Six ways to drive behavioural change in your firm

In the third part of a series on values-based leadership, Nick Humphrey outlines strategies for successfully implementing behavioural change in your firm.

There are a number of key strategies for implementing cultural and behavioural change in firms. Here are six to get you on the path to success:

1. Align culture and strategy

2. Modify your partner performance systems

3. Promote formal and informal interactions

4. Focus on a few key behaviours

5. Honour your existing culture

6. Walk the talk

1. Align culture and strategy

“A strategy that is at odds with a company’s culture is doomed. Culture trumps strategy every time” – Katzenbach, Steffen, Kronley ¹

The most brilliantly conceived strategic plan is unlikely to be successful if the culture, values and behaviours of the firm are unaligned. A firm with a power-based leadership that has poor collaboration, rampant gossiping and which tolerates mediocrity is unlikely to be able to execute. It is far better to have a good vision that is well executed by a team with a values-based leadership bound by a strong and aligned culture.

More often than not the strategy, set by an insulated management, is at odds with deeply entrenched beliefs and attitudes.² Many leaders fail to correlate their desired culture with their business objectives, critical success factors or the strategic imperatives facing their business. The relative importance of the values and behaviours listed above will be more or less important depending on the macro-economic climate, competitive factors and the size and heritage of the firm.

Competitive factors

(Size of market, number of competitors, new entrants, substitutes)

You may be facing a hyper-competitive market from new and well-funded entrants (for example, global firms launching in your jurisdiction and poaching your talent and clients; or accounting firms launching legal practices) or cheap offshore competitors providing software which enables DIY skills such as book-keeping. In such cases, a culture and values which promote innovation, client service or nimble decision-making are more likely to be important.

Size

(Number of staff, partners, offices and clients)

The alignment of culture and values in a small firm (especially a single office) will be quite different from a large firm, particularly a global one. In a small office it is quite possible for each partner to see how every team is working (the quality of work, hours worked, daily behaviours) so transparency and openness tend to be less important. In a large, multi-office firm, it is practically impossible to see how other teams are working, so management needs to be more formal and transparent, including reporting on performance.

Regional differences

(Regional and geographic spread)

A firm with overseas offices will also have a more complex task of defining those unifying values and behaviours given the melting pot of different religious, ethnic and educational backgrounds of the various offices.

Tolerated behaviours

(Negative values which have become accepted)

A firm that has a high ‘regretted turnover’ due to entrenched behaviours such as discrimination, bullying or harassment will need to prioritise eliminating those poor behaviours (which are costing them potentially hundreds of thousands of dollars in having to re-hire and train new staff, as well as the impact on morale of a toxic culture) and focus on respect as the core value.

Diversity

(Ethnic, age, religious beliefs)

A firm whose leadership is dominated by men and which is unable to attract and retain woman (particularly in senior positions) will need to prioritise values of diversity and encourage behaviours of inclusion and flexible work practices.

2. Modify your partner performance systems

To implement a change in culture, you will need to integrate new protocols, measurements and rewards into your partner performance, reporting and reward systems. It is becoming more common for large firms to include a ‘balanced scorecard’ approach to partner performance, whereby not only financial performance is measured but also the ‘soft’ side of performance such as leadership, values and exhibiting expected behaviours.

If a partner fails to uphold the firm’s values and acts in a counter-cultural manner, then their performance will be marked down accordingly and, in turn, their remuneration will be held or reduced.  In instances of more serious behaviours (such as bullying or harassment) the partner could be expelled from the firm.

As a leader, remember that you get what you measure and reward. If you only measure and reward billable hours, then you are likely to find partners will be solely focused on billings.  If there are no rewards for upholding values and adjusting behaviours, then you are less likely to get compliance.  Similarly, if management says the system tracks non-financial performance and rewards a balanced contribution by a partner, but it really only rewards financial performance, then partners will be solely focused on billings. A common example of this is when senior partners who are rainmakers are allowed to get away with poor behaviours (siloed work, not referring work to better qualified teams, bullying, harassment etc).

The measurement of behaviours is best done through 360-degree feedback from that partner’s team, along with other partners, teams and support directors. You need to be cautious when reviewing such results. As they are given anonymously, be aware that someone may simply hold a grudge against the partner. Alternatively, if a junior employee is asked to review their partner they may fear retribution for giving poor feedback (and potentially give neutral responses).

3. Promote formal and informal interactions

Aetna, a large health insurer, is a useful example of a company that was able to implement a successful cultural change – and modern law firms can learn from its lessons. In the late 1990s, it was struggling with eroding customer affinity, blossoming lawsuits, substantial overheads, archaic processes and was losing almost $1 million a day.

The source of its trouble could be credited to its intransigent culture and values. In, particular, veneration of the company’s 150-year history had bred complacency and a sense of entitlement. Its employees had become risk averse, tolerated mediocrity, resisted change and there was a mindset where employees felt entitled to ‘a job for life’.

Aetna went through four CEOs in five years, each one failing to overcome the entrenched beliefs that were at odds to the growth strategies. Mergers with other more aggressive, performance-based businesses failed to dislodge the conservative culture.  If anything, it seemed to embed it further. In 2000, John Rowe became the new CEO and faced the challenge of turning the business around. The key tools of his transformation strategy were employee focus groups, informal interactions and finding influencers.

Focus groups:  Rowe organised forums among employees at varying levels across the business to discuss the what, why and how of the company’s values and beliefs:

– What were the actual values and what should be the values?

– Why were those values not being exhibited in daily behaviours?

– How could they revitalise those values; in particular, how could the leadership behave to ensure the right employee behaviour?

Informal interactions:  Rowe also used informal connections with employees, such as ad hoc telephone discussions, impromptu meetings and social visits to ascertain how the employees were feeling and to clarify their concerns and fears.

Influencers: Rowe was also able to identify a group of influencers from various levels of the hierarchy. These were the people who exhibited the values, beliefs and behaviours that he wanted to reinvigorate. These discussions not only gave him valuable insights about the concerns and views of his employees, but also created a channel between him and a respected group that became ambassadors for his cultural changes.

(Source:  This case study was adapted from Katzenbach et al.³)

4. Focus on a few key behaviours

Research shows that only 1 in 10 people faced with a life-threatening illness are prepared to make the major lifestyle adjustments necessary to their diet and exercise regime.⁴ Changing our behaviour is hard, even in the face of strong evidence that we must. So rather than trying to do a complete overhaul, management will need to prioritise and focus the program on the critical changes.

Avoid a laundry-list: Many firms simply adopt a laundry-list approach to their values. They pick out a long list of vague, feel-good words that do not have context in that firm’s heritage or relate to the strategic imperatives facing the business. They are so general and universal that they do not assist in differentiating the firm.⁵

It is clear that honesty, integrity, teamwork, courage, trust, collaboration, innovation, community, hard work and so on are likely to be significant values for everyone, but the key is to focus on the top three or four only.  If you list 20 values and associated behaviours, they will lose significance.

Prioritise: To set priorities, Katzenbach, Steffen and Kronley⁶ suggest:

“First observe the behaviour prevalent in your organisation now, and imagine how people would act if your company were at its best, especially if their behaviour supported your business objectives. Ask the people in your leadership groups, ‘If we had the kind of culture we aspire to, in pursuit of the strategy we have chosen, what kinds of new behaviours would be common? And what ingrained behaviours would be gone?’ Say your firm is interested in becoming a better service business. If it excelled at service, how would people treat customers differently?  What kinds of interactions would be visible in any new offices you opened?  How would employees propose new ideas or evaluate one another?  How would they raise difficult issues or bring potential problems to others’ attention?  And how would employees react when they actually saw colleagues doing things differently?”

Use workshops:  When choosing priorities, it is important to hold workshops with stakeholders at different levels of the firm.  Ask them what they believe are the current values, behaviours and beliefs – both positive and negative. Ask them how they are impacting on the business, how they are aligned to the strategic imperatives and how they are holding the firm back from achieving its business objectives.

If being innovative is critical to the success and survival of your business, then focus your values on creativity and innovation and drive behaviours that foster that (and block the anti-value of introspection). If the agenda of management is solely focused on financial KPIs, if teams are solely judged on billable units, if all your systems are built around reporting on profitability and there is a culture which does not tolerate making mistakes, then you are highly unlikely to drive innovation. Consider the value statement for Facebook – “Move fast and break things.” The reference to breaking things implies that it is all right if you make a mistake.  It encourages management to stay nimble. Its gives people permission to try things.

5. Honour your existing culture

It will be useful to ensure you understand and honour the strengths inherent in your existing culture. It can be easy to focus on the negative behaviours, which are sometimes isolated to a few rogue individuals, rather than positive cultural traits. By focusing on deeply ingrained positive values you will unite your stakeholders. It becomes the ‘glue’ that binds your partners and teams together.  It can be a unique differentiator for your firm in hiring and retaining talent, as well as interacting with clients. “Acknowledging your existing cultural assets will also make major change feel less like a top-down imposition and more like a shared evolution.”⁷

Harvard Business School has written a case study on the unique culture at law firm Duane Morris and the importance of understanding the firm’s roots.⁸ Historically, the firm had strong ties into the Quaker community and was founded by a number of influential Quakers.

Although the firm ceased to be managed by Quakers many years ago, it remains strongly influenced by Quaker values, which in turn have driven distinctive governance, culture and perspectives on doing business: “Quakers believed that human interactions should be non-hierarchical and based on consensus in order to avoid the tyranny of the majority. One could never know who might, at a given moment, manifest the truth, so it was wise to listen to everyone. Hence, one of the most notable Quaker elements of Duane Morris’s culture was the reliance on consensus-based decision-making.”⁹

6. Walk the talk

Too often the cultural values and behaviours of a firm are simply words on a page, screen saver or a poster.  The firm’s leaders themselves do not really believe in them and merely pay them lip service. Partners are the face of the firm both externally (to clients and other service providers) and internally (to other partners and staff) and must embrace and uphold the common values.¹⁰

Perhaps the values statement was written by someone on the executive team (or outsourced to a consultant) and presented as part of the business plan, but the stakeholders of the firm did not go through the journey of discovery, a process that is critical to select the values and behaviours that uniquely represent and guide the firm. It is important that the leaders of the firm ‘walk the talk’ and genuinely believe and uphold the values.  Individually you should make your own personal values widely known and be proud to uphold them. Expect others to hold you accountable to them.

Shortly after Antony Jenkins took over as CEO of Barclays he announced a new group-wide set of values. He made it clear that everyone needed to buy in to these standards as it was critical for banks to regain the public’s trust in the wake of the global financial crisis. He wanted to redefine values around service and stewardship to the bank’s clients. In an internal memorandum he said: “My message to these people (who don’t adopt the new values) is simple:  Barclays is not the place for you. The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues.”¹¹

As confronting as such an action may be, law firms would do well to embrace it.

Nick Humphrey is a partner and head of corporate at Sparke Helmore. He is the chairman of the Australian Growth Company Awards and author of several books on business and law, including the Australian Private Equity Handbook.

www.sparke.com.au

Footnotes

¹  Jon R. Katzenbach, Ilona Steffen, Caroline Kronley, “Cultural Change That Sticks”, Harvard Business Review, July 2012, https://hbr.org/2012/07/cultural-change-that-sticks/ar/1

² Jon R. Katzenbach, Ilona Steffen, Caroline Kronley, “Cultural Change That Sticks,” Harvard Business Review, July 2012, https://hbr.org/2012/07/cultural-change-that-sticks/ar/1, page 2.

³ Katzenbach, et al, pp 1-3.

⁴ Katzenbach, et al, page 2.

⁵ Id

⁶ Id

⁷ Katzenbach, et al, page 3.

⁸ Boris Groysberg, Robin Abrahams, “Duane Morris: Balancing Growth and Culture at a Law Firm,” Harvard Business School, Case study 9-407-025, 2006.

⁹ Boris Groysberg, Robin Abrahams, “Duane Morris: Balancing Growth and Culture at a Law Firm,” Harvard Business School, Case study 9-407-025, 2006, page 2.

¹⁰ Daly and Newton, “The values of values”, Hays Journal, Issue 6, 2013, page 19,  http://www.hays-journal.com/issue6/

¹¹ Daly and Newton, “The values of values”, Hays Journal, Issue 6, 2013, page 21,  http://www.hays-journal.com/issue6/