that failed to recognize the clients' need for a fixed fee eventually get fired because another equally powerful law firm stated that it would handle all matters at a fixed fee.

Strategy de Jour

These firms look at what other firms are doing, and then they replicate it. A firm in the Northeast copied a firm I was working with to move to a non-equity partnership program that had taken my firm over five years to implement. The Northeast firm saw that it had worked, instituted it immediately, and lost some of its best associates. The copycat firm was not willing to go through the five-year process set up for the change. When firm leaders read about some great strategy in The American Lawyer, they need to plan how to transition from the present situation to the future situation, not just make a wholesale change overnight and expect it to work.

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 with terrible cultures taking over a firm with great culture and destroying it. There is an interesting story of a formerly famous firm that took over a practice that had strong cultural values. The partners who wanted to keep those values left before the merger. The rest of the acquired partners had to deal with the eventual dissolution of the new, combined firm.

Fearing the Big Rainmakers

Sometimes the rainmakers make the rules. In a recent article, I described how a firm let the rainmakers set the rules. But in many cases, the people in the firm who do the heavy lifting are the most important. The fact that someone “owns” a client has nothing to do with the relationship with that client. Who are the partners, associates, and staff in the firm who are really working with that client? Who is 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

This happens when the firm lacks 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. A good example is the damage to the reputation of esteemed accounting firm Arthur Andersen after the Enron situation.

How to Create a Sustainable Culture

So how does a law firm sustain its culture (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? If it does, then every leader in the firm must “walk the talk” and live it out.

A sustainable culture requires 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 one particular 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.

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 things that 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 also becomes more focused on the needs of the future. The managing partner in one Boston firm brings the core values and the mission printed onto poster boards into every meeting. When the conversations start 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 long-term growth and profitability. The world around law firms changes every day, so at least once per year, leadership should reevaluate the mission. Core values should not change very much over time.

Conclusion

The bottom line is not to 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.

William C. Cobb is the managing partner of Cobb Consulting (WCCI, Inc.), based in Houston. A member of the Board of Editors of our sibling newsletter, Law Firm Partnership & Benefits Report , he has been a consultant in strategic issues affecting law firms and general counsel since 1978. He can be reached at [email protected].

Things that count can't always be counted and the things that are counted do not count. ' Albert Einstein

Over the years of my consulting practice, I have seen many formerly great law firms fail and go under. The reason? They lost the anchor to their core values, and then started drifting into issues and concerns that eventually destroyed them from within. Herein, I try to lay out what can be done to keep the anchor holding.

Decision Priorities

In the September, 2004 issue of our LJN sibling, Law Firm Partnership & Benefits Report , I published an article titled “Producing Benefits Through Firm Culture,” in which I discussed the problems that occur when an Executive Committee becomes confused about its decision priorities. This time, I want to take it in a different direction, and 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 lawsuits 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 certain 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 greedy sharks in the firm. One example is defunct law firm Finley Kumble. A 1990 article in The New York Times looked at the firm as a shark tank filled with greed. The article indicated that Finley Kumble was founded 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 firms and connecting between meetings to discuss who should be forming strategy, who should be supported and trained as future leaders, and what should be the critical projects for the future of the firm. They are not knowledgeable enough to ask tough questions about the trends affecting the firm.

Softened by Success

Such firms, blinded by their own 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 that failed to recognize the clients' need for a fixed fee eventually get fired because another equally powerful law firm stated that it would handle all matters at a fixed fee.

Strategy de Jour

These firms look at what other firms are doing, and then they replicate it. A firm in the Northeast copied a firm I was working with to move to a non-equity partnership program that had taken my firm over five years to implement. The Northeast firm saw that it had worked, instituted it immediately, and lost some of its best associates. The copycat firm was not willing to go through the five-year process set up for the change. When firm leaders read about some great strategy in The American Lawyer, they need to plan how to transition from the present situation to the future situation, not just make a wholesale change overnight and expect it to work.

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 with terrible cultures taking over a firm with great culture and destroying it. There is an interesting story of a formerly famous firm that took over a practice that had strong cultural values. The partners who wanted to keep those values left before the merger. The rest of the acquired partners had to deal with the eventual dissolution of the new, combined firm.

Fearing the Big Rainmakers

Sometimes the rainmakers make the rules. In a recent article, I described how a firm let the rainmakers set the rules. But in many cases, the people in the firm who do the heavy lifting are the most important. The fact that someone “owns” a client has nothing to do with the relationship with that client. Who are the partners, associates, and staff in the firm who are really working with that client? Who is 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

This happens when the firm lacks 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. A good example is the damage to the reputation of esteemed accounting firm Arthur Andersen after the Enron situation.

How to Create a Sustainable Culture

So how does a law firm sustain its culture (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? If it does, then every leader in the firm must “walk the talk” and live it out.

A sustainable culture requires 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 one particular 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.

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 things that 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 also becomes more focused on the needs of the future. The managing partner in one Boston firm brings the core values and the mission printed onto poster boards into every meeting. When the conversations start 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 long-term growth and profitability. The world around law firms changes every day, so at least once per year, leadership should reevaluate the mission. Core values should not change very much over time.

Conclusion

The bottom line is not to 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.

William C. Cobb is the managing partner of Cobb Consulting (WCCI, Inc.), based in Houston. A member of the Board of Editors of our sibling newsletter, Law Firm Partnership & Benefits Report , he has been a consultant in strategic issues affecting law firms and general counsel since 1978. He can be reached at [email protected].