Law Firms: The cost of blur!

“Back to strategy!” Professional services firms (auditors, lawyers, investment bankers, consultants, CPAs, notaries…) around the world are now painfully aware that the ones who don’t have a strategy that is clear, legible, consistent, and balanced (both cyclical and counter-cyclical activities) are in a situation of profound crisis. The ones who do are doing better, and some have even been able to seize some opportunities. Well, what if putting a winning strategy in place were only a matter of doing away with blur, and above all the costs of that blur? After all, “If a man does not know what port he is steering for, no wind is favorable to him,” as Seneca said over 2,000 years ago.

In a period of growth or one of crisis, clear positioning, clear service offering and clear differentiation are daily issues for firms. But as long as the demand is there, the only problems are “deliver,” “quality,” and team recruitment challenges. Unfortunately, firms have forgotten a basic principle of management which holds that the time to call yourself into question is during a growth period of growth, so that you can take your time and anticipate the unavoidable cyclical effects which – as some had no doubt forgotten – will necessarily be felt sooner or later! Now, in a period of crisis, the room for maneuver is more restricted. Having failed to engage in strategic thinking on what the firm is and is to become (vision) and what it wants to do and what it wants to be recognized for (mission) implies that there is a huge lack of precision, both internally, with partners and employees, and externally with clients and markets. And that imprecision introduces a roll of the dice into any consideration of what should normally be done, and the door is open to disorganization, de-motivation, devaluation… In such an atmosphere, management, positioning, client strategy, recruiting, and training choices are made in a total fog by each of the partners, without any consistency, and results in a poorly focused image, financial losses – but also and above all loss of clients, cases, associates, and partners.

A clear strategy, expressed simply and above all understood, shared, and executed by all
Blur is a little like a grain of sand – it can barely be seen; it penetrates into every part of the firm’s organization, and ends up causing the entire machinery to seize up. Having a clear strategy is a way of becoming known to and more easily recognized by the market, of acting in a more consistent and coordinated way, and demonstrating a pertinence, and perhaps also a difference, that create a competitive advantage and develop the much sought-after status of benchmark brand. Behind a leader, one always finds not a 50-page strategy statement, but a vision and a mission that are simply expressed and perfectly understood, shared and above all executed by the partners and all the firm’s associates and internal resources. Far too often, the partners are excellent at analyzing problems, and good at finding areas for improvement, but not effective enough at implementing them over time. Here’s a test you can perform: look at the market. Who is getting all the good contracts in your sector (yes, there are still some to be had, even now!)? Who is delivery real growth in those troubled times? Does your strategy need to go on a diet to lose the impreciseness that weighs so heavily on your consistency and your performance?

A legible offering and recognized added value
In addition to being a burden on the firm internally, blur is something clients hate. “A lack of understanding of who does what within the team,” “lack of perception of added value,” “unplanned and unannounced budget overruns,” “lack of transparence in invoicing and pricing”… The result is that the firm expends more and more efforts to remain competitive and adopts a strategy of “more” rather than a strategy of “better” – more calls to tender, more development actions, more events, more communication… and above all, in the end, more budgets, more non-billable time spent, more write-offs. What to do? Be clear and transparent. Know how to say exactly what the firm does in 30 seconds. And then move quickly to a posture of active listening to and understanding the client. Show interest in him or her, his/her business area, his/her sector, and his/her company, rather than talking about how many technical competencies your firm can cover and hoping that there’s one the client will notice and retain! One little detail you shouldn’t forget, for your message to be effective, is that it should be the same for everyone within the firm. Repetition is reputation, and a diversity of messages generates imprecision and misunderstanding. Here’s a test you can perform. At your next partners’ meeting, ask everyone to introduce the firm in 30 seconds. Is there one 30-second presentation for the firm, or one for each partner? What impact do you think this will have on the market, on your clients, on your brand image?

Do your clients choose you, or do you have the clients you choose?
No, I promise I won’t repeat for the thousandth time since I’ve been in this business that “winning a new client costs five times as much as securing the loyalty of an existing one”! There should be no need to stress the economic value of repeat customers. To win, you’d better choose rather than to wait to be chosen; to gain a client’s loyalty, it’s preferable to listen than to impose. Is that a truism? Not really. Let’s take a closer look at the client portfolios of professional services firms. Who analyzes them and draws the real strategic conclusions? By that I mean the need to focus and invest – invest in quality, human relations, innovation, expertise and knowledge – on the clients that are the most profitable today, but above all the ones that are most promising for the future (in terms of business volume and profitability, but also of influence and credibility/image). Devoting the partners’ time to a few clients with the primary goals of improving relationships, gaining knowledge of their markets and their business areas, ensuring that the recommendations you make are appropriate and relevant, etc., will create more value (for the client, first of all, but also for the partner and the firm). Having clear development objectives makes it possible for professionals to work better in a team, within the firm, but also and above all with the client’s teams, on the basis of collaborative solutions.

Help the support functions to be true business partners rather than cost centers
If there’s one area where blur does a great deal of damage, it’s support functions. A lack of knowledge or understanding of the firm’s real strategic objectives and business areas generates increased costs, and above all it has a heavy impact on productivity, human performance, and relations and atmosphere among the teams. However the understanding comes from both sides, as is always true when it comes to human relations. The partner needs to make his or her business area and objectives clear, but the support people, becoming more and more true professionals in their core competencies (marketing, IT, knowledge, human resources, finance, etc.) need to make the effort of explaining their constraints as to make sure that their day-to-day work is perfectly integrated into and aligned with the firm’s strategy. Here again, “ever better” needs to take precedence over the “ever more” that has held sway in recent years and generated “a little fat everywhere” in structures. That alignment – and this is even more true now, in a period of crisis – should be audited and monitored in order to disinvest strongly in what brings little or no value into the firm which subsequently should invest strongly in what really creates value. For that, precise objectives need to be assigned to each support function and performance indicators and effective monitoring need to be put in place.
Then, as in any organization that wants to ensure its development and its permanence, a study of the skills, training, and career development of the support teams needs to be undertaken. Most existing teams will not stand up to a five-year projection on their department and teams. Do the calculations in your firm. The growth of salaries over a five-year period compared to actual added value generates a scissors effect and erodes profitability.
What can be done? The firm needs to understand and appreciate its support functions, meaning that they need to be more and more professional and get more and more attention within the firm. Taking that reasoning further, these functions need to be dealt with, evaluated and taken into consideration as they are in any other company. That means that they should have a seat on the firm’s management committee. Who could imagine a company today whose finance, marketing, human resources and IT functions aren’t represented on its management committee? If that were true of professional services firms, wouldn’t the partners take a different view of the support functions? Wouldn’t they expect more value from them? Will firms simply ignore this major evolution in the profession?
A real analysis of roles and skills needs to be made, and above all it has to supplant the historical quantitative approach to these matters. Examples we’ve noted in mostly the USA but that are beginning to show up in Europe, too show that the way is now open.
The crisis has to be the means of seizing this opportunity to emerge stronger, and above all to be ready to deal with growth differently and more serenely. Because after all, while doing things differently doesn’t necessarily mean doing things better, to do things better you definitely need to do things differently!

Olivier Chaduteau