A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘internal collaboration’

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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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Five steps to becoming a more agile firm

In Articles, Commentary on 31 August 2016 at 1:37 pm

Most professional service firms have woken up to the reality that if you’re changing slower than your competitive environment you’re going backwards. So the next question is, how do we change, or better still, how do we change faster?

This post offers a simple step-by-step guide to address this question.

Step 1: Choose your firm’s innovation approach and risk appetite

There are four broad options for consideration:

  1. Pioneer – seek to create a first-mover advantage by inventing new things of value.
  2. Fast follower – seek to adopt emerging ideas that appear to be working and allow others to bear the risk of failure.
  3. Sync with majority – seek to be part of the majority of firms that adopt new ideas when there is a clear and compelling case to do so.
  4. Laggard – seek to adopt new ideas when the opportunity cost of retaining the status quo becomes unbearable.

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It is important recognise that in the absence of an active choice, the Laggard option is the default position for most professional service firm partnerships. There are many well-documented reasons for this, but perhaps the most compelling is that most of these firms have cash-hungry shareholders unwilling to invest meaningfully in long-term R&D.

Step 2: Choose the type of innovation

Many firms tend to think of innovation as the invention of new products or services. This is just one of many types of innovation available along a firm’s value chain. A really useful typology has been put forward by Larry Keely and others in their book: 10 Types of Innovation:

For professional firms, the only thing I’d add to the Keeley model is “Pricing, risk and value” in the Offering (yellow-shaded) section. This will include innovating on pricing structures, risk and reward sharing models, and value creation/ communication/ demonstration.

Step 3: Choose the focus of innovation

Adopting new information and communications technology (ICT) is often thought of as the primary way to innovate. There are countless examples of ICT being used to offer something new, to improve service or take-out cost, eg. smartphone apps, online stores, workflow tools, document assembly software, cognitive technologies, e-discovery, client portals, etc.

Before leaping head first into high-tech solutions, it’s important to recognise there are two other options available:

  • High-touch. This type of innovation involves enhancing your client service experience by making it more up-front, close and personal. Improving the emotional engagement and human interactions with your clients can generate greater loyalty and advocacy. High-touch can also relate to the way you recruit, induct, train, develop, career manage, lead and motivate your people. It does not necessarily involve new software or hardware, but rather novel ways of getting your top talent to stay and perform to their full potential.  A recent example of this is Grant Thornton Australia and Gadens who now offer all their staff 6-months paid parental leave.
  • High-design. This type of innovation involves addressing the underlying client problem by making a change in the process or approach. A famous illustration of this, is the case of the engineers who were asked to quote on upgrading the lifts in an old building after a string of complaints from tenants. The engineers offered two solutions: a multi-million dollar lift upgrade or a $1K solution that involved placing mirrors in each foyer to distract waiting tenants. The client opted for the second solution and complaints dropped off markedly. In reviewing the list of recentAustralian legal innovation award winners, many of the examples relate to co-designing or co-creating solutions with clients.

Firms seeking to innovate their client service experience might wish to think of a combined high-tech, high-touch and high-design solution, the combination making it truly distinctive and difficult to emulate.

Step 4: Calibrate the degree of change and align expectations

It’s important that firms calibrate the degree of change and align outcome expectations with all stakeholders. This involves agreeing where on this continuum are you seeking to play: from incremental tactical small-scale changes, through to large-scale transformational interventions that come with much bigger risks and returns. Creating alignment on this point is extremely important so as to ensure you under-promise and over-deliver.

Step 5: Choose innovation projects or process or both

The fifth step is to agree whether your firm will be focused on a series of discrete innovation projects, or to try to develop an innovation culture that will pervade everything the firm does? Most firms try do both simultaneously, but I observe that many professional service firms tend to do better when they start with a projects focus, get some early wins, and then extend their effort into adapting the firm’s culture.

A project-based approach can be more co-ordinated and discerning. For example, this method allowed one leading Australian law firm to create an internal competition for great ideas with a panel of experts deciding which ones to fund. The problem with a centralised approach is that it’s often biased towards big ideas rather than incremental improvements. Another issue is that a number of staff with great ideas might be intimidated by entering a tank full of sharks.

Adopting a culture-focus often means the innovation effort is decentralised and relatively uncoordinated. This bottom-up approach can free up everyone to be enterprising and yield a major benefit from diversity. It can also mean nothing actually happens because everyone’s so busy trying to meet their utilisation targets there’s no time nor incentive to try do anything different. It can also result in duplication and a waste of resources on well-intentioned, but strategically sub-standard ideas.

A subsequent post will explore the levers that firms can pull to accelerate their progress on the innovation culture journey.

In conclusion

Taking the five steps together, you might elect to become a Pioneer (#1), innovating around the client experience dimensions (#2), seeking a combination of high-tech, high-touch and high-design solutions (#3), open to transformational changes (#4), through a series of carefully selected projects (#5).

Or you might just remain a Laggard…

 

Photo source: dreamstime

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10 reasons why culture eats strategy for breakfast

In Articles, Commentary on 4 September 2015 at 10:53 am

Over the past 12 months I have worked with three professional service firms that have outperformed their peers. Despite operating in flat markets they have consistently recorded double-digit revenue and profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy shmancy disruptive business models.

So what is it that has made them so successful?

To me it’s cultural differentiation. Not market differentiation, but an internal culture that creates value, both internally and externally. It’s a culture that’s eating strategy for breakfast, as famously proclaimed by Peter Drucker.

Based on these three case studies and other research, I posit that there are ten areas where cultural differentiation really counts.

#1 Productive politics

img90In firms with highly politicised cultures, enormous energy is expended addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners distract from value creating time with clients and staff. A managing partner of leading law firm once revealed to me that he spent around 40% of his time on an annual basis making, negotiation and justifying partner remuneration decisions.

Politics is inevitable, but firms that effectively balance collective, individual and directed power have a huge competitive advantage.

#2 Collaboration

Recent Harvard Business School research has revealed that when different practice teams are able to collaborate around client needs, there is a massive positive financial impact. In one case study, the average annual revenue per client increased from US$150,000 to US$800,000 by having seven practice groups offering an integrated solution versus cross-selling seven discrete services.

Those firms that have transitioned from a “my client” to “our client” culture usually outperform those where partner autonomy reigns supreme.

#3 Consistent high standards

I recently chaired a panel discussion with three senior buyers of professional services. One of the questions put to the panel was whether there was a difference between top performing firms and the rest? Consistency was the universal response. Top firms were characterised by extremely high technical and service standards delivered consistently by everyone. In other firms they felt it was a bit hit and miss.

There is much evidence to support the proposition that successful firms are those that have cultures that are intolerant of mediocrity and expect and get high standards from everyone.

#4 Discretionary effort

Organisation cultures that are perceived to be genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.

#5 Continuity

In their bestselling book, The Service Profit Chain, Heskett, Sasser & Hart referred to research that showed that client satisfaction increased significantly with staff continuity. In situations where a financial services client had five different relationship managers over a two-year period only 40% clients were satisfied or very satisfied. This jumped to over 80% where there had been only one relationship manager. Continuity builds understanding of the client and fosters deeper relationships. These factors are critical in client choice, loyalty and advocacy.

Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.

#6 Alignment

Each of the three case study firms mentioned in the introduction to this blog post are characterised by a lean management structure. All leaders across the firm, but excluding the managing partner, still retain significant practices. In a way each team or cell within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.

Alignment around firm direction, trust in leadership and a strong culture provides the glue that prevents anarchy but at the same time allows individuals and teams to be empowered. Self-management results in a significantly lower investment in planning, control and oversight and therefore more time on winning business and delivering work profitably.

#7 Busyness

In most professional services, busyness begets busyness. There is much evidence to support the notion that smart, highly motivated professionals seek to master their craft by doing good work for good clients. ‘Bring it on’ most say. In my experience the assumption that better work-life balance creates more staff engagement only applies to a minority. Consequently, one can conclude that a positive productive work culture creates more capacity to do even more work (within limits of course).

#8 Agility

If your firm is changing slower than the competitive environment around it, you’re going backwards! Firms with strong market and client-oriented cultures are really good at two things: [1] sensing and predicting trends, and [2] willing and able to make the necessary changes to adapt to different conditions. Agility and adaptability are cultural elements that are the hallmarks of successful firms in turbulent times.

#9 Fire in the belly

Business development is both a relationship game and a numbers game. Without some personal connection it’s very hard for a prospective client to develop enough trust to say yes. Equally, there will be fewer sales opportunities if you don’t show up. In tough times, there is usually a reward for those professionals with some fire in the belly and show up more often than others. The hunger to win is more intense and bears fruit in fuller pipelines and better strike rates.

#10 Execution

The last cultural element is related to all the others but is worthy of a mention on its own. It relates to the efficiency and effectiveness of implementing strategic decisions. It’s the ability to make it happen, to have the discipline and fortitude to overcome obstacles and to follow though on agreed actions. It seems so obvious, but so many firms struggle with this ‘simple’ ability to execute.

In conclusion

It is common for professional service firms describe their cultures as “collegiate”, “respectful” and “friendly”. In these tough times I don’t think just being nice is going to make a difference, to generate real value. Thinking beyond nice is incumbent of every professional service leader. Striving for true cultural differentiation will allow you to have culture for breakfast, strategy for lunch and champagne over dinner…

Photo source: http://nespresso.com

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Advancing the retreat

In Articles, Commentary on 21 January 2015 at 8:12 am

Planning to run a partners retreat, off-site or conference later this year? As a facilitator of many retreats I thought you might find these five design principles helpful in crafting your 2015 agenda.

#1 Open Eyes

The retreat needs to go beyond the regular monthly performance update. It should open partner eyes to the true strategic health of the firm – the good, the bad and the ugly. The aim should be to tell the truth in a constructive and considered way. A glossy state of the nation address serves no one’s interests.

As a practical example of this, I was recently engaged to interview 10 clients, 10 competitors and 5 consultants to provide a fresh independent perspective on how a particular firm was positioned to meet the challenges of the Australian legal market. This strategy health check yielded a rich discussion on the firm’s distinctive strengths as well as one or two blind spots.

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#2 Open Minds

Many professionals are trained sceptics. This scepticism, coupled with stellar career success, leads to very conservative thinking and behaviour – what’s worked in the past will be the foundation of success into the future. This mindset is dangerous in a rapidly changing, intensely competitive environment.

Some of the best retreats I’ve been at have included “light-bulb” presentations from outsiders opening partner minds to fresh perspectives and methods. These outsiders have included, in descending order of impact, leaders of successful peer firms, key clients, heavy hitters from industry, respected alumni, market commentators, researchers and content experts.

Another approach I’ve seen work really well is to run live “what-if” simulations. The firm’s P&L is presented and then a series of scenarios presented to demonstrate the long-term impact on partner income. The discussion then opens up and what-if questions are then simulated and the results revealed in real time. This is partly firm economics 101 in disguise, but also it’s a really useful way to show the long-term impact of things like margin erosion, cost containment, staff engagement and strategic investments or divestments.

#3 Open Hearts

“Building relationships with colleagues”, often tops the best things list in post-retreat feedback. As firms grow in both size and footprint it gets harder for partners to partner. They simply do not know their colleagues, what they’re like as people, what they’re really good at and how they might add value to clients.

Structuring (but not over-structuring) social time and activity is critical. It amazes me how often firms will book retreats at expensive resorts with glorious recreational facilities and then spend 95% of the time in meeting rooms observing other guests enjoying them.

#4 Open Questions

Retreats are often good opportunities to work on the business and solicit partner views as owners and stewards of the firm. One constructive way to address this is to ask a few carefully crafted open questions and to structure a debate around these dilemmas. For example, “Australian patent firm Spruson & Ferguson IPO’ed late in 2014 and now has a market cap over $570 million. Should we do the same?” 

These open question sessions can be set up with a presentation of relevant background data and commentary. The key is to let the discussion be open and unstructured while at the same time keeping it insightful, strategic and relevant.

#5 Open Doors

Almost every retreat I’ve attended starts out by welcoming new partners – both internal appointments and lateral hires. Other than a cursory mention of their name not much else is done to truly open the door to those joining the club. I think this is a missed opportunity to get fresh perspectives on the firm and to avoid group think.

One firm I know asks all their lateral hires to do a short presentation comparing their old firm to the new on five dimensions: culture, governance, pricing, work practices and strategy. This is really helpful in three ways: profiling competitors, benchmarking and showcasing their new partners.

In conclusion

While retreats can be a black hole in terms of time and dollars, many successful firms continue to see a return from this type of investment. The trick is not to view it as an extended partners meeting but rather as a major opportunity to build the spirit and the strategy of the partnership.

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Redefining shared services

In Articles, Commentary on 17 September 2014 at 8:48 am

I think it’s time to think differently about shared services in professional service firms. By shared services I mean the HR, IT, Finance and Marketing functions.

In many firms these functions have been limited to service, support and enablement. Their job is the provision of day-to-day “back office” operational services, but that’s where it ends.

There is growing evidence of leading firms viewing their shared services as strategic capabilities and part of their competitive armoury. My observation is that these firms define their shared services in a much broader way and expect more of them. While they might not use these exact terms, the essence of this redefinition is as follows:

From IT to Technology and Digital Transformation

Last week I had the privilege of chairing the 9th LawTech Summit, Australia’s top conference for legal IT professionals. The conference heard about the billions of dollars currently being invested in legal tech R&D and the tsunami of new toys, tools and technologies that will fundamentally change the practice and business of law. The winners will either be cash-up start-ups or agile astute incumbents who use this new technology to take out cost and improve service and client connectedness.

Leading firms realise they need their IT function to address the major opportunities and threats of disruptive technology. IT’s (expanded) role is to inform and shape the firm’s strategy in particular around the potential predictive intelligence systems, operational efficiency, big data, worker mobility, workflows and innovation. Yes, firms still need computers that work, software that runs and help desks that help, but in the future IT’s most important role will be about digital transformation.

From Marketing to Brand, Growth and Client Success

Marketing in many firms is orientated towards inputs not outputs: let’s run that event, update the website, publish that blog post, prepare that capability statement, write that tender, etc. At a more strategic level Marketing’s role should be about three key outcomes – building the firm’s brand, driving revenue growth and enhancing client stickiness and advocacy.

Positioning Marketing as agents of growth raises the bar for marketing managers and elevates their internal status within the firm.

I like the term ‘client success’ in that it has a double meaning. From an external perspective it means we work to help our clients succeed. Their success is our success. Attending a client meeting as a “Director of Client Success” has a better ring to it than “Director of Business Development”. From an internal perspective it’s about being successful with our clients i.e. creating a great client service experience, winning more of their business and getting referrals.

From Finance to Finance and Business Intelligence

I’d love a dollar for every finance report I’ve seen that’s provided without any commentary, conclusions or insights. Leading firms have finance teams provide their product with more strategic value. They deliver a range of analytics and insights about the financial and strategic health of the firm. They are constantly finding new lenses and lead indicators to inform executive decision-making. They provide dashboards to practitioners to help them establish priorities, manage their time and track progress. The new finance executive needs to see themselves as truth-tellers, provocateurs and change agents.

From HR to Talent and Performance

In the July-August edition of the Harvard Business Review, Ram Charan created a real stir by arguing that the HR function should be split into two teams: one focusing on HR processes like recruitment, payroll and salary reviews, and the other focusing on strategic talent management, capability building and creating a high-performance culture. Most professional service firms are too small to justify this type of split, but the underlying argument for both roles is spot on in my view.

Creating a Pricing and Value capability

Pricing Directors appear to be the hottest job on the planet at the moment. The firms of the future will have specialist pricing functions to win more tenders (profitably) and to help practitioners get better at capturing, sharing and communicating value.

In my view pricing should be kept distinct from marketing and finance functions. Located in finance, ‘cost-plus’ thinking will start to dominate. In marketing, a ‘revenue at all costs’ bias might eventuate.

Collaboration is key

The firm of the future has each functional area deeply inter-dependent on the other. Many of the new challenges and opportunities don’t fit into a neat box. They cross over boundaries and require multi-disciplinary thinking and behaviour. For example, a new technology to assist in client reporting and connectedness will require cooperation from IT, Marketing, Pricing, Finance and possibly even HR.

COO’ed

If shared services cannot make the transition to more strategic thinking and execution, they run a risk of being “COO’ed”. In other words, having a strategy-focused general manager sit above them that keeps shared services doing largely operational work.

C titles

Titles beginning with the letter ‘C’ (CMO, CFO, CHRO, CIO, etc.) are all the rage at the moment. While “CXX” has market recognition and internal status, my problem is with the generic nature of rest of the title. For example a CIO is a Chief Information Officer. There is nothing in this title that reflects his/her role in leading the firm’s approach to technology and digital transformation. Perhaps Chief Digital Officer is better? I think titles are important and should appropriately reflect the redefined and expanded roles described in this post.

What do you think?

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