The Four Cardinal Virtues of Law Firm Culture

Law firm “culture” isn’t that hard to define. Culture is what people at the law firm actually do every day — or, less sunnily, what people get away with doing.

I’ve worked in organizations that struck committees to study and define the organizational culture, but that failed to appreciate that the most accurate definition of culture is what actually happens around here. A law firm’s culture is the daily manifestation of its explicit performance expectations and implicit behavioral norms — what is encouraged and what is tolerated. And the culture that a law firm develops and sustains has an impact on its productivity, retention rates, and morale — positive or negative, as the case might be.

What behaviors does your firm encourage, and what behaviors does it tolerate? If your firm is typical of the genre, it encourages:

• individual effort and achievement,
• competitive relationships with colleagues,
• prioritizing financial success above personal well-being, and
• the development of an adversarial subtext to the lawyer-client relationship.

Your firm’s culture, if typical, also tolerates:

• the application of different standards of conduct to high-earning lawyers,
• the differential treatment of lawyers and “non-lawyers,”
• the generous interpretation of “billable hours” assigned to a client file, and
• the emotional or verbal abuse of junior lawyers and staff.

I’m sorry to recite a list of such unpleasant cultural features. But the foregoing collection of encouraged and tolerated behaviors is so common within law firms as to virtually constitute a definition of the species. 

Whether this accurately describes your firm or not, what is indisputable is that a firm that develops and maintains a culture that prioritizes behavioral norms in polar opposition to these will be an outstanding exception to the general rule, and will accordingly reap tremendous benefits in terms of morale, productivity, recruitment, and differentiation.

If you want your firm to develop that kind of outstanding culture, you must do everything you can to encourage practical, everyday behaviors that will bring about these cultural conditions, and to apply a zero-tolerance approach to behaviors that will ruin it.

Allow me to suggest four “cardinal virtues” for law firm culture — core cultural values that law firms can and should prioritize and incentivize — along with examples of how they might be exemplified and how they would be violated.

A. Consideration For Clients. Displaying a genuine interest in, affection for, and devotion to the overall welfare of the firm’s clients.

• Exemplified by: personal engagement through regular communication; asking about ways to reduce clients’ unnecessary legal spend.

• Violated by: failing to keep clients informed or to respond promptly to inquiries; issuing an invoice containing unexpected fees with no warning.

B. Respect For Colleagues. Treating both lawyers and staff members thoughtfully, professionally, and in a collegial and kindly manner.

• Exemplified by: Politeness even in stressful situations; sharing credit for good outcomes and accepting responsibility for poor ones.

• Violated by: Yelling at employees or junior colleagues; fighting for business origination credits beyond what is reasonable.

C. Service To Community. Contributing valuable time and real efforts to the firm’s community service commitment.

• Exemplified by: Donating money to a firm fundraising event proportional to one’s means; rolling up one’s sleeves to lead a community project.

• Violated by: Refusing to join a community service committee without good cause; unreasonably withholding consent for charitable donation of some firm profits.

D. Care For Oneself. Paying close attention to maintaining one’s physical, mental, and emotional health, and seeking assistance when necessary.

• Exemplified by: Taking every day of allotted vacation time; adopting at least one hobby or outside interest to advance one’s well-being.

• Violated by: Relentlessly working nights and weekends without proper rest and recovery; inflicting undue amounts of criticism on oneself.

Not all of these cultural values are easily measured in practical terms, but many of their associated behaviors can be assessed. Survey clients about whether they are happy with the level of care they received from each person in the firm. Ask colleagues and employees to anonymously assess that person’s conduct towards them and others. Ask the person to file an annual report detailing his or her community service efforts. And retain the services of a counsellor to regularly assess the health and well-being of all lawyers and employees.

Your firm’s culture is expressed by what actually happens there every day. Decide upfront what kind of culture you want, identify the behaviors that will exemplify and develop that culture, and take active steps to encourage and measure those behaviors. That’s how to make a real culture, and how to make a culture real.

Superstar or Renegade? Keeping Toxic Lawyers Out of Your Partnership

“Superstar employees are the obsession of the corporate world,” a recent article in the Harvard Business Review (HBR) begins. “They’re highly sought after, given the most attention and the best opportunities, generously rewarded, and expressly reassured after setbacks.”

Does this remind you of any members of your law firm’s equity partner class? Especially those recruited laterally from other firms?

This elite class of workers is “highly sought after” for good reason. These superstars can be four times as productive as average workers, the HBR suggests, and can generate as much as 80% of a business’s profits while also attracting other star employees. Given this sort of payoff, it’s little wonder law firms are constantly trying to poach key rainmakers from rivals at any price.

But the HBR article goes on to identify a kind of “evil twin” to the superstar employee: the toxic worker. “These are talented and productive people who engage in behavior that is harmful to an organization…. [A]voiding such people can save companies even more money than finding and retaining superstars.” In fact, a toxic employee can cost a company more than twice as much money as a superstar generates.

Here’s the problem for law firms: superstar lawyers and toxic lawyers tend to share many of the same characteristics.

The HBR article, citing a Harvard Business School study, identified four characteristics shared by toxic workers: “Overconfident, self-centered, productive, and rule-following employees were more likely to be toxic workers.” Powerful lawyers tick off those first three boxes almost immediately. The fourth, which means inflexibility concerning the application of rules, is frequently on display among lawyers. Other characteristics of “bad guys” in the office include charisma, curiosity, and high self-esteem. A quick look around your partnership table for all these characteristics should give you immediate cause for concern.

Virtually every major law firm actively recruits high-powered lawyers who possess the features of a potentially toxic worker. And for every toxic partner your firm inadvertently recruits, it cancels out the positive effect of more than two genuine superstars.

Law firms can take two steps to reduce their risk here. The first is to deepen and broaden the background checks of potential lateral recruits. Look well beyond their book of business; find out everything you can about what this person is really like. Ask yourself why this person is even looking around for new opportunities: is it that they’ve worn out their welcome at their current firm? Is this their first lateral move, and if not, why is that?

Don’t just interview the lawyer’s old friends and favoured clients, either. Their glowing reviews will simply strengthen your own confirmation bias: you want to hear good things, so you choose the sources likeliest to provide them. Actively seek out people who have complaints, grudges, or scars from working with this person, and consider this contrary evidence carefully. Be adamant that you will recruit only good corporate citizens into your partnership, and that your due diligence in this respect will be exemplary.

Despite a firm’s best efforts to spot bad apples, however, some will inevitably slip through. In fact, the truly lethal ones will be the toughest to spot, diabolically practiced as they are in the art of telling you what you want to hear. So the second tactic you can employ is to reduce your firm’s vulnerability to the emergence of a toxic partner.

Exercise greater vigilance over this person upon their arrival, quietly monitoring them for signs of antisocial conduct. This is not impolite behaviour towards a guest: it is the strict application of a probationary period of scrutiny to a stranger in your midst. Watch closely for warning signs in the first several months of the person’s tenure, and don’t hesitate to pull the plug on a lateral hiring experiment that is clearly going wrong.

As well, insist upon integrating their new client teams with veterans from your firm, especially professional staff who can lay down links with these new clients to your firm’s systems and processes. Do not permit the new partner to set their own rules or evade the firm’s existing practices: bad things will happen if a foreign culture is allowed to implant itself into your firm’s ecosystem.

Really, the best way to lower the risk of recruiting toxic employees is to reduce the impact that any one individual can have, positive or negative, on your firm. Enhance your firm’s client service infrastructure through the systematization of legal work production and delivery. Undertake the difficult but necessary job of shifting the ownership of client relationships from individual partners to the institutional firm.

Toxic employees can derail your law firm in a hurry. Take whatever steps you can to keep them from ever boarding the train in the first place.

Bigger vs Better: Should your firm merge?

First, see if it can answer “yes” to one essential question.

So law firm mergers are back in the news again, to the continued fascination of the legal press. For every combination that’s completed and announced, you can count on several others bubbling under in conversations within executive committees and at luncheon gatherings of senior partners, so there likely will be more such deals announced throughout the balance of the year.

It’s not clear that “mergers” are the best word to describe many of these transactions. Some of them involve global behemoths swallowing up comparatively modest firms in desired regions, resembling not so much a business deal as the annexation of territory. Others are billed as marriages of equals, but with so many of these merged firms maintaining their own profit pools, they seem like marriages where the spouses have no joint bank account and keep separate residences.

The common thread among all these deals, however, is that the merging firms go to great lengths to publicize the impressive size of the new entity, the huge number of lawyers, offices, and jurisdictions it will boast. It’s the kind of tactic you could understand if, say, two ice-cream dealers merged and could now deliver 70 flavours in one location, rather than 30 and 40 in separate stores as before. More volume and greater selection are obvious customer benefits in that kind of market.

It’s more difficult to make out clear customer benefits from law firm mergers. There’s an unspoken assumption that more lawyers in more offices in more locations is self-evidently a good thing, a competitive advantage and a client service. And maybe there are tactical benefits to be gained, especially around marketing strength, talent acquisition, and the like.

Yet I can count on the fingers of no hands the number of corporate clients I’ve overheard wishing their law firms were bigger and farther-flung. To the contrary, many clients greet news of a merger with a certain exasperation, having to turn their minds to identifying and resolving potential conflicts, or to awaiting the inevitable rate increases from the new entity.

Any law firm that’s considering a merger or acquisition should ask itself one question — the same question, really, that it should raise whenever any foundational or strategic decision is in play: “Would this make our firm more effective?” It’s a powerful question, because it forces the firm to focus its attention on its fundamental business purpose.

The point of any business is to serve its customers. For a law firm, that translates into helping clients in its chosen markets achieve their goals by addressing their legal challenges and opportunities. A law firm should be considered successful only to the extent it helps clients achieve their law-related objectives. Would a merger allow the firm to accomplish this mission more effectively? And if so, how?

Effectiveness, remember, is defined from the perspective of the client, not the firm. Clients consider a firm effective if it anticipates and meets their legal needs in the context of their business realities, demonstrates real commitment to procedural improvements that increase quality while reducing cost, provides reliability and competitiveness around pricing, and keeps lines of communication buzzing and productive. Mergers, by themselves, aren’t going to move the needle very far on any of those criteria.

Mergers might very well deliver competitive advantages, although I’d love to see a study that contrasted those advantages with the costs of merger, which are manifold and substantial. But potential mergers ought to be scrutinized primarily with specific reference to how they will enhance the firm’s effectiveness in its chosen markets, rather than with vague assurances that “global clients want one-stop shopping.”

Size alone is no longer a significant differentiator for law firms. Increased profitability does not correlate strongly with increased size, nor does talent retention, realization rates, client satisfaction, or a host of other measurable criteria with which firms should be closely concerned. There is little evidence that becoming bigger means your firm becomes better. If you’re unsure about this, feel free to call up a few key clients and ask them what they think about your merger plans. Their responses should be illuminating.

Law Firm Innovation and the Bad Bank

I’m starting to see more large law firms seriously consider, or actually create, the role of “Chief Innovation Officer” or the like. This position is often responsible, among other things, for creating a strategy and framework for leading change within the firm, coordinating and managing all the firm’s current and future innovation initiatives, developing a blueprint for ongoing change and improvement activities, and bringing about new attitudes among lawyers and staff towards change.

This is, obviously, a positive development: client demands and market pressures are finally forcing their way into the rarefied halls of the profession’s biggest law firms, prompting these firms to rethink their assumptions, enhance their productivity, and align both better with today’s reality and tomorrow’s promise. Pricing directors, project managers, and process analysts already have seats at the BigLaw table, and many of these professionals are moving into de facto or de jure positions of leading the innovation effort firm-wide.

Considering how long I’ve been advocating this sort of progress, and how central I think the success of these initiatives are to the interests of both firms and clients, it would be ungrateful, even churlish, of me to raise objections or concerns. But I’m going to do it anyway. When I flip through the job descriptions for these sorts of “Innovation Leader” positions, I see a number of things that worry me.

One is the near-complete absence of any reference to the firm’s compensation system. I’ve come to believe that no change of any significant nature to the operations of a firm and the priorities and practices of its people is possible unless the financial incentive structure is opened to serious scrutiny and amenable to real change. Yet firms seem to believe that such change and innovation and fresh approaches to their work can be carried out without so much as light tinkering with compensation. That’s simply not realistic.

If I were interviewing for one of these positions, my first question would be, “Can I change the compensation system, specifically with regard to the activities and attitudes that are rewarded and especially where equity partners are concerned?” And since the answer, in virtually every case, would be an unqualified “No,” it would also be my last question. I’m not saying the Innovation Leader should have carte blanche to decide how the partners split their profits; I’m saying that without any influence over financial incentives, innovation initiatives rely almost entirely on the good will of the firm’s lawyers — and that is not, shall we say, a sustainable energy source in most law firms.

I also become concerned when I see firms suggesting that the director of innovation should set the tone within the firm regarding the importance and desirability of changing the firm’s practices. That is not, and cannot be, the director’s job. That is the role of the managing partner, the chief executive officer, the executive committee, the firm’s most influential equity partners, or some significant combination thereof.

The message “Change is both good and mandatory” must come from the firm’s senior leadership, it must be repeated regularly, and it must be delivered so as to be taken seriously, which means it must be reinforced by action. Creating a position, hiring a person, assigning a budget, and forgetting about it till the next executive meeting does not qualify as “action.” It won’t get you anywhere unless it’s part of a package of operational and structural reforms and changes that come down from the top and are empowered at the grassroots. The chief innovation officer must be a symptom of the firm’s dedication to change, not the source of it.

And that brings me to my biggest concern with this sort of role: that it can too easily become the repository of all the firm’s innovation hopes, aspirations — and unacknowledged responsibilities.

By creating an Innovation Director position, some law firm leaders may be relegating to this person (and delegating away from themselves) the hard choices, the difficult meetings, the unpleasant truths, and the angry confrontations that innovation efforts inevitably provoke. It’s reminiscent of the “bad banks” proposed to handle the unpayable debts that were crippling financial institutions at the height of the financial crisis: creating an artificial construct to hold all the unpleasant realities no one knows how to handle, in hopes they can be gotten past and eventually jettisoned while the system moves on as before.

Changing the way lawyers work and law firms operate can be excruciatingly difficult, and a great deal of that difficulty arises from interpersonal conflicts, especially among lawyers. It’s natural for a firm leader to wish to avoid this difficulty, but kicking the responsibility down the chain of command to a new position, often one staffed by an outsider new to the firm, simply won’t get it done.

I applaud any law firm that sets out to create a Chief Innovation Officer — but I also want to warn them against thinking they’ve found a panacea, that they can now let the C. Inn. O. worry about all this stuff and report on his or her progress (or lack thereof) every quarter. Creating an innovation leadership position isn’t the end of the law firm innovation process; nor is it the beginning. It has to be part and parcel of a firm-wide, leader-commissioned, this-is-really-happening determination that the firm is going to change for the better, for its lawyers and its clients both. That’s the context within which innovation directors will do their finest and most effective work, and help bring about truly significant change within their firms.

5 Pressing Priorities for Professional Providers (This is more than just another PR exercise)

If you like lists and you love alliteration, then you’re probably a legal management consultant. It seems that practically every article these days by people in my line of work features a numbered list of entries that all begin with the same letter. I admit that I often do the same thing in my presentations.

What I propose to do here, however, is even more ambitious. Not only will the following list of five priorities for law firm leaders in 2015 all begin with the letters “pr,” but throughout this entire article, every sentence will contain at least one word that starts with “pr.” Re-read all the previous sentences and you’ll see what I mean.

Presuming that you’re on board with this (gimmick) approach, here are five elements of law firm strategy or infrastructure that will be critical to firms’ ability to hold their own, not just against today’s competitors, but tomorrow’s as well.

1. Process. Call it systematization or business improvement or legal project management, the bottom line is that firms must take steps immediately to make their workflow and operations more streamlined and effective. Disciplined procedures for performing legal work enable your firm to both meet budgets and enhance the quality of your work. It also provides a sound basis for…
2. Pricing. Client demands for fixed fees or capped budgets or discounted rates all stem from the same desire: to bring more predictability to their legal spend. Your primary focus needs to be on giving clients a reliable range of fees for their tasks. But you can’t just promise a flat fee without knowing exactly how much it will cost you to deliver the work. Pricing your work correctly is a condition precedent for the next important feature on this list…
3. Profitability. Too many law firms still measure productivity by hours billed. But a growing minority have finally accepted that the proper metric of financial health is profitability, both firm-wide and matter-specific. When firms adopt this course, prevailing assumptions inevitably give way to provocative truths. The prospect of informing powerful partners that their high-revenue client barely generates a profit can be daunting. But that simply reinforces the practical necessity of developing…
4. Protocols. It’s easy to draft mission statements and issue grand pronouncements about your firm’s culture. But when it comes to the crunch, are your leaders prepared to enforce behavioral expectations on your partners? Or even to prescribe step-by-step instructions for how work must be carried out? Peer pressure isn’t enough. Top-down protocols are needed to preserve system integrity, prohibit individual variances, and promote employee morale.
5. Proactivity. Any firm can serve its clients’ present needs. But clients are also concerned about their future prospects. How prescient are you about trends in your client’s market or industry? Can you help predict their future opportunities? Or prevent impending disasters? Be proactive about identifying risks for your client before they materialize. Clients truly value lawyers who don’t just solve problems, but who can anticipate and eliminate them.

Prioritize these five features, and you’ll have pretty good odds of profound success in 2015 and many productive years beyond.

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