Are You Really In The Service Business?

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By Tim Williams, Ignition Consulting Group

Partners, managers and associates of advertising agencies, accounting firms, and law firms alike are increasingly frustrated by the master-servant dynamic that often characterizes the relationship they have with their clients. We sometimes feel that clients treat us more as a supplier than a partner. We are quick to lay the blame at the feet of the client, but is it possible that the problem really starts with us?

For starters, we constantly refer to our business as a “service business.” Some firms – like advertising agencies — have “client service” departments. We call ourselves a “professional service firm.” Consider how this creates our self-perception.

Many firms lament that they have become “order-takers.” But why? Who turned your firm into an order-taker? You did – not your clients. You did it by forgetting what it is you’re really selling. You’re not selling service. You’re selling important business outcomes.

The firms that understand this invest in better people who can produce a better product. They resist hiring an army of junior people who are good at service, but fail to add the value that clients are ultimately paying for. They realize that the way to deal with demanding clients isn’t to give them exactly what they want, but rather to counsel clients on what they really need.

You only get treated like a servant if you act like a servant

The fact is that we shouldn’t be regarded as professional service firms, but rather professional knowledge firms. Clients don’t just hire us for what we do, but rather what we know.

In the advertising agency business – my domain — clients routinely complain that the average “account executive” doesn’t really add much value to their business. That’s because most account executives view their job as simply responding to client requests.

Over the many years that Ignition Consulting Group has been conducting surveys of advertising agencies, we have discovered that agencies give themselves the highest ratings in the areas of “Responsive service,” “Listening to clients,” and “Meeting timetables and budgets.” The lowest-rated areas? “Developing proactive ideas and delivering marketing leadership to clients.”

Service is a commodity. Smart thinking is not. Clients can get good service anywhere, but proactive marketing leadership is in short supply. In fact, most surveys that seek to diagnose why clients switch advertising agencies usually produce the same answer: “Because our agency never gave us anything we didn’t ask for.”

Think hard about the question of what business you’re in. If you’re in the service business, you can expect to be treated and paid accordingly. If you believe you’re in the knowledge business, then you’d better hire, train, and invest in people accordingly.

There are plenty of smart clients who value and respect what a smart firm can deliver. But respect starts with a firm’s self-perception. You will never be accorded more respect than you think you deserve, and you will never be paid more than you think you are worth.

Podcast: Touring IVP – Chapter 2 Part 1 – The Firm of the Future

Ron Baker and Ed Kless continue their tour through Ron Baker’s book Implementing Value Pricing: A Radical Business Model for Professional Firms. This a part one of three on Chapter 2 – The Firm of the Future. Ron describes the business model in general and delves into profit vs revenue and the forms of capital.

Missed It By That Much

Thanks to Sheri Blaho from CS3 Technology for passing Three Ways Brush Factories Are Surviving In America from Planet Money on NPR on to me today. Audio here.

There is much with which to agree here.

However, the whole thing unravels for me with this sentence, “This allows Cheney to set prices based not on how much the bristle and block cost, but on how much time and effort went into it and how much it’s worth to the customer.”

So close!

It would have been perfect if they had said, “This allows Cheney to set prices based not on how much the bristle and block cost, and on how much time and effort went into it, but how much it’s worth to the customer.”

It never ceases to amaze me that we humans can make the same category mistake when the language involves labor as compared to materials.

There is no difference from a cost accounting perspective between the components and the labor and, therefore it effect on price, but for some reason, our brains just sometimes do not let us see that.

How would Charles Darwin see you?

DodoIt isn’t about survival of the fittest. Darwin actually held that the most adaptable were the survivors. So, are you and your business adapting or are you heading down the path of the Dodo?

The current environment is one where there are so many changes taking place that the firm of 20 years ago will find it hard to compete. I know looking at my business and the work we do that to produce our current output, 20 years ago we would have required a heap more people and resources. Thankfully, technology has developed and enables us to create the results etc that our customers want and need.

But, there are two other components that are vital – your people and your customers. Unfortunately, a lot of firms “out there” have taken on (some very grudgingly) the technological change, but they have made few, if any steps, toward adapting their approach to their people or their customers.

Most of my thinking here comes from the “Growth Curve” approach which looks at “Three Gates” – people, process and profit. The technology has helped us deal with and adapt to the process gate, but I am seeing very little in the way of adaptation to the profit or people gates.

The profit gate needs to be adapted to by looking at the way that you engage with your customers, the service you offer them and the methods by which you price and they value what they get from you. The arcane approach that is the timesheet is becoming less and less popular (as can be evidenced by a brief review of other posts on this site) and customers are demanding more certainty, clarity and comfort that they are not signing on to an annuity stream for the advisor whereby they are being charged and billed for the advisor’s inefficiency or learning. In effect, given the timesheet places the customer and the advisor in directly opposed positions, the customer is now waking up to the fact that they want to know in advance what the price for the work will be. Those firms that do not adapt to this emerging reality will find it very difficult to retain or attract customers where other firms out there offer this as an alternative.

The people gate is the other area where firms are finding it difficult or are not wanting to adapt. The blunt object that is the timehseet that is used for performance management in many firms is rapidly becoming redundant. As an example, we recently advertised for an accountant and one of the headlines in the ad was “no timesheets”. We have had some sensational applicants for the role who are currently working in accounting firms in town where they are managed and measured by the timesheet. I don’t know about you, but if my performance is being measured in 6 minute increments, it is going to be fairly meaningless to me. I want to be judged on results and outcomes. Inputs are irrelevant. Hence – particularly with our Gen Y guys – our people want to be and remain relevant and highly valued based on what they have added to the business, not how much time they have spent doing it.

Many of the firms with which I speak are afraid of moving from the timehseet and adapting their business model to what the world is slowly going to demand of them. These poor bastards are going to be wondering what hit them in about 5 years’ time when it will be all to late.

They will have few staff and fewer customers but they will be able to account for every single minute of their day.

They will be preceisely irrelevant.

And a future Charles Darwin will wonder why they chose not to adapt.

The Billable Hour Is Dead-Sort Of.

 

the demise of the dinosaurs (2)Fearless lawyer Mike Ayotte who is never afraid to express his opinions as The Last Honest Lawyer, recently wrote a post titled “The Billable Hour is Dead” and likened lawyers use of the billable hour to the demise of dinosaurs, whilst conceding that even after dinosaurs met their fate lizards pulled through (as did crocodiles and sharks!).

As you know, I would so love to believe that the billable hour is indeed dead-but I regret to report it is not- at least not yet. It is no doubt sick, but if it is dying its death throes are still reverberating.

I recently returned from the US attending some legal conferences and meeting with many lawyers, law firms, legal commentators, consultants, academics, legal authors and law students. Almost without exception (the exceptions primarily being legal consultants and software vendors who peddle time “capture” methodologies and who perpetuate the “lawyers sell time” myth) all agreed that the billable hour is pretty crook, is a sub optimal model and is no longer meeting the business needs of either the law firms or their clients (let alone the social and cultural needs of those who work in law firms).

What then has largely been the response from the profession to this sickness?

Apart from the innovative and courageous outliers- whose numbers I hasten to add are increasing all the time- and who have put the billable hour out of its misery by completely changing their business model- most firms apply a bandaid approach and continue to work within, and therefore prop up, the existing leveraged based business model.

Some firms have come up with all sorts of ingenious ways to increase the billable hours of their lawyers especially by spending huge dollars on technology & training so lawyers can better (“more accurately”) record their time wherever they might be and whatever the day or night of the week. (Atticus Finch’s tombstone would these days read something along the lines of “Here lies Atticus-a heroic biller & time recorder”). Whilst it is true many firms have adopted Alternative Fee Arrangements (mostly in response to client demands, rarely of their own volition), most of those AFA’s look to me to be billable hours in drag (“if it walks like a duck, quacks ……”) based around fixed fees, capped fees, blended rates, etc- all calculated on the time x rates x people model.

Is it any wonder good people are increasingly looking for better alternatives than working in a private legal practice; clients are looking to other providers to add value to their businesses; and that external disruptors will continue to flock to the legal profession in droves to exploit law firms’ soft underbelly-our lack of flexibility, failure to innovate, unwillingness to collaborate, our short term greed for the almighty dollar, our 19th century governance structures, absence of diversification-and most of all our cultural desert.

 

 

Are You a Diamond Cutter?

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Do you cut diamonds in your role? No, I recognise that we’re not really jewellers – we’re dealing with far more valuable and precious things than they ever do.

When someone comes into your business, they can be seen as either an uncut diamond or an unset gem. How you manage their induction and culturisation within your business will determine the sparkle and presentation that they eventually offer to you and the customers they deal with.

Many firms have the archaic concept that they can just give someone a computer and a phone and “let them at it”. With respect, they will then wonder why they have staff turnover issues and the morale and culture in the firm is not great or even toxic.

Selecting the uncut diamonds to bring into your firm is both an art and a science. It requires a deep knowledge and understanding of not only where you are but also where you want to be – as a firm and as the whole team within the firm.

Recruiting someone merely because they have a pulse and a degree/experience ain’t a guarantee of success. Getting to know what motivates them, what matters to them and letting them see the same about you (both at firm level and as individuals who make up the firm) is going to enable a far more successful/less stressful introduction.

I know in my firm, we take at least 3 meetings with other team members before I even get a look at the candidate! If anyone has reservations, they are tabled and addressed. We need to remember that everyone needs to work together and the new hires will either add to or detract from the culture that you have worked hard to establish (or are working hard to improve!) – getting it wrong can be a disaster.

The process of taking an uncut diamond (or even a rough diamond) to a sparkling gem as per Wikipedia – take the following and apply it to how you deal with your people – from initial assessment through the process of refining and cutting to produce a valuable gem that people want:

Mined rough diamonds are converted into gems through a multi-step process called “cutting”. Diamonds are extremely hard, but also brittle and can be split up by a single blow. Therefore, diamond cutting is traditionally considered as a delicate procedure requiring skills, scientific knowledge, tools and experience. Its final goal is to produce a faceted jewel where the specific angles between the facets would optimize the diamond luster, that is dispersion of white light, whereas the number and area of facets would determine the weight of the final product. The weight reduction upon cutting is significant and can be of the order of 50%. Several possible shapes are considered, but the final decision is often determined not only by scientific, but also practical considerations. For example the diamond might be intended for display or for wear, in a ring or a necklace, singled or surrounded by other gems of certain color and shape.

The most time-consuming part of the cutting is the preliminary analysis of the rough stone. It needs to address a large number of issues, bears much responsibility, and therefore can last years in case of unique diamonds. The following issues are considered:

The hardness of diamond and its ability to cleave strongly depend on the crystal orientation. Therefore, the crystallographic structure of the diamond to be cut is analyzed using X-ray diffraction to choose the optimal cutting directions.
Most diamonds contain visible non-diamond inclusions and crystal flaws. The cutter has to decide which flaws are to be removed by the cutting and which could be kept.
The diamond can be split by a single, well calculated blow of a hammer to a pointed tool, which is quick, but risky. Alternatively, it can be cut with a diamond saw, which is a more reliable but tedious procedure.

After initial cutting, the diamond is shaped in numerous stages of polishing. Unlike cutting, which is a responsible but quick operation, polishing removes material by gradual erosion and is extremely time consuming. The associated technique is well developed; it is considered as a routine and can be performed by technicians. After polishing, the diamond is reexamined for possible flaws, either remaining or induced by the process. Those flaws are concealed through various diamond enhancement techniques, such as repolishing, crack filling, or clever arrangement of the stone in the jewelry.

When having a read through the process outlined above, it occurred to me that the way we treat our uncut diamonds is vitally important to the outcome of the final gem. We also need to recognise that the setting into which the gem is going to be placed needs to be carefully considered – this has a big bearing on the design of the cutting process.

But, do we really adopt this process in the firms we run? Do we really value our people as potential gems worthy of admiration and even as objects of (for us vainglorious types), envy?

Or do we treat them as rocks – a commodity which is generally processed roughly (if at all) and not valued?

I know how I view this process. The jewellery bench is a wonderfully creative and deeply satisfying place to work. Far better than a quarry.

Class of 2013: What Is Calling You?

It you have not already, you should really check out Ron Baker’s graduation speech post on LinkedIn: Class of 2013: What Is Calling You?

Why Accountants and Lawyers Suck at Learning

I have just put up a post on my site relating to the behaviours that we professionals can adopt in our businesses that can seriously impede us from learning (and contributing).

It should make you think.

It can be found here.

Ego is a Dirty Word

Do you treat your people like mushrooms?

I was speaking to a firm recently where the Partners would not let their staff meet with customers. They would not let anything go out of their office without the Partners reviewing it and signing off on it. In short, they were putting a lid on their people and effectively “bonsai-ing” their growth. Unsurprisingly, they were having trouble identifying people who could develop and create a succession plan for them and their firm. There was also an issue with staff turnover.

We have just been going through the Growth Curve X-ray process in our business and one of the aspects that we have identified is a deliberate “personal brand” development strategy for everyone in our business. This will see us work with each person individually and collectively to build their personal brand internally and externally. We are doing this because we have a fantastic group of people working with us and by investing in their development they and we will reap far greater satisfaction and engagement.

Many Partners and managers in firms seem to be afraid of developing the people they work with from a fear that these people might actually be better or more capable than the Partner/manager. Their ego is controlling the business and stultifying the firm as a whole. Effectively, the personal “issues” of the leaders of these firms will restrict the opportunity for the firm to flourish. I view this as akin to abuse.

How do you treat your people? Are you working with them to develop their “brand” under your brand and reputation? Or are you sitting on them and restricting their development?

I know which approach will create a happier, healthier and more successful workplace. And it will then mean that the only mushrooms you have are in your salad or the sauce on your steak.

Slow Down!

How quickly do you feel you have to reply/respond/react to an email? How quickly do you expect your people to reply/respond to emails?

I have been thinking of late about how we are working. The constant pressures of email, social media, texts, phone calls and the like mean that we are “always on”.

This has a number of side effects which I believe are unhealthy and lead to a a range of issues for firms and the people in them. Recent posts by my fellow Fellows of Verasage point to increased incidence of depression amongst lawyers. To be honest, I am seeing a lot of this in other professions as well.

Due to the constant pressures we have now to be available 24/7 and respond almost immediately to customer/staff queries, we have lost access to one of our most powerful offerings – considered and developed advice based on wisdom and experience. By not having the time to fully think about the issues at hand, we aren’t allowing ourselves the best opportunity to create and offer value.

Think about many of the requests you get – most of them aren’t really time critical but we have developed a self-imposed obligation to respond asap. This is dangerous and unhealthy.

The other issue that comes from this is that we no longer have the “peace and quiet” available to think freely and create innovative stuff. Consider the success of “Google Time” and other approaches taken by businesses that are renowned as great places to work (eg: Atlassian) – much of their success is directly attributable to the time they allow their people to create and innovate. Imagine what would happen if they changed their approach and required their people to report their efforts based on time spent?

With all of the above in mind, I was heartened to read a recent post by Richard Watson. He argues that the 24/7 lifestyle we are currently living is unhealthy and does not lead to what can be great, human outcomes.

It is incumbent on all of us as business owners, leaders, managers and team members to encourage ourselves and the people with whom we work to slow down. Quicker is not always better. Considered is better. Reply properly, do not react.

Next time you get an email, think about when you will respond and what you really need to think about before you respond. Otherwise it will just be a reaction.