A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘business development’

6 strategic shifts and implications for HR

In Articles, Commentary on 8 November 2017 at 4:22 pm

By Joel Barolsky and Sue-Ella Prodonovich

If you have HR responsibilities in a professional services firm then you’re working in the epicentre of turbulent times. Changes to our workforce population, participation and productivity are throwing up new challenges while the expectations of firm owners and employees are changing – but not necessarily in sync.

Here are six strategic shifts we’ve observed which we believe will have profound implications for HR.

#1 Shift to the rocket model 

The next five years will see a migration away from the pyramid model towards the rocket model. A typical pyramid structure has a partner at the top supported by one or two senior associates and four or five juniors. In the rocket model, most juniors are substituted by a combination of technology and para-professionals.

For HR this means

  • Partners need a new set of skills and knowledge to manage their rockets and to win and deliver projects, profitably
  • Improvement in digital literacy across the board.
  • The end of the apprenticeship model that involves training juniors on-the-job on low-level process work.
  • New recruitment markets, processes and criteria to include non-technical areas.
  • Measurement and reward systems that reflect non-time-based pricing, innovation and collaboration.
  • Managing a much more diverse culture of professionals, para-professionals, technologists and project managers,

#2 Shift to workforce accordions

Most firms currently operate with a defined cohort of full-time staff. With growing variations in client demand, there is a growing trend towards the accordion model. This model means having a blend of full-time staff plus a pool of pre-selected trained variable cost contractors. Corrs’ Orbit, Minters’ Flex, Pinsent Masons’ Vario, Allen & Overy’s Peerpoint are firm-based accordions. LOD (Lawyers on Demand), LexVoco, Crowd & CoBespoke are examples of specialist providers in this space.

Other variants of the accordion include flexible work arrangements, hot-desking, secondments, reverse secondments and sabbaticals. Maddocks recently reports that over 20% of its partners were working outside the ‘normal’ 8 to 6, five days a week model.

HR complexity increases exponentially as a firm increases the variability and flexibility of its workforce.

#3 Shift to smart collaboration

With the increased competition from in-house providers, boutiques and individual freelancers, most multi-service firms are recognising that their main competitive advantage lies in the collective. If firms continue to be just a collegiate group of individual practitioners, then they will lose share to other competitors with lower costs and/or better-perceived quality.

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Source: uspinjaca.hr

While economic geographers have identified the positive relationship between physical co-location of knowledge workers and firm performance, HR plays the critical part of bringing capable people together. It’s through true cross-practice collaboration that the firm can offer something that others can’t. Bringing a diverse set of expertise and experiences to solve clients’ toughest problems is more profitable, more fun and more valuable to the client. It’s also a lot harder to do.

#4 Shift to supportive intolerance

There is ample evidence that better leadership leads to better performance. Firms with a depth of leadership capacity across all its partners are in a much better position to handle market uncertainties than those with just one or two stars.

Developing leaders doesn’t just happen through a wish and a prayer. It requires a particular style of operating, first coined by David Maister, called ‘supportive intolerance’. The support bit is offering partners personal insight/reflection, coaching and training to help them develop their full leadership potential.

The intolerance bit is making them accountable for their actions and inaction. This means calling-out behaviours inconsistent with firm values, providing constructive, prompt and honest feedback, having full transparency around agreed actions, and if all else fails, reducing reward as a sanction.

HR should be the lead change agent in introducing this style of leadership and operations. Again, it’s really hard without formal authority, but it’s critical to the firm’s long-term sustainability.

#5 Shift to loving the problem (not the solution)

While we try to do more with less and stay up with game-changing ideas, many HR professionals are still expected to solve day to day problems so it’s easy – and tempting – to go into problem-solving mode.  Boudreau and Rice’s caution for HR professionals:  “Embrace too many ideas (from popular talks and articles) or apply them too superficially and you’ll develop a reputation for fad surfing. Dig beneath the surface to the fundamental scientific research and insights and you can set the stage for true impact.” So one thing HR can do to add more value is ‘fall in love with the problem’ – that way you’ll look forward to spending more time on understanding them more deeply.

#6 Shift to ambidexterity

One can think about firm strategy as two parallel streams: one being ‘exploit’ and the other ‘explore’ (based on the work of O’Reilly and Tushman). Exploit refers to efforts to leverage current strengths and capabilities to make the current core business as good as it can be. Explore refers to new exploratory and experimentation efforts that will hopefully bear fruit in the future.

Firms need to become more ambidextrous, that is, change the firm’s culture so that everyone embraces explore and exploit in his or her everyday work and client interactions.

In an environment of rapid change and hyper-competition, every firm needs a healthy portfolio of both exploit and explore initiatives. A genuine commitment to exploring will most likely mean substantial changes to the firm’s dividend policy and capital structure. Firm governance and structural arrangements are also likely to be impacted, as will marketing, pricing, IT, operations and, in particular, HR.

Join us in Melbourne November 21 or Sydney November 22

HRMinds have asked Joel Barolsky and Sue-Ella Prodonovich to help finish their year of seminars with a discussion of major trends and practical ideas for those with an HR remit. These November workshops will be in Melbourne on Tuesday Nov 21 and Sydney Wednesday Nov 22. Details and registration here.

From pyramids to rockets to ecosystems

In Articles, Commentary on 19 October 2017 at 8:36 am

The pyramid has been the foundation operating model in professional services for the past century. Put simply, a typical pyramid has a partner at the top, one or two senior practitioners below him or her, and then four or five juniors below them. These ratios obviously vary from practice to practice. Leverage of the mid and lower levels of the pyramid is currently the profit engine of most professional firms.

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More recently there has been much talk of the pyramid losing its bottom left and right corners and becoming a rocket. In this model, there are far fewer juniors and their work will now be done by a combination of technology and lower-paid process workers. The rocket is being driven by powerful clients demanding that services be ‘disaggregated’ (using Susskind’s term), that is, highly-trained practitioners doing advisory and judgement tasks and technology and para-professionals doing process activities.

In my view, the rocket is not the destination but merely a stepping-stone. The rocket model doesn’t really take into consideration the growth of client co-creation and client involvement in the delivery of services. It largely ignores the role of third-party software vendors, freelancers and experts in adding value to the firm’s offering. And lastly, it underplays the potential impact of HR, IT, BD and Pricing functions.

Take this recent case study for example. In August 2017, Allens-Linklaters won the highly-coveted ILTA Innovative Project of the Year award for its Real Estate Due Diligence App (REDDA). Allens’ Chief Legal Technology Officer, Beth Patterson, stated that REDDA was “the result of a collaboration between partners, real estate lawyers, technologists, project managers and business analysts at Allens, client representatives and artificial intelligence provider Neota Logic.”

This case study illustrates a future with a delivery model where a partner or project leader will configure up to six different types of resources, in the form of an ecosystem, to address a client’s need or solve a problem (see diagram above).

A cup of latte is pictured at a cafe in Sydney

Source: vocative.com

It’s important to distinguish this ecosystem model from a multi-disciplinary offering. The latter involves multiple professional services or technical disciplines working together. The former is focused on one service line, such as legal, integrating multiple resources, both people and technology and both firm and client, to provide the most cost-effective solution.

Even if I’m half right, there are profound implications of moving to the ecosystem model for firm strategy, culture and operations. Almost everything is likely to be impacted, most especially the firm’s basic economic model and profit engines. It will also profoundly change recruitment and development, measurement and reward, pricing and firm governance.

How ready is your firm for this kind of future?

Are your practice groups primed to win?

In Articles, Commentary on 26 April 2017 at 8:23 am

If each of your practice groups is primed to win, then there’s a pretty good chance your firm will win as well.

With this in mind, there’s much benefit to be derived by assessing all of your practice groups on two dimensions:

  • A winning strategy – from strong to weak, and
  • Execution capability – from strong to weak.

 

Illustration of portfolio map – not real data

 

If most of your practice groups are in the weak-weak quadrant, perhaps it’s time to take that call from the headhunter. If all the groups are strong-strong, don’t change a thing! If you have a mix of everything, it’s time to get to work…

A winning strategy

There is a range of factors to take into consideration to assess whether a practice group has a winning strategy for the next three years:

  • Does the practice have clear aspirations to win? Is there a stretch intent?
  • Are they competing in sizeable, growing and profitable market segments?
  • Does the practice have a compelling value proposition, that is, clear reasons why clients should choose them over others?
  • Does the practice have a profitable and sustainable business model? Bonus points if the model is scalable.
  • Is there a Plan B if non-traditional competitors strengthen?
  • Are there pilots and experiments in place creating options for future growth?
  • Is there a clear implementation roadmap with accountabilities, measures and timing?
  • Is it clear what they say ‘no’ to, and why?

Execution capability

On paper, the practice group might have a world-beating strategy but it may not have the skills, resources and systems to implement it.

a cup of coffee on the wood table.cafe latte with tulip latte art pattern on the wooden background.

Source: fotolia

The first, and most important, the question is whether you have the right practice group leader. Is she a true leader or merely a convenor? Does she lead or just manage? While she might seek to lead, does she have loyal followers? Does she have the ability to inspire and support team members to be their best? Is she strong enough to stand up to the recalcitrants?

Other questions to ask around execution capability:

  • Is the team a real team or just a loose coalition of colleagues?
  • Does the team generally follow-through on their commitments?
  • Does the team own its strategy and take accountability for it?
  • Does the team have the right talent necessary to win, now and in three years time?
  • Does the group have access to the right technology, processes and systems to underpin its business model?
  • Is there sufficient open-mindedness to adapt to new inventions and work methods?
  • Are there mechanisms in place to regularly review progress and tweak their plans?

The portfolio

While it’s important to assess the competitiveness of each practice, there’s also a lot of value in assessing the inter-dependencies, synergies and gaps across the portfolio. Another portfolio overlay is the amount of partner equity allocated to each group and expected ROE (return on equity).

A review of the portfolio should indicate which practices require investment, divestment or just be maintained. Handling the politics of these decisions is a topic for another post, or three.

In conclusion

While a firm is more than just the sum of its parts, the parts play a critical role in sustaining success. Your firm’s strategy needs to reflect firm-wide themes like overall market positioning, culture, brand, strategic clients, talent, R&D, infrastructure and support. It also needs to deep dive into the practice portfolio, making sure each plays its part and leverages the strengths of the whole.

Is 2017 the year the fat smoker quits?

In Articles, Commentary on 19 December 2016 at 12:38 am

Eleven years ago David Maister published a brilliant article on the barriers to strategic change in professional service firms. In Strategy and the Fat Smoker, he stated…

Much of what professional firms do in the name of strategic planning is a complete waste of time, no more effective than individuals making New Year’s resolutions (to lose weight or give up smoking).

David argued that most firms were far too successful to seriously consider any radical shifts in strategy. He stated that unless partners faced imminent existentialist threats, equivalent to cancer or a heart attack, they were just going to pay lip-service to a strategy that involved any sort of change.

Much of what I’ve read and experienced as a strategy advisor affirms David’s proposition. But is 2017 going to be the year the fat smoker quits?

Early signs

Over the past six months I have been involved in a significant strategy project in a 100+ partner law firm. One thing that has struck me about this project compared to many others, is the degree of partner engagement in the process. They’ve all turned up. What’s more they all turned up with their their phones turned off. They’ve all seriously tackled the questions of where they will play, how they will win and what change is needed. It’s still a bit early to see if they will execute on their plans, but the early signs are positive.

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Source: Shutterstock

In undertaking the research for the 2016 Thomson Reuters Peer Monitor Melbourne Law School report, I counted more than 25 case studies of established Australian BigLaw firms launching new services, business models or joint venturing. Each one of these changes would have had to pass through a vote of partners. This points to a resolve to innovate AND, more importantly, the ability to follow-through.

The typical resistors to change are very well document, but I think there are three factors that might make 2017 the year of slimmer, healthier professionals.

#1 Transformed leaders

“Company transformations accelerate when a critical mass of leaders transform themselves… Insight is the first step. Choice is the second step. Practice is the third step.” Carolyn Aiken

It’s a big call, but I think many of Australia’s professional service leaders have begun to transform themselves. They are going through the personal change journey of rejection and denial, through to acceptance and commitment. Many have seen the writing on the wall, challenged their beliefs and sought to reinvented themselves. This has in turn has led them down the path of changing the people around them and crafting a new strategy and culture for their firms. With a stronger guiding leadership coalition, firms themselves are in a much better position to embrace change.

The evidence for my transformed leader assertion is not definitive. It’s based largely on the tone and content of discussions at recent conferences, retreats, panels, media comments and blogs. The dialogue at this fabulous Chris Merritt-hosted panel is a clear case in point.

#2 Hip pocket

The 2016 Peer Monitor report indicates lower overall profit per equity partner due, in part, to declining client demand, increased discounting and rising expenses. The data also suggests a wider variation between top- and bottom-earning firms.

For many partners, there is increased pressure to justify their equity status and share of profits. Even a small drop in earnings or a delay in distribution payments, signals the reversal of a long-term trend of growth and abundance. The misfortunes of KWM in Europe have also raised more than a few eyebrows. The hip pocket is now in play, even though at this stage it’s more symbolic than catastrophic.

#3 Client pressure

Leadership guru, Simon Sinek, has a very simple but compelling message: start with why! His view is that success comes from finding an authentic purpose for the firm. The answer to the “why” question in most professional firms is about helping clients succeed, that is, saving clients money, reducing their risk, solving their problems and realising their opportunities sooner. The voice of the client is a big deal in many professional firms. How clients think and feel is a key catalyst for change.

With a shift to a buyers market, more and more clients are speaking their mind and voicing their pains and gains. Many more are asking for their professional advisors to share risk and justify their fees. While this client pressure is not a new phenomenon, 2017 will seek a continuation of this trend and force many professionals to adapt to new models of service and pricing.

In conclusion

The pace of change is only likely to increase in the years ahead. While many commentators paint a picture of doom and gloom, I have a more optimistic view and see clear signs of firms remaking themselves. There are forces at play softening the ground for fundamental and sustainable change. Yes, there will still be laggards, but as Maister concludes…

If we are prepared to rethink how we view strategy and business life, then people can achieve things they never thought possible. If I can become a fit, nonsmoking exerciser, there’s truly no limit!

Postscript

Thank you all my clients, referrers, collaborators and friends for a fantastic 2016. It’s been the best year yet in the life of Barolsky Advisors P/L.  I hope you have a safe and rejuvenating holiday season and a prosperous 2017.

Two-speed firms: the problem and solutions

In Articles, Commentary on 20 November 2016 at 5:22 pm

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“We have a two-speed firm! There’s one group of partners who are ambitious and willing to spend the extra energy necessary to win new business. And then we have another group, who work hard but are broadly happy with the way things are. In reality, they expend far less energy than the first group. The problem is we’re all rowing the same boat. Rowing at different speeds makes us go in circles, not forward.”

Does this sound familiar?

The expectations of partner energy, commitment, speed, fire-in-the-belly, etc. are missed in most strategy discussions. You might have motivational words in your purpose, vision and values statements. Your goals might include stretch revenue and profit targets. But, if you look carefully, there’s nothing there on how much petrol needs to be spent by each individual partner. It is just ASSUMED that every partner will be equally committed and energised.

Five key reasons

I think think there are five main reasons why energy expectations are not adequately discussed:

  1. Remuneration model: the view in some firms is that those willing to invest more will be paid more, and therefore there’s no need to talk about it. The problem is that discretionary reward, on its own, is a very blunt (and lazy) performance management tool. Over time, it entrenches a multi-speed firm.
  2. Measurement: there’s no easy and accurate measure of energy level. Firms may have proxies like billable hours or hours worked, but these measures can be gamed and do not really capture the temperature of belly fire. As firms introduce different business models and new flexible work arrangements these measures become even less relevant.
  3. Confrontation: talking about energy expectations inevitably leads to heated discussions as to whom is contributing more or less. Firm leaders often prefer harmony over harrowing debates around relative commitment.
  4. Autonomy: in many firms partners believe their autonomy is paramount and should not be questioned. As owners, they should be free of “big brother” accountabilities around how and where and how much time they spend.
  5. Outputs over inputs: some people will argue that assessing energy feels like clock-watching – a focus on time spent rather than outcomes achieved.

#1 Focus on partner engagement

The conventional solution to address a two-speed partnership is to shine the light on the “under-performers” and hope that this will shame them into speeding up. This is often coupled with a stern conversation around accountability and the threat of sanctions. In my experience, this approach seldom has enduring success and often ends badly.

An alternative approach is to shine the light on everyone in the spirit of support and development. The idea here is to frequently check-in with the whole partner group on questions like:

  • What’s going well?
  • What’s causing you the most stress at the moment?
  • How’s your team’s strategy implementation going?
  • What support do you need?
  • What are your key priorities over the next period?
  • What things might get in the way of success?

The logic there is that through greater transparency and a more supportive leadership style there will be a positive impact across the board. This approach is aimed at growing the overall pie and reducing dissonance between the fast and the slow.

The reason this approach is seldom attempted, or, if it is, implemented badly, is that it requires the firm leaders to do some serious heavy lifting. It’s practically impossible to do well in medium and large firms.

Until now…

There are a range of new applications, like Jobvibe (an Australian start-up), Wethrive and Culture Amp, that allows for easy frequent check-ins to assess how people are feeling at work, and to identify and resolve issues quickly. The trick is to tailor the questions for professional services and for the partner group in particular, and to run it out of the managing partner’s office, not HR.

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#2 Agree a partner charter

A complementary approach is to agree the social contract between the firm and its partners. As Nick Jarrett-Kerr explains, these partner codes or charters should agree explicit expectations for each partner in regard to :

  1. their dealings with the firm, for example, to accept the spirit and the letter of the firm’s strategy;
  2. their treatment of the firm’s clients, for example, promoting the highest standards of professionalism, truthfulness, integrity and trustworthiness;
  3. their dealings with fellow partners, junior staff members and support staff; and
  4. their personal learning journey and commitment to ongoing development, improvement and innovation.

I’d suggest adding a fifth dimension which describes the expectations around commitment and energy levels.

#3 Team profit contribution

Some firm’s have shifted focus away from individual revenue targets to team profit contribution. Rather than set individual budgets, the core accountability is for the team to deliver a specific profit outcome. Team members need to work through the optimum approach, roles and requisite energy levels. While there are many positives to this approach, it may further entrench silos and factions. It may also hide enduring aberrant behaviour by some individuals.

Call to action

I don’t think there is a magic silver bullet to address the issue of variations in partner contribution. It’s a complex, politically sensitive problem. The key is not to ignore the problem as it festers rage in the fast, and facilitates a victim mindset in the slow. Without active positive leadership, you’re charting course for a circling boat.

Photo sourced from dreamstime.com

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