ROBIN’S BLOG
Robin has 30 years of professional and financial services marketing experience. Here he provides commentary about some of the key evolving issues within professional services strategy and marketing. The aim is to provoke thinking and provide useful information that marketers can use within their firms as they continue to improve performance.
thriving… Improving marketing, business development, client satisfaction, and financial performance.
What do clients want firms to focus on?
Managing Partner’s Forum, together with the FT, recently published the results of a study into effective client-advisor relationships.
The Co-op and accountancy firms
Accountancy firms will need to become places of creativity, imagination and, most of all, passion for their pursuit.
This will go beyond the parochial nature of the personal relationships by which many practitioners currently set so much store. It will mean thinking about strategic messaging and branding in ways that perhaps have so far been ignored.
Profit per equity partner….?
While the data relates to UK law firms, many of the underlying issues are true for any professional services firm, anywhere.
You can access the executive report by this link but its interesting that what is measured is the outcome of activity.
So, if Profit per Equity Partner (PEP) or Work in Progress (WIP) levels are key measures of success for your firm, the next question to ask is “what actually influences these?”
The executive report of the study notes the importance of“placing more emphasis on the strategic element of support roles”. It also notes the influence of fees per fee-earner and of pricing on the overall performance of firms.
But again, I would bring the “strategic elements” of the marketing into focus here and say “if fees per fee earner and effective pricing are outcomes, what is the best way for marketing skill and expertise to contribute?”
Its perhaps worth asking that question of yourself, and for your firm.
The levers of growth and profitability
Unless you have unique technical skills that others cannot replicate, you must do the right things (i.e. have the right strategy) and do them as well as possible (which means really good implementation across the firm).
We don’t live in a perfect world and the comforting thing about that is that you don’t need to get everything working perfectly, or in absolute alignment, to succeed.
Nonetheless, there’s huge benefit in understanding the key levers to pull that result in increased billings or reduced costs, whether you’re the managing partner, or responsible for performance in a particular function.
Some of the key components that drive improved profitability are:
- reduced write off
- improved client acquisition
- improved ability to extend relationships
- increased client value
- more productive referrer relationships
- pricing for value and profit
- reduced sales costs
- better use of human resources
- effective resource management
- better use of technology
- reduced operational costs
Effective marketing and HR activity can have a much bigger impact across a range of these areas than managers often realise. We will shortly have some free resources available on this, so email me at or call me on 44 (0)7940 886677 if you’d like to access them.
What kind of firm do we really need to be?
Its still a challenging time for professional services firms. But many are now starting to look ahead
Markets have changed or even disappeared and client needs in the future will be different. To prosper, firms need to ask themselves: “What kind of firm do we really need to be?”
I’m seeing a number of firms doing this but I do worry about the direction of some of the efforts, being intrinsically “internally” driven. There’s little point in defining a firm that looks great in the insight but doesn’t drive value for clients and referrers, isn’t realistic as far as the market is concerned, or doesn’t differentiate the firm from its peers.
To get a realistic answer to these fundamental questions, firms should listen to, not only existing clients, but also prospective clients and those who regularly refer work to them. That will define the nature and required levels of its future performance for it to successfully compete, by:
– providing input into its strategic thinking with a view to expanding what it provides to, and the share of business it wins from its current clients;
– ascertaining how it is perceived by clients, referrers and the market place;
– identifying any clear requested improvements or gaps in its capability against what its market needs, both currently and in the future, or competitors are providing;
– identifying any significant strengths and weaknesses against relevant competitors;
– understanding levels of client awareness and receptivity to current services and how these may need to change.
Consider the following – would better knowledge about any of the following areas help you further secure your firm’s future?
- What are the most profitable opportunities?
- What is the potential demand for new specialisms?
- Where should the firm position itself and build capability to gain more profitable business?
- How is the firm perceived by key clients and referrers, and how does it compare to key competitors in fulfilling these needs?
- How can more revenue be generated from the current client portfolio?
- How can you evidence a robust revenue stream when talking to potential new partners, mergers or investors?
- How can you reduce client loss and create more predictable and sustainable billings?
- In which of your clients is there untapped potential for more work?
- In which of your intermediary relationships is there untapped potential?
- How can you improve the return and revenue from marketing and BD efforts?
- How can you ensure all of your investments – including training and CPD – help improve revenue growth and profitability?
Key Performance Indicators – art, science or luck?
More of my clients and contacts are thinking about, or implementing ways to better manage performance of both the firm as a whole and individual staff.
Unsurprising perhaps. If economic growth continues to be slow, how does the firm grow profitability? Either by acquiring/merging (which of course brings its own challenges and concerns about the quality and sustainability of revenue accessed) or gaining more and/or higher margin work. In other words, not tracking the market but building market share in profitable areas. Performing better.
But the responses being made are interesting. In one case, the firm was initially looking at measuring the quantity of documentation produced by fee earners to evidence business development effort. There’s an understandable desire to measure something that you can get your arms around, but the implications of going down that route are;
– high amounts of bureaucracy/unproductive time both in documenting and reviewing effort
– grudging compliance by fee earners (at best) and avoidance by others
– “the document stays the same, but the date on top changes…” to meet the measure
– little evidence of a strong relationship between documents and extending client relationships.
I’ve said elsewhere (and I can’t claim any original thought on it) that key performance indicators need to be strategically relevant, important, influenceable by those being measured, and without an inordinate burden of time being placed. The other key piece of course, is that there has to be some form of reward and recognition for fee earners and any other staff meeting or exceeding the KPI.
The following isn’t a fully comprehensive list, but some of these indicators are worth considering for any professional services firm:
– Client satisfaction with firm
– Share of spend by client in relevant area
– Number of cross practice referrals generated
– Likelihood of recommendation
All of these meet the criteria noted above and have a much more direct link with the ability to extend client relationships, win more work, and generate higher quality earnings.
So a bit of art, a bit of science, but definitely not luck.
Getting the best from your CRM vendor or advisor
The 2011 “Managing Client Relationships – the truth in professional services” study has just been completed.
It includes feedback from 277 participants on the activities they undertake, the level of benefits gained, their expectations for investment in CRM and use of systems, together with feedback about vendors and systems and the ways to extend the value and contribution that can be made by advisors.
Today, 98% of firms gain some benefit from managing client relationships, but (for example) only 26% have achieved major improvements in the ability to cross-sell.
Some of the other top line findings are:
* 93% of firms will invest cash in CRM systems and activities this year
* 52% of firms believe they will upgrade their CRM systems in the next three years
* 36% say they are likely to move to a different system/vendor
* 37% of participants would speak highly of their current provider while almost as many (29%) would be critical
A free copy of the executive report is available at:
https://www.thrivingcompany.co.uk/improvedResultsFromCrm/
so just copy and paste the URL to access it.
Strategic Options for Professional Services firms
Writing in Accountancy Age (www.accountancyage.com) recently, Scott Barnes prompted firms to consider (the) “good M&A opportunities for those that are brave, as firms will need to look for mergers/partners given the long lasting nature of the recession and the very slow recovery.”
I don’t have any argument with that per se. Firms across professional services sectors should think deeply about how they secure the capability and how best to meet whatever objectives they have in a more (ahem) “difficult” economy.
But while some firms instinctively look for the “M&A button”, mergers or acquisitions themselves are of course fraught with risk and uncertainty and aren’t always the right answer. They can be protracted, there’s always the risk they don’t conclude successfully, and even if it happens, if the culture isn’t right or if there are other material obstacles, the net effect can be to reduce value and to be a long and painful distraction from securing core objectives.
So, what might be the right approach to determining if M&A is the right option to take? I’d suggest a two stage process.
1) Be very clear headed about the capabilities that you need at attain to reach your firm objectives (for example to grow billings or profitability by x%). Make sure this isn’t based on supposition but is about the skills, resources, market perception and other “assets” you need to have. Be diligent, challenge your assumptions and make sure you know this based on what the market thinks, not on what you guess…
2) Evaluate various strategic options to gain the improved capabilities you need. Mergers aren’t the only game in town necessarily. Other appropriate ones for the firm might be redeploying, alliances, recruitment, refocus/exit from some markets, organic building etc.
Review each option against 5 criteria (I mustn’t claim credit for these as Professor Tony Grundy, now of Henley and previously Cranfield School of Management defined them). There are a number of areas you should consider under each one, but in summary they are :
Strategic Attractiveness – How well does this fit in with what we really want, and what is important to the firm?
Implementation Difficulty – In other words, would the option be a reasonably easy thing to do (thus scoring highly) or will it involve a lot of time, additional resource, skills we don’t have a lot of, worry and sweat!
Financial Attractiveness – How much better (or worse) off do we think we’ll be with this option? What investments, other costs, and potential payback is involved?
Uncertainty and Risk – In summary, a blend of “what is the possibility that this could go wrong” and “how bad would it be if it did?”
Stakeholder Acceptability – If fee earners, referrers, clients, shareholders, lenders think the option is fantastic, then the option scores highly. If it is very likely to result in valued partners or strategically important clients exiting, it doesn’t!
Thinking through both these areas in an honest and considered way, with an input from clients, and not just based on your best guess, is a much more powerful recipe for success.
FT report into law firms and clients
The FT, in conjunction with Managing Partner Forum, has just undertaken a study including over 400 participants drawn from senior fee earners in law firms, and decision makers in law firm clients. You can access more detail at www.pmforum.co.uk – look for “putting clients at the heart of your firm”
The key findings include the point that clients are increasing rigour in procurement, having more frequent incumbent reviews, and are introducing more stringent performance measurement. What is also perhaps concerning is that clients and law firms have different views about what makes a successful relationship. For example:
- Clients look for more than legal expertise and they value a broader range of attributes (including transparency in pricing) than law firms recognise
- Clients want law firms to better measure performance and track satisfaction levels, though a more structured approach than they currently get. 30% say that the way their current main firm tracks performance and satisfaction is “not effective at all”
- Clients don’t think law firms provide enough information, or understand the client business enough.
Do you know what your clients think about these issues? Is there a gap between what your firm “knows” or believes, and what they do?