The Key Challenges Facing Professional Services Firms Today
The sure, steady pace of a law, accountancy, surveying or architects firm is a very distant memory. The challenges facing professional services are numerous.
In the Twenty First Century, the pace of change in these professions has been enormous. Simply keeping up with these changes has been hard enough, but there are new challenges on the horizon, in fact, they’re no longer on the horizon, they are here today.
With every challenge comes an opportunity, so consider this article a list of opportunities to embrace and not challenges to overcome. This article focuses attention on the small to medium sized firms in the USA and UK. The Magic Circle Firms, global architecture practices and accountancy and surveying firms are so big, they operate in the same way as corporate entities.
If you’re leading a small to mid-sized firm across one to ten locations, then read on.
Pace of Change
Speed. Since the iPhone burst onto the scene in 2007 everything in business has changed.
Lawyers, accountants, architects and surveyors are now available to their clients 24/7 who expect to be responded to quickly, even at the weekends and late into the evening.
This has put enormous pressure on the work life balance of almost all professionals I come across at Tricres. Managing Partners are running at one hundred miles an hour to keep up with their own professional work load as well as the rapidly changing nature of their businesses.
That brings me onto the other area for professional services firms that is changing rapidly – leadership and expectations around leadership. It’s no longer good enough to be a great lawyer, talented architect or brilliant accountant, the Managing Partners must have great leadership skills and superb business acumen in order to guide their firms through the choppy waters of change.
Your strategy of three years ago is barely relevant today. It’s virtually impossible to plan accurately more than two years ahead because the landscape changes so rapidly.
As a leader of a professional services business, its vital to equip yourself and your senior team with excellent leadership skills and commercial skills. The questions you must ask yourself as the Managing Partner is ‘what do I need to learn to keep pace?’ and ‘who do I engage with to get the right kind of support as we grow?’ To attempt to tackle the future strategies of your business alone, is a tough gig even without a global pandemic.
Having a board structure which can make strategic decisions is a great place to start. Whilst partners share the responsibility and accountability for strategy, its important each individual partner understands which part of the business they are responsible for. Having four partners all responsible for business development means tasks get left undone as everyone looks at each other and says ‘I thought you were doing that?’
A non-lawyer, non-accountant, non-architect and non-surveyor as an external advisor or non-exec (depending on your legal structure) is also a good idea. They will bring ideas to the business from outside of your sector. One of the biggest ways we add value to clients is to bring different perspectives from other industries which often work extremely well when used within professional services.
The pace of the change is also being driven by very rapid changes in technology and by the expectations of your employees as well as your clients.
I’ll deal with both of those aspects next.
Challenges Facing Professional Services -Technology
The mobile phone is the least of your concerns in the professional services sector. This device has made it easier to remain in constant contact with your clients and your teams, resulting in faster response times and a more nimble business model.
If it hadn’t been for mobile technology, wifi, brilliant broadband and cloud computing, none of our businesses would have survived Covid and the lockdowns. This type of technology has been the saviour of most office based businesses during 2020 and will help them emerge stronger, leaner and more flexible than ever before.
That kind of technology is not a challenge, it’s a clear opportunity to develop new ways of working that appeal to a wider audience. It also helps businesses recruit talent from beyond their immediate location, making it easier to attract the best people possible for their growth.
The challenges I’m talking about in the form of technology are AI and machine learning. Both artificial intelligence and machine learning have the capability to productise law, accounting, surveying and to a degree, architecture.
The ‘Big Four’ know this and that’s why they’ve positioned themselves as consultancies rather than accountancy firms. With digital banking, digital taxation and the rise of cloud based accounting software, fully integrated stock management with end to end to ordering and distribution, the role of the auditor and standard accountant is diminishing. The value an experienced accountant brought to the table at the end of the year or quarter now firmly lies in their ability to provide solid business advice based on the numbers, rather than simply producing a set of accounts. The production of annual and quarterly accounts is now a product, rather than a service and this changes the business model for accountancy practices everywhere.
Similarly in law, the production of a standard contract can be done easily and cheaply by software. Online wills are a prime example of this and it won’t be long before other legal contracts can be delivered entirely through a portal.
The consumer of law expects smooth, efficient processes delivered in a timely manner and is switched on enough to know when they’re receiving a copy and pasted document. Plus, they can download endless numbers of standard contracts and documents for free at the touch of a button.
Whilst most lawyers will be horror struck at such a thought, that’s not what’s relevant here. What’s relevant is the perception of clients around the service you’re offering.
If the client feels they’re getting an off the shelf product, they’re not likely to pay much for it or value it, making fee disputes more likely. Again, the key to the long term future of all professional services businesses is to be able to package up some of their services to create products, employ technology to smooth the process of delivery and then add value through additional advice and services that cannot be replicated by machine learning or AI. Becoming the trusted advisor and not just the processor is crucial to the success of all professional services businesses and this is unlikely to change.
However, many professional services firms rightly see themselves trusted advisors, but clients can see them very differently. I still hear my clients complain about the lack of advice they receive from their accountants and the lack of transparency with the interactions they have with their lawyer.
How can all professional services firms build deeper relationships and move away from the time for money model which can put a strain on the desire to interact more with their clients? The billable hours challenge has been around for a while and some firms are moving to a fixed fee model or retained assignments.
I don’t profess to have the answer and this is indeed challenging for leaders in professional services who understand that completing time sheets is often unpopular with their teams too.
Some disrupters in the legal services sector are helping law firms reduce time spent on ‘back office’ activities and allowing them to focus on providing what they do best, legal advice to their clients. Amiqus is one such business as are Proper Wills (this company can be seen as a competitor by some law firms) and The Cash Room to name just three.
One accounting firm which doesn’t even call itself an accounting firm is Ashton McGill. A small firm, which uses a subscription billing model for its ever growing client base. This makes cash flow a delight as all invoices are sent out on the first of the month and paid by direct debit making it very easy for the Co-Founder, Alasdair McGill to plan ahead. He knows exactly how many clients a month he needs to employ one more member of the team and he likes to have more capacity in his team to allow for rapid client acquisition.
It’s only going to take the legal, accountancy or architectural equivalent of Uber or AirB&B to change the face of professional services for ever and I’m guessing that somewhere someone very clever is working on that right now, so why not address these matters today and think about how you’re using technology to enhance the depth and breadth of services you’re offering to your clients.
Talent Attraction and Talent Retention
Before re-training as a business consultant and coach, I spent fifteen years in the recruitment industry, specialising in the recruitment of lawyers and accountants. During those fifteen years, I discovered the biggest reason for people leaving a firm had absolutely nothing to do with how much they were being paid and everything to do with how they were being treated.
In other words, the culture of the firm was the single most important factor in a talented employee staying with a practice or leaving to join another practice.
If you run a law firm, accounting firm, architects or surveyors and you haven’t yet paid attention to your purpose, vision and values then you need to put this at the top of your to do list.
The generation entering the workplace now is specifically seeking to be part of something special, something that does more than just make money. They want to feel as though they’re adding something to society and making a difference in the world.
If your business isn’t positioning itself in this way, then you are losing the best talent. That doesn’t mean you all have to wear t-shirts and jeans and sit on bean bags. It means you must begin to look at your clients and reflect back the changing nature of their businesses. Sometimes professional services businesses think they must act and look a certain way to be credible. This simply isn’t the case anymore.
We’ve all seen inside each other’s living rooms, bedrooms, sheds and home office now and often seen the kids and pets pop up on screen. We know we’re all human and have lives outside of work, let’s not lose this humanity when we return to the office. I’m much more interested in the quality of the advice, than whether my lawyer or accountant has a shiny suit, briefcase or traditional looking office.
This isn’t anecdotal. Jayaram Law in the US is led by Vivek Jayaram who is US born to parents who came to America from India. The two other partners who run the firm are women. His entire team are from very diverse ethnic backgrounds and sexual orientations. As a small to medium sized law firm in the highly competitive legal sector in the US, they are attracting very talented lawyers who are taking substantially less pay than they’re being offered elsewhere by more traditional firms with much bigger reputations to join this disruptive legal practice.
Vivek does wear jeans and a t-shirt when he sees clients and his team has a very flat structure. This is attracting superb talent to their team and therefore superb clients in the creative and innovation sectors.
Finally, let’s look at two law firms in the UK: Keystone Law and Shakespeare Martineau both award winning law firms with disruptive approaches to law. Keystone engages lawyers on a self employed basis, giving them huge flexibility and access to a wide range of very talented colleagues as well as higher income levels. They describe it as ‘law set free’.
Shakespeare Martineau also has flexible working practices and has a fifty fifty split between men and women on the board. Their Chief Executive is Sarah Walker Smith and is an award winning business leader in her own right and one of the only non-lawyer female Chief Execs in the top 55 law firms in the UK. She puts her people first and talks about heading into the storm of change, rather than battening down the hatches.
So, what are you doing to proactively attract and retain the best talent? If you’re still advertising in the same way and fishing in the same pools, then you’re going to get the same type of employee, which if you want to stay the same is a perfect strategy. However, if you want to be ahead of the curve, set yourself apart from everyone else in your sector and location, then it’s time to review your Purpose, Vision and Values and embed a truly unique culture into the fabric of your business.
Separating Yourself from the Competition
If you’re running ‘a full service……’ fill in the blanks, then you’re in the same business as all of your competitors. If you haven’t changed your businesses model, embedded a different kind of culture, introduced technology to create different products and services or niched down into a particular sector, then you are just like everyone else in your market place.
This means you have no competitive edge other than location, which after 2020 has become much less relevant. Interestingly, both small boutique firms and large firms work well for clients as its very clear on what they’re about. Big firms are all about big corporate deals, so they act and behave like big corporates. Small boutique firms are all about local or very specific types of work and therefore attract those limited audiences and do very well out of it.
The big firms will always do well because they’re big. Small, boutique firms will always do well because they are small and boutique. The middle ground is a very dangerous place to be right now in professional services.
If you describe yourself as a medium sized, full service…….then you’re about to hit some very tough times indeed. A re-branding exercise and new furniture isn’t going to solve the problem either. That’s just window dressing.
Over the past ten years, medium sized, full service firms across professional services have been swallowed up by VC backed companies (Azets, formerly Baldwins being a prime example in the accounting world) and numerous medium sized players in the legal sector which had been established for hundreds of years have now disappeared forever as they’ve been taken over to create big law firms, usually run from a faceless HQ in a big city somewhere.
Medium sized professional services businesses who adopt one or more of the following strategies are more likely to be able to expand and thrive in the 21st Century;
- select a niche and really go for it
- embrace technology and revolutionise how you deliver your service, whilst creating some products
- create and embed a culture that sets you apart from everyone else to attract and retain the best talent
- change your business model and move away from billable hours
I realise these points can be controversial and many people in the professions will disagree with my perspective. However, staying in your comfort zone and doing business the way you’ve always done it is no longer a long term viable option for any business, anywhere.
Our high streets are littered with examples of mid-range retailers who failed to see what was coming and did not adapt, don’t let that happen to your firm.
Challenges Facing Professional Services – Time Zones
If 2020 has taught us anything, it’s that it no longer matters where you are in the world, we can still do business with each other.
The tiniest law firm in the back of beyond can now provide legal services very easily across several time zones. We can employ freelancers for a fraction of the cost if we seek skilled people from places like South Africa and the Philippines. A good friend of mine has employed nine chartered accountants in South Africa this year for his investment business for a third of the cost of employing them in the UK.
My head of brand lives 450 miles away and my biggest growth in clients this year has come from the USA.
Even major investment deals are being done over Zoom. A business I know of recently received £3.5m in investment from people she’d never actually met in the flesh.
This changes everything.
Not only can you attract talent from anywhere in the world (taking professional standards and rules into account), but you can also win business anywhere in the world, again taking professional standards and rules into account. Your firm doesn’t have to do the work though – you’ll be able to find key partners on the ground to collaborate with in order to offer your clients the best service. This international aspect was once the preserve of the big firms, but is now open to the small to medium sized practices out there who have the vision to grow globally.
Clinging onto the Past
I’ve saved the biggest challenge until last. Sticking your head in the sand and hoping the world will slow down is no longer and option. The single biggest factor in the failure to succeed in any business in any sector is the habit of pretending everything is ok and saying things like ‘we’ve got this far doing it like this, why should we change now?’
That’s probably what all the high street retailers were saying ten years ago as online shopping started to take hold. That’s certainly what the big music companies were saying and then Napster, iTunes and Spotify came along to spoil their party.
People who think they are immune to the modern world and believe that these things don’t have an impact on them are about to experience a huge shock (unless you’re retiring in the next five years, in which case you’ll probably miss it!) Resting on your laurels, relying on past reputations and sticking to the way we’ve always done things around here is a dangerous strategy in the 21st Century.
Yes, there will be firms who do ok and won’t make many changes, but even these firms will find it increasingly challenging to carry on with business as usual as the pace of change speeds up.
It’s not getting slower, it’s getting faster.
So, perhaps the biggest challenge for professional services firms today is changing their mindset. It’s embracing the new, diverse world which is driven by technology and the desire to make a positive impact on the world from the people who are now entering the workplace.
2020 has taught us that every business on the planet has to be flexible, adaptable and resilient. These attributes are grounded in the culture, the fabric, the very DNA of the business and supported by a clear set of behavioural standards and systems which support those behaviours.
Without this, it’s sad to think that our well loved and well respected law firms, accountancy practices, architects and surveyors won’t be around to see the turn of the next decade, let alone the next century.
Book a free confidential discovery call with Rebecca Bonnington to learn more about how Tricres can support the sustainable growth of you professional services business in the 21st Century without having to wear t-shirts, jeans and sit on bean bags.
If you want to carry on with business as usual, don’t book a call!