Business and professional services trends shaping up for 2019
INSIGHT ARTICLE |
Business and professional services (BPS) firms worldwide recognize the need to continue their evolution alongside – or better – in anticipation of economic changes, technological innovation and other trends.
What follows are some top-of-mind trends for BPS firms and resulting opportunities for improvement, compiled from RSM’s interviews with BPS executives, our sector knowledge and other external studies and data sources. While designed to be a high-level overview, each trend may pertain to your business to a greater or lesser degree depending upon your firm’s size, culture and strategic mandate.
1. Keep up with your clients
Clients are under tremendous cost pressure and are actively innovating and transforming to meet these challenges. Therefore, clients must be the centre of your strategy. Tailor your client service to align needs with fees that bear directly on the value provided. Clients want greater cost-effectiveness and value and they are in a position to insist. Many times, organizations focus on fixing internal issues, when they should refocus their attention to executing their external strategy.
Recognize that clients are buying services differently. As a result, they will continue on the path of rationalizing providers through strategic sourcing. Investing in a chief client officer, or similar helps strengthen, build and rebuild consultative, trusted advisor relationships.
2. Client satisfaction cannot be measured enough
Does your firm have customer relationship management (CRM) software? Do you conduct client surveys? Many firms naively believe good work speaks for itself. It does not. Measure client satisfaction constantly and invest in technology to gain better visibility into real-time performance metrics.
There are a number of other ways to measure client satisfaction, including:
- Hiring a consultant;
- Sending the chief executive officer or chief operating officer on the road;
- Asking the chief marketing officer to conduct interviews;
- Undertaking an annual satisfaction survey; and
- Following the conclusion of every engagement with a survey.
One other tool is the net promoter score to determine how likely clients are to refer a friend or colleague.
Generating feedback from any of these items will allow you to determine what you do well and where you can improve including why prospects hire you or why not, or why clients fire you. This is especially true in highly commoditized industries where the primary differentiator is price. Simply resting on accomplishments will not cut it.
3. Collaboration is the engine behind growth
One trend we have noticed is that collaboration leads to exponential revenue growth. Note, collaboration and cross-selling are not synonymous. As more teams work together on a single client engagement, average annual revenue from the client increases. However, collaboration is a double-edged sword – when done well, clients feel the level of attention and support they can come to expect from a first-choice advisor. When done poorly, clients notice disconnected teams, possibly harming your overall relationship.
When BPS firms actively lower the barriers to collaboration, they are more likely to land highly profitable work as well as ’stickier‘ clients. Some other benefits of collaboration include:
- More successful business development;
- Higher personal productivity;
- Enhanced reputation;
- The ability to charge higher rates;
- Faster integration of lateral hires; and
- Less propensity for burn out.
Individuals and leaders can facilitate collaboration by de-emphasizing billable hours and focusing on greater revenue per client.
4. This is not your grandfather's economy
When it comes to fee arrangements and other economic elements, the BPS sector has undergone a profound shift in recent years and firms need to focus on maintaining strong cash flow. Cash flow management affects all levels of operations from attracting top talent to capital investment and infrastructure to support long-term growth. For BPS, the most readily available response to cash flow is proper monitoring of accounts receivable and work in progress.
One of the lessor talked about culprits that affect cash flow and collections, is outdated accounting software. If issuing invoices is a tedious process, there is a higher likelihood of billing errors and delays, increasing wait time on payment. When the internal accounting system is robust, there is more visibility into cash flow trends.
Similarly, as technology moves forward, more and more clients seek convenient payment methods, including:
- Standard cash, cheque and credit cards;
- Wire and electronic funds transfer;
- Direct vendor access at local bank branches
- Lockboxes that directly scan and deposit cheque payments.
Lastly, cryptocurrency is becoming a viable payment method. While this technology is still early, several firms have begun to accept it. Understanding, awareness and above all infrastructure will be needed for BPS firms to integrate such payments.
5. Technology changes the playing field
As BPS firm leaders consider the competitive marketplace, it is important they focus their attention not only on their direct competitors, but beyond. Often, the greatest market disruptors come from outside the industry. Besides the threat of non-traditional competitors entering the marketplace, BPS firm leaders need to also be aware of growing digital and business transformation as well as ongoing changes to the workplace of the future.
Of course, with technology comes risk. Cyber-related threats affect any and all businesses. All data is worth something, so BPS firms are just as attractive to cybercriminals as larger corporations. One sample question to ask yourself is how often your firm conducts penetration testing of its networking systems? If the answer is “never” or “I don't know,” your firm could be vulnerable. Leadership does not need to know the ins and outs of the cybersecurity protocol; however, risk increases when leaders are not broadly aware of the protective steps.
6. It is a new generation for BPS
The profession is under significant pressure to accommodate a new economic model, one premised on lower billable hours and greater time spent on non-office activities. As younger staff enter professional services, they seek more control over work schedules and more time for family and personal commitments. Remote work schedules and increased connectivity are the norm. As such, many BPS firms may need to rethink the 9-5 workday as well as the brick and mortar office.
Work-life balance is a key trend having a significant impact on BPS firms, specifically mid-sized ones. Large firms have the scale to invest and innovate while smaller firms are agile and less restricted by fixed costs. Medium-sized firms in particular will need to focus on talent strategy as well as work-life balance to remain competitive and attract younger associates.
7. Top talent can no longer be bought
Talent continues to be an ongoing discussion at all organizations. Gone are the days when BPS firms could attract the best talent with the biggest salary. Talent needs to feel personal satisfaction, a sense of accomplishment and support from senior management, in every way from workload to learning opportunities. As more and more professionals are entering the marketplace, their qualifications become table stakes; therefore, the real differentiator for young talent is their ability to fit within your firm’s culture.
When teams are committed, they believe in what they are doing and they align their goals with those of the firm. As such, BPS firms need to make a concerted effort to engage and inspire employees, maintain a level of challenge in their roles, provide mentorship opportunities and generally invest in employees in ways that transcend traditional compensation.
Regardless of firm size, RSM research has shown that attracting top talent is all about: becoming an employer of choice, differentiating your firm from the competition, and showing top talent how joining your firm can help them reach their career goals. Harnessing the power of your people and clients is very powerful. After all, they are great brand ambassadors for your firm and their experiences significantly impact your ability to attract top talent.
8. Succession planning is the elephant in the room
Succession continues to be top of mind for many BPS leaders irrespective of firm size. What keeps BPS leaders up at night is their firm’s ability to attract and retain young professionals with a technology- and growth-mindset to transition their firms into the digital age. Many BPS firms either handle succession on a case-by-case, ad hoc basis or avoid the issue entirely. In our experience, although the majority of leaders in small to medium-sized firms are over 55, a general reluctance to develop a formal process persists.
The right time to address succession is now. Without a solid pipeline of talent behind senior management, the firm’s legacy may be lost, sold, or swallowed up by another firm who took the time to groom its future leaders. Succession is of critical importance particularly for smaller firms where firm ‘institutionalization’ is not present to support the changing of the guard.
9. Slow growth will perpetuate
The BPS sector, in general, is a mature industry – meaning, revenue grows at the same pace of the economy. Competition, however, grows at a far greater speed than revenue. There are now more players sharing in the ‘revenue pie’ and the world is getting smaller and more heavily specialized (also see trend 5).
While slow growth will continue, we are seeing a bit of a bubble through the increased M&A activity of the last few years. Globalization is a prime motivator for much of this. Acquisitions seek local expertise and language to service their clients’ international legal needs. As M&A activity among BPS firms starts to cool, we anticipate firms will start to be creative in order to capitalize on new synergies and maximize growth.
Given the current economic environment, our experience working with the BPS industry has shown that firms need to:
- Be nimble – most firms are conservative and slow to react or implement change;
- Digitize their practice – use technology to their advantage;
- Rethink the client experience – differentiate themselves in how they deal with clients and delivery of their services;
- Rethink the billing model – alternative fee arrangements may make sense for some of your services, while you may choose to continue hourly billing for others; and
- Avoid doing commoditized work, unless strategic – free up time and skills for more valuable work.
10. Embrace diversity
Diversity is not an easy topic to address, but it is critical that firms address it. BPS firms are in the business of serving clients. If you bring people who come from different perspectives to the table, the solutions you present to your clients, the way you interact, and the relationships you build with your clients are going to distinguish you from your competition. Diversity gives you access to a greater range of talent, not just the talent that belongs to a particular ethnicity or world-view. It helps provide insight into the motivations and needs of all of your clients, rather than just a small part of it.
Firms that invest in diversity report a number of advantages, such as an increased ability to attract talent, greater innovation and improved financial performance. Working together is more than just a good idea – it is essential for individual and organizational success.
The pace of external change currently being experienced by BPS firms is not expected to slow in the foreseeable future. In our experience, a large challenge for many firms is to adjust the mindsets of their leaders and increase their willingness to change and adapt. Recognize that the status quo is not an option.