DO FIRMS FAIL BECAUSE OF THEIR CULTURE?

By Michael Goldstein

In an earlier News & Views, I stated that, "firm culture to me is the totality of behavior patterns and thoughts characteristic of a firm's population, their beliefs and services, their attitudes and actions." Do firms fail because of their culture? That is, do they become no longer viable financially because of their firm culture, or do culture differences leave partners unable to come to an agreement on important issues, e.g., common goals and profitability issues. Or perhaps the firm culture causes partners and employees to desert en masse. The answer is that any or all of the above can come about as a result of a firm's true culture. Following are only three of many attributes that, if not positively present in a firm's culture, could lead to its demise.

Direction. Incompatible visions, missions, and goals can be fatal. Sometimes these incompatible ideas haven't even been shared among members of the firm. There is a need for planning and a common understanding regarding where the firm is going. In many instances there is a lack of planning, perhaps just poor planning, or a convoluted partnership agreement, which itself may be the result of poor planning.

Mergers are frequently put into place without a genuine look at the culture fit--the result, culture shock. Do the firms share a common philosophy on how to do business? While their goals may be the same, their how-to may be totally different. To name only a small sample of where attitudes may sharply vary; how does each firm feel about work ethic, risks, work environment, community involvement, and new ventures? To some, only the dollars make sense.

Whatever the reason for the lack of a uniform culture, this is frequently accompanied, in both the smallest and larger firms, by the attitude that strategic planning is nice, but who has the time. Some fantasies about where the firm is headed become the mission. Whatever the reason, attitudes such as "allow the firm to grow in any direction," and "don't bother to plan or talk to one another about it" pervade the organization.

Leadership. Is there anything in the firm culture that dictates what it takes to train and be a managing partner? Is it simply a case of the founding father (hopefully, at least, a benevolent despot and something of an entrepreneur, or the rainmaker) who controls the business, calls all the shots, right or wrong, beats up on the "techies," but is able to replace lost clients? Sometimes after a merger, the firm ends up without a single up front leader, but rather, some kind of Alphonse and Gaston act--"you first." Or even worse, a committee!

Hopefully the firm culture calls for training managing partners who are both leaders and managers, a culture that says, managing partners do not compete with the other partners, e.g., in areas such as compensation. But rather, the firm managing partner is someone--a coach and cheerleader--evaluated on what his or her people do. Without a real coach in charge, most firms do not get past the first generation, usually with the successor to the business--if there is any successor--retaining only a fraction of the practice.

Performance Quality. Everybody talks about performance quality, a great deal has been written about it, and it has been discussed at length many times in the past. It will continue to be a major topic for discussion, but is quality really part of a particular firm's culture? Without quality performance, there is no question that a firm can die either slowly from starvation or a bit more quickly from litigation. However, one thing is certain about quality being a part of a firm's culture--all the published plans, memos, and other policy documents are not nearly as important and influential in setting policy as the signals sent out about the priorities of the firm and the attitude of its management toward quality.