Law firm strategy is more likely to succeed if it is backed by a culture empowering employees to carry it out. Jaime Fernández Madero led a discussion about whether new cultures emphasising collaboration and learning are a reality or just wishful thinking.
"Culture eats strategy for breakfast" is a phrase coined by legendary management consultant Peter Drucker to emphasise that without the appropriate working environment backing it up, business strategy can fall to bits.
Law firms are far from immune to the damage a bad working environment can do to achieving targets. Built on the individual knowledge pools of their partners, they can be precarious structures. "Lawyers prefer to create individual capital for themselves rather than for their firm," says Jaime Fernández Madero of Fernández Madero Consulting. "Good firms recognise that fact and try to compensate for it by creating organisational forces that connect people to the firm." A positive culture can be the source of those forces and the glue that holds everyone together.
Firm leaders are acutely aware of the sway culture holds. A survey of Latin Lawyer Elite firms found that managing partners at every single one think about culture when deciding their firm's strategy. Some 85% said their firm's culture is very closely aligned with strategy, while the rest afford culture some importance.
In deciding their firm's future trajectories, many managing partners are moving away from traditional law firm cultures. More firms are defining their working culture as one driven by collaboration and common purpose rather than by traits more conventionally associated with law firms, such as competitiveness and individual achievement.
It's not that firms are any less motivated to achieve excellent results, but their view of the route to achieving them has changed. "Collaboration and trust lead to results," sums up Francisco Ibáñez of Mijares Angoitia Cortés y Fuentes SC. "Results are a consequence of culture and the way you are working with your partners to achieve things for your client." Law firm leaders have identified a direct link connecting collaboration between partners and an improved bottom line, and are making the former rather than the latter their chief target. "The primary focus is to have a trustful relationship with the people you work with," says Jaime Carey. "Money is a consequence of that and if you have a firm that lives by that you'll get good results, but it doesn't work the other way around."
Law firm leaders are measuring success in different ways besides profit. For example, Ferrere's ambition is to achieve a leading position in the jurisdictions it operates in (the firm is one of two market leaders in Uruguay and is elevating the position of its offices in Paraguay, Bolivia and Ecuador). "We decided to invest in the region, aiming to grow collaboratively and occupy a leading position in those countries," says managing partner Agustín Mayer.
In an increasingly crowded legal market, economic advantage does not always translate into competitive edge. "We decided some time ago that we were going to put our competitive advantage into those things that money cannot buy," says John Aguilar Quesada of AguilarCastillo Love. "In the legal profession you have to rely more and more on soft skills, like faithfulness and commitment."
As well as building working environments that foster greater trust and interdependence between partners, Elite firms are seeking more flexibility from their lawyers, which sometimes translates into a greater willingness to learn new skills.
The line of thought is that cultural styles that emphasise these traits will better equip firms to meet new market pressures and client demands. Increasingly, clients are drawn to one-stop shops. They want to work with the partner who's best for the job, not the one they know. They want flexibility on fees. They like firms with international operations because it saves time and effort on cross-border matters. Increased competition from international firms and alternative service providers like the Big Four mean Latin America's law firms are under pressure more than ever to adapt to client demand. Meanwhile, the rise of artificial intelligence gives firms the choice of either getting on board with new technologies or risk falling behind.
Though many managing partners aspire to have a culture driven by collaboration and interdependence, often the reality falls short of that. Few can hand on heart say their own partnerships value teamwork above all else. "We have a mantra within our firm that collaboration is our goal," says José Eduardo Carneiro Queiroz of Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados. "We've worked towards this for many, many years and we are getting there, but we still have miles and miles to go."
Perhaps the biggest obstacle in the way of firms adopting a more collaborative culture is the detrimental effect such a culture is perceived to have on financial turnover. Law firms must be profitable to survive and it can be difficult not to give turnover a predominant position in law firm strategy. It's all very well fostering a collaborative working environment, but for some the bottom line must come first. Pablo Berckholtz of Estudio Echecopar – a member firm of Baker McKenzie International – puts it simply: "The danger comes when you don't have results, because that's where you'll run into problems."
Eschewing a culture that prioritises individual achievement above all else has been known to have a detrimental effect on the all-important lifeblood of a firm: profits per partner. The concern is that when collaboration is measured over individual performance it paves the way for underachievers to ride off the coattails of others. Simone Musa says her firm, Trench Rossi e Watanabe Advogados, achieved a more collaborative culture over time, through incentives to client and matter management, as well as increased peer evaluation at the senior partner level. But promoting changes in the remuneration system to increase collaboration has a short-term cost, as differences in partner performance and contributions are exposed and the transition generates some tension. "One needs to adapt and learn how to succeed in an environment of collaboration and peer evaluation," she says. "It is, however, a necessary step for partners to perform better, to work in teams and to have the proper incentives to create multidisciplinary, higher value services or solutions for clients."
Perhaps the type of lawyer most likely to be turned off by a culture of collaboration is the star player. Senior partners – rather than lawyers at the start of their careers – are less likely to work interdependently with their partners (although this is by no means a hard and fast rule). Amir Bocayuva Cunha reports that at BMA - Barbosa Müssnich Aragão the older generation of partners tends to work more independently, whereas their younger partners are more predisposed to collaborating with peers. The same is true for other firms. "The younger generations are much more horizontal: they all push to the same side," says Marcelo den Toom of M & M Bomchil Abogados. "It's more natural for them to collaborate more, maybe because while there are star performers among them, their star is not that big yet."
Finding a common purpose between a large group of people of different ages and stages in their careers can be difficult. More than 60% of Elite firms count more than 100 lawyers, and uniting that number behind the same cause is no easy feat. In the experience of Brigard Urrutia's Jaime Robledo, most lawyers are open to collaborating in principle, but building a common purpose between them can be a tougher call. "The difficult part has been convincing old-school lawyers who have grown incredibly successful practices doing it their way that they have a common purpose with the mindsets of younger lawyers starting their careers," he says.
One area that can expose the gulf between ages is technology. AI is often viewed as a threat to the legal industry, as a way to commoditise practice areas and do away with entry level jobs in the profession. But although firms at the top of their markets are showing signs of adapting (one in three are already trialling or using the technology), is this enough?
Some are frontrunners in this regard. Fernando Serec identifies TozziniFreire Advogadosas being characterised by a culture of innovation more so than any other trait. The firm has a reputation for being especially forward-thinking when it comes to new ways of doing things; it is one of the few firms in the region already using AI technology based on IBM's Watson programme, and has a dedicated innovation practice.
But more generally, Elite firms don't characterise their firm's culture as one driven by creativity and learning. This would suggest that, for many firms, staying on top of technological advances that will shape the legal profession in the future remains an aspiration rather than a reality.
No easy answers
It is possible for firms to devise carefully orchestrated compensation systems that find a magic balance between giving leading partners their due and increasing the level of collaboration. "You can't have a successful law firm without the star performers, but you also can't have one without those lawyers capable of holding an organisation together, so you need to create incentives that strike the right balance between the two," says Pedro Eugenio Aramburu of Pérez Alati Grondona Benites & Arntsen. To achieve that balance it is fundamental to gather objective metrics on performance and profitability. "Having reliable information is essential to identify your flaws and overcome them, and to adequately compensate each member of the firm," says Aramburu.
Modified lockstep systems are now de rigueur among many leading firms in the Latin American market. But the extent to which they dictate the tone of a firm's working environment can be limited. "Individual-driven compensation formulas tend to create non-collaborative environments," acknowledges Fernández Madero. "But in my experience, even if you have a lockstep or something similar it doesn't automatically mean people will collaborate with each other."
Brazilian firm Veirano Advogados' experience illustrates this point. The firm began an extensive internal restructuring process some years ago, installing modern management structures and a modified lockstep compensation system. It wanted to move from a culture solely driven by results to one that was more collaborative. According to partner Rafael Gimenes, although the firm's leaders thought hard about how to roll this out in practice, ultimately, a top-down approach failed to filter down the partnership. Instead, it was a once dormant WhatsApp group – until recently largely silent save for once-in-a-while birthday wishes – that saw the first signs of the firm's change in spirit. "It was like the bottom of the iceberg finally surfacing. Perhaps such behaviours take their time and develop on their own, after all," reflects Gimenes. In the past six months the group has seen a flurry of activity, with partners using it to coordinate with each other on events and other promotional activities for the benefit of the firm.
Likewise, firms without lockstep compensation methods are capable of achieving a collaborative spirit. "Regardless of the compensation formula you can as a firm espouse certain values or principles," says Nader Hayaux & Goebel's Gunter Schwandt. His firm utilises a variation on the modified lockstep, which Schwandt describes as "a means to foster collaboration and sharing among the partners, but is neither a cause nor effect on our culture".
Some are convinced that for a shift in culture to actually be achieved, younger generations must lead the change. This line of thought supports the idea that culture cannot be imposed on a group, instead it must develop naturally (as was the case at Veirano). "Associates and young partners were born into the legal profession more orientated towards collaboration," says Héctor Kuri of Galicia Abogados. "A shift in culture has to come from the bottom up, not the top down."
This can be problematic in practice, however. Older generations naturally sit at the top of the law firm hierarchy, and their way of thinking sets the tone for how the firm operates. "Most of us developed our careers based on an ethos of working hard and only focusing on results and firm profits, and I think we're still hiring, firing and retaining talent based largely on good old-fashioned results," says González Calvillo SC's Cristina Massa.
There's an argument that younger firms, where hierarchies can be less deeply ingrained, or firms undergoing a rebirth of sorts – for example, following a split – can find it easier to achieve a culture of collaboration. The fresh start available to new firms can be an opportunity to rewrite the rules. BLP's Eduardo Calderón attests to this. Founded in 2003, his firm is the second-youngest of all the Elite firms. "'Collaborative' completely describes our culture," says Calderón. "We find that collaboration translates into better results for our clients."
Firms that change the status quo in other ways may also be in a position to more easily foster collaborative spirit. Musa draws a link between diversity and teamwork, and believes her firm's strong track record in promoting female talent (some 50% of Trench Rossi's partnership is composed of women, and women occupy two out of three managing partner positions) is part of the reason why there is a genuinely collaborative culture in place. "Women often do not make it to equity partner level in very competitive and individualistic environments," she says. "They are more likely to collaborate than men, less likely to fight for ownership of a client and more likely to introduce the client to a broader group of partners to work with," she says.
No law firm operates in a vacuum. Law firm leaders know that even the best laid plans are liable to fall apart, scuppered by metaphorical stumbling blocks put there by factors out of their control. It is therefore no bad thing for managing partners to view a culture of collaboration and learning as an aspiration and not yet a reality. Rather, building a law firm culture that correctly addresses the challenges of today's legal market can be viewed as a continuous improvement process than evolves with the growth of the institution.
Juan Enrique Allard of Guerrero Olivos knows this all too well. His firm was named one of the best companies to work for in Chile by the annual Great Place to Work rankings, but maintaining that positive atmosphere remains very much a work in progress. The firm is not immune to stumbling blocks: in 2018 it suffered the loss of its sports and entertainment division and split with its IP association firm. "Markets change," says Allard. "It could be that you face challenges growing your firm without losing the culture you already have. Or there could be a recession that triggers problems within your firm and you could suffer a spin-off. At the end of the day, it might be a reality today that you have a collaborative culture, but it has to be an aspiration too, because it's something you have to keep working on."
When it comes to encouraging lawyers' learning and development, it may also be enough that firms ensure they have started their journey – even if they haven't reached the finish line. After all, innovation does not need be represented by a big change to be effective. Posse Herrera Ruiz's Daniel Posse urged firms to be prepared to adjust where necessary, but not at the expense of building on existing strengths. Small adjustments can reap big rewards.
And of course, law firms do not need to innovate for innovation's sake. In reality, they are motivated to do so out of a desire to please their clients and win work. If the goal is to meet client demand, innovation can be a means to do that – but it is not the be all and end all for many successful firms. "Clients come to us to sort out their problems, possibly in the quickest and least expensive way," says Pinheiro Neto Advogados' Alexandre Bertoldi. "They come to us for the best possible solution. Whether it's a new solution or an old one, they don't care – they just want the solution."