We’ve all been there. A key partner or principal announces they’re taking their shingle elsewhere. Sadness and shock quickly turns to panic as you realize their book of business–and more importantly, the cash flow it generates–is leaving too. Minds race thinking about the ripple effects and what we could have done differently to make the parting less disastrous. This happens all the time, yet few professional services firms are really prepared.
The damage can be long-lasting and reach deep into the organization. Too often, founders react by delegating fewer key relationships in the future. Wrong answer. Solving one problem by limiting the firm’s growth potential is an high cost.
Establishing the value of your firm (the whole) above and beyond the value of individual principals’ practices (the sum of the parts) is the biggest untalked about challenge for professional services firms. It’s not about doing great work–you’ll do that regardless; it’s all about ensuring that clients see leveraged value in your firm. That’s why you operate as a firm, isn’t it?
While a few firms are worth far more than the sum of their parts–think McKinsey, Accenture or Exponent / Failure Analysis Associates–most mid-sized professional services firms are actually worth less than the sum of their parts. That’s right, the firm adds minimal value in the eyes of clients–and potential employees. Can’t be true, you say, or certainly not for your firm. Truth is, many professional services firms suffer a proportionate (or greater) loss in income and value when key personnel leave, and some never recover. For those that survive, building it back may be easier the second time, but it’s the familiar learning curve more than the innate value clients see in your firm. It doesn’t have to be this way.
Establishing value over and above the individual principals is critical
Trust-based relationships are part and parcel in professional services, meaning the individuals delivering services will always be important. Consequently, creating value for the firm is hard. For the smallest firms, you are the firm, so it’s nearly impossible.
Failure to transition from a collection of principals to firm-centered relationships slows the rate of change of the firm’s growth (second derivative), even if top line revenue continues to climb for a while. Each new principal adds less incrementally when a leveraged model suggests growth should be accelerating. Firms that transition successfully are better at cross-selling capabilities and services, growing faster and generating more value–both to clients and to owners in terms of equity–than comparable firms built around individual practices. Successful firms, in part, fuel their own success.
With positive experiences less tied to specific individuals, organization-centered firms make more attractive referrals and can build bigger pipelines and win more engagements. Getting it right requires striking a balance. Individuals must provide exceptional delivery, but you want clients to perceive the motivation as deriving from the firm, its culture and processes rather than a from brighter light in a dim field.
Why is becoming firm-centered hard?
Creating firm-centered value goes against what initially makes many service professionals successful. We establish practices founded upon our personal capabilities. For many service professionals, being one in the same as the firm isn’t a bug, but a feature. Egos resist altering this dynamic. I worked with a woman for many years who talked constantly about creating value around the firm, but at the same time she loved the limelight of being the center of attention. With a sales process defined around her personality, she never became comfortable selling engagements that could be delivered without her involvement, regardless of the capabilities involved.
More generally, unlike becoming a trusted advisor, there is no clear road map for becoming firm-centered. Although it is an all-encompassing endeavor that touches on every aspect of your firm and everything you do, the central role of communication makes marketing a critical player.
What professional services marketing can do
Here are three specific actions you can take:
- Nurture a strong, consistent corporate culture that builds consistency in the firm experience so engagements are less personality-centered. Common processes and methodologies build consistency, as does recruiting people that collaborate and work well together. Anyone–regardless of their innate talent–who detracts from your culture should be directed outside the firm.
- Establish strong positioning. Your clients are used to personal relationships even when working with a firm, so you must be very good at telling the story of why your firm is a better choice than other firms or solo practitioners. Your story must reflect your corporate culture and value you bring to clients. Ideally, the firm values closely parallel those of the responsible principal and delivery staff. Strong positioning is about describing value relevant to your clients and how you create it better than others.
- Collect and tell stories about how your firm creates value for clients. Talk in terms of your firm rather the specific individuals. It’s OK to use names, but make it clear that the individuals acted the way they did because they reflex the firm’s values and culture.
In summary, establishing value in your firm is a holistic and on-going process in which you must:
- Believe that your firm offers incremental value–preferably a lot–over a collection of solo practitioners.
- Build your firm so this value is realized via culture and processes.
- Define why your firm is better than the alternatives. If you don’t include your firm as part of why you are a better choice, neither will your clients.
- Communicate why you are better than other options. As the core of who you are as a firm, this topic should eternally excite you. Add new stories and examples, but it’s not a message to change until the mission of your firm changes.