From ‘my’ client to ‘our’ client – it’s time for a change of mindset
Joel Barolsky outlines five of the key reasons why partners are often tempted to ‘hoard’ clients rather than share them across the firm – and how this poor practice can lead to terrible results for clients and the firm itself.
What’s the prevailing mindset in your firm? Do people talk about ‘my’ clients or ‘our’ clients? Are client relationships primarily owned by individual partners or principals, or are they viewed as assets of the firm?
Many firms are still struggling with this idea of institutionalising their key client relationships. While there are attempts to cross-sell and refer others, it is usually done from the perspective of calling in a specialist to address a specific (often narrow) client need. The client is still someone’s client, with others ‘helping out’ when asked. It’s not an ongoing firm-wide collaborative effort to create the most value for the client and for the firm.
Individual client ownership adds strategic risk and weakens the firm. If future cash-flows are predominantly linked to the reputation and relationships of a person who can leave at any time, what’s the firm really worth? Future partners will simply pay less or be less inclined to take on firm risks if they deem there is no relationship capital in the firm.
The not-so-fabulous five
There are five principal reasons that underpin client hoarding.
1. Reward – the firm’s measurement and reward system incentivises the individual to hold on to the client and do as much work as they can for that client, regardless of whether they are the most suitable provider or not. I recently heard of a case where a law firm’s commercial partner ran a major dispute for ‘his’ client, rather than refer the matter to the firm’s specialist litigators. A post-mortem of the file revealed the approach had not only exposed the firm to undue risk, but the client ended up paying about 20 per cent more for sub-standard outcomes and a very inefficient process. At the time, the partner’s bonus was principally linked to his personal billings, so there was a huge disincentive for him to involve others.
2. Power – in professional services firms a senior practitioner’s power base is often linked to their ability to make rain and drive revenue growth. Having personal ownership of high-revenue clients feeds this perception and power is increased from the implied threat of leaving the firm and taking a sizeable chunk of revenue with them. Similarly, being Mr or Ms Big with big clients is one way that large egos can be stroked.
3. Legacy – a vast majority of client relationships start out as one-to-one, person-to-person engagements. Very few commence as firm-to-firm collective pitches. The individual who wins the initial work tends to keep on going and over time develops strong personal relationships with key buyers and influencers. While these personal bonds are great, they can come to define the overall relationship and limit others stepping into the frame and joining the club as equals.
4. Distrust – in some instances partners simply do not trust the quality of advice and service delivered by their colleagues. They feel the client would do better by going elsewhere. Some firms are in indeed challenged by very high variability in technical ability and inconsistent service standards. Client hoarding is probably a good thing in these cases! However, from my experience the problem of inconsistency is often overstated and the real problem is professional arrogance and distrust based on ignorance.
5. Control – recent Harvard Business School research by Heidi Gardner suggests that heightened performance pressures in professional services drive people to seek control and adopt a ‘go it alone’ mindset that ultimately undermines collaboration. Larry Richards‘ research work points to lawyers, in particular, having a strong autonomy and control streak.
Cultural versus process solutions
I often see firms trying to fix this problem of individual client ownership with process solutions. They put in new business development processes that require people to sit together and prepare and execute a client plan. They install new CRM systems and try to get people to institutionalise client knowledge. They train staff in a new sales methodology that requires pre- and post- call planning. What happens is that people don’t pitch up to client planning meetings, they don’t bother to update the CRM, and they fill in coloured sheets once or twice and then go back to the good old days.
In legal services, I believe one has to tackle this issue, first and foremost, as a cultural problem. In some instances, it goes to the heart of the firm’s purpose or raison d’être. Is the firm there as a place for individual owners to practice their profession, or is it a business that seeks to create and build shareholder and stakeholder value? If it’s more the former, it’s going to be a long, hard battle trying to build the firm’s relationship capital.
Cultural solutions start with strong leadership and a commitment to live the firm’s values. If your firm’s values reflect something about respect, integrity, teamwork, service excellence, or similar ideas, then there’s enough ammunition there to start and win the battle. It’s really up to the firm’s leadership group as to whether they have the courage to take on this issue and fight!
Joel Barolsky is managing director of Barolsky Advisors, Senior Fellow of the University of Melbourne and creator of the Price High or Low smartphone app designed to help with pricing projects. Visit www.barolskyadvisors.com for more details.