The Culture of Contradictions

, The Am Law Daily

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The latest Citi/Hildebrandt Client Advisory takes an ironic turn toward valuing a law firm's culture—but isn't it a bit late?

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  • It is a little facile, I think, to place the blame for law firms focusing "myopically" on short-term economic performance so squarely at the door of "non-lawyer law firm management consultants." It is probably true that some have been guilty of encouraging their clients to focus too heavily on "business school-type metrics that maximize short-term profits" (i.e. at the expense of the long term) - but certainly not all. I think also that the market's obsession with how law firms compare to their peers is a far greater culprit in encouraging such imbalance. Observe how quickly the predictions flow that a firm is heading the same way as Dewey, if it slips a few places in the Amlaw or other league tables.

    Nor is the tension between short-term results and long-term sustainable economic sustainability unique to the legal profession. It is a malaise that affects most businesses. Observe how quickly the market penalizes a corporation if its quarterly earnings slip, irrespective of any brilliant strategy that it may have for the longer term. With a plunging share price goes the value of executive share options and shareholder support ... so small wonder that when faced with a choice between propping up today's share price or enhancing the long-term, most executives opt for the former.

    For law firms, the pace and depth of change under way in the legal profession makes this tension between short-term performance and long-term sustainability even more profound. Over the course of probably less than the next decade, we can expect the practice of law to fundamentally transform. Client pressure on price is inexorable and probably not going to go away anytime soon. I don not think that we have even begun to see the impact of technology on the practice of law (as opposed to on legal business services) .... in particular technology displacing significant work now done by attorneys .... and in sophisticated firms - not just in commoditized services. New legal markets with unique challenges are emerging as previously undeveloped economies grow and develop more sophisticated legal needs. The 'alternative business structure' experiment under way in England and Wales, induced by the Legal Services Act, has yet to spawn the major unanticipated consequences that, in time, it no doubt will.

    Against this challenging canvas, we have managing partners and executive committees trying to balance peering ahead into an ever-more-confusing future and crafting strategies to address that, while simultaneously keeping their eyes very closely focused on those very same " business school-type metrics that maximize short-term profits." Money in, as Dan de Pietro is fond of quoting from Dickens, must exceed money out. In the midst of such uncertainty, it is difficult to find too much fault with a strategy of focusing on optimizing performance in the short term while evolving as best one can as the future emerges and begins to make sense.

    So what of culture amidst all this? Of course it is critical. Of course it is difficult to properly describe, let along alone manage (although there are ways to achieve this effectively.) A "good culture," though, is responsive to market realities and drives the firm's strategy (assuming that the strategy is well-conceived.) A "bad culture" is the opposite. In my opinion, in many firms it is the culture that needs to evolve in order to become more focused on business requirements. "Collegiality," after all, means shared responsibility - not comradeship. The whole notion that equity partnership is a reward for long service to a club of professionals is now so far removed from reality that I doubt any lucid associate truly clings to that belief any longer.

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