“Culture eats strategy for breakfast.”
Peter Drucker
Back when I was a Managing Partner in a law firm, I did not think nearly enough about law firm culture. I really should have, but not only because it is the secret to business success. No, I should have thought more about firm culture because it is a crucial factor in whether or not lawyers are happy in their jobs, and as we all know, many of them are not very happy.
Now that I am retired and entertain myself by writing about the legal profession, I have thought about law firm culture quite a bit. One of the conclusions which I have reached is that it is virtually impossible to change the culture in an existing law firm of any size, because the partners tend to have entrenched values which dovetail nicely with their compensation. It only takes a few senior partners who will resist any change which might adversely impact their income to derail the process. And there are always at least a few of them around.
When I get the opportunity to speak to someone who has thought about changing cultures in law firms even more than I have, I am always interested in talking to them. And when that person is actually doing something about it, I can become quite a fan boy.
Most of my satisfying conversations with lawyers about their firm cultures have been with people who are starting new firms with a view to doing things differently. I love hearing about how they are building their firms on healthier principles, and I cheer them on and wonder why I never had the brains or guts to do what they are doing.
As you can imagine, I am pretty jaded about law firms that say all of the right things about firm culture. My glib line is that I will believe them when they move the firm culture discussion from their marketing department to operations.
And so I go on looking for the unicorn: a firm of some size which has actually changed their firm culture and is enjoying success as a result. Although my cynicism persists, I am wondering whether I found one.
For those of you who are not familiar with the law firm of Loopstra Nixon (“LN”), it is a regional firm based in the Greater Toronto Area which has been around since 1973. In the last few years it has been on the move, opening offices in New York City and Buffalo (2017), Vaughan (2018), downtown Toronto (2022), Newmarket and Ottawa (2023), and Kingston (2024). Some of that growth has been by absorbing smaller local firms. (It also has the distinction of being the only law firm that ever sued me for negligence. They lost, but they tell me that they are much better at it now.)
In any event, LN is now up to over one hundred lawyers and seems poised to grow further. I recently reached out to their managing partner, Allan Ritchie, to ask him what he does to protect his firm culture in the midst of all of this change. He replied by telling me about their compensation system, because he understands that you get the behaviour that you reward.
While the notion that compensation drives behaviour is hardly new, what I found illuminating in my conversation with Allan was how much time and effort his firm has put into developing their values and aligning their compensation system with them. I found it particularly interesting to learn that they did so as part of an intergenerational transfer of the reins of power and equity where the older Partners are still there, respected, and contributing, and have bought into the new direction. It was clear to me as he described the process, which took over 4 years to complete, that it could only work because of the character of the people involved.
A few of the things that Allan told me about that I found particularly interesting were the following:
- Under LN’s compensation system, a Partner working with an Associate has a direct financial interest in that Associate’s profitability. The Partner gets paid more money if they properly train and mentor their Associate. Their reward for doing so is not the usual namby-pamby fluff that many firms put forward about “your mentoring efforts will be rewarded in compensation” or “that is just what we do as Partners.”
- In a bit of a throw-back to a bygone era, LN thinks in terms of their lawyers staying with them over the long-haul and lays out a transparent roadmap of how to get to Partner, with several stops along the way. They set out the criteria for advancing from Summer Student to Articling Student to Associate to Senior Associate to Salaried Partner (that was a new one on me) to Income Partner to Equity Partner. Allan tells me that it is working and that the tenure of lawyers at their firm is quite high compared to the average.
- Law firms are somewhat famous for short-term thinking. With the focus on profits per equity partner in the current and next year, it is difficult to get buy-in for decisions around implementing technology, or to encourage people to mentor the next generation of lawyers. Let’s not even talk about the ‘just below the surface’ thought process about the effect that a lawyer’s parental leave is going to have on their supervising Partner. I am told that at LN they have managed to get the Partners to think a few more years into the future (and commit their thoughts to business plans), which makes for much better management decisions and more acceptance of lawyers at various stages of life.
- I asked Allan about an attitude toward admission to partnership which I have seen in other firms. As one law Partner who I know used to say, “at the end of the day it is our club and we decide who we want to admit.” Allan told me that at LN their approach is the opposite. They set out objective criteria and want people to get there. Because people can see their path forward, they do not get frustrated and jump ship. Allan said that “becoming a partner is very difficult, but not complicated.”
- Firm management at LN is so awash with data and makes so much of it available to the lawyers that the lawyers use their knowledge of the data and the compensation formulas to do what they have to do, and do not have to be hounded to do things like record their time, get their bills out, or collect their receivables. He describes a system which is almost self-policing.
- Allan talked about the ‘big tent’ and the firm welcoming people from different backgrounds, and at different stages of life. He spoke about an Associate billing 1,500 hours being just as welcome as an Associate who bills 1,800 hours, and Partners billing 1,200 hours and Partners billing 1,800 hours all being one big happy family. I really, really, want to believe him.
- And finally, LN has done away with the dreaded compensation committee. Imagine the sheer volume of hours which can be reclaimed from the ‘sucking up’ budget!
Of course, I remain skeptical as to whether LN’s approach will continue to work if growth slows down and the room for new Partners shrinks, or profitability takes a hit and rainmakers start looking for opportunities elsewhere. I used to have a partner who liked to quote the old adage that “a rising tide lifts all boats” and LN appears to have convinced their lawyers that this is the case. I just spent too many years observing lawyers trying to get the tide to lift their boat higher than their partner’s boat to know whether or not you can really keep lawyers rowing in the same direction over the long-term. But it certainly is a good starting point to hear a managing partner saying all of the right things, and I wish them luck and am cheering them on from the sidelines.