A Culture of Excellence

Ask the head of any major personal service firm – law, consulting, accounting, health care, investment management, etc. – about their firm’s culture, and “a culture of excellence” or “the highest quality professional work” is likely to appear high on their list – often first. Nor is that mere puffery. They believe it and work hard to make sure it is true – at least in their view. I spent the better part of my career as a partner in such a law firm, and I believed – and still believe – that my firm provided the highest quality legal work to its clients. Although the examples I give below concern law firms, they are typical in many personal service professional relationships.


That uniformity of response raises two sets of interrelated issues: first, how does one “excellent” firm differentiate itself from the others? Second, what do firms mean by “a culture of excellence” or the “highest quality professional work”? I describe those issues as interrelated because it is the very content of the definition of excellence that can function as a differentiator, So let me begin with the second issue.


Many professional service firms define the “highest quality” as pretty much equivalent to what they do, their classical approach to a given engagement. In the case of law firms, for example, I mean their approach to advice as to legal risk, to a proposed transaction, or a to potential litigation or investigation. For a period of about seven years, I left my firm to be general counsel, successively, at two large financial institutions. In doing so, I shifted to the other side of the lawyer-client relationship and dealt with a large number of law firms, all of which prided themselves on their culture of excellence – yet many of which practiced law quite differently from the others. I was initially astonished at how different the lawyer-client relationship looked from the other side of the table and how nuanced the issue of “the highest quality legal work” looked from where I sat.


A Culture of Excellence within a firm

Let’s begin with mistakes. I would venture that every professional makes them in the course of a career. Sometimes they are so serious that they are there for all in the firm – and even the public – to see. Others are serious but can be fixed or remedied in private. Others are minor. Sometimes the mistake is tiny but the consequences are huge. In one much-discussed incident, a young lawyer put the decimal point in the wrong place and a $15 million loan was secured by a mortgage on commercial real estate only to the extent of $1.50. To make matters worse, I believe that that the project ended up in bankruptcy.


If a professional who has made a mistake believes that everyone else in the firm is doing “excellent work,” that professional is likely to think that he or she is a rotten tomato in a basket of beautiful fruit. In a firm that holds itself out as doing the “highest-quality legal work,” the tendency to fix the problem and avoid any discussion of the incident, inside or outside the firm, is often irresistible.

What is the consequence of that approach? An important learning experience is lost, along with the opportunity to develop a systemic solution to minimize the likelihood of the error happening again. The culture of the firm strongly inhibits a partner – no less an associate vying for partnership – from saying “I made this mistake – let’s look for a systemic solution to make sure it never happens again.”


Contrast that with the practice in hospitals, where a serious morbidity or mortality event is closely examined for root causes and is often required to be reported to state health regulators. Surgeons now physically write their initials on the body part to be operated on to ensure that they cut in the right place. Extensive checklists have been developed to prevent recurrence of untoward events. Similarly, the most experienced pilots are required to make extensive use of checklists prior to takeoff. In contrast, law firms and other personal service firms usually rely on the “two sets of eyes” safeguard, in which a second professional looks over the work before it is released. I need not rehearse the wide variety of reasons for which the second set of eyes can miss an error. How many personal service firms have checklists that are used after a project or new draft is completed but before it is released? How many firms look to the practices adopted by other personal service organizations when a mistake occurs? See Atul Gawande’s excellent book, The Checklist Manifesto: How to Get Things Right (Metropolitan Books, 2009).


More generally, and even more important, what does “the highest quality professional work” mean in each firm – other than the standard of practice they currently adopt? How common is it to conduct firm-wide and continuous discussion of what the firm means by “the highest quality professional work?” How highly is creativity valued? Is a culture of continuous improvement part of that discussion? In the absence of a broad-ranging and more or less continuous discussion, the standard of practice may mean different things to different partners, the adoption of checklists and other fail-safe processes may be sporadic and what the firm is striving for may be opaque to younger lawyers.


From the client’s viewpoint, “excellent legal work” means a lot more than work that is error-free and creative. As a general counsel, I was struck by how seldom a firm came to me at the outset to discuss our objectives in a new transaction or new litigation. For example, I was seldom asked questions like the following: What are your business objectives in this project? How much legal risk are you prepared to take to achieve your business objectives? How do you weigh those objectives against the likely cost of the transaction or litigation? How important are the principles underlying this project – is a loss likely to expose you to more litigation? How would you like the work divided between inside and outside counsel? Is this a “turn over every rock” project or would you prefer something quick and dirty? How important are the reputational issues? All of those and more are part of the client’s view of “excellent legal work.”


Quality of work is also from client's perspective

When the client assesses the quality of the work, what weight do they give to client service broadly conceived? How promptly are questions answered? Are they tailored to the sophistication of the client? I remember how irritated I became as a general counsel when, having practiced corporate law for many years at my firm and serving as a Commissioner of the SEC, I received a long memorandum reviewing the basic concepts of securities law before addressing the question I had asked them to consider. How is the flow of communication between the firm and the law department managed? Is it informal and sporadic? Are the lines of communication clear? When developments occur that are likely to escalate the cost of the project, is there a full discussion of the alternatives in advance? Does the client believe that the firm is staffing the project in the most cost-effective way?


Finally, we come to the issue of differentiation. Firms try to differentiate themselves by the length and depth of their “deal list” – the transactions they have done, the litigation they have handled, the investigations they have conducted. But unless the client is looking for a firm that has handled a specific issue, the deal list of any firm in a given size and quality band often does not look that different from that of the others in that band. A professional services firm that defines what it means to provide advice and services of the highest quality, that adopts processes to catch errors and to learn from them, that discusses with its clients the nuances of the clients’ definition of the highest quality service and that adopts a process of continuous improvement with metrics whenever possible will be substantially ahead of much of the competition.


 

As always, I welcome your comments, thoughts and reactions.

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