Adventure of Strategy

Does a firm's culture influence the likelihood of successful execution of its strategy?

You bet it does! Culture is an extremely important strategy driver.

Misalignment between what strategy needs and what the firm's culture supports or evens allows, is one of the most fundamental causes of breakdown in strategy execution.

This makes it critical to, in the first instance, be able to accurately measure and describe a firm's culture. Then only can its alignment with strategy be assessed.

There are many tools on the market that purport to analyze culture. Most rely on "scale of 1 to 5" questionnaires that are translated into diagrams of one sort of another, to show where the firm is "strong" or "weak." The problem with most is that the ratings often relate only to the firm being surveyed. They are not benchmarked against the market.

This is a very significant failing. What, after all, does "4.2 out of 5" really mean? If all your competitors would score 4.6 for the same question in the same survey, then you are performing poorly. If they would score 3.6, then you are doing well.

What metrics should be measured? Another important question. There are so many aspects to culture that it is impossible to be exhaustive. It's also unnecessary. Only those metrics that have a proven link to profitability are really important, in the long run.

At its most basic level, culture is how partners or shareholders, associates and support staff work together and interact with the firm's clients. It determines what is rewarded, merely tolerated, and actively discouraged in the firm. It is about how people view their future and their roles in the firm. It is code for "good" and "bad" things and "how things are done around here." It is about attitude.

A recent Edge International survey of law firms in several countries worldwide, each with over 100 attorneys, showed that 34% believed it "likely" or "highly likely" that they will be involved in a merger with a similarly sized firm in the next three years. Of the firms that believed such a merger would be "unlikely" or "highly unlikely," the primary reason was:

"a fear of losing their culture."

Yet, despite general acknowledgement of the core strategic importance of culture, when law firms are asked to describe their culture, they almost inevitably revert to euphemisms such as:

"collegial" .... "democratic" .... "comfortable .... "

Culture is not static, but can and does evolve over time. There are many similarities between an organization's culture, and an individual person's personality. Just like different personality types are better suited to specific lifestyles or careers, so different cultures are better suited to different strategies. A process driven firm that specializes in conveyancing, debt collection or routine insurance defense work, for instance, requires a completely different strategy and consequently a different culture, in order to optimize profitability, to a high end commercial firm specializing in hostile takeovers. Ultimately, there are no "good" or "bad" cultures. Rather, there is alignment or misalignment between culture and strategy.

The tool that we use to measure and describe culture is based on several decades of research into what aspects of culture are most closely aligned with profitability. An individual firm's responses are furthermore benchmarked against a global sample of organizations now running into the thousands, to yield a true picture of how the firm is performing in a competitive sense. (That way, you know exactly what your "4.2 out of 5" means!)

Called the Cultural Inventory, it has been used very successfully on a range of professional service firms, including law firms and accounting firms across the globe. To receive a 12 page document outlining the tool in detail, please email me and I'd be happy to send it to you. (The file, while not huge, is too large for me to post to this blog site.)

As always, comments are most welcome and may be posted below.