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Gray Rule
October 2016 | VOLUME 17, NUMBER 4
Gray Rule
Growing the Pie and the Talent through Organizational Effectiveness
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Growing the Pie and the Talent through Organizational EffectivenessBy Silvia Coulter and Geoffrey Schuler
Today's firms will fare better if leadership attention is turned toward creating a culture of organizational effectiveness. Driving behaviors that lead to a collaborative, effective work environment for everyone means increased levels of collaboration, client service, profitability, and talent retention.

Culture effectiveness will remain an important strategic priority for the foreseeable future. Companies, industries, and geographic regions have defining cultural identities, each of which has serious implications for the way business is conducted. Companies strive to build strong cultures as the marketplace pays closer attention and places greater importance on cultural identity and organizational effectiveness. Simply put, an effective culture helps attract and retain talent, fosters growth (at an individual, department, and company-wide level), enhances collaboration, facilitates superior work product, improves and increases client service, and results in higher profits.

Leaders may begin in various places within their organizations to shift to a culture that drives organizational effectiveness. Knowing where in the organization to look and what to look for is the most important puzzle piece. Law firm leaders, in particular, face significant challenges as the legal environment focuses on complex expertise, fast turnaround time, competition, disruption–all unintentionally creating an environment that is risk averse and task-oriented versus people-oriented. These pressures can have an unintentional outcome and negative impact on a firm's culture. In order for law firm leaders to retain and grow their firm's talent and increase market share, they must understand the crucial elements needed to build, sustain, and adjust their firm's culture as necessary.

There are a number of practical reasons why law firm leaders are now focusing their attention on culture. One reason is due to the generational shift that is taking place in the workforce. The legal industry, among many others, is in the midst of a major changing of the guard as Boomers exit the work force. Generation Xers and Millennials are inheriting more responsibility. With this new wave of law firm leaders comes a shift in cultural priorities, which may create tensions as clients, management, and leadership roles are transitioned. Another is profitability. Maintaining profitability requires a culture of collaboration across people, not just legal professionals. Happy, productive, effective cultures simply produce better results, achieve higher service standards, and enjoy greater profits.

There is also the realization that a material cost component is associated with culture. Since the recession, law firms have become extraordinarily cost-conscious and have identified the high cost of associate and staff turnover. The Millennial generation in particular, switches jobs frequently (four times in their first ten years out of college, according to LinkedIn) and the continued wooing of senior partners who are either rainmakers or substantive experts may leave firms with a dearth of talent. Thus law firm leaders have turned to resources to help identify weak spots in their firm's culture, with the hope of better retaining employees, and top legal talent, and thus saving financial resources. No longer thought of as the "soft" side of the firm, culture effectiveness can be diagnosed and measured.

The good news is that the ability to measure culture is quantifiable. In this data-driven age, there are several proven tools that exist in the marketplace used to help identify the culture existing within an organization. These platforms help law firm leaders gain a deeper understanding of how to shift their firm's unique culture so that it benefits lawyers (young and old) and staff, and supports the long-term strategic plan. Facilitating a culture of effectiveness has big business implications.

Heidi Gardner, a Fellow at Harvard Law School's Center on the Legal Profession, wrote about the tangible connection between collaboration across boundaries of expertise in the business world and financial results. She concluded that there were significant financial and client service benefits from multidisciplinary client collaboration. Heidi found that clients tended to become institutionalized rapidly if multiple partners service their needs. She also discovered another benefit to client collaboration was that partners that cross-sell to other partners/groups within their firm, sell more client work themselves. These findings correlate directly to law firm business models. The better a partner collaborates and gets other attorneys involved in his/her matters, the better he should be able to cross-sell to other groups and institutionalize clients. One of the greatest barriers to reaping the benefit of collaboration in Heidi's article is the effect compensation has on a culture.

In short, creating an effective culture matters more now than ever before. Many law firm mergers seem potentially aligned when it comes to the financials and the practice make-ups of the two firms involved. If the cultures the firms could not be more different, then ultimately culture will kill the deal. For good reason, an ineffective culture will easily tear into the fabric of a well-woven culture.

So how do law firm leaders go about identifying, understanding, and shifting their firm's culture to improve organization effectiveness? In general, it's best to follow a two-pronged approach that includes partner interviews and data analysis to examine the firm's unique situation. Leaders must also tie culture to the firm's long-term strategic goals. Working with experienced resources inside or outside the firm is key. The one on one time helps experts to experience the culture organically existing at the firm. After the partner interviews, a diagnostic tool–we recommend and use Human Synergistics' diagnostics tools–is used to survey the firm and provide relevant data analytics on which to act. From the surveys, the firm's current culture (what lawyers and support staff experience in the current operating environment) and the ideal culture (what lawyers and support staff envision the best version of the firm should be) are identified. These data points are then reviewed and a plan for addressing the areas most misaligned is put into place. The plan, backed by analytics and supported by firm policies and strategy, will together help to shift culture and promote organizational effectiveness.

The great news about shifting to an even more effective culture is that a firm may begin in one or two areas and expand from there. Whether it's the leadership team, associates, operations, or a combination, measuring effectiveness against the desired ideal will be worth the investment of time and resources, and result in building a collaborative, effective environment.

Resilient cultures are more adaptive to change, something that the legal world is very familiar with post-recession. Firms with resilient cultures are open to adapting alternative fee structures (mass application of fixed fees, blended fees), technology (including artificial intelligence), formulating and executing long term strategic plans, successfully transitioning client relations and leadership roles, and mergers or acquisitions (if it makes strategic sense). All of these topics have become increasingly important post-2008. We recognize that culture plays an important role in nearly every strategic decision a firm must make. The key is to include everyone in the firm in the process (particularly if decisions are being made that affect their jobs or work environment) for creating an effective, collaborative culture, to measure the existing culture against the ideal culture (as defined by all support staff and professionals), and to begin to shift the culture for change. The legal marketplace will continue to evolve and change in the coming years, so law firm leaders would be wise to evaluate and understand the culture dwelling within their own firm, in order to better grow their slice of the pie, build profits, and retain talent.

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