Author Archives: aadarshs

Managing Professional Services Firm

by David Maister


This is a great book on managing professional services firms such as law firms and management consulting firms. It gives insights in to Partner level thought process and presents a lot of new ideas which do not come naturally to an Analyst or AN Associate in such firms.

Chapter 1 – Question of Balance

There are three primary goals of professional services firms (PSF) :

  • Service – Serve your clients well
  • Success – Be profitable
  • Satisfaction – Keep the staff motivated

There are three kind of project which PSF get:

  • Brains project – new task, requires significant senior time
  • Grey Hair project – somewhat familiar tasks, some opportunity to delegate to junior staff
  • Procedure project – Well established task, majority of task done by juniors

Leverage – The ratio between junior and senior staff.

It affects all three factors which a PSF cares about:

Service and Success – Optimal leverage depends on the type of project. Mismatch between the organization structure and the optimal leveraged structure leads to two possible problems:

  • Under-levered – Senior staff would be underutilized. Higher cost. Lower profitability
  • Over-levered – Shortage of qualified staff. Quality risk.

Satisfaction – Leverage also determines career trajectory. High-leverage means a lot more associates would not make it to the next level.

Growth – Growth does not mean increased profitability. It can lead to reduced per partner profits if done badly. Growth areas should mean taking up high value tasks to increase profitability.

Temporary high profitability through leverage -Brains projects command the highest fees. By creating procedures to tackle such tasks and utilizing high leverage on subsequent projects, a firm can achieve high profitability. However, these projects will eventually be considered grey-hairs and procedural projects so high profitability is not sustainable.

Chapter 2 – The Professional Firm Lifecycle

There are three benefits which a client seeks from PSF:

  • Expertise
  • Experience
  • Efficiency

These three needs require different organization structures for the practice.

  1. Expertise-based Practice – Creativity valued. Top graduates as juniors. Low Leverage. High Billing Rates. Partnership based governance. One location. Profit sharing.
  2. Experience-based Practice – Domain experience necessary. Paraprofessionals and less skilled professionals. Training counts. No up-or-out system. Centrally Managed. Salaries.
  3. Efficiency-based Practice – Cost sensitive clients. Highest leverage. Strongly managed to survive small margin business. Operating system, procedures and marketing programs are value drivers instead of individuals. Multi-site. Wages.

Important to identify the right practice type as:

  • Clients are becoming aware of their own need and the right practice
  • The evolution period from expertise to efficiency has become faster

A firm can have multiple practices with different maturities. It is best to silo them (Chinese Walls) and manage them according to their maturity levels. As a group, it is important to maintain a consistent image as low-cost provider are not considered “frontier” practices and cutting edge practices are unable to go after mature marketplaces.

Chapter 3 – Profitability: Health and Hygiene

Profitability (Profit / Partners) = Margin  (Profit / Fees) * Productivity (Fees / Staff) * Leverage ( Staff / Partners)

Margin  (Profit / Fees) * Productivity (Fees / Staff) * Leverage ( Staff / Partners)

OBS – Changeability and Realization is given greater priority than Leverage. A levered partner can create greater profits than highly chargeable partner.

Hygiene – Short-term profitability.

Health – Profit potential of the organization.

OBS – Usually, Hygiene issues are over-managed and Health issues are under-managed.

  1. Margin Management – Margins in itself are deceptive. Margin improvements can be driven by Productivity and Leverage. Besides these factors, space cost, equipment and the like affect margins. They should me maintained at a hygiene level.
  2. Productivity Management – Utilization management is a hygiene factor. Once target utilization is reached, it should not be pursued further. To increase the value, firm should take steps to take higher value creating work from the client.
    Productivity = Value (Fees / Hour) * Utilization (Hours / Staff)
  3. Leverage Management – This is a health issue. It is the last lever available once margin and productivity levers have been used. The optimal leverage is determined by the kind of work undertaken.

OBS – Growth and size do not appear on profitability formula. Growth is necessary for motivating the staff and create new partners.

OBS – Only increasing fee levels or leverage move the firm forward. All else is hygiene. Nature of the work, not volume, matters.

ISSUE – Lot of firms reward partners for top-line improvements. Bottom line should be considered. Leverage and fee structure should be considered.

Profitability Tactic – Page 38

  • Raise prices (fee levels) – HEALTH
  • Lower variable (delivery) costs – HEALTH
  • Fix under-performers – HEALTH / HYGIENE
  • Increase volume – HYGIENE
  • Lower overhead costs – HYGIENE

Chapter 4 – Solving the Under-delegation Problem

ISSUE – Systemic Under-delegation

  • Profitability – Leads to under-leverage and high cost structure.
  • Skill Building – Less rapid skill development of juniors.
  • Satisfaction – Poor morale of juniors.
  • Under-investment in future – Takes senior staff time away from important value creating tasks.

Causes 

  • Personal Bill-ability Targets
  • Lack of system to track profitability per engagement
  • Reluctance to invest in coaching and supervision of juniors
  • Fear of unavailability or difficulty of high value work from seniors

Solutions

  • Engagement-level profitability measures – Instead of revenues, consider the costs and profits in partner appraisals
  • Reward coaching – Measurable monitoring system
  • Scheduling and project assignment – Instead of considering it a administrative task, it should be considered a managerial task. Cross-assignment is essential for skill building.
  • Increase fee rates of senior staff
  • Challenge the partner’s use of time
  • Analyse partner’s use of time and optimize it

Chapter 5 – The Practice Development Package

The full package of practice development tasks comprises of:

  1. Broadcasting – Activities which generate lead, en queries and new client opportunities. e.g. Seminars, Articles, Newsletters,  Speeches.
  2. Courting – Selling and proposing. 
  3. Super-pleasing – Delight clients to win word-of-mouth.
  4. Nurturing – Win future business. “Marketing to Existing Clients”
  5. Listening – Gathering market intelligence.

OBS – Firms over-invest in broadcasting and courting and under-invest in the rest.

Existing ClientProspective Client
Aware of needSuper-pleasing
(Highest ROI)
Courting
(3rd ROI)
Not aware of needNurturing
(2nd  ROI)
Broadcasting
(Lowest ROI)

Ideal split of partner’s time in order of  priority (existing client > new clients)

  • Listening – 10-15%
  • Super-pleasing – 10-15%
  • Nurturing – 30-35%
  • Broadcasting – 10%
  • Courting – 25-40%

CLIENT MATTERS

Chapter 6 – Listening to Clients

Why listen?

  • Improve competitiveness of current services
  • Identify opportunities to develop new services

Means of listening

  1. User groups – Small client group critique on new initiatives
  2. Reverse seminars – Firm talks to the client and then the client speaks with the firm
  3. Attending client industry meetings – Listen to clients talk about their challenges
  4. Market research – Limited effectiveness but necessary.
  5. Senior partner visits – Higher level client issues
  6. Engagement team debriefing – Client feedback after engagement
  7. Systematic client feedback – It should be used in addition to other feedback mechanisms and not as a replacement.

Chapter 7 – Quality Work doesn’t mean Quality Service

Satisfaction = Perception – Expectation

In medical profession, three factors of success are (in the order of importance)

  • Availability
  • Affability
  • Ability

OBS – Firms need to project a caring image and back it up with substantive reality do well.

  1. Manage Expectations
    • Promise reasonably during Sales process
    • Keep clients informed on the developments, progress and decisions
    • Set agenda in advance
  2. Manage Perception
    • Small but detailed gestures to show care
    • Follow up with a memo
    • Find out and meet client’s real deadlines
    • Demonstrate integrity – Take only value-creating work

OBS – Improving quality of service is more visible and cheaper than improving quality of work.

Chapter 8 – A Quality Service Program

5 Front Program

  1. Measurements – Mailed questionnaire (Page 85-86)
  2. Management – Follow up to questionnaire with thanks, EM visit or partner visit. Maintain average score records. Private discussions for accountability.
  3. Tips and tools – Teams to identify journey and moment of truths.
  4. Training – Knowledge Transfer or Skill-building
  5. Rewards – Tie rewards with service quality.

Tactics to enhance client value – Page 92

  • Inform
  • Include in decision making
  • Make reports and meetings valuable
  • Help clients use the results
  • Be reachable

Chapter 9 – Marketing to Existing Clients

Existing clients are good prospects because

  • High likelihood of new business
  • Marketing costs are low
  • Follow-on profitable engagements can be won
  • Possibility to improve leverage structure over time
  • Possibility to win new type of work to grow capabilities

Why win new clients?

  • Existing clients get saturated
  • Staff morale
  • High NPV of the new engagement -> requires existing client service

OBS – Winning new clients is considered more important than serving the existing client. Marketing activities on existing account show up as extra costs, leading to underinvestment.

  1. Find clients who have 
    • Additional needs which the firm can serve
    • A good relationship to succeed
  2. Set up a budget for each target account for marketing activities
  3. Involve juniors in marketing activities to root out hidden problems
  4. Develop written marketing plan for accounts

Client Specific Marketing Campaign

  • Making the Client Disposed to Use the Firm Again (106)
    • Go extra mile
    • Increase client contact
    • Build business and personal relationship
  • Increasing Firm’s Capabilities (107)
    • Know client’s industry and business
    • Know client’s organization
    • Know the client
  • Finding and Pursuing the Next Engagement (109)

Chapter 10 – How Clients Choose

Buyer’s main concerns (113)

  • Insecure – Unable to distinguish service providers
  • Threatened – Putting affairs in hands of others
  • Taking a personal risk – Losing control
  • Impatient – Long-standing issues
  • Worried – Threat to personal credibility by asking external help
  • Exposed – Exposing secrets during problem-solving
  • Ignorant – Unsure about the complexity of the problem
  • Sceptical – Burned by similar people
  • Concerned – They won’t try to understand MY problems
  • Suspicious – Patronizing behaviour, jargons.

Action points

  • Preparation – Due diligence. Research.
  • Understanding – Understand me.
  • Be Helpful
  • Give evidence of expertise
  • Ask questions instead of making statements
  • Understand my role
  • Don’t jump to problem solving
  • Convince me that the problem is worth solving
  • Give solution options
  • Give time to make a decision
  • Decision is based on face-to-face time. Proposal submission is just a formality.
  • Discussion > Presentation
  • Take objections seriously and address them well
  •  

Chapter 11 – Attracting New Clients

“Raspberry Jam Rule” – The wider you spread it, the thinner it gets.

The Secrets of Consulting, Gerald Wienberg 
  • Don’t spread the word too thin
  • Marketing works when it is demonstrated, not asserted.
  • In person marketing > Written communication
  • Marketing is a seduction, not assault. Give concrete evidence to choose you.

P122 – Marketing tactics

  1. First Team – Small scale seminars, speeches, articles, research
  2. Second String – Community, referral, networking, newsletters
  3. Clutch at straws – Publicity, Brochures, Seminars, Mail, Cold calls, Ads

Chapter 12 – Managing the Marketing Effort

  • Make every partner contribute to marketing in any way and form
  • Make small teams
    • Choice of people and focus area (autonomy)
    • Greater individual impact
    • Coaching, mentoring, knowledge transfer
    • Joint planning and accountability
    • Team spirit and inter team competition
    • Dynamic but aligned interest teams
    • Concrete action plan > wish list
    • Plan 70% of time; leave 30% buffer for unplanned activities
    • Review progress

PEOPLE MATTER

Chapter 13 – How’s Your Asset

  • Income Statement – Increased by milking your asset
  • Balance Sheet – Build asset through capability development

Client relationships are the key to get future work which can help build assets.

  1. Assets depreciate in value. Keep on building new skills.
  2. Manage the work assignment to build skills.
  3. Direct your own career yourself.
  4. Ensure that you market to existing business

Personal Strategic Plan

Most people acquire their skills and knowledge by Opportunistic insights

Donald Schon
  • Clients value depth more than breadth. Go depth first.
  • Knowledge is easily acquired. Skill is hard to win.
  • Interpersonal skills are important to drive action
  • Counseling ability is needed to deal with groups and drive consensus

Debrief to promote learning – Self, team, clients, peers.

Chapter 14 – How to build Human Capital

  • Work Assignments
  • Coaching
  • Teaching Partners
  • Add to Knowledge Base
  • Manage the Project Mix

Chapter 15 – The Motivation Crisis

Page 169 – Motivation Maintainers

“Yeah, you’re good… But how good are you?” – Both part are important to keep motivation high.

Give meaning to work. Link analyst work to bigger picture.

Provide great outplacement services

Chapter 16 – On the Importance of Scheduling

Key considerations:

  • Profitability – Changeability is paramount.
  • Client Service – Matching the client tastes
  • Skill Building – Balance interest of firm (profits) and individuals (goals)
  • Motivation – Location, peers, personal goal considerations

30k training run

Hi everyone,

On Sunday, I did 30k training run before the big Standard Chartered Marathon. I was feeling lazy and a bit scared to begin with as this is the longest run I have ever done! I wanted the route to be interesting and non-repetitive to make the run feel easier.

I planned the run as follows:

  • run along the Kallang river, Serangoon, Lavender (lot of park connectors but not much of a view)
  • go to Marina Barrage via Helix Bridge (good view and cool breeze)
  • go to Kallang Stadium via Tanjong Rhu Road
  • go to ECP

For extra motivation, I made the route pass through my JC hostel 🙂 Here is the picture of the route:

Screen Shot 2014-11-24 at 1.13.33 pm

The run was awesome! Ran consistently without pushing myself over the aerobic threshold. I was trying to keep heart rate around 172 for the whole time and was quite successful at it. At 30k, my knees were weak but heart and body were strong. I tracked the run (didn’t turn the tracker on for first 3k) and here is the link.

I recovered quickly. Two days after the run, I feel ready for another quick 7k.

Hello World (WordPress style)

Just started using WordPress. This is my first post.

This is the stack I am using:

I am very happy  with the performance and responsiveness of the website so far. I also changed name servers so that I can use Linode’s DNS management system (which is free!).

Here are the steps which I had to take to set up the stack from scratch:

  1. Creating a 1GB Linode with Ubuntu
  2. Setting up LAMP stack
  3. Setting up WordPress
  4. Setting up DNS manager and reverse DNS

That was it!

I encountered some issues during Theme installation but setting the right permission level on directories and files recursively solved the issue.

755 for directories

644 for files

Things are working. It’s awesome!