A growth model for success

As a solicitor and an accountant respectively, we have worked with and in professional firms for many years. Pooling our experiences, we developed a number of ideas about what made these firms grow. We tested these by researching on a range of professional firms, not just legal partnerships. We looked at successful firms who were expanding – either by increasing existing business, attracting quality work, and/or opening new markets, and/or developing new “products”. We looked at the way they worked together, their operations and management structures and the extent to which they had developed their use of IT. This confirmed a lot of what we had previously suspected about successful professional firms and has allowed us to develop the “model of a growth firm” for the professional sector.

The growth model

Formal marketing and strategic management books, often many hundreds of pages long, hammer away at the need to “delight the customer”, about the importance of “internationalisation” of firms in the global market and “blue skying”. This may be very worthwhile for major PLCs with marketing and sales departments and senior management teams, but how valid are these strategies for professional service firms?

We are all too familiar with the current difficulties the professional sectors are facing in Scotland – an under-supply of quality work, direct and indirect competition with the restrictions imposed by our professional bodies resulting in an uneven playing field. We know from direct experience how difficult it can be to combine fee-earning work with running the firm – how hard it is to persuade the rest of the partnership to develop new ideas even if the firm has the resources and money to do it.

What can we do about all of this? How can we continue to serve our clients and still have time to develop the firm? How can we agree a way forward which meets the needs and demands of all the partners? How can we attract new energy into the firm and pay for exit routes for others? How can we develop new areas of the business – new expertise when we are too tired even to read the Journal!

Our model illustrates that there is hope – that there is a way to develop the firm – that, working through each stage of the model, a partnership can achieve steady and sustainable growth without the usual knee jerk reactions to short term problems and the alienation of partners and staff so typical of many reorganisations.

The partnership must deliver the personal and professional values of the partners.

• We found that the structure of partnership can provide a flexibility of approach, of client responsiveness well suited to business development. In addition, the active involvement of all the “shareholders” in both management and client delivery should ensure that their own professional values are delivered and maintained.

However, the first key to success for a partnership lies in how well that flexibility is used by the firm. We all know of partners who have left firms through frustration with the activities or lack of activity of the firm – who were unhappy about their role or the ability of the firm to deliver their aspirations. Over the years we have found a variety of styles and structures being used by firms. There appears to be no “right approach”. Some firms are very structured, others very informal. Some are run by “benevolent dictators”, others by “three wise men” and some by active consensus. What is essential is that the style reflects the values of the partners.

Whatever style of approach is adopted must ensure that the firm is effectively managed.

• The second key to business growth is that the style adopted allows effective management, i.e decision making and, equally important, subsequent implementation. We know the legal and professional implications of trading as partnerships – we advise our clients about it! The essence of any partnership is trust. Without trust, decision making is cumbersome at best and impossible at worst. In such an environment, even if partners pay lip service to a decision, they will stall or interfere with its implementation. Addressing this area may well be difficult, but some common ethos must be established to allow the firm to move forward. Effective management, which includes planning, decision making, organising, controlling, co-ordination and motivation, must be introduced. Only once firms have achieved this ability to implement decisions can they begin to achieve a “turnaround” and grow.

• For those of us who preach the need for business strategies and an external focus to deliver the needs of clients, this may appear to be disappointing news. Effective management is not the stuff to quicken the heart of most professionals. Look at the reluctance with which many of us every year addressed the five hours management training required for CPD! However tedious and boring it may appear to be in the first instance, it is the heart of successful professional firm growth. If we think about the successful firms we often envy, we know that they are well run, that they charge at competitive levels and that they are good at attracting new business and quality staff. The model of the growth firm is illustrated below. This shows the stages necessary for successful development.

Growth model for professional firms

1. establish and implement effective management 
2. undertake internal turnaround
3. develop the ability to change 
4. identify and plan strategies and external market responses
5. adapt operational structure to match
6. achieve long term and sustainable growth

As already explained, the first element is to establish effective management. This can be implemented in any way that the partners and the firm as a whole are comfortable and will work with. This may involve the recruitment of a professional manager or “doing it themselves” – may involve clearer lined of reporting or a complete re-allocation of work patterns.

The next stage involves the internal turnaround described in more detail below. This concentrates on the current internal workings and resources of the firm. Working through this process not only develops the management skills and the financial systems and people resources that are needed for the future of the firm but also creates the ability to change. From that more solid base and with this ability the firm can agree its future strategies and external marketplace responses, and plan their implementation. Finally, the operational structure of the business should be adjusted to assist in this implementation. Working through these stages will result in successful development of the firm and, perhaps more important for partnerships, the commitment to continuing growth.

OK, so if that’s the model, how can we use it?
Within the space of this article we can only comment in detail on Stages 1 to 2. Stage 3 should develop out of the initial stages. Stages 4 and 5 require the identification of long term objectives for the firm and an understanding of the trends affecting the external marketplace in which the firm is operating. Reviews need to be taken of clients and competitors in particular.

Stage 1 Effective Management

We have sought to establish that effective management is essential. Easier said than done – what with the need to establish trust and respect, often overcoming a history of strained relationships amongst the partners. All partners need to discuss previously avoided issues and more importantly implement agreed outcomes!

Most professional firms come to us because they perceive that they have a problem but either don’t or won’t deal with it. We often have to start by simply listening to people within the firm to identify the essential nature of that firm – what has made it successful in the past, what motivates it for the future. We can assist in the development of effective management decision making and implementation. We can then facilitate a “turnaround” for it – both in the short term and in the long term. 

Stage 2 Internal Turnaround

In this stage of turnaround it is essential in the short term to provide the firm with the ability to have a future! It must therefore allow the firm to stabilise and build its solid resource base to fund future developments.

How do firms achieve this turnaround?
In the short term, turnarounds focus on the internal working of the firm. This checklist illustrates certain areas that need to be considered:

People issues

• Is everyone fully utilised?
• Are people doing work at the most appropriate level?
• How productive is our use of time?
• Is training required?
• How can we simplify working methods to improve productivity?
• How can we eliminate bottlenecks?
• How can we reward ability?

Pricing issues

• What is our feeing policy?
• Are we feeing at profitable levels?
• On what basis are we setting fees – e.g. cost to us, based on what clients will pay or as a response to the levels set by our competitors?
• What are the profitable areas of our business?
• Should we be subcontracting areas of work?

Supplier issues

• Are we purchasing effectively?
  
• How can we eliminate excess usage/wastage?
  
• Are our leasing arrangements cost effective?

• <>Do we need all the office space we are currently occupying?
• <>How will we fund future capital purchases?
• <>How accurate is our working capital information?
• <>How effective is our debt recovery?
• <>What do we know about our clients’ credit status?
• <>What is causing late/non-payment of fees?
• <>What are our current levels of work-in-progress? – how recoverable are they?
• <>Are we seeking payments to account?
• <>How consistent are our recovery procedures?

Each firm has therefore to tackle a turnaround in its own way, depending on the particular issues affecting it. We can cite a number of examples of successful turnaround of legal firms, for example:

• Absorbing the retirement of office managers by a re-allocation of roles within the firm, operating more efficiently with appropriate investment in IT and training,
• Resolving the delicate issues of the erosion of certain areas of the business and the re-skilling of affected partners,
•  Diversifying away from core legal business by developing joint arrangements with other professionals.

Growth is possible – using the strengths of partnership rather than being defeated by its weakness. The growth model has been tried and tested and will deliver sustainable success for the professional firm. 

Martyn R Robertson and Fiona A Westwood, Robertson Westwood Limited, Catalyst for Growth, 4 Kirklee Gardens, Glasgow G12 0SGTel: 0141 339 0240