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What The Leader Needs To Know:
Client Focus Can Drive The Growth Of Professional Services
The Opportunity
Following several decades of fast paced growth –
many professional services firms have been forced to contract over
the past few years. The challenges of maintaining, much less growing
a firm, have been compounded by several factors.
First, the public scandals have hit several components of the sector,
particularly financial advisors and accounting firms. These have
eroded the long held trust placed in professionals and their organizations.
Other components of the sector have seen a strong influx of independent
professionals. Senior professionals in firms and corporations are
becoming disillusioned with life in large organizations. They opt
instead to “hang out a shingle” much as the traditional
physician did before the domination of group practices.
Mid to large sized corporations have been the traditional clients
of the bigger, more well known and lucrative firms. Against the
backdrop of scandals and independents with lower overhead accompanying
lower fees, the corporate client is demanding more and more value
from the professional services provider.
Many leaders of professional services organizations believe that
value is defined by greater and greater professional knowledge,
expertise and capacity. Therein is the competitive opportunity.
Value is not defined solely by the professional, (i.e. technical)
expertise and performance of the firm. Certainly, these are necessary
to the firm’s success. But to borrow from that old expression,
they are not sufficient. As in any other industry – it’s
not just how good the service is – it’s how it is delivered
that keeps it from becoming a commodity and grows its value.
The professional services business that thrives is the one that
not only has world class technical expertise and performance, but
knows how to deliver them in the specific ways that loyal, targeted
clients value.
How To Leverage It
- Build & Communicate The Business Case For Customer Focus
Regardless of whether your enterprise is legally a partnership
or not – professionals have a partnership mentality. Successful
professionals have three characteristics: 1. mastery of a discipline;
2. solid analytic and problem-solving skills; and 3. the confidence
to advise clients on how to manage their business. Emphasizing
the resulting tendency to act independently is the fact that it
is personal not team contribution that leads to advancement and
reward. In this context it is crucial that the firm invest in
educating leaders and professionals about the fundamental principles
of a customer focus strategy and the financial benefits of executing
it.
A key principle to emphasize is the need for the client to experience
a consistent, differentiated, valuable relationship (as defined
by them) regardless of which particular professional they are
working with. Second in importance is the fact that if all professionals
focus on delivering consistent, differentiated value when working
with clients, growth is accelerated and relationships deepened.
Finally, the economic benefits of a customer focused strategy
need to be clearly communicated. Given the analytical skills of
the audience this communication must include projections rooted
in the firm's business model, client base and financial performance
to date.
- Target The Right Clients
Professionals tend to build client relationships on an opportunistic
basis. Starting out any client or prospect is welcomed by the
professional new to business development. The result is a client
base that is extremely diverse. On the surface this appears to
be a strength, i.e. relationships across a broad range of industries
and geographies. However, many professional services firms have
difficulty determining the real profitability of any given client,
much less the entire client base.
Careful financial analysis of client segments and profitability
can be quite revealing. Two examples illustrate this.
In one firm, senior leadership believed that government contracts
did not generate sufficient profits. In fact, given the pressures
on the firm’s fee structure they suspected most government
work resulted in a loss to the firm. Fortunately, they invested
in a careful analysis of their government sector work. The facts
proved that government clients were the most consistently profitable
segment for the firm.
In another firm, leadership strongly believed in the value of
Fortune 100 accounts – and pursued them aggressively. Indeed
they were successful. However, financial analysis showed that
for the firm’s top 10 accounts with average revenue of $1.2M,
the firm lost money in 4 of the 10 accounts. Why? First, Fortune
100 companies are pursued by virtually every professional services
firm. Second, these companies know their business is highly valued
and demand fee discounts. Third, Fortune 100 clients typically
demand additional services during the life of an engagement. Because
of the perceived value of the relationship many professionals
are hesitant to ask for the increased fees to deliver the additional
services.
A critical step in executing a client focus strategy is identifying
your most valuable client segments.
- Define Value & Service With Science Not Opinion
When firms do decide to pursue a client focused strategy the decision
about what clients value is often made in a conference room by
the leadership team. The discussion consists of voicing conclusions
and recommendations based upon each leader’s personal experience.
Keep in mind the point made above – professionals usually
build client relationships on an opportunistic not strategic basis.
A discussion based on personal experience about what clients value
is therefore going to lead to decisions based on what has been
experienced by chance.
A much more rigorous, reliable process is called for.
First, it’s not what clients value that is important.
It is what your most important clients value that causes them
to do the things that drive sustained, profitable growth for
your firm.
Second, you need to provide clients with an unbiased opportunity
to tell you what they really value from a professional services
firm.
Third, the answer to the first question is not a topic for discussion.
It is a matter of fact. You build a statistical model based on
your most important client segment, what they value, and what
they do in return for this value. The model predicts your client
loyalty and sustained business growth based on whether or not
you consistently deliver certain very specific sources of value.
Science - not debate - is the way to define the value and service
that will build client loyalty.
- Achieve Early Wins
In most situations successful change is accelerated by an early
demonstration of results. This is particularly important in professional
services firms where people are, again, highly analytical and
independent. As one senior leader of a professional services firm
recently said to us "…remember who we are. We can find the weakness
in any argument - no matter how sound. We take pride in being
able to prove anybody wrong. And we're not always aware when this
two things work to our detriment."
Once you have scientifically defined the client experience that
will drive your growth - prove that it works. Select a cadre of
leaders and professionals to deliver the new experience. Track
and document the results. Key to credibility and the execution
of your strategy, capture the lessons learned to allow you to
continually improve the delivery of your differentiated and valuable
client experience. Once 4 - 6 small teams have delivered the experience
to a like number of clients with proven results professional independence
will be tempered. Professionals will begin to demand the opportunity
to play a role in executing your client focus strategy.
- Focus Where The Leverage Is
Leaders and seasoned professionals set the tone for your firm.
Throughout the process of formulating and executing your client
focus strategy invest in engaging these people. Once they are
engaged they will engage, lead and coach the rest of your organization.
© 2004 Flanagan Consultants, LLC. Terms and Conditions
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