Unsurprising perhaps.  If economic growth continues to be slow, how does the firm grow profitability?  Either by acquiring/merging (which of course brings its own challenges and concerns about the quality and sustainability of revenue accessed) or gaining more and/or higher margin work.  In other words, not tracking the market but building market share in profitable areas. Performing better.

But the responses being made are interesting.  In one case, the firm was initially looking at measuring the quantity of documentation produced by fee earners to evidence business development effort.  There’s an understandable desire to measure something that you can get your arms around, but the implications of going down that route are;

- high amounts of bureaucracy/unproductive time both in documenting and reviewing effort

- grudging compliance by fee earners (at best) and avoidance by others

- “the document stays the same, but the date on top changes…”  to meet the measure

- little evidence of a strong relationship between documents and extending client relationships.

I’ve said elsewhere (and I can’t claim any original thought on it) that key performance indicators need to be strategically relevant, important, influenceable by those being measured, and without an inordinate burden of time being placed.  The other key piece of course, is that there has to be some form of reward and recognition for fee earners and any other staff meeting or exceeding the KPI.

The following isn’t a fully comprehensive list, but some of these indicators are worth considering for any professional services firm:

- Client satisfaction with firm

- Share of spend by client in relevant area

- Number of cross practice referrals generated

- Likelihood of recommendation

All of these meet the criteria noted above and have a much more direct link with the ability to extend client relationships, win more work, and generate higher quality earnings.

So a bit of art, a bit of science, but definitely not luck.

It includes feedback from 277 participants on the activities they undertake, the level of benefits gained, their expectations for investment in CRM and use of systems, together with feedback about vendors and systems and the ways to extend the value and contribution that can be made by advisors.

Today, 98% of firms gain some benefit from managing client relationships, but (for example) only 26% have achieved major improvements in the ability to cross-sell.

Some of the other top line findings are:

* 93% of firms will invest cash in CRM systems and activities this year
* 52% of firms believe they will upgrade their CRM systems in the next three years
* 36% say they are likely to move to a different system/vendor
* 37% of participants would speak highly of their current provider while almost as many (29%) would be critical

A free copy of the executive report is available at:

http://www.thrivingcompany.co.uk/improvedResultsFromCrm/

so just copy and paste the URL to access it.

I don’t have any argument with that per se. Firms across professional services sectors should think deeply about how they secure the capability and how best to meet whatever objectives they have in a more (ahem) “difficult” economy.

But while some firms instinctively look for the “M&A button”, mergers or acquisitions themselves are of course fraught with risk and uncertainty and aren’t always the right answer. They can be protracted, there’s always the risk they don’t conclude successfully, and even if it happens, if the culture isn’t right or if there are other material obstacles, the net effect can be to reduce value and to be a long and painful distraction from securing core objectives.

So, what might be the right approach to determining if M&A is the right option to take? I’d suggest a two stage process.

1) Be very clear headed about the capabilities that you need at attain to reach your firm objectives (for example to grow billings or profitability by x%). Make sure this isn’t based on supposition but is about the skills, resources, market perception and other “assets” you need to have. Be diligent, challenge your assumptions and make sure you know this based on what the market thinks, not on what you guess…

2) Evaluate various strategic options to gain the improved capabilities you need. Mergers aren’t the only game in town necessarily. Other appropriate ones for the firm might be redeploying, alliances, recruitment, refocus/exit from some markets, organic building etc.

Review each option against 5 criteria (I mustn’t claim credit for these as Professor Tony Grundy, now of Henley and previously Cranfield School of Management defined them). There are a number of areas you should consider under each one, but in summary they are :

Strategic Attractiveness - How well does this fit in with what we really want, and what is important to the firm?

Implementation Difficulty – In other words, would the option be a reasonably easy thing to do (thus scoring highly) or will it involve a lot of time, additional resource, skills we don’t have a lot of, worry and sweat!

Financial Attractiveness – How much better (or worse) off do we think we’ll be with this option? What investments, other costs, and potential payback is involved?

Uncertainty and Risk - In summary, a blend of “what is the possibility that this could go wrong” and “how bad would it be if it did?”

Stakeholder Acceptability - If fee earners, referrers, clients, shareholders, lenders think the option is fantastic, then the option scores highly. If it is very likely to result in valued partners or strategically important clients exiting, it doesn’t!

Thinking through both these areas in an honest and considered way, with an input from clients, and not just based on your best guess, is a much more powerful recipe for success.

The key findings include the point that clients are increasing rigour in procurement, having more frequent incumbent reviews, and are introducing more stringent performance measurement.  What is also perhaps concerning is that clients and law firms have different views about what makes a successful relationship. For example:

• Clients look for more than legal expertise and they value a broader range of attributes (including transparency in pricing)  than law firms recognise
• Clients want law firms to better measure performance and track satisfaction levels, though a more structured approach than they currently get. 30% say that the way their current main firm tracks performance and satisfaction is “not effective at all”
• Clients don’t think law firms provide enough information, or understand the client business enough.

Do you know what your clients think about these issues?  Is there a gap between what your firm “knows” or believes, and what they do?

The questions they care about are varied, but can include

• What are the most profitable opportunities?
• What is the potential demand for new specialisms?
• How is the firm perceived by key clients and referrers, and how does it compare to key competitors in fulfilling these needs?
• How can more revenue be generated from the current client portfolio and in which clients is there untapped potential for more work? ?
• How can you reduce client loss?
• In which intermediary relationships is there untapped potential for more work?

However, sometimes firms and marketers can get frustrated by the lack of clarity they gain, and action they can take, when conducting in-house research. The following items are some of the key areas anyone considering a client or market research in a professional services firm should cover:

1. Be clear about research objectives. 

Doing a “satisfaction survey” because other firms do one, or from a vague interest in client views, won’t help you much. Define the most important questions you need insight on – as without it, your firm’s strategy may be founded on guesswork.

 What are the real challenges and key issues for the firm?  If you are considering merging, what areas are most in demand from your client base? If competitors are beginning to win more business from your clients and target markets, how and why are they able to do so?

 2. Utilise the right method

 You can track service performance with a paper questionnaire, but if you’re trying to gain insight into important issues, it won’t bear much fruit.

 Think about your own response to questionnaires - How many do you complete? If the client is long-standing, or has just involved you in a major issue, does a standard letter with a form full of boxes show you value them?   

 3. Think about those who should take part

 One answer is to identify “which clients we least want to lose”. 

Research not only identifies the risk, but determines the corrective action which can “rescue” the relationship.  

Do you think certain clients may need additional advice? Research can identify if there is extra medium term potential for you, from their future plans, and where you can win business from competitors.

   4. Engage clients effectively

 If done professionally and appropriately, the research will enhance perceptions of the firm. 

Explaining the rationale for the research pays great dividends.  Showing interest in their views, to improve client service or to inform your future strategy, is very well received. 

5. Engage other partners and staff

 Partners and staff can feel slightly threatened by client research.  

However, their concerns can be alleviated if they are well briefed about the process. Partners should be involved in contacting those you would like to take part.  

Engaging with colleagues makes it more likely that the actions you may need to take – with individual clients as well as across the whole firm – will be supported.   The reality is that not just the firm as a whole, but each partner, will gain benefits from the process. 

6. Act!

Unless you will respond to what you learn from research, don’t do it!

Participating clients expect that the insight gained by the firm is used.  Their view of the firm can worsen if they believe the firm hasn’t listened to what they have said.

Gaining the return from your investment requires that you act.  After the feedback is gathered, partners should identify priority actions, set accountability, and track them.  

These are some of the key steps that can ensure the research effort can lead to an improvement in financial results, a stronger strategy more capable of being implemented, improved competitive positioning, and a healthier client portfolio with more opportunity.    

By all means contact me at robin@thrivingcompany.co.uk if you’d like to know about some of the other key steps.

Its worth reading and you can get a copy from www.winmarkeurope.com .  Some of the themes covered include potential changes in the business model in law firms, general counsel’s experience of innovation, and the usage of different pricing approaches.

Marketers may also be pleased to see that 42% of Managing Partners say they expect their investment in marketing to increase over the next 12 months, with only 5% saying it will decrease.  

Another finding from the report grabbed my attention straight away.  Managing Partners were asked to choose their top 3 areas of strategic focus.  Costs and expenditure were in the top 3 areas for 65% of the managing partners, and pricing for 72%.

But the top factor with 99% including it – and over 90% including it as first choice – was client service.  If that is the case, then in my opinion there are some firms who understand what is involved in such a strategic focus and some who don’t.  Typically, those that don’t have not asked the right questions and not thought through the implications of what this strategic focus means.  They may also believe they know what drives value for clients.

However their peers and competitors are actively and openly asking this.

Which group does your firm sit in?

While that’s partly right it’s (at last) “half-wrong”!  That’s been brought home to me in part by the sheer impact that social media has had recently in the middle east, and the power of communication and feedback between people.

Back in the world of marketing, across many sectors the impact of “customer” reviews is now critical on-line.  I have no idea what the stats are, but I bet that the number of us booking a holiday or hotel without looking at feedback from others, whether via tripadvisor or other sites,  is getting smaller and smaller.

Could this become more “normal” in professional services too? Given the role of word of mouth to date, yes I think so!  While there is no equivalent of tripadvisor the future could well see a site blending some of LinkedIn, the “good lawyer guide”, and directories like Chambers (which at the moment are still very “old school” in the way they gather and report on the performance of firms).

The financial and reputational penalty for firms who do not provide consistently good client service at that point will get sharply higher. So the time to get coherent and well executed client service strategies in place is now!

The study can and should evolve.  If there are questions and ideas you have about what you would really like to know about driving successful results from CRM in the sector, reply to this blog or email me at robin@thrivingcompany.co.uk

We’ve had some early input suggesting that more insight into key areas of value gained from vendors, vendor performance, expected timescales for ROI and success in motivating fee earners would all be useful. 

What do you think?

In a good proportion of cases, even if there is an explicit tender process, the incumbent firm is successful.  In these cases, the decision makers note that the length of relationship has enabled them to better evaluate the technical expertise, and business knowledge of the supplier.  Moving to another firm creates uncertainty. Thus there is a material (though undefined) “switching” cost.  

This perceived risk gets greater if the incumbent firm has been flexible in its dealings with the client, based on understanding needs and a real  ability to tailor what it does.

The role of “price” in the decision is also interesting.  When participants scored the importance of 10 factors, price only came in 9th of the 10.  HOWEVER (and its a big however) when participants were asked about the key difference between the firm they chose and the “next best”, price – together with flexibility - was one of the two most commonly mentioned factors.     

How so?  On several occasions participants said that where they cannot differentiate between suppliers based on their performance in all other aspects, price becomes the “de facto” driver of the decision.

What does this mean for firms? 

Firstly, think about whether you are exploiting the advantages of incumbency with your clients consistently enough. The best way is through driving value for them, building a hurdle which is difficult for competitors to overcome.

Secondly, unless you can differentiate by performing better than competitors on one or more key areas when tendering, you are damning yourselves to win only on price.  Fine if that’s your strategy and on a sustainable basis, you are more efficient than any other competitor, but a recipe for decline if not.  You’ll need to drive performance on what your targets truly value.

One (of several) of Legal Week’s articles on the results includes the following:

“…though clients remain generally impressed with the quality of legal advice and service they get …general satisfaction has declined across the board against 2009, and particularly on cost issues.

This lack of satisfaction also comes during a period when the report suggests that clients are becoming more demanding. In 2009, clients on average rated the importance of ‘quality of legal advice’ as 9 out of 10, a figure that rises to 9.4 this year even as average satisfaction rating has fallen.

There’s a similar pattern for other criteria with ‘cost/billing practice’ and ‘service delivery/responsiveness’ being rated as more important than in 2009 while satisfaction levels have again dipped.”

It’s also interesting that the top rated of the top 20 firm’s achieves an average satisfaction rate of 7.7/10.  

Frankly, this ain’t great.  There are few sectors of the market place where the highest scoring provider would get an average of 7.7 for customer satisfaction.  The flip side of this is the sheer prize for any firm that does differentiate…and, eventually, some will.

Think of the 3 broad areas that Legal Week refers to.    

Quality of legal advice. Potentially a “given” in some minds, but most of the clients of law firms we talk to incorporate the applicability and commerciality of legal advice into ”quality”. Are firms doing enough and communicating properly here?

 Service Delivery/Responsiveness.  Some law firm clients rave about the accessibility and responsiveness of their key contacts and the insight they have into progress on transactions. Other’s don’t – and we find that it is one of the areas which most regularly determines whether a firm is retained…or not.

Cost/Billing Practice.  Its easy, but potentially dangerous to equate this to “level of fees”.  That is only part of the story.  Law firm clients we speak to are more concerned about the predictability and transparency of fees, rather than getting the “lowest cost” job.  Firms who can effectively describe the value of what they do and react effectively to the demand for clearer billing practice gain a financial reward.

It is a brave firm which doesn’t gain objective feedback from a representative set of its clients.  While Legal Week’s research is insightful, each firm needs to respond to what its clients are saying, and manage its engagements with clients effectively. 

Some readers may find the “CRM – the Truth in Professional Services” benchmark study, available from www.thrivingcompany.co.uk or www.pmforum.co.uk useful in thinking through how to manage this – and how to avoid the risks clearly shown by Legal Week’s report.