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[Top tips & case study] Commercial understanding

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In the second of a series of articles, Ben Kent and Adrian Furner discuss how advisers can better understand the context of their clients’ businesses [Habit 2].

How much do you really know about your clients? In our recent study, Effective Client-Adviser Relationships, 52% of clients cite a lack of understanding of their business by external advisers as the factor which is most likely to derail the client-adviser relationship.

As we discussed in the Summer 2014 edition of pm, understanding the business context in which a client operates is one of seven core habits that commercially-savvy advisers exhibit. Commercial understanding is now a major factor clients consider when they commission work. When looking to instruct advisers for complex work, 40% of clients place an understanding of their business as among their top three selection criteria. The professional firms that have been most successful in this area have managed to turn their more commercial approach into a brand differentiator: “You must constantly educate yourself otherwise
you can’t deliver successful advice.” Mike Strong, Executive Chairman EMEA, CBRE.

So what exactly do clients expect from their advisers? Reading financial statements and annual reports is useful, but no longer sufficient. Clients are demanding much more: 75% say they expect their advisers to know about their organisation’s strategy and business plan, and 67% expect knowledge of industry sectors and trends. As clients raise the bar, professional firms are expected to jump higher and higher to demonstrate commercial understanding.

Three steps to demonstrating better commercial understanding:

1. Research the style and culture of your clients

Each client has their own language, jargon and way of doing business. Communication styles and risk appetite vary between organisations and individuals. Understanding the personal and emotional factors involved in any piece of work will inform how to best position advice to ensure it gains traction. Top tips:

  • Map out the key stakeholders for any engagement, and meet with them to discuss their personal views and objectives.
  • Keep in touch throughout the duration of an engagement and afterwards. Informal meet ups work well, particularly at the client’s premises.
  • Be inquisitive about a client’s strategy. Don’t be afraid to ask for strategy documents that would help contextualise your advice.

2. Share best practice and case studies

Clients want to know from their advisers how other organisations, especially those in the same sector, have undertaken
similar engagements. Sharing insight on what does and doesn’t work, and how pitfalls can be avoided, is a key attribute
of trusted advisers. Top tips:

  • Capture the knowledge that you build up from different clients. Write down the key learnings and actively share with junior colleagues.
  • Develop a checklist of questions to ask when attending initial meetings with a new clients.
  • Prepare relevant case studies to show clients ahead of meetings, and talk to colleagues to gather more examples.

3. Keep one eye firmly rooted on the future

Clients also highly value foresight on trends likely to reshape their sector in the future. CFOs and GCs are time poor and so look to external advisers to offer a view on the issues that might impact their business over the short and long-term. Top tips:

  • Read blogs and thought leadership, and attend industry events and networking sessions to keep abreast of sector developments and issues.
  • Attend seminars and workshops delivered at client organisations to understand the in-house dynamic.
  • Send short, personalised emails to clients drawing their attention to issues you think are relevant to them.

Case studies: fostering business understanding
The talent management strategies of professional firms are at a turning point. Firms now recognise that business understanding
is as important as technical understanding. Sector groups, key account plans, and knowledge managers are a good starting point. However, more innovative firms have taken further steps to build business understanding into their culture:

Simmons & Simmons has created a highly successful mini-MBA for trainees joining the firm that teaches young lawyers essential business skills.

Thomas Eggar, a law firm based in the south of England, sends its lawyers to do a day of work experience at their client’s retail outlets.

The Big Four accountancy firms and large consultancies have high developed knowledge management systems that allow fee-earners to share insight and collaborate across practice areas.

[This article originally appeared in professional marketing magazine. For further details go to www.pmforumglobal.com. In the next issue: Habit 3 – Understand the economics]

What keeps your clients awake at night?

What keeps your clients awake at night?

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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?

The power of alignment – how easy is it to use your advice?

The power of alignment – how easy is it to use your advice?

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In our personal life, whether in the digital world, or the physical world, we often chose services, in a large part, based on how easy they are to use.  This ‘ease of use’ is often driven by how supportive they are of us achieving our desired outcomes.

Let’s take an example, buying a camera.  People buy cameras for many different reasons, it could be they want to record their family growing up, they could be going on a special trip, or be a passionate wildlife photographer.  Each of these people will have different desired outcomes, which in each case isn’t buying a camera, it’s producing great pictures to show to people.

For a retailer, understanding these desired outcomes could be the difference between making a sale, or not and therefore it’s important piece of the jigsaw.

With the advent of e-tailers we have seen a significant consolidation of the number of physical camera shops on the high street.  Those that have survived have done so by creating very loyal customer bases.  Often what they can provide over the e-tailers, is the ability for buyers to seek pre and post purchase advice.  This is often focused on their needs and context, and helping them achieve their desired outcomes. In return they’re willing to pay a premium for this, and will likely buy additional items and services from the retailer over time.

So why is it, that in the context of professional services do we often miss the target in relation to being ‘easy to do business with’, or making our advice ‘easy to use’?  After all, as with personal life often it’s this ‘ease’ that creates positive customer feedback, repeat business, and customer loyalty.

How much time do we spend really understanding the client’s desired outcomes? How our advice will be used? The audience and users for that advice?

And even if we do spend time understanding these, and other key issues, how often during the creation of the advice do we come back and check our advice against them?

So what can we do about this?

Often the answers are all around us if we look for them. Think about your favourite brand, or shop, or airline.  What is it that they do that keeps you coming back?  How do they understand your needs?  Your desired outcomes?  And how do they adapt their service to you?

Finding ways to really understand your client’s desired outcomes is fundamental to commerciality as it links to some of the other habits such as: agreeing the scope; creating practical solutions; and communicating for impact.

So, just step back for a few moments and think about the last few engagements you’ve worked on.  How easy do you think your client found it to use and apply the advice you gave?

If you can’t answer this question quickly and easily, then it may be that a focus on habit 1, understanding your client’s desired outcomes, is a good starting point for you to increase your commerciality.

Igniting a project management revolution in legal services

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Over the last five years, many law firms have reduced costs by slashing overheads and firing underperforming partners.  Despite this, profit margins remain under pressure.  Several firms have gone into insolvency and more are in financial distress.  The move to fixed fee means law firms are now bearing the cost of inefficiency, which they had previously been able to pass on to clients. The results are painful.

In this context, the case for better project management seems overwhelming.  A few firms have developed sophisticated approaches.   There has been considerable recent press about major firms, such as Dechert, DLA Piper, Eversheds and Latham & Watkins, implementing project management training and software.

But most firms are struggling to get traction.  They are debating what to do, or are struggling to introduce change.  So why the slow progress?

barriers to changeThe barriers mainly come down to advisers’ mindset.  Most partners will buy into the importance of project management as a concept, but are slow to change the way they themselves work.  Some see project management techniques as bureaucratic and inappropriate to their highly bespoke work.  They are uncomfortable using the new techniques and don’t have the confidence to have frank conversations with the clients about scope (the foundation of good project management).  If partners don’t set a visible example, fee-earners won’t follow.

Learning from the accountants –  But there is no need to despair. The good news is that the large accountancy firms have already blazed this trail.  Law firms would do well to emulate them.  Fifteen years ago they started programmes to improve project management, driven by declining margins in audit and tax work, and the switch from hourly rate to fixed fees.  Meridian West interviewed the former managing partner of a law firm who acknowledged that “the accountants have got smarter, much smarter than lawyers [at project management]”.  Many of the strategies devised by the large accountancy firms can be directly applied to law firms.

What are these strategies?

Develop simple protocols, don’t invest in complex “project management” software / protocols – Be sensitive to the uniqueness of professional services.  Prince 2 and various other methodologies and software programmes developed in the corporate world do not apply well.  They are too prescriptive, and too complex.  There are horror stories of law firms spending a million pounds on advanced project management software which are hardly used.  It is better to work with fee-earners to develop a series of straightforward protocols and templates, adapted to their particular practice area eg dispute resolution, commercial contracts, M&A.  In effect, rather than teaching lawyers about theoretical ‘project management’, turn the subject around and capture instead best practice ‘matter management’, which is a subject more likely to grab the practitioner’s attention.

Position the strategy as “profitability management” rather than “project management”.  Project management is seen as mundane, whereas all partners understand the importance of profit management.

Help partners become financially literate. Partners need to full understand the economics of the law firm and each project.  Partners often have a sketchy understanding of the impact of different pricing mechanisms, charge out rates, leverage, and write offs on profit margin.

Provide real-time financial information. In a recent seminar Meridian West ran on project management, two thirds of attendees acknowledged that they were not able to track project profitability in real time.  Indeed the issue is often even worse, with practitioners failing to support the preparation of a budget for fixed fee work, and therefore not having a means of accurately appraising performance on a week-by-week basis.  This is a serious shortcoming.  Unless fee-earners know if a project is becoming unprofitable, they cannot take actions to put it back on track.

Map how your matters are really managed. Process mapping helps you understand how time is really wasted rather than rely on self-evaluation.   This involves reviewing the files of a small number of similar matters (eg litigation, acquisition). In short it is a technique to find out how the business operates to deliver a service: what people do, how they do it, how long they take and in what order.

The exercise enables management to understand.

a. How different is the work that is actually done from that which is laid out in internal guidelines?

b. How different is the work that is actually done from what may be considered industry best practice?  Both are critical to then following up with an appropriate and effective process improvement programme.

Training and workshops in isolation are usually ineffective, because few fee-earners really know how much time they spend on each task, or indeed are able to accurately describe what actually happens in practice.  Attempts have been made to apply wider industry techniques to process mapping (eg Six Sigma), with mixed results.  It is important the review is conducted by people with a strong working knowledge of the legal business, and critically the high value activities.

Use process improvement exercises as an opportunity to enhance “added value” as well as cutting cost.  Process mapping is an opportunity to enhance the quality and consistency of the client experience.  Over the last 2 years Meridian West has surveyed the views of over a thousand clients of law firms.  They want lower prices but they also want better consistency of service and more commercial advice.  They are telling us that they want better scoping out of the work, more intelligent delegation, better communication, more transparency on process and more commercial advice.  The GC of a FTSE 100 company put it bluntly, “If you guys are charging us £500 an hour, it better be perfect.” 

PM and Commerciality diagram

So: good project management is an essential survival tool. But more than that, it is also a significant driver for enhancing the client experience.  Without it, you have, inadequate scoping (with possible pricing implications) and major risk of not meeting client expectations.  Leading firms are developing methodologies and techniques that enable them to deliver a high quality and consistent quality of service. But even good project management will only get you so far.

The final delivery is judged as much on ‘Commerciality’ – a concept which Meridian in West has refined, having undertaken substantial research on the subject.  In essence, Commerciality consists of ‘7 Habits‘,   driven by a steady focus on the client’s business goals – ie not just delivering a technically brilliant solution.  Combining  ‘Commerciality’ with good project management can move you into the sweet spot where you are pricing right and delivering well.  As the diagram above shows, the alternative positions are uncomfortable and unsustainable for most firms.

by Ben Kent, John Rowley and Andy Smith