Embracing Culture As a Path to Survival

To align people with the organization's goals requires leadership and communication, elements necessary to create a strong culture. Organizational culture has been defined by many experts as a system of shared assumptions, values, and beliefs, which governs how people behave in organizations. These shared values have a strong influence on the people in the organization and dictate how they act toward peers, leadership, direct reports and clients. These beliefs guide people in how they perform their jobs. Every organization develops and maintains a unique culture, which provides guidelines and boundaries for the behavior of the members of the organization. Cultures are deep-seated, pervasive and complex. Yet we know firms with strong, supportive cultures outperform firms with misaligned cultures. To understand culture and especially to implement cultural change, requires reading and learning from the experts.

One of the foremost authorities on the subject of culture is Edgard Schein, Professor Emeritus with MIT Sloan School of Management, and author of many best sellers including the Corporate Culture Survival Guide and, his most recent book, Humble Inquiry ' The Art of Asking and Not Telling.

Schein's model of organizational culture originated in the 1980s. Schein (2004) identifies three distinct levels in organizational cultures:

1. Artifacts and behaviors;
2. Espoused values; and
3. Assumptions.

The three levels refer to the degree to which the different cultural phenomena are visible to the observer. See Edgar H. Schein's Model of Organizational Culture, http://bit.ly/1SpCc4J.

Artifacts include any tangible, overt or verbally identifiable elements in an organization. Architecture, furniture, dress code, office jokes; all exemplify organizational artifacts. Artifacts are the visible elements in a culture and they can be recognized by people not part of the culture.

Espoused values are the organization's stated values and rules of behavior. It is how the members represent the organization both to themselves and to others. This is often expressed in official philosophies and public statements of identity. It can sometimes often be a projection for the future, of what the members hope to become. Examples of this would be employee professionalism, or a “family first” mantra. Trouble may arise if espoused values by leaders are not in line with the deeper tacit assumptions of the culture.

Shared Basic Assumptions are the deeply embedded, taken-for-granted behaviors which are usually unconscious, but constitute the essence of culture. These assumptions are typically so well integrated in the office dynamic that they are hard to recognize from within.

From Theory to Practice

Many law firms will describe their firm as “a collaborative culture,” or a “unique culture.” These descriptions beg the question, what does this mean? How might we use the model above to unravel the meaning of “unique culture” in any firm's organization?

Tools are available today to measure organizational culture effectiveness. Simply put, assessments can be used to “assess both a firm's operating culture in terms of the behaviors and personal styles that are expected (i.e., behavioral norms) and its ideal culture in terms of the behaviors and personal styles that should be expected (i.e., espoused values).” Human Synergistics International, OCI/OEI Report, January 2013.

With the pressures of the maturing legal industry before us, many factors contribute to a potential disconnect between a firm's ideal culture and a firm's operating culture. Human Synergistics will call these “causal factors” and suggest that when the causal factors are in alignment with organizational values, the profile of the firm is in alignment with the ideal. However, when the causal factors are not in alignment with the organizational values, they suggest there occurs a “cultural disconnect.”

We interpret this disconnect and speculate on identifying some of these factors, which may include: external factors such as continued erosion of client share of legal budget; continued competitive pressures; the war for good legal talent and the evolution of new competitors in the market, including legal startups and accounting firms' expansion of legal services offerings. These bridge directly to internal factors, which include: a drop in financial resources and continued decline of profits; talent retention; client retention and growth; emerging technologies; the need for innovation; and many other pressures affecting the traditional law firm management model and thus the members (owners and staff) of the firm. Firms that take the time to assess their cultures with appropriate diagnostic tools will find they will be better at defining their ideal culture, understanding their current culture and those factors impacting the culture. Using the data and implementing change over time, starting with small groups, will help firms to thrive in new ways.

For some firms, the answer has been to run leaner and smarter ' re-examine allocation of firm resources and expenditures; promote the best and brightest; meet regularly with clients; and other effective strategies to combat the shrinking market. For other firms, the answer has been to cut costs across the board ' downsize support staff; vote out unproductive partners and offer fewer the chance for advancement to equity partnership. Others yet will rely on a strong lateral integration strategy. Some of these firms have made the right decisions, but how many will have made the wrong decisions only to be seen in the not-too-distant future? To what extent have these changes impacted an otherwise successful culture?

Firms focused on culture may reap unseen benefits including (think Zappos, Nordstrom and Southwest) an uptick in client service. When client service is high, strong financial results usually follow. When the culture is such (outstanding client service) versus (we need to cut costs; promote less; cut budgets) people tend to hunker down. They are less inspired by the message of doom and gloom than by moving toward a common goal of the “best place to work” or “best client service.” Culture is fast-becoming one of the most challenging tasks facing managing partners.

In a Harvard Business Review article, Sean Silverthorne speaks to this challenge and highlights expert James Heskett's views:

Corporate culture is often thought of as a hard-to-define, or soft concept in management circles. Soft not in the sense that it isn't important ' most CEOs will tell you that their ability to inculcate values and mission into the DNA of a firm is among the most important work they do.

“The Profit Power of Culture,” Harvard Business Review, (Sep. 28, 2011), http://hbs.me/1SMhUV4.

No, the problem arises because little research has been targeted at trying to quantify its importance on performance. In his new book, The Culture Cycle: How to Shape the Unseen Force that Transforms Performance (available on Amazon at http://amzn.to/1TuwEoA), Harvard Business School Professor Emeritus James L. Heskett attempts just that. “Organization culture is not a soft concept,” he says. “Its impact on profit can be measured and quantified.”

Heskett finds that as much as half of the difference in operating profit between organizations can be attributed to effective cultures. Why? “We know, for example, that engaged managers and employees are much more likely to remain in an organization, leading directly to fewer hires from outside the organization,” Heskett writes in the book. “This, in turn, results in lower wage costs for talent; lower recruiting, hiring, and training costs; and higher productivity (fewer lost sales and higher sales per employee). Higher employee continuity leads to better customer relationships that contribute to greater customer loyalty, lower marketing costs, and enhanced sales. See Silverthorne, supra.

Conclusion

Amidst a changing and challenging environment, law firms will have a stronger chance at a healthy (financial, talent and clients) future when they better understand their culture as it exists today ' what makes it great or what needs to change.

Silvia Coulter, a member of this newsletter's Board of Editors and a principal with LawVision Group, is certified in leadership and culture assessments, and assists firms with strategic client growth initiatives. She may be reached at [email protected].