In Industry Insights

By Chris Sweetman and Jonathon Bray

“Culture eats strategy for breakfast”. Although some would argue this well-known quote overstates things, most people accept that culture plays an important part in business success. 

And with hybrid working here to stay, high profile headlines about working practices, and the SRA’s recent thematic review and guidance, the subject of culture has quickly moved up the agenda of law firms. 

In this article, we’ll look at what culture is, why it’s important and some steps that firms can take – both to meet the SRA’s expectations and achieve the wider business benefits of a strong culture.   

What is culture? 

Culture is an amorphous thing so can be difficult to define. 

A common metaphor is an iceberg, with a portion ‘above the surface’ that can be ‘seen’ – like dress code, the working environment and perks and benefits. And a portion that sits below the surface which includes organisational beliefs, values, and norms and which only becomes visible through the statements and behaviours of those who work in the organisation. 

This iceberg metaphor is reflected in how the SRA describes culture. Their thematic review recognises that culture is established by the behaviours, attitudes, and values of leaders and employees, and adds that it’s supported by systems, controls, and procedures.

Why is culture important? 

So, what are the benefits of articulating and developing your culture, especially that part that sits below the waterline? 

The SRA focussed on wellbeing in its thematic review. They found that firms who prioritised it as part of their culture experienced the following benefits: 

  • Lower turnover of staff and reduced recruitment costs
  • Able to attract new talent and small businesses to grow
  • Protection from claims because employees come forward and admit mistakes
  • Easier professional indemnity renewal 
  • Improved client experience because of happier and more productive staff 
  • Differentiation in the marketplace for clients.

If we look at wider aspects of culture – things beyond well-being – we could add: 

  • Higher performance – a 2018 McKinsey study of over 1000 organisations found that those with top quartile cultures (as measured by its Organizational Health Index) post a return to shareholders 60 percent higher than median companies, and 200 percent higher than those in the bottom quartile.
  • Increased employee engagement – other research shows that employees feel engaged when, among other things, they are invested in their company’s future and culture
  • Innovation, creativity, and adaptability – organisations that genuinely value, reward, and recognise new ideas will inevitably be more innovative and creative and be better placed to respond to threats and opportunities that emerge in their markets. 
  • Leadership and decision-making – clearly articulated values and behaviours can be a helpful anchor for leaders when there’s a need to navigate uncertain waters and make difficult decisions. 

SRA requirements

The SRA has become interested in culture for several reasons, but chiefly their concern is about the regulatory and ethical risks associated with so-called ‘toxic’ cultures. Visible elements of a toxic culture might include behaviours and attitudes such as:

  •  A ‘blame culture’, where people are tempted to hide mistakes and make poor ethical decisions for fear of being humiliated by supervisors, or reprisals affecting their career progression.
  • Treating junior staff and anyone who isn’t yet ‘profitable’ poorly.
  • Bullying and harassment which, when perpetrated by senior members of the team, can be emulated by others.
  • Management sweeping poor behaviours ‘under the carpet’ to avoid embarrassment, regulatory reporting, or the risk of losing a high performer.
  • High pressure to achieve unrealistic targets.

So concerned is the SRA about this issue that the professional rules were amended to address culture head-on. A 2023 revision to the individual Code of Conduct inserted the following requirement:

“1.5 You treat colleagues fairly and with respect. You do not bully or harass them or discriminate unfairly against them. If you are a manager, you challenge behaviour that does not meet this standard.”

‘Manager’ means partner, director or equivalent. For the first time there is a positive regulatory duty on law firm leaders to intervene when a team member is being subjected to ‘unfair’ or ‘disrespectful’ treatment. The regulator wanted this duty to apply to all solicitors, but rolled back following consultation. 

The rules already contained self-reporting duties for all serious conduct concerns, whether or not fully founded. And under the Code of Conduct for Firms there is a responsibility to have in place “effective governance structures, arrangements, systems and controls”. This would include things like proactive policies, clear reporting lines, staff and management training and monitoring.

Reviewing your culture 

To meet the SRA’s expectations, and achieve the benefits of a strong and clearly defined culture, here are some steps that firms can take:

  1. Review and update your values. Many firms have a set of values, which sit on their website, in client proposals and on walls in the workplace. If they’re not brought to life, however, through a set of behaviours and aren’t incorporated into day-to-day operations and decisions, then colleagues (and clients) may just see them just as a set of words, rather than something that reflects the things the firm stands for and truly believes in. Taking steps to ensure that your values and behaviours are aligned with your strategy can also support longer-term plans for business success.
  2. Recognise that leaders are ‘a voice’ around the table, not ‘the voice.’  An unspoken assumption about defining culture is that it’s a job for the leadership team and that everyone else falls in. Involving colleagues from different levels and parts of the business in discussions about culture can increase engagement, generate fresh ideas, and increase buy-in to new cultural initiatives at a later date. 
  3. Role-modelling is key. As in all business, the most senior people in the firm play a crucial role in influencing culture. Other staff will be listening to what they say and watching what they do – the things that sit below the waterline – to get a sense of what is and isn’t valued in the firm. If a firm pledges that excellent client service is the most important metric of success and a partner keeps financial performance at the top of their agenda for team meetings or devotes the most time to it, then that pledge won’t ring true. It’s vital therefore for leaders to ensure that their behaviour aligns with the culture the firm wants to encourage. 360 feedback exercises are a useful tool to help leaders understand their areas of strength in this context as well as opportunities for development.
  4. Consider a culture audit. Knowing that the regulator is seriously looking at the issue of culture and well-being, a growing number of firms are commissioning external auditors to analyse the visible and intangible elements of the ‘iceberg’. A good culture audit will give leaders insight into how the firm’s values impact on day-to-day operations and broader commercial and regulatory risks. Actionable suggestions will become apparent from this process of analysis and reflection.
  5. Accept that it might take a while. Clarifying the firm’s culture and reaping the benefits is a journey, not a destination. It’s unlikely to happen overnight (although you can make quick progress in some areas), and is constantly evolving. But if you remain committed, and invest over time, you can build momentum and reap the rewards in the long-term. 

As law firms navigate the increasingly complex terrain of modern legal practice, cultivating a robust and positive culture is not just beneficial but arguably essential. 

Making a commitment to a transparent and respectful workplace – where employees feel supported, risks are managed, and clients are protected – will not only meet the SRA’s requirements but can also set a firm on the path to sustainable success, characterised by high employee engagement, innovative practices, and improved client satisfaction. 

By viewing culture less as a static state, and more of a dynamic framework for growth and adaptation, firms can ensure they not only survive, but thrive in the challenging legal landscape of the future.

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