Clients as friends as Clients

Daniel F. Hunter, Special Counsel at Schulte Roth & Zabel LLP in New York has posed the following questions:

1) Should friends become clients?  I am often afraid to ask friends for legal work because it might "taint" our friendship and make me feel like a service provider any time I go over to their house and see their kids, etc.

2) Should clients become friends?  When this happens I feel I am less able to give objective advice and I sense that the clients feel like they can ask me legal questions at any time of day or night.  For example, if we play squash all they want is free legal advice on the squash courts.  Very frustrating.

***

I would vote "no" for both cases.  For me, there's all the difference between knowing how to be friendly with clients and actually being friends who socialise regularly.

But others, I think, might vote differently.

What do the rest of you lawyers, consultants, accountants, financial planners and other advisors out there think?

Pricing Consulting Services

Raintoday.com has just released a new study Fees and Pricing Benchmark Report:  Consulting Industry 2008.  645 respondents in the consulting industry completed the survey.  Among the findings:

Firms that are well-known in their target markets receive higher fees, see their revenue grow, and earn higher profits than their lesser-known counterparts.  Brand leaders were more likely to price their services at a higher level than their competitors in the market (42% of brand leaders were premium-price vs. 28% of lesser-known firms).  And, they were more likely to actually get higher fees by up to 35%.

While most consulting firms (and consultants to consulting firms) criticise the use of discounting, 65% of consulting firms report that they do indeed discount their fees.  Even the most profitable firms discount -- 49% of firms, with 25% or more firm profit, report that they discount.  The average discount level:  11.7%.

When it comes to premium-price firms and what sets them apart, it is not their size, the amount of repeat business they are able to get, or the region of the country in which they are located.  As a matter of fact, none of these had an effect on a firm's ability to charge premium fees.  The factors that matter most to premium price firms are how valuable their work will be to the client upon completion, and whether or not the firm can deliver superior results versus the other providers -- 36% find this "extremely important"

Verbatim Comments From Respondents:

Pricing Strategies:

"We do not compete on price.  Ever.  If we can't compete on value, ability, talent, and, frankly, if we can't create a better value proposition for the client, we don't want their business anyway."

"We are aware of the potential need to reduce cost to gain access but also believe that the selling process should effectively focus on value and reference capability to deliver.

Introductory Service Pricing:

"We've found that the first project creates pricing expectations for future projects, and that the work is valued more when it is priced at full rate."

"The introductory pricing strategy is not necessarily a lower price, but a smaller or pilot project which makes it easier for the client to accept without prior experience with our work."

Why Do Use Value-Based Pricing?  Respondents Say:

"Our work, approach and value delivered are unique enough that value-based pricing is the ONLY way in which we are compensated fairly.  A time-based approach simply makes no sense for us -- one intervention/coaching session often causes a change in direction that's worth millions of dollars to the client -- how many hours of our billing would that be worth?"

"Part of our approach is to address the business's issues and value of any potential solution to the bottom line of the business or business unit.  Our pricing is provided in relation to the benefit.  We also use this approach to minimise work in low value areas of the business/org."

"Provides income far beyond hourly billing availability."

Standard and Realised Fees:

"Our pricing model almost always ensures that the standard hourly rates are realised, hence the zero difference in the numbers above.  Sometimes we will cash in a little more on the senior levels, and provide juniors cheaper, but on average we end on the standard rates (which are not public)."

"Difference between published and realised rates is due to discounting to get the business and/or project taking more hours than estimated to complete.  Often this is due to client being unable to supply content or time when needed."

"I do not even keep track of time, nor is time a factor in establishing value to the client.  I simply don't think this way.  Managing capacity is about being extremely effective, not about focusing on time."

Service Guarantees:

"It is a great source of competitive advantage.  We offer to solve a specific business problem with a specific technical solution at a specific time and price (price includes expense and travel).  No excuses, just deliver.  Using this philosophy, we are slowly taking work away from competitors who don't know we exist.  We are also charging 2 to 3x more for projects than competitors are bidding on an hourly basis."

"We find that our consultants rise to the expectations, so the service guarantee has not cost us much but has led to a higher level of personal dedication to meeting client expectations."

Web 2.0 and law firms

A question from a reader:

Though plenty of examples of "Enterprise 2.0" show tangible ways that social media can improve business, I have not been able to find many examples of law firms taking advantage of Web 2.0 technologies.  In the UK at least, it seems that although some niche blawgs are very popular and have done quite well in establishing the author(s) as authorities in their respective fields, law firms as organisations have yet to take advantage of new platforms in substantive ways (as have eg investment banks with internal use of wikis/ social networking).

Am I right in thinking that this is pioneer territory for law firms?  If not, could you please point me to some good examples of firms that use social media -- internally or externally -- to improve productivity/ efficiency/ client services (ie beyond business development/ HR/ recruitment functions)?

Client Responsiveness and Compromised Quality

A question from Joseph A. Heyison of the Legal Department at Daiwa Securities America Inc.

"Richard, a thought sparked by April 11's WSJ front page, describing Moody's alleged move to client-friendliness and possible debasing of its ratings process.

"This is a repetitive theme in professional services:  the most rigorous firm builds its reputation but is considered client-unfriendly.  Then a new management enters, vowing to be more responsive to customers, and the partners learn that yes, their incomes rise and they get better client relationships by bending a little.  Then a lot.  Examples:  Arthur Andersen, KPMG (tax shelters), various law firms, lobbyists (Cassidy &  Co.), etc.

"Question One:  How do we differentiate client responsiveness from compromising the quality of our work, and what other than moral suasion works?  (Tyrannical regulators?  In theory, an internal incentive process would be best, but I've never seen it done workably.  Despite your advice, I think that firm culture in most cases is simply too weak to rely on).

"Question Two:  How does this affect the economic "gatekeeper" theory?  (Firms maintain standards to establish a brand which effectively vouches for the client and thus have sufficient economic incentives to police fee-earners against dropping standards for short-term gain).  Is that realistic in an environment where fee-earners are mobile and short-term oriented?  Or is the only way to maintain gatekeeper standards the threat of regulatory and criminal action, or ruinous civil lawsuits?"

***

What think you all?

Satisfaction Guaranteed

For more than a decade, I have preached (and practiced) the policy of giving all clients an unconditional satisfaction guarantee.  Most of my clients have thought the idea impractical and idealistic.

So, I was delighted to be made aware of the Valorem Law Group who make this statement on their website:

"If you're interested in seeing whether we are right for you and your team, try us on a matter.  What separates us from our competitors is that you have our value promise on every invoice.  If you don't think we're worth the amount you agreed to pay, you make whatever adjustment you think is necessary.  If your other firms don't walk that walk, it's time to try Valorem."

(Thanks to Gerry Riskin for drawing my attention to this firm)

Merchandising

I just received a complementary copy of a new book(let) by David Cottrell called "Leadership Energy (E=m x c squared)".

It's a 100-page large-type (very clever) packaging of some key management lessons, using Einstein's famous equation.  In this case, the energy is the organisation's output, the m is the mass of the people and the c is the leader's impact on energy.

What caught my attention was this sentence:  "To help you facilitate teaching these concepts to your team, a Powerpoint slide presentation is available at www.CornerstoneLeadership.com"

What you discover when you click is that the slide presentation sells for $99.95, compared to $14.95 for the booklet.  And I bet it generates training and consulting opportunities.

Very clever!  Are any of you merchandising yourself (or your business) this way?  What's been your experience?

I wonder what would have happened if, starting 12 years ago, I had been charging for slide presentation versions of my material?

New Edition of Ford Harding's Classic Book

Ford Harding has carved out a deserved reputation as one of the most highly regarded authors, trainers and consultants on sales in professional services.  His books began with RAINMAKING in 1994, followed by CREATING RAINMAKERS in 1998, and then CROSS-SELLING SUCCESS in 2002.

Now he has issued a second edition of RAINMAKING, revised and updated.  Here's his chapter list:

1. Writing and Publishing Your article
2. Finding a Podium
3. Marketing by Mail
4. Organising Seminars and Conferences
5. Getting Publicity
6. A Few words on the Web
7. Eliminating the Dread of Cold-Calling
8. Networking:  The alternative to Cold Calling
9. Special Rules for Special Networks:  Trade associations, Formal Networking Groups and Internal Newtorks
10. Increasing Network Quality
11. How Markets Structure Networks
12. From Networks to Leads
13. Building Client Relationships that Last
14. The Sales Meeting:  The First Five Minutes
15. The Sales Meeting:  Questioning and Listening
16. The Sales meeting:  Offering Your Solution
17. The Sales meeting;  Formal Presentations
18. The Sales meeting:  Handling questions and Concerns
19. Team Selling
20. Shortening the Sales Cycle
21. Writing a proposal
22. Quoting a Fee
23. Turning Down Small Work
24. When You Lose a Sale
25. The Logic of a Sales Strategy
26. Simple Strategies that can Help You Now
27. Self-Marketing:  Experts Make Themselves
28. Market-Based Strategies
29. Conclusion:  Becoming a Rainmaker

****

Even if you know Ford's first edition, this second edition is a must-read!

The Client From Hell

Bob Sutton, author of the fabulous book "THE NO-ASSHOLE RULE" has developed an amazing quiz to rate your client(s).

You've GOT to check this out!

Survey on Pricing

Mike Schultz of Rain Today.com sent this request:

We are conducting our next major RainToday.com and Wellesley Hills Group benchmark study on Pricing and Fees in Professional Service Businesses and we would like your input.  Please take 20 minutes to share how your firm approaches pricing its services.

You can access the survey here.

As a thank you for your time and input, upon completing the survey you will receive the complimentary RainToday.com report of your choice from the list of our most popular reports below:

• The Professional Services E-Guide To Online PR (PDF)
• How To Write And Market A White Paper E-Guide (PDF)
• How To Become A Thought Leader E-Guide (PDF)
• How To Set Appointments Through Cold Calling E-Guide (PDF)
• Marketing Strategy, Planning, and Budgeting for Professional Services (Webinar Recording)

And, feel free to pass the survey on ... your colleagues can receive a free report as well.

Thank you for helping make this research possible.  I appreciate your time and input!

Digital Marketing for Professional Firms

David Koopmans, Director of Mokum Marketing in Melbourne, Australia wrote in by email to raise the topic of how professional services firms can use the web in their marketing strategy and what the specific benefits are.

He points out that among some types of professional firm there is often resistance to the concept of marketing in general, and the digital space in particular.

If you were advising a professional firm about web marketing, what would you stress?

I'm not sure how much hard evidence there really is about the benefits of the web in marketing professional services. I suspect that key decision-makers and buyers are not spending much time on the net. Their staff subordinates (HR people, marketing directors, strategy people etc.,) may use it more, and you may be found that way, but I doubt that there is much of a direct executive audience.

I would probably point out that the old adage "demonstrate don't assert" remains the key to effective use of web technology, and that websites need to have voluminous amounts of easy to search and easy to find content, so that you can you can prove that you have something to offer (and are generous and professional enough to share it.) The ease of use of your digital marketing gives you an opportunity to show your ability to put yourself in the shoes of the client / purchaser and understand things from their perspective, rather than saying "let us tell you about us."

I'd also stress that you need to be well advised by people who understand search engine optimisation, so that if there are buyers who don't know you, you are found when they begin searching.

It's still early days for blogging, podcasting and videocasting, but I'd have to guess that, for most professional service firms, these are not high return activities -- again, because I'm not sure that the "high-level" buyers are listening and watching.

I've had a lot of fun and success with my own activities (which I reported on last year in an article called "Adventures in Modern Marketing") but it's very hard to unbundled the incremental marketing benefit that being active on the web has brought. I'm not sure what I would advise a client to do in this area, nor how much of their marketing budget to devote to web activities.

What do the rest of you think? What advice would you give to a professional firm about digital marketing? What have we learned?

Another reader question

My question to you and all your website contributors;

What have been people's experiences with the strategy of targeting only working with one client per industry sector and deliberately broadcasting to the market that that is your "modus operandi"? It's a bit clumsy, but, for example -- "We guarantee our clients that we will not work for their competitors, thereby preserving exclusively for our clients, the commercial advantage of partnering with us"

I know the applicability may vary with the type of services one offers, but do others have any thoughts on this approach?

Implementing a Client Service Strategy

One of the most common topics I am asked to advise on is achieving distinctively high levels of client service. I find that many firms underestimate how tough a diet and exercise program (see STRATEGY AND THE FAT SMOKER) it would really take to pull this off.

Among the changes that most firms would need to make are:

1. Adopting a culture that no longer allows people to "opt out" on the topic of client service excellence on the grounds that their skills lie elsewhere. A firm can't get a reputation for something that not everyone does.
2. Finding some way to monitor client feedback in real time (not just once a year) and make it credible to everyone that there will be a follow up for anything less than excellence.
3. Providing training in client counselling skills
4. Providing research support from the marketing department to help service delivery people stay current on client industries
5. Enable sharing of experiences (workshops and workbooks) among practitioners on an ongoing basis to establish a continuous improvement approach to client satisfaction.
6. Implement disciplined project management systems, including mandatory processes for communications strategies with clients mid-process.
7. A systematic program of senior officer visits to clients to "role model" the firm's commitment.

None of these approaches are new or innovative. (I first wrote about them in the 1990s, and I wasn't the originator then.) However, it is still my experience that firms are less than systematic in implementing a client service strategy.

What systems do you think are need to pull this strategy off? What else needs to be in the "change package?"

Screening for Relationship Attitudes and Skills?

Yesterday's post was about whether relationship skills must be "found" by firms in their hiring process or whether they can be developed.

As I reported, about one-third of a conference of leading management consulting firms felt that these values, attitudes and/or skills are mostly "hired in" rather than developed once people have reached the age and stage of being hired by consulting firms.

Which raises these questions:

1. How can firms screen for and identify relationship values, attitudes and skills?
2. How, in fact, do they screen for them?
3. Do formal testing approaches work?
4. What about "behavioural interviewing" (I'm still not sure what that is!)
5. Do you have to rely on the "take them out for a beer" test?

Developing Relationship Skills

At a conference of leading management consulting firms last week, I led a discussion about the barriers to developing strong, deep relationships with clients -- a "fat smoker" strategy in the sense that we all know we should be good at it, but few of us are.

As we explored the topic, I took a poll on how many people thought relationship skills were "born" and how many thought they could be "made" (i.e. developed.)

(Only) two-thirds of the audience thought they could be developed. However, very few firms said they had formal programs to help their people develop the interpersonal, social, political and emotional skills necessary to be good at relationships. As a rule, they depended either upon people developing these skills for themselves, or (if you were lucky) learning on the job by observing those ahead of you who were good at it.

The challenge was made even more difficult when it was pointed out that -- ultimately -- relationship skills are about values and attitudes, not personality characteristics and skills. If the discussion is about values, then it really is challenging to address the key questions:

1. Are these born or can firms develop them in their people?
2. If they can be developed by the organisation, how?
3. How did you learn to develop your relationship skills?
4. Were you ever given any formal training that helped?
5. What would you advise others that wanted to work at developing these skills?

Firing unprofitable clients

Hi Richard,

I had a question I wondered whether you or your blog readers had any opinions on.

Many companies have unprofitable customers. This situation may arise for many reaons including:

• Poor pricing controls -- offering large and multiple discounts
• Historic over-servicing and under-charging long-term customers
• Lack of understanding of the true cost to serve

Nonetheless, whatever the reason, when companies do find unprofitable customers they need to manage them. They can be made profitable or they can be "fired".

Do you have any ideas or strategies for actually firing customers? Does anyone have any examples of how their companies (or others) have done this and what the results were?

Regards. Daryn, Sydney, Australia

***

Well, gang, what say thee?

Consultant Seeks Advice

A consultant sent me this emaial, soliciting advice:

Last week I spent a couple of days with group within my client's organisation. The group was all male with one female. I was appalled by the pre-pubescent behaviour of the males towards the female. I'm a former Marine, played football in college, I'm not unfamiliar with male environments. Their behaviour towards their own female staff made me uncomfortable. My test is that I don't want to put our employees in an environment in which I would be uncomfortable putting my wife or daughter.

But, it's a really big client. And, my desire to back away from this client is being challenged by others.

Our first, agreed-upon principle is that our employees come first. Great employees, who are truly experts in their area, are harder to come by I think than clients. This is an interesting test of our application of our principles.

Any suggestions about how best to handle this would be appreciated.

Loyalty to Whom?

Another reader question:

A partner of a large firm specialising in training and development asks how to make sure that the clients develop loyalty to the firm, as opposed to the individual trainer?

When the firm gets a contract to train managers of a company X, the firm assigns a trainer (who is, most commonly, an independent contractor) to the company. If the company likes the results of the training, they would most likely invite the same training firm again and again, most commonly asking for the same trainer. Over time, the relationship between the trainer and the client company flourishes to the degree that the company starts offering training assignments directly to the trainer, without even notifying the firm.

How can the training company protect itself from such an unfortunate turn of events? I realise that there are some "half-baked" solutions like, for instance, try not to send the same trainers to the same company, but there should be something else.

***

There are two dimensions along which this can be examined. There is a triangle formed by the individual consultant (or trainer), the client and the consulting (or training) firm. The question makes clear the strength of the link between the individual and the client. But what strengthens the link between (a) the client and the firm and (b) the individual and the firm?

In both cases, we are asking how the firm "adds value" above and beyond the talents of the individual service provider. Some possibilities:

1. On-going enhancement of the consulting / training product or service
2. Access for both the individual consultant and the client to proprietary tools owned by the firm
3. Access for both the individual consultant and the client to research conducted by the firm
4. Access for both the individual consultant and the client firm to regular "solons", discussion groups, seminars and other learning opportunities, so that there is Value in belonging to the network.

Does anyone else have other ideas?

Relationships: What's the Problem?

Almost every firm (and individual professional) I know SAYS (and has said for a long time) that they want to build their strategy on having deep and broad relationships with key clients.

But the percentage of firms that have pulled this off is (in my experience) relatively small. I explore this in part in STRATEGY AND THE FAT SMOKER where I explore the fact that while firms say they want romance, too many firms still act in a transactional "let's win this one" mode.

But there's more that needs to be said. It's not enough to argue that relationships are a good thing, or even prove that they are economic. We must understand why they are difficult to pull off.

Here's a preliminary list of some of the possible barriers:

1. Many clients, in fact, don't want relationships. They prefer to buy on a transaction-by-transaction basis.
2. Too many providers are not really trying to build a relationship, they're just trying to sell more product and services -- and clients can tell
3. Firms or individuals are too short-term focused, over-investing in short-term sales opportunities and under-investing in long-term relationship-building: it's a time allocation problem
4. Senior professionals just don't have the time to invest in relationships: it's a time problem
5. Senior professionals are actually not that interested in clients: it's an attitude problem
6. Individuals are not skilled in earning clients' trust: it's a skill problem
7. Internal barriers in firms -- for example, excessive "silos" mean no incentive to create opportunities for colleagues to provide additional services to "your" clients: it's a structural problem
8. Lead professionals see it as too risky to introduce their colleagues -- they worry that their own PERSONAL relationships would be threatened by any attempt to turn the relationship with a client into an INSTITUTIONAL relationship: it's a quality or cultural problem
9. Firms are not discriminating enough in selecting which client relationships actually have a chance at succeeding: they try to develop relationships with too many clients -- they should focus more effort on fewer, carefully selected opportunities: it's a focus problem

What would you add to the list? What do you think is the most common explanation of why most firms' relationship strategies fail to succeed as often as they hope?

How to be a Customer

In the latest online issue of Harvard Business School's Working Knowledge professor John Quelch argues that, as a customer, it is possible to get preferential (or at least better) service from your vendors, suppliers, etc, if you know the right approach.

He lists the following as the keys:

1. Be Demanding
2. Be Respectful
3. Be Reliable
4. Be Surprising (eg reward a job well done)
5. Be Engaging.

You can join John's discussion, or we can start one here.

We've had discussions here before about what we providers seek in an ideal client, but would you agree with John's starting list? Do you agree that these are the keys to eliciting better reactions from providers?

The Importance of Appearance

Back in February, I blogged about my experience being a juror. As part of the follow-on discussion, Penelope Trunk (who has a fabulous blog called "The Brazen Careerist") commented: "one thing I learned is that fat women don't have a lot of empathy and defendants usually try to strike those jurors."

Yesterday, Joseph Dunphy reacted by saying: "On behalf of many, I suspect, I'd just like to say WHAT? Did I really just read that? Unbelievable. That's just terrible."

I understand Joseph's initial reaction, but I don't think Penelope was advocating anything -- she was just sharing her real-world experience that appearance matters a great deal more than we like to admit openly.

For example, last week I was conducting a workshop for a global corporation that had concentrated a number of its in-house services into one "shared services" unit. One service line in particular received much higher client satisfaction ratings than the others. We discussed why, and focused on the traditional client service topics.

During one of the coffee breaks, one of the participants came up to me and said, "The real reason that unit does so well is that it explicitly sets out to hire attractive young women. No-one likes to admit it, but that makes a huge difference." (The unit was in a South American country, if that makes a difference to your reaction to the story.)

Of course it does. I know of more than one top-flight professional firm that takes appearance into account in its hiring of both males and females and gives its young people lessons in how to dress well and how to behave with sophistication.

Should appearance, youth and manners matter? Maybe not, but they do -- a lot. To pretend they do not is just unrealistic.

Yet in many countries this is called discrimination and is legally barred.

All of this raises some interesting questions:

Should more firms continue to include physical appearance in their hiring, even to the point of preferring some ages and genders?

Are we naive to believe they are not already doing that?

Are discrimination laws fighting a losing battle against human nature?

Should I get back on the treadmill and worry more about my clothing in order to enhance my career prospects?