When Cultures Clash: Why the Rise in Law Firm Mergers Has Left Leaders Asking for Help
Smaller law firms are increasingly the focus in the race for mergers in 2019 now that many of the major players have already chosen their partners; but that doesn’t mean the challenges for leaders as they attempt to combine two, often very different, business cultures are any less pressing.
Below Lindy Cozens, Executive Coach, EMEA at Black Isle Group, explains to Lawyer Monthly that mergers have always posed a significant range of complications for firms looking to create a new, unified and accepted culture without haemorrhaging talent in the process or even harming the bottom line or alienating customers.
Despite that, the trend for joining forces appears to show no sign of abating. There were 72 completed law firm mergers in the US in 2018 and a further 27 in the first quarter of 2019. In the UK, there were 12 mergers involving firms in the Lawyer 100 alone last year. So, although many of the bigger mergers are already complete, leadership specialists are finding that smaller firms joining forces can provide even more complicated leadership issues.
The reality is that some firms are scrambling to find a match in a rush, nervous that the pool is growing ever smaller, and often choosing businesses which are not a cultural fit, increasing the risk of joining a ‘bad’ culture and setting up problems for the future. The external risks are clear. Melding two cultures is rarely easy and in many cases a merger involves one organisation effectively exhuming another, creating an environment in which employees of the smaller operation fear their job and responsibility and development is under threat. It is often more difficult to go from a small firm, where employees often undertake tasks beyond their job title, to a larger one where the same levels of trust and empowerment may not be as evident.
The management structure of law firms provides a challenge, too, and they are not always renowned for their leadership and management skills. After all, Partners are selected and promoted based on their legal aptitude and often find themselves managing people for the first time in their lives in their late 30s or early 40s when they have already picked up all manner of bad habits – and so the culture self-perpetuates across the business. They certainly aren’t given the kind of leadership support or training they need, especially in the event of a merger.
If you look at the high-profile mergers of recent years, how many can truly be regarded as successful? Those which self-identify that way are often hiding the truth and when you peel under the skin, you’ll find it has been problematic. Some, of course, were managed well but others were manged poorly and not only destroyed value but lost talent, too.
Some of the key aspects for leaders to consider in the event of a merger are:
- Assess the culture in advance of a merger, not after, and be prepared to walk away if it isn’t right. If the culture doesn’t work, you’re in danger of losing the firm’s best partners very quickly. In so many cases, deal fever sets in and businesses embark on unsuitable mergers but culture mapping, identifying the strengths in each organisation, can help to prepare for, and predict, future problems.
- The biggest question partners will ask is ‘where do I fit in’, so address that question early and assign roles as early as possible. There’s a myth that this cannot be done transparently, but it can. Be explicit about what roles are available and the demands of those roles. Then, in interviews, include representatives from both businesses plus an independent third party so that the decision is an objective, shared one.
- The speed of the process is vital to negate rumours and avoid unrest. So, appoint heads of departments early on rather than allowing managers from two organisations to work and ‘compete’ against each other as they fight for the top jobs. A swift process creates more clarity.
- Consider who is best to deliver messages and don’t feel they all have to come from the top. Empowering heads of department to deliver key messages, and supporting them throughout the process, can often have better results than leaving all statements to the CEO.
If we look at mergers that have been perceived to go well, then often it is because the businesses took time to map out their cultural differences and understand them, discussing and rehearsing everything in the boardroom before it happened in real life. Good leadership addresses fear, which can be the most debilitating aspect of a merger, puts people first and handles the human element properly. When French oil giants Total and Elf merged, for instance, there was real gossip around their very different cultures and whether they could possibly co-exist. But the board addressed those fears, diligently set in place a timetable of culture mapping and predicted the times when they could clash. Now Total are number three in the world.
It shows that mergers, when handled correctly, can be successful if businesses remember the golden rule that people matter. Too often the focus is on the perceived ‘big stuff’, the corporate goals and ambitions, and companies forget that people’s fears are the most complicated factor. After all, it’s very difficult to listen to positive messages, no matter how enlightened or inspiring, when your primary thought is a fear that your role could change or be lost.