Posts Tagged ‘Sales management’
Make it Memorable – my recent article on pricing professional services published in BRIEF
In Articles on 28 July 2020 at 12:21 pmWill new partners need to keep grinding away?
In Articles, Commentary on 13 July 2020 at 6:18 pmFull text of my opinion piece first published in the Australian Financial Review on 9 July 2020.
Most practice teams in the larger law firms have been set up with partners as the “finders” and “minders” and associates as “grinders”.
A decade’s worth of time records analysed by Thomson Reuters Peer Monitor shows that associates have around 10 more billable hours per month on average than partners in the same firm.
However, in April and May 2020 – the first full months of the COVID-19 lockdown and remote working – this long-term trend reversed and partners recorded more billable hours than associates.
There are two questions worth asking. Why are partners producing more now? Can all the new partners in the Financial Review Law Partnership Survey expect a permanent change in their role? In other words, will they have to be finders, minders and grinders?
Why now?
Many law firm clients went into crisis mode with the onset of the coronavirus. Deals needed to be completed quickly. Funding needed to be secured urgently. Disputes on unfulfilled contracts needed rapid resolution. Almost daily changes to government regulation needed interpretation and action.
To deal with these pressing and complex issues many clients indicated a strong preference to get more direct access to partners. This meant fewer opportunities for delegation to associates.
Cost-conscious clients also had less tolerance for juniors being allowed to learn on these matters. As one general counsel put it to me: “I was happy to see one maybe two people [from the law firm] on [Microsoft] Teams, but not a football team.”
Another factor that has led to the increase in partner hours at some firms is partners holding on to more work due to fear of a broader market slowdown so they can hit their personal billing targets.
During the GFC, many large firms cut partner numbers through a combination of de-equitisation, early retirements, dismissals and reduced promotions.
While many firms now prefer measuring the contribution of a team rather than an individual, having a healthy personal practice can strengthen a partner’s case for retention if things get tough. In recent weeks, it appears that some partners and associates have been getting a little tired of working from home.
After the rush of adrenalin in dealing with the crisis and keeping connected during March and April, there’s now slightly less enthusiasm for the weekly video drinks – and growing frustration with the clunkiness of a distributed workforce.
Supervision, training and delegation is hard enough when everyone is co-located and physically present in a purpose-designed city office. It’s that much harder when associates are working from a kitchen table in a shared rental apartment with variable NBN speeds.
As time moves on, some partners might resort to the easier – though strategically flawed – option of doing most of the work themselves.
Will there be a permanent change?
No, and yes.
Leverage of non-partner fee-earners is at the heart of the law firm business model. The economics of having lots of associates doing lots of production will not change in the years ahead. Effective and efficient delivery of larger transactions, projects and disputes will still require teams of lawyers, paralegals and legal technologists at different levels.
Over time, firms that don’t tailor their approach for each project will lose out to those that do.
When demand returns, the issues around less delegation should ease. Intransigent hoarders will get caught out and move on – or be moved on.
As technology and workflows improve over time, the clunkiness of the remote workforce should diminish and become less of a handbrake.
One change that will hopefully stick is that of the law firm partner as the client’s primary strategic risk advisor. The coronavirus crisis has revealed the relevance of experienced lawyers in assisting clients on things that matter. This period should hopefully build their confidence as strategic advisors from a legal perspective and not just narrow technical legal specialists.
The discussion above suggests that perhaps the finder minder grinder characterisation is a little out of date.
A better description of the role of partner is that of a strategic advisor and leader – a thought leader, a team leader, a client account leader, a project leader and a sales leader.
The winners will be those firms that recruit and develop outstanding legal leaders and not just see their associates as high-billable grinders.
Stop trying so hard to be different
In Articles, Commentary on 6 May 2019 at 4:33 pmFull text of op-ed that first appeared in The Australian Financial Review on 3 May 2019.
99% of Australia’s full-service law firms have a strategy based on seeking clear market differentiation. In my view, they’re largely wasting their time and money.
AFR Legal Affairs op-ed
Conventional strategy thinking suggests there are two sources of sustainable competitive advantage: [1] having the lowest cost, or [2] differentiating from competitors on things that matter most to customers. The former strategy allows firms to win by having greater price-setting discretion. The latter strategy allows firms to extract a price premium for added benefits.
When it comes to the legal market, this theory starts to get a bit wobbly.
Research shows that while most law firm clients can distinguish firms between groups of firms, such as Tier 1 versus Tier 2 or domestic versus global, they really struggle to clearly discriminate between specific full-service firms within a group. To clients, many of these firms look and feel the same.
One of the reasons for this is market fragmentation. Unlike most industries with three or four dominant players (think airlines, grocery retail or banking), the Australian commercial legal market has nearly 30 firms claiming in some way to be leaders in legal expertise and client focus. Australia’s largest law firm by partner number, HWL Ebsworth, has less than 5% share of the total market. Carving out and keeping a unique and relevant market position in such a crowded market is next to impossible.
Another reason for a lack differentiation is a self-inflicted one. Most full-service firms present themselves as being all things to most people. Within the partnership model it’s political suicide not to give every partner a guernsey in describing what the firm is really good at.
So, what’s the solution?
The first part of the answer is to worry less about being known for being different and focus more on just being known. Strong brand awareness still counts in opening doors and staying top-of-mind.
The second part is to encourage more differentiation at the practice, partner and/or product level. With a more micro approach, differentiation usually come from legal specialisation combined with a focus on a particular market segment or industry. So, for example, a general commercial litigation team can distinguish themselves by positioning as class action defence specialists for ASX200 companies.
The third element is to concentrate firm strategy on how the firm competes. ‘The how’ refers to the resources, skills, standards and systems used to win. These are collectively called capabilities, or as Pier D’Angelo, Allens’ Chief Strategy Officer, calls them, the organisation’s “muscles”.
Most full-service law firms need work on these five muscle groups and the inter-play between them:
1. Firm and team leadership – setting and aligning everyone around a clear direction; inspiring others to meet/exceed expectations; and providing support with accountability.
2. Talent management – recruiting, developing, engaging and retaining the right workforce for the firm to flourish, both now and in the future.
3. Winning work and capturing value – developing trusting relationships with clients and referrers; converting more of the right opportunities; and pricing profitably.
4. Collaboration – shifting the mindset from ‘my’ to ‘our’ client and combining expertise from inside and outside the firm to solve clients’ wicked problems.
5. Operating with discipline – having an efficient and effective operating platform; ensuring adherence to agreed policies; executing plans consistently; and optimising leverage and utilisation.
Spending more time at the law firm gym will, over time, create a form of cultural and operational distinctiveness. Paradoxically, this will most likely be reflected externally and create a firm that both top clients and top people will want to work with and for. They will be authentic points of difference not created by spin doctors but radiating from a firm truly fit for the future.
10 ways to describe the Client Relationship Partner (CRP) role
In Articles, Commentary on 29 August 2018 at 11:41 amClient Relationship Partners or CRPs are responsible for the overall success of the firm’s long-term relationship with each key client. Listed below are 10 different ways to describe the CRP role each with its own nuance and emphasis. These descriptions are useful in creating clarity in expectations, CRP selection, capability development and accountability.
Source: strikingly.com
#1 The firm luminary and client advocate
The CRP faces outward and represents the firm to the client. At the same time, they face inward to ensure the voice of the client is heard and client’s interest are appropriately served. Read David Maister’s famous post to dive deeper into this job description.
#2 The pedestal seller (aka the Tinder Tactician)
The CRP networks actively within the firm and the client organisation, and brokers new relationships. They put colleagues and client contacts on a pedestal and talk them up wherever they can. They start their day by thinking about who they can introduce for mutual benefit.
#3 The strategic account leader
The CRP has the primary role of leading the team of practitioners and functional specialists servicing the client. As with any leadership role, their job is to set direction, communicate the strategy, inspire, motivate, cajole and align the various constituencies to execute this strategy. They span across formal organisation boundaries and facilitate collaboration in the core client team and with everyone in the broader client community. This job is made especially difficult in professional service firms because they usually have signifcant responsibilities without formal authority. They typically would have an internal network map looking like Partner 2 from Heidi Gardner’s recent research:
#4 The planner
The CRP documents a clear set of activities that will help build a successful firm-client relationship over the short-, medium- and long-term. Their plan may look something like this:
#5 The front-door
The CRP is the client’s first point-of-contact and the key person to address any service failures or concerns. They help redirect work to the most appropriate person within the firm that can service their need. They help make the client’s experience frictionless and engaging. This CRP role is a little more passive than the other models described, but it may suit a ‘care and maintain’ relationship that has little profit growth potential.
#6 The rainmaker
The CRP’s job is to maximise revenue and profit from the account. Full stop.
#7 The co-creator
The CRP facilitates the process of aligning the client’s strategic needs with the firm’s capabilities. They explore in some depth the client’s critical problems and opportunities and help bring together integrated bespoke solutions often involving multi parties, technologies and vendors. The CRP’s role would be to understand deeply the key elements that create value for the client. Page 1 of their client plan would be Bain’s 40 elements model applied to their key client:
#8 The intrapreneur
Most relationships need ongoing renewal and inspiration in terms of product, process, people and pricing. The CRP role is to generate new ideas that add value and help get the best ones implemented.
#9 The elder
The CRP role is that of senior door opener, shmoozer, steward and repository of institutional memory. The role is less hand-on in terms of day-to-day account management but they do what’s necessary to influence key decision-makers and help win major new projects.
#10 The relationship choreographer (MY PREFERENCE)
The CRP orchestrates a set multi-lateral connections, value exchanges and mutually beneficial projects. They work internal and externally, strategically and tactically, short-term and long-term. The CRP brings the best of the firm to the client; and the whole of the client to the firm. Their job to drive the pink process to win more blue:
Formula won
In Articles, Commentary on 29 March 2018 at 1:21 pm
Source: Kazuki Yamamoto
Formulas, equations and rules of thumb continue to be a popular way to communicate important principles in leading and managing professional service firms. For your interest, here are the ones I use or refer to most often…
CHANGE
David Gleicher: D x V x F > R. D = level of dissatisfaction with the status quo. V = a vision of a future state i.e. clarity of what we’re moving to. F = first steps in a clear action plan. R = level of resistance to change. If R is more than the multiple of the other three, then no change. Click here for more. A graphical variation of this formula:
STRATEGY
A.G. Lafley and Roger Martin: Firm strategy = 5 questions – What are our winning aspirations? Where will we play? How will we win? What capabilities do we need? What systems and enablers are required? Click here for more.
Mehrdad Baghai et. al: McKinsey 3 growth horizons – concurrently manage both current and future opportunities for growth. Spend roughly 70% of your time on H1, 20% on H2 and 10% on H3. Click here for more.
George Beaton: Firms that fly = a shared vision + a strong culture based on shared values + shared power across the firm and key stakeholders + strong leadership and management to pull it all together and sustain it. Click here more.
Joel Barolsky: In the past… Firm Success = Ability x Stability (firms succeeded if they were competent practitioners and were able to keep the firm stable and collegiate). Over the past decade with the increase in client power and sophistication… Firm Success = Ability x Stability x Affinity (firms that have close trusting relationships with their clients outperform others). In a VUCA future… Firm Success = Ability x Stability x Affinity x Agility (firms that can make changes that add value quickly and efficiently will outperform others). Click here for more.
BUSINESS MODEL
David Maister: Profit per Partner = Leverage x Utilisation x Realisation x Blended Hourly Rate x Margin. Click here for more.
Ron Baker: Profit = Intellectual Capital x Effectiveness x Value-based Price. “Effectiveness” is a measure of the outcomes achieved for the client, not like the Maister equation which focuses on the cost of the inputs used to create the service. “Intellectual Capital” includes leveraging human capital, structural capital and social capital. Click here for more.
ORGANISATION DESIGN
Dunbar’s Rule: Our brains are only capable of sticking together within a community of around 150. Design organisations, offices, divisions, etc. with this number in mind. Click here for more.
REMUNERATION
J. Stacy Adams: People will trust a remuneration model when they perceive, [1] there is a sense of fairness of their contribution relative to their reward, AND [2] there is a sense of fairness of others’ contribution relative to the reward that others receive. Click here for more.
INDIVIDUAL PERFORMANCE
Mitchell and Porter: Performance = Motivation x Ability x Environment. Click here for more
David McClelland: Match jobs to an individual’s relative needs. People have three core needs, usually with different weights – Need for Achievement, Power and Affiliation. Achievement – the drive to excel, achieve in relation to a set of standards, strive to succeed. Power – the need to make others behave in a way that they would not have behaved otherwise. Affiliation – the desire for friendly and close interpersonal relationships. Click here for more.
Dan Pink: Drive = f(Purpose, Mastery, Autonomy). Click here for more.
STAFF TURNOVER AND PRODUCTIVITY
Mornell: If you make a mistake in hiring, and you recognise and rectify the mistake within six months, the cost of replacing that employee is two and one-half times the person’s annual salary. Put another way, the wrong person earning $50,000 will cost your company $125,000. Click here to read more.
Revenue per employee: In most industries, above-average firms produce revenue per employee that exceeds three times their average employee’s salary. Interestingly at Apple, it exceeds nine times. Click here to read more.
CLIENT RELATIONSHIPS
David Maister and Charlie Green: Trustworthiness = (Credibility + Reliability + Intimacy) / Self-orientation. Click here for more.
Joel Barolsky: Long-Term Relationships = (Understanding + Reliability + Value + Affinity) / Complacency. Click here for more.
Ford Harding: Geometric growth of social networks. With 90 strong connections in your personal network, you can make around 3,500 matches i.e. introduce one person to another for mutual benefit – see chart below. Click here for more.
SALES
Sales 101: Your Revenue = Number of Opportunities x Average Value x Overall Strike Rate. Click here for more.
Andrew Sobel: Number of Opportunities = Number of initial conversations you have or initiate x % that convert to a proposal. Click here for more.
McKinsey’s 2-4-8: Directors in McKinsey need to be working on 2 major assignments, be the process of proposing for 4 more, and in communication with 8 more prospective clients. Management within McKinsey follows up to ensure that 2-4-8 is a reality. Click here for more.
PRICING
The Discount Matrix: The amount of additional revenue required to make up for the lost profit as a result of a price discount:
SERVICE EXPERIENCE
Frederick Reichheld: Net Promoter Score = % Promotors (i.e. clients that score 10 or 9) – % Detractors (i.e. clients that score 1 to 6) on the question, “What’s the likelihood of recommending XYZ to a friend or a colleague?” Click here for more.
Customer Effort Score: “Firm XYZ made it easy for me to handle my issue!” (on a Strongly agree / disagree 7-point Likert scale. Click here for more.
What formulas or rules of thumb do you use? Please share using the comments feature…
A professional services value chain
In Articles, Commentary on 31 August 2017 at 2:00 pmMichael Porter’s famous value chain did NOT have me at hello. I’ve never found it a particularly valuable tool in crafting professional service firm strategy. Most firms don’t talk about “Inbound and Outbound Logistics” or have “Procurement” as a major support function. Distinguishing between “Operations” and “Service” in a service business is just plain confusing.
In the spirit of further developing the theory of the professional service firm, here’s my go at a professional services value chain…
WAYS TO ADD VALUE
Firms can add to their profitability and competitiveness (my definition of adding value) in the following ways:
#1 Profiling and Pitching
- Brand and Network Building – branded premium providers command higher prices and attract top talent. Firms with better networks spend less on mass marketing and get more low-cost referrals.
- Client and Industry Insights – firms that really understand their client’s business and industry have better bid-win strike rates and a higher percentage of sole-sourced work.
- Selling and Pricing – firms that are adept at selling and pricing capture more value, discount less and win more.
#2 Resourcing and Communicating
- Process and Workflow Design – firms that have streamlined workflows use fewer resources for the same outputs. They generally have faster and more predictable response times and enjoy lower error rates.
- Resource Planning and Project Management – significantly higher margins can be realised by configuring the right combination of talent, tools and technology for each matter or project. More and more clients are choosing firms based on their ability to plan and project manage their work.
- Client Interaction and Co-creation – better client communication and engagement usually increases the chance of client satisfaction and value perceptions. These, in turn, improve client loyalty, pricing and billing outcomes.
#3 Delivering and Controlling
- Technical and Commercial Capability – firms that are perceived to provide better quality and more commercially relevant advice are usually able to command a price premium.
- Service Delivery, Quality Assurance (QA) and Billing – firms that are able to deliver efficiently, effectively and consistently usually outperform their peers. So too are those that bill and collect fairly and promptly.
- Team Engagement – firms that can motivate and inspire their staff will usually enjoy higher productivity, better quality work and less regrettable turnover.
#4 Connecting and Innovating
- Client Relationship Management – firms that have wider and deeper relationships with their key clients will usually enjoy lower business development cost, higher share-of-wallet and more predictable revenue flow.
- Client Education and Support – firms that support their clients through ongoing education and other activities relevant to their needs will enjoy better client relationships and loyalty. Informed purchasers often brief better, respect their providers and know what they don’t know.
- Service Innovation – firms that continue to evolve their service offering to address new market needs will retain current clients and attract new ones. Innovation that lowers costs will give firms more price-setting discretion.
USING THE MODEL
Where to invest
Source: Dreamstime
The value chain model can be used to assess where resources are currently deployed and where they should be. For example, most law firms put a lot of time and energy into just five areas: Brand and Network Building; Technical and Commercial Capability; Service Delivery, QA and Billing; Team Engagement and Client Relationship Management. This means that seven other value-adding areas are potentially sub-optimised. A more deliberate focus in each of these areas could add up to a significant improvement in profitability and competitiveness.
Where to innovate
Many professional service firms are looking to innovate and “digitise” their business. The model can be used to determine what elements of the value-chain should be the focus of change and investment. For example, rather than spreading themselves too thinly, a firm might want to focus their energy and dollars on getting closer to their key clients and enhancing client connectivity and engagement. This would mean an emphasis on Client Engagement and Co-creation, Client Relationship Management and Client Education and Support.
What should we make, buy or borrow
By analysing its value chain, a firm can decide which elements it should make, which it should buy, and which it should borrow. So, for example, one of my accounting firm clients has engaged a specialist lead generation company to help out with Sales and Pricing. They recognised that prospecting for new clients was a key weakness, and that re-training the firm’s partners would be like flogging a dead horse. They pay the consultancy $500 for each meeting they set up within defined ‘right client’ parameters.
How do we compare
The value chain model can be used for head-to-head competitor analysis. Further insights can be gained by examining each of the 12 areas, assessing where a firm is ahead, where it’s at par, or where it’s behind its key competitors. A firm can then use the model to decide its core strategy, that is, how it’s going to win and what capabilities will be needed for success. For example, if very few direct competitors are focusing on Resource Planning & Project Management, this might be a source of competitive advantage in the period ahead.
How do we organise
The final application area of the value chain model is to ensure there is oversight of each of the value-adding areas or categories. For example, a firm may elect to create a Resourcing and Communicating SWAT team, with a blend of Practice, IT, HR, Finance and BD executives, charged with identifying and making improvements.
TO CONCLUDE
I’ve stuck my neck out and come up with an alternative value chain model. What do you think?
Sorry, Michael. Nothing personal. Just business. Professional service firm business.
7 key enablers of smart collaboration
In Articles, Commentary on 10 March 2017 at 7:27 amIn January 2017, Harvard professor and ex-McKinsey consultant, Heidi Gardner, published Smart Collaboration. The book describes the results of her 10-year study into the benefits of collaboration in professional service firms. Gardner concludes that firms that effectively integrate cross-team solutions to solve clients’ problems will significantly outperform those that just rely on cross-selling solo-specialists:
The book is great in making the case for collaboration, but is a little thin when it comes to the “how to” bit. This post is my take on execution, and describes seven key enablers of smart collaboration…
#1 The right clients
The business case for collaboration is much stronger when your firm is servicing [i] large client organisations, [ii] with complex and diverse needs, and [iii] relatively sophisticated approaches to purchasing professional services. For instance, a small monoline insurer with a cab-rank panel structure would not be a prime prospect.
#2 Capability breadth
Gardner states that the true benefits of smart collaboration come from combining the skills and experience of a range of different practitioners to solve the client’s most pressing problems. This multi-disciplinary approach is hard to copy, is less price sensitive and much more fun to deliver.
It follows, therefore, that firms need to have service depth AND breadth for collaboration to payoff. Larger full-service firms would have relatively more opportunity than others.
#3 A culture of “our” client, not “my”client
In many firms, the prevailing culture is one where client relationships are primarily owned by individual partners, rather than seen as assets of the firm. In these instances, distrust of colleagues to serve “their” clients is more common than not. Trying to facilitate smart collaboration in a deeply individualistic culture is a long and hard road.
Many of the professional service firms I work with think they are collaborative, but in reality they’re collegiate. The latter describes a club of friends happy to socialise together. The former describes a one-firm firm where everyone is hardwired to win and deliver together.
#4 Great client leaders
Client Relationship Partners work across practice teams to bring the best of the firm to the client, and the whole of the client to the firm. These boundary-spanners are crucial in growing the network of relationships between the firm and the client. Success is more likely if the firm empowers this important leadership role, and invests in developing its client leader talent pool.
#5 Effective client knowledge sharing
Gardner states that a “collaborative technology platform” is essential in connecting partners with the right opportunities, as well as mitigating some of the obstacles to collaboration. While I broadly agree, many firms fail to get a positive return on their CRM investments, not because of technology issues, but because the cultural and strategic settings don’t facilitate communication and knowledge sharing.
Collaboration is enhanced by partners having a good understanding of [i] the firm’s full capability set, [ii] the client’s context and needs, and [iii] the details of the firm-client interaction.
#6 Consistency in energy and standards
The outcomes of a team are significantly enhanced when all team members have similar service standards. Problems arise if one team member thinks a “responsive” email reply is 24 hours, while another thinks its 24 minutes. It also helps if all team members have a similar drive to succeed and share common values around client focus.
There are two schools of thought around consistency of service style. Those who argue for a house-style cite benefits of a seamless client experience, resource fungibility and delivery efficiencies. The contrary view is that differences in style facilitate diversity and creativity. I’m more in the latter camp.
#7 The right measures and rewards
In the words of Peter Drucker, “what gets measured gets managed”. In the words of James Goldsmith, “if you pay peanuts, you get monkeys”. If the firm incentivises solo-specialist behaviours and outcomes, the chances of meaningful collaboration are exceedingly low.
Call to action
Gardner’s research clearly illustrates the benefits of smart collaboration over cross-selling. If you sense the potential in your firm: [i] write down each of these seven enablers; [ii] give your firm a score out of 10 on each, and [iii] identify the key actions to shift the dial in the next six months, and closer to a 10 over the next 36 months.
The Taxi Taxonomy – four things to learn if you’ve only got a taxi ride to prepare
In Articles, Commentary on 14 June 2016 at 12:06 amYou’ve got a meeting with a prospective client and you’ve left your preparation to the last minute. What are the ESSENTIAL things to learn during your taxi ride on the way to the meeting?
The Taxi Taxonomy, presented in the two-by-two below, is a client analysis cheat sheet. It is no substitute for more in-depth preparation, but provides a useful start to the intelligence gathering process. The Taxonomy suggests classifying your analysis into four Ps (to make it easier to remember):
- Profit drivers* – the revenue, cost and other strategic priorities of the organisation;
- Political drivers – the cultural and political state of the organisation;
- Position drivers – the role and requirements of the person you’re about to meet; and
- Personal drivers – their key personality attributes and preferences.
There is a continuum of data ranging from the overt to the obscure. The overt can usually be ascertained from web and social media searching. Obscure data most often comes from speaking with those with direct first-hand experience, including employees, clients, suppliers or business partners.
The Taxonomy in Practice
A client of mine gets her business analyst to prepare a one-page Google Doc summary based on the four quadrants in the Taxonomy before every client meeting. With repeat clients much of the data is the same but any new items or changes are highlighted. She then updates the Google Doc with new or fresh insights after each visit. Ironically this is usually done on her smartphone during the taxi trip back from the client.
MBA IN A DAY
For those interested, I will be expanding on this framework and presenting many others at a forthcoming public seminar called MBA IN A DAY. The seminar is targeted at mid-career lawyers looking to enhance their knowledge of business and develop a deeper understanding of their clients and prospects. Many lawyers are experts in the law but have received very little training in business. Click here to read more: http://mbainaday.strikingly.com/
Source: Fotolia
* For non-profit organisations and government agencies, this quadrant might be reframed as Purpose drivers, and include things like social charter, development strategy, cost and operational priorities and H2 and H3 opportunities.
10 reasons why culture eats strategy for breakfast
In Articles, Commentary on 4 September 2015 at 10:53 amOver 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
In 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…
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Relationship Capital 
culture, key account management, Leadership capacity, professional service firms, Sales management, strategy management
Why Harvard is wrong on law firm management
In Articles, Commentary on 11 November 2020 at 10:17 amFull text of my opinion piece first published in the Australian Financial Review on 5 November 2020
Bob Andersen is a hands-on, high-billing, star partner at the Cambridge Consulting Group. He also has deteriorating relationships with his fellow partners, his team members and his family.
Anyone who has been through Harvard Business School’s Professional Services Leadership program knows Bob well. The Cambridge case study is used to illustrate the tensions in the role of partner in being both a successful ‘producer’ and busy ‘manager’. The producer builds relationships, wins new business and services clients and the manager internally oversees operations.
The Harvard faculty make much of the producer-manager concept in distinguishing professional services from other types of organisations.
But it’s time for Harvard to update their thinking and refine their language – the role of partner in the modern law firm is much more an adviser–owner–leader.
Business owners
The Harvard model is silent on ownership – a core tenet of the law firm partnership model – yet from day one, most new partners are told they need to think and act as proprietors.
This aspect of the role typically includes taking stewardship of the firm’s assets (including its IP), role modelling its values and brand, building its relationship capital by sharing clients and connections, helping set the overall firm direction and risk profile, and showing public support for agreed firm investments and initiatives.
Adoption of a business owner mindset applies to all partners regardless of financial stake. Both equity and non-equity partners have ‘partner’ on their business card and that means the same thing to all stakeholders outside of the partner group.
More leaders than managers
The Harvard model also seems to emphasise management over leadership.
Leadership is about setting directing, inspiring action and facilitating change. Management focuses on creating order and efficiency. Both are needed, but effective leadership is very often the critical difference in a legal practice going from good to great.
Law firm partners take on roles that include a mix of team, sales, thought, project and client account leader.
Good team leaders facilitate a process of crafting strategy which describes the team’s purpose, objectives, operating standards and where and how the team will compete. Strategy implementation is enabled by the communicating clear expectations, providing support, holding people to account, giving and receiving ongoing honest feedback and removing roadblocks.
As sales leaders, partners must ensure there’s enough revenue coming in the door to cover costs and meet or exceed targets. This means active ongoing prospecting for new work opportunities and converting a healthy share of client proposals into paid work.
A common approach to sustainable revenue generation is for partners to become well-known as an expert or thought leader in a specific area of law and/or client sector. In this role, thought leaders generate valuable content that can be used in marketing communications, events and client pursuits.
Most partners will also have a responsibility to protect and grow key client relationships. For large, multi-practice clients, the job goes beyond good client service. They must act as client account leaders to drive value creation across the board for both the client and the firm.
The adviser-owner-leader construct provides a more comprehensive and accurate description of the modern partner role. Doing it all and doing it all well is probably a stretch for most partners in your firm, but stretch is better than stagnation.
It takes a bit of chutzpah to claim Harvard is out of date. But in this instance, I think I’m right.
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