Seven Managerial Headaches in Professional Service Firms

by Tom "Bald Dog" Varjan, Organisational Provocateur

While growing any business can be a major challenge, and while many aspects of growth in industrial companies can be delegated to watertight systems and minimum-wage workers, growth in a professional service firms is a totally different ballgame. And while I truly believe in systems and processes, to truly grow a professional service firm requires kick-arse talent as well. Please re-read. Not workers but actual talent.

So, to close the year, let's discuss some challenges managers and partners of professionals service firms are facing and wrestling with when trying to bring out the best in their people to grow their practices.

Many firm managers mistakenly believe that by hiring ten more associates or acquiring tem more clients the firm is actually growing. Well, yes. In terms of overheads and total number of working hours the firms is really growing. But when you examine profit per person, profit per hour or profit per client, you may see a drastically different picture.

Professional service firms produce something no one can touch or smell. Their "products" are concepts, ideas, strategies and perspectives being perceived to have significant level of ambiguity and risk. That makes both the promotion and the delivery of professional services drastically different from the promotional and delivery methods of industrial organisations.

Unlike the offerings of industrial companies, professional services are "being consumed" while "being produced". What that means is that there is no such thing as a prototype. Every time you "fire", that is, you deliver the service, you fire real "ammo" at real people. That's an awkward comparison. I don't encourage you to kill your clients though.

So, lets look into seven issues that can cause major headache for partners and managers of professional firms.

1. Maintaining One-To-One Trust Between Clients And Professionals

The professional service firm is the only business model where - ideally - services are performed by the same people who've land the business. I know large accounting behemoths have rainmakers and workers to deliver services, but that's not really unique professional service but mass-production of a commoditised service. Maybe that's why they have to overstaff their projects, so they can earn a living while still charging acceptable hourly rates.

Actually this is the bullshit behind the "rainmaker" concept. Essentially the chief peddler (a.k.a. rainmaker) with just enough gray on his temples, pretending to be your partner, sells the engagement then disappears to the next victim. Then an army of schoolkids (all right, let's call then junior MBAs) descend on the client at competitive(ly low) hourly rates, and then stretch the project, so the firm still can make a killing by selling a boatload of - often empty - billable hours. This is not a good way of building trust. And this is the exact reason why you can't sell professional services the same way cars or vitamins are sold. What that means is that, since most sales trainers teach how to sell commodities, you have to be very selective about where you send your people to learn about selling.

2. Knowing The Real Competition

This may sound simple, but there is a bit more to it. But first read renowned advertising man, Roy Williams' words about the topic, entitled "Of Sharks and Pigs".

"It is a true but little-known fact that more American citizens are killed by pigs each year than by sharks.

I believe this is also true of American businesses.

Business owners spend most of their time worrying about the sharks - those diabolical demon competitors though it is far more likely to be the pigs who kill the company.

The pigs are the employees who would rather lie in the mud and oink than jump through hoops for a customer. The pigs are the middle managers who are more concerned with getting the most out of the company than with getting the most out of their staff. The pigs are the owners whose only thoughts are for short-term profits.

A healthy, pig-free company is one with a powerful sense of mission and purpose, a company with values that run deep enough to create a strong company culture."

For industrial companies the competition is other industrial companies in the same industry. That is, the competition is external. For the professional service firm the competition are the clients and the firm's own people. The competition is largely internal. Your clients can choose between firms, and so can your talents. And the quality of your clientele is just a reflection of the quality of your people.

Just look at restaurants, for instance. You'll never see affluent people to organise their birthday parties at Wendy's or Pizza Hut, staffed by minimum wage school kids. No. They expect a certain standard because they understand standard.

And the fact is that professional firms, while putting huge emphasis on solving client's problems, fail to put enough emphasis on providing memorable client experiences. They mistakenly believe that providing a certain number of hours (the work itself) and a certa8in poundage of deliverables are the same as great service.

And the other side of the same coin is retaining top-tier talents. If some great people don't work for you, then they work against you. There is nothing in between. This is a basic warfare equation: Here is the battlefield. You are either on my side or on the enemy's side. It's this simple.

3. Realising That "Who You Are" Is Your Brand

And this "who you are" stuff goes well beyond your marketing. You have to express your real self in every aspect of your firm, knowing full well that some people will hate your guts for it. Former UN General Secretary, Dag Hammarskjold, put it this way, "It is more noble to give yourself to one individual than labour diligently for the salvation of the masses".

The only way of creating consistency in your firm is by living your true values and not to compromise on them. And this consistency becomes a major building block of your brand.

In 1990 Cadillac won the prestigious Malcolm Baldrige National Quality Award. Does that mean Cadillac was aiming at producing quality in any shape or form? Not at all. Cadillac was aiming at winning an award, and using it in subsequent advertising campaigns to fight foreign - mainly Japanese - competition. The whole quality initiative was called off right after winning the award. To a certain extent it worked, but now the market knows about the hype, hubbub and brouhaha-driven American car industry, and most people opt for the higher quality, more economical and cost-effective Japanese models, and tend to ignore the evangelised scrap metal, called the American car industry.

As Stephen Covey says in his book, Principle Centered Leadership, "Only very few university graduates actually obtain an education. The majority go to university to acquire a piece of paper." Also in Principle Centered Leadership Covey talks about the difference between "being" (real, authentic and professional) and "seeming" (pretentious, falsely business-like). Staying with the car industry fir a moment, the Japanese car industry is. The American car industry seems and pretends to be.

Running a professional service firm is more about who you are than what you do. The "what" is always defined by the "who". When you send a duck to eagle school, he can pretend for a while but then some problems start emerging. It starts in flying class. And even if the duck manages to go through the flying class without raising some serious eyebrows, the shit will seriously hit the fan in hunting class when the assignment is killing, eviscerating and eating big, fat, juicy a rat.

So, in order to be consistent under all circumstances, just be the real you and don't try to pretend. If you're a jeans dude, then be a jeans dude day in day out, and don't try to pretend something else by putting on a pinstripe suit. I know I could create huge incongruence by dressing so far up. That's just not me. I do my best work when I dressed the way that is in synch with who I am. Some people like it, some don't and that's fine.

The other day I was writing a biographical sketch for a client. He looked at the draft copy, which I based on his behaviour during our relationship, and he was scared. He is a laissez faire guy like me, but in his business communication he is desperate to come across as a classy "pinstripe". He's desperate to look business-like. Then I pointed out to him that in spite of his effort of looking business-like, he takes, on average, one full week to return a phone call or respond to an email, which makes him an unprofessional guy who looks very business-like.

"Jason, which option do you prefer? Looking business-like or being professional. You can look business-like until you're blue in the face and broke, but if you can't be professional enough to promptly respond to calls and emails, then your whole business is pretence without substance. You're just a third-rate punk in a fancy suit, and sooner or later you'll get found out."

After networking events, I always send emails to people I talked to. Nothing complex just a few kind words and a casual invitation to my newsletter. It's a gross overstatement to say that some 10% of people ever respond to my emails.

A short while ago a potential joint venture partner was losing my emails in his "junk box" because, after one month of "comparing notes on email" communication, he didn't bother to put my name into his address book, and several of my emails ended up in his spam box, which he deletes without ever checking it. And this was an IT guy, selling Internet solutions. The phrase "Doctor, heal thyself" comes to mind.

4. Constantly Generating Good Leads

Now this is an interesting topic. Interesting because for some reason professional service firm partners believe they can get away without "wasting money" on it.

So, what happens is that proactively generating qualified prospects is pushed to the backburner, while the rainmakers go out to pound the pavement and chase "opportunities".

As the old British proverb says, "You gain on the swings but lose on the roundabouts". But as Fish was singing in "Script for a Jester's Tear" on the 1983 Marillion album of the same title, not generating leads is a surefire way of losing both on the swings and the roundabouts. You end up with your steering wheel locked in a full-right position, and you're just going round and round with no idea what to do next and how to exit the darned thing. Hm. It reminds me of the time when I was learning to drive in the UK (on the wrong side of the road). Luckily the Brits didn't mess with the pedals.

Yes, you can save some pocket change by skimping on lead generation or skipping it altogether, but what is the price?

The difference is the same as prevention and reaction in medical care. When people are falling off a cliff to almost certain death, you can either build a fence on the top of the cliff or build a hospital and a graveyard at the bottom. Yes, you have to spend some money before the first person falls off, but you don't have to spend a fortune later on the hospital and the skull garden. You also don't jeopardise the attraction factor of the cliff, so revenue from tourism doesn't suffer.

According to McGraw Hill, the cost of one one-hour local in-person sales meeting costs the selling firm some $370. An out-of town meeting costs over $1,000. This is the price you too might be paying for playing the chasing game.

If you are willing to make a fair investment at the beginning, you start the momentum and your ongoing investment keeps going down while your return keeps increasing. Sadly many firms choose to lift the money out of the business and spend it on personal, stuff like a new car or an exotic vacation.

So, unless you invest at the beginning, you will drastically increase the cost of landing a new client. The later you start the investment, the more it will cost to convert prospects into paying clients.

Yes, I know many professionals say "Advertising doesn't work", "Our market doesn't respond to direct mail" or "Newsletters don't work in our industry". It's the same as saying, "My car is different. It doesn't need engine oil. It's a special dry system." It reminds me of what the drill sergeant told us at shooting practice in the military. "Don't blame the target for missing it. Shoot better." He was dead right. The problem is not with lead generation per se, but how it is used. Professional firms just have to find the best way of using certain methods to generate leads.

5. Integrating Sales Into Operation

This is another huge difference. Unlike in industrial organisations, in professional firms there is no dedicated sales force. Selling must be a seamlessly integrated part of the whole operation of the firm and every single member of the firm must be able to conduct conversations with members of their target markets to establish whether or not there is a fit to work together. No firm must be in the mercy of some rainmakers who can come and go as they please.

And this is another huge reason why there must be a proactive lead generation mechanism in place. I use the word "mechanism", because a large part of lead generation can be automated, so by the time prospects contact the firm, they are pretty close to making a buying decision.

And when I say selling must be incorporated into the service delivery process, I don't mean that you manipulate prospects and spend service delivery time pitching. This is a basic flaw with so-called free consultation. It's not consultation at all. It's an extended sales pitch and hard-core manipulation. All I mean is that when in the middle of a strategy formulation session the managing partner sighs that "Oh I wish we stopped losing our best people after only a few months", then you can ask her, "Tell me about it".

You don't interrupt your delivery process per se, but still ask about the problem and establish whether or not the client wants to solve that specific problem. Remember, your job is to improve the client's condition. And if you know you have the expertise to address the problem the client tells you about, then you have a legitimate reason to discuss it as a future project.

And this is why you need more than good lawyers, accountants or doctors. You do need them, but you also need them with the additional "enquiring into" ability. That is, they must be able to recognise "distress signals" from clients and respond to them appropriately.

6. Maintaining Client Acquisition Momentum

Many professional firms rely far too heavily on haphazard work-of-mouth referrals. This approach highly depends on the industry. If you're a financial advisor, you can create quite a bit of word-of-mouth. After all, your clients have like-minded friends and associates who also need responsible financial planning.

But what do you do if you're a divorce lawyer. You can't pester your clients to introduce you to their friends who are headed to the divorce court. If you're a funeral director this word-of-mouth stuff becomes even more complicated. A few years ago I organised a series of health and fitness workshops at a funeral home to generate leads. Feel free to laugh, but the gig was pretty successful.

Unlike industrial companies, most professional firms suffer from the dreaded feast and famine cycle. Typical accounting firms are dead busy around the tax season and try to put food on the table for the rest of the year. They could eliminate feast and famine altogether by having a good client acquisition system in place, but many firms regard that as a waste of money.

Professional firms must realise that it takes some time between first contact and signed contract. Professional firms can't land new clients on the first contact. After all, you're selling a unique service not discounted tin openers. Your services are not bought on impulse. It takes your prospects quite a bit of time to become paying clients.

This is why it is important that you have a client acquisition machine quietly humming in the background, while you're doing your daily work. And every single person in the firms must participate in the cranking of that clients acquisition machinery. Everyone must be able to dedicate time and effort to landing new business.

Can you imagine a soldier who refuses to perform peacetime activities, like shining his boots or the daily morning run because he joined the army especially for shooting the enemy? That's retarded. There are certain peacetime activities to be performed to keep the army ready and prepared for shooting.

In professional firms too there are peacetime and wartime activities. "Peacetime activities" are performed in preparation for client work. And "wartime activities" are the actual client work.

Also, client acquisition must be a firm-wide effort. I find it ludicrous that when new associates join firms, more often than not they are given the Yellow Pages with the instruction, "Letter M through P are yours. Start calling." In this scenario associates are flying by the seat of their pants doing all sorts of haphazard activities to bring in business while greedy partners pocket the marketing budget for themselves.

So, make certain you have a comprehensive and firm-wide client acquisition system in place and that everyone is on board to using it.

7. Sustaining Firm-Wide Passion And Enthusiasm

Now we know that passion and enthusiasm are two of the biggest profitability drivers in professional service firms. Yet, what we see in most firms is just a robot-like performance of activities. What causes this? Well, partly it is plain garden-variety burnout. I have worked with several - mainly law - firms where the norm was 1,900 plus personal billable hours per year.

Let's calculate a bit here.

There are 220 working days a year. With eight hours per day this gives us 1,760 total hours.

1,900 billable hours require 237 fully chargeable days. Or you work 220 days but work longer than eight hours. Now you're working harder than a prisoner in a Gulag death camp in Siberia, but you haven't accounted for your non-billable activities yet.

And on the top of this you still have to accommodate time for non-billable work like administration, skill building and client acquisition. At the end of the day, typical professionals work about 70 hours a week (about 90 hours for medical professionals). So, how can you have even a shred of passion and enthusiasm if you work like a dog day in day out just to make your quota of billable hours?

Again the military comes to mind. The battle is over and is won, but Joe didn't shoot anyone. Not one single enemy soldier. The commander walks up to Joe and tells him, "Joe, either you go and shoot someone right now or don't get dinner tonight and have your allowances suspended for two weeks. Remember you must make your quota of corpses if you want to get paid."

The fact is that a professional firm should act as a tight-knit team, but realistically most firms are a group of individuals who happen to be working under one roof but the commonality ends right there. They don't have time to work for the firm because they are so busy working for themselves.

Can you blame them? I can't? Is such a firm worth working for? Not really.

This is a cut-throat environment, like car dealerships, where salespeople deceive both each other, their managers and customers in order to fatten their personal commissions. They care as much about the firm's welfare as the firm cares about their personal welfare: Zero, nada, zilch, not a sausage.

Passion and enthusiasm must be part of the culture of the firm and new associates must be able to pick it up upon entering the firm. And a firm can only have passion and enthusiasm if it has a higher purpose, than simply making money.

As Henry Ford once said, "A business that makes only money is a poor kind of business."

The firm must provide an environment of both professional and personal growth fro its people. If, as a firm leader or managing partner, you can find out what's really important for your people on an individual basis, then they will start truly caring about what's important to you and your firm.

And in the meantime remember the words of Clarence Francis: "You can buy a man's time, you can buy a man's physical presence at a certain place, you can even buy a measured number of skilled muscular motions per hour or day. But you cannot buy enthusiasm, you cannot buy initiative, you cannot buy loyalty; you cannot buy the devotion of hearts, minds, and souls. You have to earn these things."

Just think of the ultimate passionate renegade, Richard Branson. I don't think he's the best airline pilot, musician or telephone designer, yet his company is a major player in the air travel, music and mobile phone industries.

And while you can't institutionalise passion and enthusiasm, you can always lead by example. And remember that like attracts like. If your firm is a gloom room, then it will attract doom and gloom people. And at the last count it's bloody hard to sell doom and gloom on the marketplace.

Post-Reading Provocation

I start from the back with this passion stuff because that can take quite a bit of time. It requires no money but it requires behavioural change, and that's the real hard part. Many firms can't even pull it off. They are so mired in this "smartly business-like" image that being authentic is out of the question.

The next one is lead generation. You can't put the future of your firm in the hands of your clients in the form of word-of-mouth. There must be something proactive too. Can your people speak or write? Lead generation is not necessarily cold calling or advertising in the local paper.