Seven Distinctions for Outstanding Professional Service Firms

By Tom "Bald Dog" Varjan, Organisational Provocateur

This article was triggered by a discussion I have had recently with a senior partner of a large law firm. They have reached a plateau in their growth, so decided to hire a consultant to help them to gain momentum again and elevate their operation to the next level.

There was one snag. They ended up hiring a consultant who was a retail expert, and gradually started turning the law firm into a retail shop. You know, Christmas sale, monthly specials and coupon books. It is frightening stuff. This law firm wants to grow as service professionals and this consultant is about to turn them into a retail shop, something like the legal equivalent of Wal-Mart: "Legal packages at low low prices."

Can you blame the consultant? I can't. He is a specialist at selling "things" in large volumes and with deep discounts. (Hey, Harrods of London and Wal-Mart don't use the same consultants when they need help, although they both are in retail. They are located at the opposing ends of the quality scale.) And now he is about to do the same with this poor law firm. Holy sausage, man. The next thing is really flying pigs. Or flying lawyers. Hm.

So, now we know that selling high volume at a discount won't build a great service firm. It can only build a firm with chronic busy-ness, headache, heartache and stomach ulcers. That is why I am a fanatic proponent of building low-volume high-margin firms, where you serve a small number of carefully hand-picked clients who appreciate your support and are willing to pay premium fees for your expertise.

The interesting fact is that I often see one-person firms to achieve this status, whereas larger firms - even the so-called successful ones - struggle to achieve it. Hey, I know several firms where it is expected to conjure up 1,900 billable hours per person per year. Calculating with a 40-hour week for 52 weeks, that is 2080 total annual hours. So, you are allotted 180 non-billable hours to do practice development and also to cover vacations, illnesses and all sorts of unexpected bits and bobs. Average North American consultants bill out 1,140 hours per year and that requires 55-65-hour workweeks. Creating 1900 billable hours may require 80 plus hour workweeks. That is retarded. You may want to live a bit too, regardless of how much you love your work and business.

And when you look at the statistics (Business in Vancouver Book of Lists here in Vancouver), you find that the top firms (of any kind) do this madness, however when you calculate their productivity (net profit per employee), we are often talking about less than $15,000 per year. The partners could make more profit by investing their money in the stock market or real estate and they could sleep in every day.

So, let's see what you can do to create a distinctive service firm. And I mean distinctive to you, your clients and your people. It is not about winning awards or being written up in magazines. Think of the Pepsi commercial with Michael Jackson. It won all sorts of awards, but sales took a nosedive. The same happened with the award-winning Cadillac commercial some years back. Go figure. Arthur Andersen was a highly regarded and a highly "decorated" firm, but went down with Enron. Put your finger on your temple and say after me, "Hm, that's interesting".

All right. Let's get rolling here, otherwise the sun goes down on us.

1. Unparalleled Skill Building Excellence

Since our industry is changing pretty rapidly, it is very important that you seize all opportunities to build new skills, abandon obsolete ones and polish the ones need polishing.

Just imagine a carpenter who has the best and most expensive tools in the universe but doesn't understand the principles of woodworking. Yes, he can only build a great-looking chair out of veneer and chipboard, but it will collapse as soon as someone sits on it. It doesn't serve the purpose of a chair, but they look impressive.

Many firms fall into this trap. They almost blindly hire people with MBAs and other fiendish diplomas without making certain those candidates actually have something "solid" behind the veneer of their credentials. I do agree with Henry Mintzberg that most people acquire their credentials in order to jump the queue, and get into a high position where accountability is almost non-existent and they can only fail upwards. After all, they have expensive tools. The University of British Columbia is one of the cheapest universities in North America, but even there you have to plunk down some 32 grand for an MBA. And that is only the veneer of theory. Then you have to go to the trenches to collect some real scars to learn the principles.

It is vitally important that you constantly evaluate your skills. And don't get bogged down with core skills only. As a service professional you must have a width of skills too. Look, some 63% of the unemployment lines are computer people of some sort, mainly programmers. Why? Because they plainly refuse to learn anything but new computer languages. The way I see it, they deserve to die of starvation.

Programming, regardless how good you are, is only one skill, and it is damned hard to build a career on one single skill. Who the hell wants to employ them on a full-time basis. I read the other day on a discussion forum that some local techies want to form their own union to create steady employment for themselves, and to force companies to employ only union techies. Good luck. Who the cricket want to employ someone whose only skill is making turntable cartridges, just because s/he is a union member? More and more people don't even know what a turntable cartridge is.

Besides your core skills, you have to learn social and emotional skills for better interaction with clients. The professional service world is a sequence of one-to-one interactions. So, what to learn? Here is a short list: Listening * spoken and written communication * practice development * coaching and counselling skill * reading people... and however much you may hate the word... brace yourself... selling skills.

And I dare to bet some vital parts of my anatomy that the more you resent the word, the more trouble you have to land new clients. I also dare to say that you may have a deep issue around receiving money for your expertise. Most service professionals undercharge for their services because they don't believe they deserve more. Watch out for this. This is some serious emotional baggage we carry from our childhood, and it is hard to overcome by ourselves.

We almost always need some external, objective help. I grew up in hard-core communism, so you can imagine how strong this "I don't deserve it" stuff used to be for me. When you are brainwashed that your sole duty is to serve the state, this money issue can cripple you pretty easily. But it is there for everyone, and it would be a mistake to deny it.

We are living in an non-compartmentalised world and every - seemingly irrelevant skill - can have an impact on our work and life. I have recently been hired by a law firm "to maintain action". They have all sorts of ideas and strategies but realised that they need a ruthless, tough-as-nail arsekicker to make certain those ideas and strategies get tried and tested, and the good ones are actually implemented for the firm's greatest advantage. What got me the gig was my military and skydiving background. They are both pretty tough-as-nail and "no turning back" activities. And it is a pleasure to work with these folks because these are tough-minded professionals. We can push back to each other and in doing so creating some really neat stuff that will further elevate the firms in the legal pecking order.

2. Unique Methodologies To Raise The Bar

Yes, we could talk about problem solving skills, but problem solvers are dime a dozen. The key is about raising the bar. Initially we may start out to restore the status quo, but if you stop there, then you offer nothing unique to the client.

And here I want to talk a bit about content knowledge. I recently read an ad. A local IT firm was looking for a business development manager. The minimum qualification was a master's degree in computer science. Here is another retarded IT firm. They have IT knowledge oozing out of their ears, but have serious client acquisition issues. So, they want to hire another computer expert, just like them, hoping that doing more of the same lunacy will solve their problem. People are really their own greatest enemies.

They mistakenly believe that by accumulating more computer knowledge they become more successful. I emailed the president and mentioned to him that maybe it is not the amount of IT knowledge that has to be increased, but the methodology of how they communicate and use existing knowledge that needs revision. He told me he had been in the IT industry since the late seventies, and he had forgotten more than I would ever be able to learn and knew what to do without taking advice from a young and inexperienced punk, like me. Well, the word "young" made me feel good and the word "punk" enthused the rebel in me.

I wish them the best of luck, but I have a sneaking suspicion that managerial ego will sooner or later floor the company permanently.

There are not many brand new things under the sun, but every method can be modified, made more exciting, more effective and more lucrative.

If you are an accountant and find a way of halving tax return preparation time, which demands less time from you but presents new value to clients, you can legitimately charge more in spite of taking less time to do the work. By charging more, you have new money to invest both in taking better care of yourself and attending top notch workshops or acquire new tools.

Which financial advisor is more valuable for the client: Premium Paul, the top notch MDRT (Million Dollar Round Table) member who charges premium fees for his services, or Competitive Chris, the local financial advisor who charges competent(ly low) fees?

Paul's personal life is in order. His personal needs are met: He has time for vacations with his family. He regularly exercises to keep his body in top condition. He eats good quality food, so he is always mentally alert and physically and emotionally relaxed. Paul also has the money and the desire to go and learn from the greatest financial masters, which then he translates into value for his client.

Chris's life is a disaster. He works like a dog from dawn to dusk. He barely sees his family because he is too busy seeing existing clients and prospecting for new ones. He is always tired and keeps himself alive on buckets of coffee. When he gets hungry, he picks up some junk food between two client meetings. He doesn't have time for learning new stuff because - he believes - he knows it all and nobody can show him anything new.
And he doesn't have money for workshops and seminars anyway. He tries to stay in business by charging competitive(ly low) fees, but his clients are getting less and less value and keep deserting him. So, his life is a constant hunt for new clients.

Be honest with yourself. Which one would you choose as your financial advisor? Guess what? This syndrome plagues every single service professional who try to get by on competitive(ly low) fees. If we want to raise the bar for clients, then we must raise it for ourselves first.

Why do you think the medical profession has such a bad reputation? Because the lifespan of the average medical professional is some 15 years shorter than that of non-medical people. Go figure. Some 60% of the nurses in hospitals are grossly overweight. Go figure.

Look at your methodologies and look at the impact they make on your clients' condition. Could you create the same client impact with less work on your part? Instead of writing that report, can you just dictate your notes and then the client's secretary can transcribe it? Can you record each client interaction and then offer it to the client on a CD ROM? I tell you, it is much less work but the value is still there.

Can you cut down on face-to-face meetings and do more work on the phone or email? When face-to-face is unavoidable, can you ask clients to come top your office. Hint: Your dentist won't come to you. Neither will your lawyer or accountant, nor your car mechanic. You had better start demanding to be treated like a professional not like a journeyman (politically correct version: journeyperson).

Digression starts: What do you build in winter? A snowman or a snowperson? Digression ends.

And now let's take the next step. How can you create more impact with less work on your part and charge more for it? This is a bold question but you must understand that you are not paid for your labour, but for the value you bring to the table, and the whole idea is to create as much client value with as little effort and time as humanly possible.

3. Innovative Talent Attraction Methods

Some of you who read this are solo practitioner but some of you are building sizeable firms. It is important to create a buzz around your firm so that right people queue up at your doorstep wanting to work for you. The professional service firm is the only form of business that is based on trust-based one-to-one relationships. Yes, all industries talk about creating and maintaining trust with their customers in the process of selling a commodity, but the professional firm is the only form of business that works with clients, selling care, protection and guidance.

And it takes a certain set of values of the firm and attitudes and atmosphere in the firm that define the overall aura around your firm. And that aura can be either very attractive or very repellent. Just think of your own experiences when you were walking into the offices of a potential client, and you had that sneaking suspicion that something was terribly wrong with that firm. A few years ago an IT firm hired me to help them to make their day-to-day operation more effective and smoother.

I had already received the downpayment and I was going to their offices for the first meeting with key people. Half of the offices were dark. It turned out the electricity company cut off supply because the firm failed to pay its bills. The same happened to the phones. It turned out people lifted every penny out of the business for personal use. In the end, I handed back their downpayment and walked away.

My gut feeling was that this was a company in deep trouble and I decided not to become part of the problem. Yes, I know some shores are set aside for shipwrecks, and if the gig is interesting, I may be interested, but when the primary concern of the sinking ship's captain is how to save the silver from the kitchen and turn it into a fancy car or a larger house, then I prefer to back off. Exactly this was happening at this firm. They were laying off their people on a daily basis, so partners could use their associates' now saved salaries and bonuses for their own personal purposes.

In order to create an attractive atmosphere within the firm, people must manage emotions. It is not logic, statistics and the number of awards that make a firm irresistible attractive.

4. Special Client Counselling Skills

This is very important. This will define a large chunk of the experience clients have with you. You must understand that a degree from Harvard alone is not enough to provide memorable experiences for clients.

Actually I read it a few years ago that in spite of how useful a Harvard degree is, the experience of going through Harvard is rather miserable and pretty diabolical.

We must understand that "experience" is more of a gut feeling process than a head process. Your clients must have the experience in their guts, not only saying "s/he is pretty good at business".

And this is why we must improve in the area of counselling and giving advice the right way. The way I see it, "Hay man, you should do this" is not proper advice worth paying for. Besides, people are pretty allergic to this kind of "advice" and tend to ignore it. Clients must feel that we have their best interest at heart not only collecting billable hours. The interesting thing is that we cannot disguise our intentions. When we are in for the dough and not for helping clients, they can read this intention on us, and they will run very fast and very far.

So, make sure you have all the appropriate soft skills, and if you have employees require them to invest a certain amount of their professional development time to sharpen their social and emotional skills.

5. Massive And Valuable Knowledge Base

Your firm's "deliverable" is brainpower. If you operate as a real service professional, then people should perceive your sellable value in what you have between your ears. Writing reports, memos and putting in more hours of manual labour can hardly be called client value. If it is then you just ill-educated your clients, and just watch what they will demand from you down the road.

There is one problem though. If you are an hourly service labourer type firm with an army of juniors, then your interest is in selling more billable hours at competitive(ly) low hourly rates, and make up for the loss in volume. But is this a win-win? It is a win to you in the short-term, but is it a win for your clients? I doubt it. Sooner or later they discover they were taken for a ride and they not only desert you but start spreading bad words about your company. And we all know that can be a disaster.

Also create value in the form of templates and processes that is in forms that don't require your personal presence. This can be client website where they have access to now stuff at their convenience.

6. Different Approach To Different Projects

Clients are different. Therefore I have always been against the "our unique approach", which also translates into "our trademarked one-size-fits-all process". It reminds me of a family physician in my hometown in Hungary. He asked every patient to strip naked regardless of the problem the patient had. That was his "trademarked" approach with every single patient. Once I went to see him with a shin splint, but the process was the same. He refused to examine my foot until I had stripped butt naked.

Far too many - especially large - firms have this level of rigidity. Just think of the Six Sigma craze. Before that there was Reengineering, Management by Objectives and some other flavour of the month stuff, mainly created by fuzzy-brained college professors who have never seen what is happening in the real world. Hey, if you are hiding behind a union job with a secure paycheque and a union pension, I don't think you know much about the daily "streetfight" and the occasional "bloodbath" that are happening in the real business world.

7. Perpetual Research And Development Excellence

This is a big problem in most professional firms. Associates and partners get so bogged down with working with clients that they have no time left to develop new approaches and processes, not to mention time to mentor junior associates. The fact is that people only want to engage in billable work because this is how they get evaluated at the end of the year. Managers and associates should sit down and schedule in advance how many non-billable hours people are willing to invest in building the future.

And talking about the future, we have just reached another roadblock. Professional firms in general are pretty short-term focused. Until this obstacle is overcome and people are willing to invest in non-billable activities, like research and development to build the future, nothing will change and they will keep offering the same regurgitated ho-hum methodologies for the rest of their lives.

Summary

So, what does really make and outstanding professional service firm? Most people would say it is the gross revenues and outstanding technical knowledge.

I would disagree. I think it is the net profit per person and both core and peripheral skills. You see, the key is not what you make but what you actually keep and you can invest to improve your quality of life.

I also believe that if you have a neat service, well positioned and promoted, you don't need to waste your money on a corner office in a nice complex at the posh end of the city with a gigantic mahogany desk. People who make good clients come to you for your brainpower not for ostentation, and if people perceive you can help them, they will focus on your knowledge and won't care much about the plumage and the fluff. People create their own perceptions based more on their own past experiences than on what you present.

As the famous coach John Wooden once said, "Be more concerned with your character than your reputation, because your character is who you really are, while your reputation is merely what others think who you are." Remember both Churchill (a chain-smoker, hard-drinking pensioner) and Ghandi (a less-then-business-like-dressed guy with a funny accent) were followed and respected for their characters.