Business mindset: How to become a trusted adviser for high-value legal work

General counsel are increasingly asking law firms to demonstrate commercial awareness when working with them. But, what does that really mean?

Manju Manglani, editor of Managing Partner magazine, spoke with Meridian West’s Ben Kent and Adrian Furner about how commercially-astute lawyers can become trusted advisors and business partners to multinational corporations.

Busines Mindset – Managing Partner Magazine

This article was first published in Managing Partner (www.managingpartner.com) on 27 October 2015 and is shared with kind permission. To subscribe, please contact Emily-Jane Beechey onemilyjan[email protected] or +44 (0)20 7549 8609.

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Active listening

Active listening

What keeps your clients awake at night?

What keeps your clients awake at night?

If you had to write down the top 3 things that keep your client awake at night could you do it?  Before you read further write them down …

If you were able to do it, then question yourself whether you have tested your view, and if you couldn’t then you are not alone.

In a recent meeting with a FTSE CEO we asked what were the big decisions that he had to make this coming year.  In his mind, there were only two, and they could be articulated in an elevator pitch.  That’s not to say that these were the only vexing decisions that he and his board would make this year, but the two were the ones that were fundamental to the future success of the organisation.

Nothing we were told was confidential or secret, but by asking the question, we were able to get an insight that is immensely valuable. An insight that not many people, probably including most of the organisation’s employees, would have access to.

So why is this insight so valuable?  In short, as a professional services adviser, it gives us contextual insight which will, if we use it well, allow us to provide more ‘commercial’ advice.  For example, if we were advising on the structure of a new business venture for the client, then we may be able to use this insight in recommending which solutions would support and hinder the strategy.

The secondary value in the above example is that whilst you may have been able to identify the same issues from other publicly available material, having it from such a direct source adds credibility to the knowledge.

In addition to the direct benefit of allowing for more ‘commercial’ advice, there is also an indirect benefit. If we know the most important issues for our client and if we marry this with our ‘thirst for knowledge’ discussed in an earlier article [Do you have a thirst for knowledge?], then we can make connections between knowledge that we gain and our client’s needs, which may allow us to build the client relationship outside of specific engagements with relevant knowledge and discussions.

So when was the last time that you asked your client what keeps them up at night?

Virtuous habits: embrace Commerciality to stay ahead of your peers

Research conducted by Meridian West and Financial Times shows financial professionals are perceived by their clients to be less commercial than other advisers. 34% of senior executives say legal professionals are excellent at providing advice that shows commercial insight, compared with just 15% for accountancy and finance professionals.

Why should this be? With their grip on the numbers, financial professionals are close to the heart of any business. Yet external advisers are becoming increasingly specialised – able to give clients a view on the intricacies of transfer pricing in Eastern Europe, say – often at the expense of being able to share a broader, more commercial perspective. Compared with lawyers, accountants are disadvantaged by regulation such as Sarbanes-Oxley, which create barriers (both real and perceived) about offering business advice.

With increasing frequency, information about other organisational priorities – risk, talent, technology, innovation and customer – are being given equal attention alongside financial data when boards take business decisions. External advisers need to respond to this appetite for forward-looking metrics and non-financial KPIs. One way to stay ahead of peers and keep ahead of changing client expectations is to embrace Commerciality.

What is Commerciality?

Commerciality is a much used, but ill-defined, term. Yet the nub of Commerciality is simple: it involves focusing on business outcomes when providing financial information and advice. To do this successfully means understanding the context in which decisions based on that advice will be taken. This is an area where many professionals struggle. Pride in being technically correct can lead to inflexibility. Lack of clarity about desired business outcome can lead to results that don’t quite hit the mark.

Take tax planning: this is an area rife with complexity where technical and specialist knowledge is vital and advantageous. To benefit from tax efficiencies it might make good financial sense to advise a company to operate a foreign subsidiary. However, a solution that is technically sound on paper may in reality throw up many operational challenges such as an increased cost of workforce mobility, and have a negative impact on corporate reputation by not being seen to pay a fair share of tax.

A truly commercial professional balances these competing demands to find a solution that helps an organisation achieve the best possible business outcome. This may require problems to be framed in new ways. In the above example, rather than dive straight to a technical tax-planning solution, it may be possible to achieve the desired outcome – freeing up cash for investment – through means that fewer reputational or operational drawbacks.

Commerciality in practice: seven habits

Commerciality is a mind-set. Yet this does not mean it cannot be taught to new graduates or honed further by experienced professionals. To translate Commerciality into pract7 habits of commercialityice it is important to focus on behaviours. Identifying behaviours that frustrate clients, consciously eliminating these and replacing them with more commercial ones through practice and repetition is the best way to ensure lasting improvements are realised.

Based on extensive research among thousands of finance professionals and their clients, Meridian West has developed a framework to help professionals identify, communicate and improve Commerciality. The seven habits of Commerciality framework can be applied by finance professionals to any client engagement, regardless of their area of expertise. [More on the 7 habits]

Virtuous habits in practice: three examples

First: understanding the people. Business is mainly about managing people, relationships and politics. Being aware of individuals, their competing interests and motivations is therefore imperative not only for determining the solution to a given problem, but also how the rationale for that solution is communicated.

For example, one firm spends time creating relationship maps for all of its client engagements mapping out all individuals within their own team and the client team. This includes stakeholders such as the CEO and NEDs, not just the direct members of the finance team they liaise with on a daily basis. It is important to pay close attention to the competing interests and preferences of this wider group of individuals who may have power of veto over any decisions made.

Next: agreeing the scope. When deadlines and resources are tight, it is tempting to launch straight into a piece of work to complete it as quickly as possible. This leaves little time to think through the strategy. The most commercial advisers set goals and metrics about what a successful client engagement looks like, communicating information about desired outcomes, tasks, resource and timelines.

Scoping is critical for external advisers grappling with a move away from traditional ‘time and materials’ pricing to fixed or success-related fees. Having a clear scope of works agreed up front helps accurately price an engagement to avoid writing-off large amounts of work when client needs change.

Lastly: communicating with impact. A common complaint we hear a lot from time-poor executives is that financial reporting is long, technocratic and has to be translated for non-financial audiences. They want information which is easy to understand, quick to assimilate and highlights the key points in complex or contentious issues. Simple changes such as prioritising risks, explaining implications clearly for non-financial audiences and communicating visually make a big difference.

The payoff: why bother with Commerciality?

Meridian West’s Mid-Market Monitor, an annual study of buying behaviour in the audit and advisory market, shows that Commerciality can be a significant differentiator when clients choose which external firms they work with. Being able to articulate knowledge of sector trends, provide foresight on relevant issues, and be proactive on scoping and project management can boost pitch win rates and the profitability of engagements.

One firm that has tackled this challenge head on has reengineered its delivery of pension advice to adopt an approach based on Commerciality principles. In doing so they have been able to virtually eliminate an average 20% write-off in fees for subsequent engagements.

So what next for finance professionals?

The seven habits of Commerciality framework focuses on virtuous habits that have both short-term pay off (greater efficiency or profitability) and long-term benefits (improved competitive positioning). Developing a strategy sheet for an engagement, creating a stakeholder map, or focusing on outcomes need not be a tortuous experience.

Any adviser can benefit from spending just a few minutes being more thoughtful about Commerciality and what this means for their interactions with clients. Small changes matter. At the beginning of an engagement have the courage to ask Commerciality-focussed questions: Who are the key stakeholders? What form of communication is preferred? What kind of solution is being sought? What is the desired outcome? The answers might just surprise you.

[By Alastair Beddow, Associate Director and Ben Kent, Managing Director at Meridian West. A version of this article first appeared in the July issue of ACCA’s Accounting and Business magazine. ACCA is the global body for professional accountants.]