Managing performance in professional service firms
It’s not what you preach it is what you tolerate that counts……
I took the title for this month’s blog from one of the key principles in a new book called Extreme Ownership by ‘Jocko’ Willink an ex Navy Seal.
The book was a discovery by one of the Partners in a client law firm while completing our year long leadership programme. Books on leadership are commonplace especially by athletes and military advisors and while they are a great companion on a long flight, are very often consigned to gather dust on our shelves. Sometimes though, something strikes a chord and I feel that this title sums up the attitude we take to managing performance in so many elements of a professional services firm.
On Monday last week we ran module one of the Managing Partners Programme for the ICAEW and as part of the first day of the program we looked at success and the tangible ways that you could measure it and get a sense, objectively that you are on the right track. We turned to lock up and the Managing Partners, all of whom were from practices ranging from £1 to £15m fee income, were very open in setting out their expectations on performance and the challenges in driving a greater degree of success.
Typically debtors were anything from 45 to 75 days, but what can you do? The Economy has been tough and despite having the phrase “payment within seven days…” on your invoice, clients simply don’t pay. Larger clients are even worse! – and as you negotiate the quagmire of various accounting systems and procedures it can easily become a bit depressing… “My debtors are negative “ said one of the partners… Everybody turned and exclaimed I beg your pardon? “Well, you see, we started asking clients to go on to direct debit a couple of years ago, and while not everybody does it, the majority of them do, so right now we have debtors of -£100,000 on a turnover of 4.5 million…”
There was a noticeable pause as this sunk in… Why don’t we do this? Then the questions… Who actually asks the client to pay by direct debit? The accounts team? All the Partners? How did you change their attitude? How did you get them all to do this? Why didn’t the clients revolt?
What is clear to me, is the size of the difference (gulf!) between what we know to be true in our own minds (“The client will never pay us like that!”) and what can be achieved in practice if you just ask.
Over the course of a very interesting day where everybody was candid and shared both expectations and experiences it became clear that in certain firms a culture and been created where apathy was not tolerated. In one firm, the rule was that WIP got billed at the end of every month… and it was, so WIP was down to just 20 days. This raised some eyebrows, how could clients possibly tolerate a bill before you finish doing the work? What do you send them along with the bill to justify your fees? That’s quite simple, came the reply, “We explain to our clients that they would probably prefer little bills, as the work gets finished, rather than waiting all year for a big bill and we found it works. We can ask for referrals after we finish the tax work, and accounts prep when we finish that. But most of all, what it does do, is to separate out the value that the client gets from all our meetings and advisory work, from the simple preparation of accounts and tax returns.
I believe that because of the way so many firms have operated in the past many firms live in a vicious circle. Everybody wants their clients to see them as a valued advisor, yet we persist in supplying them with one single bill after a year of work when we do the audit and accounts. Little surprise then, that our clients perceive that we are backward looking and are only there to tick boxes and help with the Inland Revenue.
What will become a key skill going forward in the 21st-century is to engage with your client and demonstrate your own value by invoicing them for work outside of accounts preparation. We need to learn to teach clients that the real value in the business advisor has nothing to do with looking backwards at last years accounts and everything thing to do with preparing them for the future trading conditions that they will experience next year.
So, never mind what you say about WIP, lockup and T&Cs… what do YOU tolerate within your practice?
To learn more about how to help you fee earners ‘Just ask’ and develop their business advisor skills. Call us on 01892 610060.