Friday, 14 February 2014

Did Culture Destroy This Company?

I was surprised to read that a top ten Canadian law firm had closed down. The partners of Heenan Blaikie LLP had voted to dissolve their 40 year old firm of more than 550 lawyers. They chose to do so after recording a profit of $75 million on $222 million revenue in 2013. What would make them do that?

In the last week, Heenan Blaikie's demise has been attributed to:
  • The 2012 retirement of Roy Heenan, one of its founders and chairman for 39 years
  • The inability of the executive committee to appoint a replacement
  • Replacing the two long-standing co-managing partners of the firm and heads of the Montreal and Toronto offices
  • In-fighting between the new co-managing partners and their teams
  • No aligned vision of the future or long-term strategy
  • Product mix issues caused by a decline of M&A and resources industry work due to the recession
  • Greater competition and client demands for big discounts
  • Over-expansion during the recession 
  • Reputation damage through association with a client charged 
  • Restructuring, downsizing and cost cutting tensions
  • Loss of star partners, along with their clients and capital
  • The closing of a few large files that were ongoing sources of revenue
  • Exodus of partners (40 in the last few weeks of the firm), many being poached by other firms after partners learned that profitability (and their compensation) decreased by 15 percent versus last year
  • A change in culture
I found the last reason the most revealing and significant. How did a culture change contribute to closing a venerable law firm that had attracted former Prime Ministers (Trudeau and Chr├ętien) and other dignitaries to join as partners? To answer this question I had to understand the culture before and after it changed.

Heenan Blaikie LLP was formed in 1973 by three school friends. Their partnership was sealed by handshakes. As the firm grew, a people-first culture was built and maintained by the partners, led by Roy Heenan. "We had a happy firm where people liked each other. We didn't try to be the highest-paid firm but the happiest firm in the country." John Craig, who joining in 2001, described the firm as "a really great place to work. It wasn't the stuffy Bay Street environment that people hear about." Many partners described the culture as collegial and family-like.

In the last couple of years, there was more focus placed on M&A and financial business. Hiring practices also changed. One person observed that they were hiring for revenue versus cultural fit. "They were just taking on people to bring in a lot of money." 

Managers began scrutinizing and comparing practices, questioning billable hours versus lawyers employed. Matters became worse when some partners left for more money. Mark Power, a lawyer in the Ottawa office, said "The issue isn't that Heenan Blaikie was not profitable; the issue seems to be that it was not profitable enough for some." 

Without a leader or a common vision of the future, squabbling, rivalries and power struggles heightened between the Toronto and Montreal offices. Accusations were made that offices weren't contributing their fair share. As Roy Heenan summed it up, "There was no trust" and people weren't working as a team. Once you start feeling that this isn't a happy place, you go somewhere else."

Marcel Aubut, partner and Canadian Olympic Committee President, joined another firm on Monday. "My team and I are joining an entrepreneurial and forward-thinking company, two important criteria that (match) my values." He may not have had to if the values and culture at Heenan Blaikie had survived.

Phil

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