Former SJ Berwin head David Harrel argues that law firms delude themselves when it comes to their own values
The banking crisis and the revelations about mis-selling and Libor fixing, and the failures in the NHS, have highlighted the issues surrounding corporate and organisational culture. It is perhaps not surprising that the newly-formed Financial Conduct Authority has made business culture a particular area of focus. What is perhaps more surprising is that culture was not a central focus before.
It is my experience, both as a partner in a law firm and then subsequently as a company director, that, while culture is talked about as being important, businesses are generally reluctant to examine and analyse their cultures with anything approaching the same vigour with which they might address their business strategies. It is as if culture is an interesting by-product of the business but not related to the hard metrics by which success and risk are measured.
I remember very clearly that when I initiated discussions on the subject at partners’ meetings, I could see the faces of many of my former partners light up, not for the reasons I hoped, but from the reflected glow of their BlackBerrys. It was clear they saw this moment as an excellent opportunity to catch up on more pressing and important issues, while I, to their minds, embarked on some abstruse philosophical and largely meaningless examination of our corporate soul.
There are a number of reasons why culture is not properly examined, but one reason is the context in which it comes to be discussed. Culture and values discussions are frequently reserved for drowsy afternoon sessions at the partners’ retreat or part of a team-building exercise, where managing partners and team leaders, desperate to keep the session upbeat and motivational, encourage a consensus around a number of aspirations and values. We all play along and, therefore, it is not particularly surprising that we leave the session with a renewed belief in motherhood generally and apple pie in particular. It is little wonder those BlackBerrys light up.
In the law, we build firms that have real personalities, more apparent to those who deal with the firm than those within.
Another reason for scepticism about debates on culture and values is that, for many businesses, the issue only surfaces at the behest of the marketing department, who need something catchy for the firm’s brochure, or the branding consultants, who advise that they cannot choose the corporate colours or logo for the website without a list of ‘values’. Is ‘innovative’ pink or yellow? Only the consultant (and heaven) know. Focus groups are formed and we set out our ‘values’ in as pithy and punchy a way as we can, but ultimately we are engaged in an exercise that is less about who we are but more about how we want to be seen. Some of it is based in truth but much of it is wishful thinking. There is nothing wrong with being aspirational and, indeed, aspirations are part of a firm’s culture, but where the actual norms of behaviour within the business are not reflected in the ‘innovative, proactive, client focused but caring and loving’ environment which we have described, then scepticism follows quickly.
Ultimately, I believe the reason why so many businesses do not analyse their cultures with any real vigour is because, like analysis of ourselves as individuals, it is not an easy or comfortable exercise and, therefore, best avoided by listing a collection of values which, if repeated enough times, might possibly become a reality.
The paradox in all of this is that, in the law, we build firms that have real personalities, more apparent to those who deal with the firm, such as clients, suppliers, recruits or even alumni than those within. I always made a point of asking the firm’s vacation students to describe the other City firms where they had spent the summer. Their responses were always unequivocal. One firm was hierarchical and formal, another open and honest, some pompous, others warm or cold and so on. Given that they had been engaged in a two-week programme at each firm designed in part to showcase its attractiveness as a potential employer, and that the firms themselves were largely similar businesses, it was striking how different each one had felt to these students. This might seem to be a pretty uninformed view when seen through the lens of a university student, but, in my experience, culture is embedded widely in a business and its influence and effect is often more apparent further down a business than it may be in the partners’ boardroom.
However reluctant we may be to examine our business cultures, it is clear to me that organisations, and law firms in particular, build strong and distinctive cultures which, like our natures as individuals, have a very significant influence on how businesses develop and evolve. Culture acts as a driver and a brake and therefore it is pretty obvious that it is only by having a clear and honest understanding of those factors that a business can maximise its potential, understand its limitations, assess risk and bring about, or adapt to, change.
How cultures are created is an interesting subject in itself but I believe that if one wants to get an understanding of one’s business culture, it is necessary to ask some simple questions. What does the firm value and believe? What is important to the business and how are those important things interpreted and played out in the way the business behaves? What are the strengths and what are the necessary and corresponding vulnerabilities that attach to those perceived strengths? I joined the board of a small business some years ago that made a big play about the strength of their collegiate culture and it was clear that this was something that was deeply treasured by everyone. Indeed, it was part of the attraction for me in joining the board. However, as a newcomer, it became apparent that there was a reluctance to address issues of underperformance based on a fear that confrontation would in itself damage collegiality, whereas, of course it was the underperformance which was threatening their culture and not the confrontation. Once we recognised that collegiality was built on mutual respect and trust and not simply ‘getting on’, confronting the performance issues became easier and acceptable because we were acting consistently with our beliefs and values.
The most robust business cultures are those where there is the closest connection between what they hold important and how they behave. It is not, in my view, a question of being good or bad, but being honest and genuine. For instance, a firm that recognises that it is a collection of egotistical bastards, only recruits bastards, rewards bastardly behaviour, and sacks anyone who demonstrates any common humanity may hardly be equipped for the care sector. But it will be more effective as an organisation and be clearer in its strategies, management and decision-making than a business that has rather more admirable aspirations and beliefs, but practices something different. In those latter businesses, strategies built around unconnected aspirations can become difficult to effect as the behavioural norms within the business can get in the way. This leads to management by megaphone and exhortation and we all know that that has limited effect in a law firm. A business plan or strategy built on what a business demonstrably finds important, using the drivers in the culture, has a far greater chance of being properly executed and achieving its goals.
What I have also come to recognise is that culture needs constant examination and management in order to ensure that it doesn’t ossify or change, by neglect, in ways which are inimical to the continued success of the business. For all the beneficial power which culture can exert, it can have an equal and opposite effect, as every strength carries a vulnerability and vice versa. I am convinced that much of what we have seen in the financial sector is an emanation of a strong performance culture that was allowed by poor management to get out of control. Performance cultures by necessity carry risks and you can’t eliminate them but you can build behaviours that mitigate the risk, provided that you have taken the trouble to understand the culture in the first place.
The pace of change in the legal landscape is accelerating and the strategic agendas for all firms are becoming more challenging and pressing. I believe that those firms that absorb and adapt best to the changing environment are those who have a profound understanding of themselves, not just in terms of their skills and services but the strengths and weaknesses of their culture. Those who don’t have such an understanding encounter greater difficulty in navigating through change as, to a large extent, they are flying blind. If it all feels too ethereal or metaphysical, might I suggest putting down the BlackBerry and cross-examining those vacation students.
The author was a founding partner of SJ Berwin and senior partner between 1992 and 2006. He is currently chairman of Savile Group and legal mentor at IDDAS. Other current roles include a non-executive directorship of Rathbone Brothers and a trusteeship of the English National Opera.