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Virtuous habits: embrace Commerciality to stay ahead of your peers

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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.]

Commerciality - a game of two halves - do you give actionable advice?

Commerciality – a game of two halves – do you give actionable advice?

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In Chinese philosophy the concept of yin-yang is used to describe how seemingly opposite forces in the natural world are interconnected and interdependent.

Commerciality can also be looked at from two perspectives, which whilst not strictly opposing, are equally important and interdependent in order to achieve success.  These perspectives are: context; and delivery.

As laid out in our ‘7 habits’, context is about understanding: the client’s desired outcomes; the business; the economics; and the people.  It’s about: the why; the where; the who. In an ever increasingly complex and interconnected world there are many options and solutions to even a simple challenge. Understanding as much as possible about the context is critical to being able to filter, and make trade-offs between options.

Delivery, it could be said is what professional advisers have been traditionally about. After all advisers are only as good as the last piece of advice they gave.  Delivery is fundamental to success, however, this is where a ‘commercial adviser’ differentiates themselves in the eyes of the client.

Increasingly, clients are looking not just for advice, but ‘actionable advice’ and the way that this is achieved is by providing advice that fits the client’s context.

The art of ‘actionable advice’

‘Commerciality’ is about creating balance between the context and the delivery such that you better understand the context and you adjust the delivery approach to ensure that the advice and the context converge.

Balance, in the context of commerciality, is multi-dimensional, being different for each client, each opportunity, and varying over time during an engagement.  Only when professional advisers achieve it in a dynamically stable way are they seen as ‘commercial’.

The ‘7 habits’ provide a framework that helps identify and articulate the context, and then deliver against it in an adaptable way with the balance between the two tailored to your client’s desired profile.

Defining the amorphous - a definition of commerciality

Defining the amorphous – a definition of commerciality

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If I asked you and a group of your peers to create a definition of commerciality then it’s likely that after much head scratching the responses would be more questions rather than answers.  Like ‘innovation’, or ‘creative’, ‘commerciality’ as a term is fairly amorphous and means different thing to different people and often depends on the context of the moment.

As terms, they’re all aspirational and have positive connotations.  It’s therefore not surprising that people and organisations like to proclaim proudly that they are ‘innovative’ or ‘commercial’.  In reality though, the real success stories in these areas are acknowledged as such by others rather than themselves.

However, without clarity around what it looks like and feels like to achieve success, it’s difficult to get there and be recognised for it.

In creating the ‘7 habits of a commercial advisor‘ we have used insights from both clients and advisors to create a layered framework that at the top level identifies seven areas that can lead towards success.  In order to then link the ‘7 habits‘ to actionable improvements we have identified competencies for each habit, and defined what it means to attain differing levels of maturity in each.

In short we have created a robust, consistent framework that can be applied throughout the life-cycle in order to, for example:

  • understand what you client means when they identify ‘commerciality’ in client feedback
  • provide a consistent language for conversations with clients and demonstrate that action is taken based on client feedback
  • turn client feedback into actionable feedback and measurable improvement plans
  • focus, tailor, and measure investment in L&D
  • provide a mechanism to help align your firm with your clients such that you’re seen as ‘easy to do business with’

The ‘7 habits‘ framework is simple enough to be memorable, yet deep enough to provide robustness and consistency.