A blog by Joel Barolsky of Barolsky Advisors

Posts Tagged ‘Sales management’

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

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?

Three essential topics for your 2014 strategic agenda

In Articles, Commentary on 14 January 2014 at 11:26 am

This is a good time to do a quick stress test of your firm’s 2014 strategic agenda.

Looking at the list of strategic priorities you should be asking: [1] is there a reasonable balance between today’s business and tomorrow’s business; [2] have we been brave enough in tackling our sacred cows; [3] have we adequately addressed client, market and competitive challenges; [4] is the list too long/are we trying to do too much; and [5] is everyone committed to the same list?

You may wish to take your stress test one step further by asking whether these three critically important topics have been considered:

  1. Innovation
  2. Co-venturing
  3. Leadership capacity.

Innovation

Late last year I was quoted in The Australian Financial Review and The Australian on the rapidly changing dynamics of the legal and accounting markets. What’s clear is that these markets are displaying classic signs of market maturity: new entrants, product commoditisation, mergers and client demands for more and to pay less.

Latte-Art-16The old saying, “when the going gets tough, the tough get going”, could not be truer. Firms that are not looking to innovate and make step-change improvements will simply fail. The market will no longer tolerate mediocrity.

The problem with “innovation” is that it’s very broad concept and means many things to different people. My strong advice is that if you want to address innovation in your firm, you need to define it for yourselves. Without this clarity, everything will quickly be lumped into the innovation bucket and when it’s everything, it’s nothing.

To illustrate how you might commence on this innovation journey, I recently ran a successful half-day “kick-start” innovation workshop for a client (XYZ). The workshop yielded two key outcomes: XYZ’s specific definition and approach to innovation and five high-impact innovation opportunities for the firm to action.  The workshop covered:

  • Why is innovation important
  • Types of innovation inc.  process, product, people, pricing and positioning
  • Reshaping culture to become a more innovative and agile firm
  • Case studies in successful innovation amongst professional service firms
  • XYZ’s definition and approach to innovation
  • Brainstorming XYZ innovation opportunities
  • Priortising the XYZ’s best ideas
  • Action plans to advance XYZ’s innovation approach and to develop the top few ideas.

Co-venturing

The second strategic agenda topic is about asking the question: “which other businesses in your universe would be best to partner or co-venture with?” Co-venturing might enable rapid entry into new markets, accessing new technologies, acquiring complementary capabilities and de-risking new product development. Partners might include other types of professional service firms, suppliers, intermediaries and even competitors.

Traditional firms might be able to leap-frog the innovation and R&D process by partnering with a start-up business with a new service delivery model. This is one option to avoid disrupting your core operations and to bypass conservative cultural constraints prevalent in many firms.

One great co-venturing example is the initiative between environmental engineering firm, Energetics, and accounting firm, BDO. They’ve worked collaboratively to provide carbon auditing and assurance services in Australia. The two parties have brought complementary capabilities to the table enable each to compete more effectively:

  • BDO –  audit process and risk management; in-depth knowledge in the audit of company finances, financial accounting systems and performing transactional-based audit analytics.
  • Energetics – well-recognised emission knowledge and reputation across wide range of industries; largest group of technical specialists in Australia in greenhouse reporting, grants and renewable schemes. 

Leadership capacity

The third critical issue that all firms should examine is their leadership capacity. I see many firms with highly skilled CEOs or Managing Partners but with moderately competent team leaders. Teams, be they client, work-type, office, internal service, project or industry teams, are where all the action happens. They’re the bedrock of the firm.

In the past, a buoyant market masked the lack of leadership talent and allowed teams to thrive largely on auto-pilot. This, in my view, is no longer the case. If your firm does not have the current and future capacity to lead teams, it will always under-perform and succession will become a major headache.

Developing leadership capacity is not a quick-fix, easy issue to address. It’s NOT about running a 2-day leadership training program and expecting everyone to walk out as Nelson Mandela. 27 years in jail is not a feasible alternative either!

Building leadership capacity is about a systematic developmental approach tailored to each individual. From experience, it’s expensive, risky and delivers returns over a long time period. In other words, a prime candidate for the ‘too hard basket’. Notwithstanding this, there is much merit in doing an honest assessment of your leadership talent and to develop a plan to address the key gaps and to realise the potential that’s there.

Dread or delight

In 2014 we have the FIFA World Cup in Brazil, the Winter Olympics in Russia and a mouthwatering cricket test series in South Africa to look forward to. With a robust strategic agenda in hand, hopefully you are looking forward to 2014 with more delight than dread. I wish you and your firm everything of the best for the year ahead.

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