The 3 Biggest Fee Revenue Mistakes in Professional Services Firms

The 3 biggest fee revenue mistakes in professional services firms

Background

In many organizations Sales and Marketing are two of the most customer-facing functions. They are what a customer gauges the business on and they are the growth engine. Thus, they usually have developed into discrete functions with highly specialized skill sets and dedicated processes, and different managers.

Professional services firms, and particularly those that have a Partner structure, seem to have taken a different approach.

Our observation is that their approach to Sales and Marketing is not ideal and that they are leaving money on the table. This paper describes three of the most commonly encountered causes and it proposes three solutions to unlock the unrealized value for professional services firms.

Here the three most common mistakes:

1. Partners are ill-equipped to Sell

In most professional services firms the Partners seem to be expected to generate the bulk of the revenue. Usually, they have risen up through the ranks because of their specialist expertise. They represent the organisation towards their clients and are the experts in their respective fields. However, being subject matter experts unfortunately does not automatically make them experts in selling.

In fact, most Partners are inherently uncomfortable with the notion of “selling” and do not enjoy being associated with "sales"”. They may even consider the term “selling” as something inferior to their profession.

Many professional services firms have recognized that this attitude towards selling hinders revenue growth and they are offering professional sales training courses to their Partners.

However, taking a Partner out of client contact in order to attend a couple of days’ sales training is unpopular. Then expecting them to come out of the course fully proficient in sales is unrealistic. Often, the Partner perceives the training course as a nuisance that is beneath their status.

The outcome from all of the above is that professional services firms often do not realize their full fee potential and thus they are leaving money on the table.

The outcome from all of the above is that professional services firms often do not realize their full fee potential and thus they are leaving money on the table.

So, what is the solution ?

While subject matter expertise is a good way to differentiate a firm it is not effective to promote Partners on the one hand due to their specialist knowledge and then, on the other, to expect them to suddenly evolve a completely different and (to them) unnatural set of selling skills.

Rather, it is more natural to create a pervasive culture into professional service firms where “selling” is not considered a dirty word, right from the lowest entry-level employee all the way up to the most Senior Partners so that as staff rises up through the ranks there is no culture shock around suddenly having to “sell” when they make it to Partner status.

Fortunately, there are sales methods that are akin to the advisory work that Partners are already accustomed to. They often involve active listening and problem solving techniques which may in any case lend themselves more naturally to the culture of professional services firms.

These sales training methods carry names such as The Challenger Sale, The Provocative Sale, The Disruptive Sale, The Collaborative Sale, SPIN Selling, RSVP Selling, et al. Essentially, they all more or less utilize questioning techniques to solicit a client conversation that uncovers hidden problems that the Partner can then help solve and attribute billable time to.

My Recommendation:

Introduce consultative selling techniques early and across all ranks in the firm so that selling becomes natural to staff as they climb up the career ladder.

2. Misunderstanding the Difference between Sales and Marketing

Many people who have not been intimately involved with either Sales or Marketing do not tend to have a clear understanding of what each function does and how their roles differ. Often, the two are lumped together into “Sales and Marketing” and more or less become synonymous in a way that more or less means "make more money".

Our observation is that professional services firms at times hire Marketing Managers that come from a marketing background, something which sounds like an obvious thing to do. However, often there is then surprise when they find that the newly hired Marketing Manager and their team who arrived with high expectation do not directly generate much new business at all. The reality is that Marketing concerns itself with higher level (some would say “strategic”) matters such as the firm’s brand recognition, its corporate profile and thought leadership in order to differentiate it in the market place. Marketing may employ techniques such as segmentation, targeting and positioning to set the firm up in the eyes of its target audience so that selling the firm’s expertise becomes easier. The truth is that Marketers may generate sales leads but they do not generate sales.

The truth is that Marketers may generate sales leads but they do not generate sales.

Marketing is not equivalent to selling. The simple truth is that the marketing team does not usually sell, they would naturally expect the Partners and their support functions to take on that task and responsibility. Often, questions are then asked and problems arise from this misunderstanding of how Marketing is different from Sales, at times cutting short the tenure of the Marketing Manager for perceived “under-performance”.

This disconnect often creates internal and inter-personal tensions as the initially high expectations on the Marketing team are not being met.

So what is the solution here ?

In Point 1 above we spoke about instilling an organizational culture where selling is accepted as a natural extension of familiar advisory techniques. An additional benefit of this approach is that the firm develops a good understanding of what “selling” is about.

We can then build on this common understanding and introduce Marketing in the correct context, namely as a support and enhancement to the Sales function.

My Recommendation:

Understand how Marketing is different from Sales as a first step. Once that understanding is in place we propose regular and formal meetings between Sales and Marketing functions in order to align the activities, effort and budgets for maximum return. Marketing should propose, and have signed off by the Partners, agreed content marketing activities and lead generation campaigns, such as events, campaigns, direct marketing, functions and both online and offline events. Members of the marketing team should also be invited to attend client meetings so that they can gain a deeper understanding of client needs and how they can better support the Partners in their sales endeavors.

3. Reward Systems are not conducive to maximizing Billable Time

In our observation, professional services firms are just as concerned with revenue growth as those in other industry sectors. Another commonality is that specialist functions and/or expertise are arranged organizationally into separate teams, supposedly to enhance focus and performance. However, one negative consequence of this structure is that it often devolve results into a “silo” mentality where different teams operate more or less in isolation from each other. Outside the professional services sector this may manifest itself along product lines, i.e. teams that are selling different products are calling on the same customer without necessarily realizing it.

Sales organisations are employing CRM (customer relationship management) systems and other technologies to address this problem. Many professional services firms are also deploying these kinds of systems with more or less success.

At a strategic level the senior Partners often agree that maximising the return from each client account is a desirable outcome. Hence, the Partners are actively encouraged to introduce their peers to their clients so that the firm can benefit from cross-selling opportunities that result in additional billable time. However, one consequence of this approach is that Partners are then expected to share their clients with other Partners. However, often the processes that need to underpin and support this arrangement are under-developed and, often, the Partner reward structure does not actively encourage this client-sharing paradigm.

Often, the Partner reward structure does not actively encourage this client-sharing paradigm. 

Therefore, Partners are not only reluctant to potentially “dilute” their personal client relationships but, what is more, they are seldomly financially rewarded for opening up new revenue opportunities to their Partner colleagues.

All the above results in a kind of lip service where everybody pledges to support other Partners' business, but in reality is reluctant to do so because the perceived risk is higher than the perceived benefit.

So, how can we remedy this sub-optimal situation ?

My Recommendation:

As Partners seem often to be financially motivated we suggest that the internal reward systems should be updated to compensate Partners for the effort and perceived risk in introducing their peers to clients. Additionally, we propose the introduction of appropriate support systems to promote cross-selling internally and to equip Partners with the right skills to detect, and maybe even to create, the right opportunities to introduce their peers. Marketing may well have a role to play as the intermediary between the Partner 'silos', to be the instigator, promoter, supporter and encourager of Partner collaboration, and to foster cross-selling to maximize billable time from each client account.

Some Caveats

Just as is the case in many business situations there are some matters that need to be borne in mind when implementing the changes that we suggested above. In this section is a short list of the more common caveats to consider.

Trying to implement change without executive support

When change touches on aspects of corporate culture then implementing reforms can be an uphill battle. As laudable as it might be for middle managers or junior staff to attempt to effect cultural changes, such optimistic projects are often doomed to failure unless they have executive buy-in. The kinds of initiatives that we have touched on, and the implementation of the proposed solutions necessitate executive agreement and they deserve Senior Partner support.

That means that the decision to proceed with the proposed initiatives and the means by which they are managed need to be agreed and signed off at the highest level. Then, they will require ongoing executive support and encouragement if they are to deliver the results that they promise.

Tip: Do not attempt these changes without executive support and buy-in.

Expecting Immediate Results

Too often, we expect overnight results, and sometimes even that seems not fast enough. The fact is, that realistic time frames need to be accepted by all stakeholders to allow the changes to take a lasting effect.

Tip: Do not be overly impatient when planning and implementing these changes.

Relying on Technology to Solve Communication Problems

Earlier we mentioned CRM systems to support clearer understanding of client interactions and overlaps for the firm. But, there is much more technology available to address a myriad of problems, e.g. Sales Force Automation, Marketing Automation, Sales Enablement and other systems. Their vendors often promote what are essentially tools as a panacea that will resolve all your problems the instant they are installed. However, even the most sophisticated technology will remain ineffective if you don’t have your people and your business processes aligned.

When attempting to foster a cooperative relationship between business teams it is important to address the human dimension as a priority. Only then will it be appropriate to move on to HOW each function can support the other, and only then can we move on to setting up joint processes and metrics to support the desired outcomes.

Tip: Do not neglect the “People/Human” aspect when implementing change.

Conclusion

Our experience has taught us that only what we call a “Trinity” approach leads to lasting success, i.e. one where the “People/Human” element is the highest priority, followed by “agreed Processes and Metrics”, and then supported by the appropriate Technology. Feel free to contact me for more information.

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Thanks again for your interest.

Peter Strohkorb