• zero entry or exit costs (there are no/low startup costs),
• zero transaction costs (customers are free to go where they please)
• firms have a relatively small market share (no single firm dominates the market),
• ‘factors of production’ are mobile in the long run (labour and capital can be modified easily), and
• an homogenous product (an easily substitutable product, characteristics do not vary across suppliers).

In such a market there are only two conditions which can be altered by the firm itself; one is modifying labour and/or capital, the other is defining their product so it is perceived to be ‘less substitutable’ or to use plain English – different. The latter is also the only way a firm can command a price premium above that of ‘the market’.

The perfectly competitive market is mostly a theoretical concept; this specific set of conditions do not generally occur together, although some industries have notable similarities and are what you could call “near-perfect”. Utilities are one example; how many times have you been asked to change electricity companies and not really understood (or cared about) the difference?

The professions are arguably another; relatively low startup costs, few barriers to entry, clients can easily change suppliers and our ‘factors of production’ (our people) are fairly mobile. Notwithstanding their similarities, all professional firms say they differentiate their product – but in reality do they?

Value propositions, marketing strategies, corporate values and the like, are often part of a carefully crafted ‘Differentiation Strategy’. Despite careful consideration putting these into the ‘right’ wording and attractive designs, these efforts often fail to help customers see a firm as something different to another firm because these efforts generally focus on ‘table stakes’ rather than highlighting anything that truly makes the firm different. Of course “Honesty, integrity and respect” are important principles, as are “partnering with our clients” and “providing cost effective solutions” but would you ever knowingly work with a firm which didn’t have these values?

Founder of Ignition Group,  a thought leader and consultant to top advertising agencies of all shapes and sizes and advisor to Fortune 500 companies, Tim Williams has built a career advising his clients how to truly differentiate themselves. His most recent book,  Positioning for Professionals: How professional knowledge firms can differentiate their way to success (2010)  is an excellent guide for any professional firms wanting to move beyond ‘table stake’ definition.

Tim discusses many myths about professional firm differentiation- especially taking a well researched and justifiable dig about most firms positioning strategy. “Size” is not a strategy.. neither is “full service”, “middle-of-the-road-stand-for-everything” nor is “hope” or “effort”. He clearly defines what a differentiating positioning strategy is- being different: meaning “going deep versus wide”, narrowing your focus and defining not only the features you have, but more importantly the features you don’t have.

Written in plain English (not marketing or academic speak), Positioning for Professionals is a brilliant collation of proven methods professional firms can use to create an effective differentiating positioning strategy. It is not only a resource to assist firms develop a truly differentiating value proposition and define their brands boundaries- a firm’s “calling, customers, competencies and culture” as Tim calls it and he also suggests steps to implement and bring that strategy to life (without execution, “initiatives remain good intentions”).

Tim is also a Verasage Senior Fellow, so it goes without saying that he has little sympathy for those firms that cling to the “we sell time” mentality and he is also not shy about his disapproval of benchmarking or “institutionalised imitation”, favoring “next practices” over mirroring what others have successfully done.

Needless to say, we cannot recommend this book highly enough.

Of course it is great to be better than your competitors but frankly most of your customers really would not know if you are, or are not- and you probably don’t want them to know. Tim sums it all up nicely by saying “If you stand for nothing, you will have nobody against you, and nobody for you.”

What differentiates your firm from your competition? No, truly differentiates your firm?

by Jess Hadley, John Chisholm Consulting

Ron & I also got to have discussions with ACLA in house counsel in Melbourne & Sydney on “Obtaining Value & Price Certainty from Your Law Firm” and with some firms. We were also fortunate to meet with the respective Legal Services Commissioners of New South Wales, Queensland & Victoria, speak to several APSMA members over dinner on value based pricing and Ron was interviewed by various business, legal and accounting press who reported on the tour and the principles behind Firm Of The Future.

If you were one of those who attended any of these events- a big thank-you to you for making the whole tour such a success. I not only wish you all the best in your ongoing journey to be a Firm of the Future but again remind you that there are numerous sources where you can seek assistance and guidance at any time. These include the Firm Of The Future Facebook page and LinkedIn Group, the Verasage website, or by contacting Ron Baker and I direct as well as any of the other organisers of this tour. These organisers included Matthew Tol from mta optima, Matthew Burgess from McCullough Robertson, Michael Stewart from Integrity Accountants, Michael Bradley from Marque Lawyers, Steve Major from The Trusted Authority and of course my Associate Jess Hadley.

Thanks also to our supporters without whose assistance this would not have been possible. These include Alli Murphy from Redstick Strategic Communications, the Austlaw Group for opening up their Hobart Conference to other professionals so they could hear Ron present, the Queensland Law Society for making their rooms available for the Brisbane Forum & MasterClass, DX Toll for all their transport assistance, the Melbourne Cricket Ground for hosting the Melbourne leg, Trish Hyde CEO of the Australian Corporate Lawyers Association (ACLA), Colin Jasper from the Asia-Pacific Professional Services Marketing Association (APSMA) and to Jenny Watson for all her organising skills in Brisbane.

Whether you attended any of these events or not I urge you to listen to this short podcast interview with Ron Baker by Ed Kless on Ron’s summary of his “Tour Downunder”. (Apologies, the link may not work in Google Chrome)

We still have a few copies left of Ron Baker’s books so if you are interested in purchasing any of them contact Jess or I. Here is the order form.

Whilst we might have a long way to go in the professions overall before we completely move away from pricing our services solely by time, the change is happening and is gathering momentum as evidenced by this tour and its discussions that focussed much more on how we can change our business model and pricing structure not why. Most professionals now know why we should make these changes for the betterment of both our current and future professionals and clients. At the moment the innovators and early adopters are leading the way and I genuinely commend them for their courage and leadership.

With your help one day we will bury the billable hour……and with it burn those timesheets.

Putting the plan into succession planning

The failure to groom successors in a law firm is a recipe for disaster for both the firm and the founding partner who one day hopes to successfully exit the business, writes John Chisholm.

There is little doubt that succession is one of the most significant issues facing professional firms of all sizes and from all regions in Australia. I suspect this may be the case in the United States and the United Kingdom, too.

Recently I gave a talk entitled Succession Planning: Why Most Firms Should But Don’t outlining some of the reasons that Baby Boomers are still hanging in there and failing to consider the need to plan for the inevitable. These reasons are complex, but often include:

• Financial position: Anecdotally some partners who might have before the global financial crisis considered retiring ‘shortly’ feel they are no longer in a financial position to do so. Equally, there are other partners who have seen their incomes increase substantially over the last few years, in particular, and even the mere thought of them leaving that income behind gives them the cold sweats.
• Successors = competitors: There is a short-term mindset in many firms where you may only be as good as your last month’s billings. In these firms, this not only has a negative effect on their culture, but the thought of bringing in a potential successor who will in reality be seen as a potential competitor is not easily contemplated let alone accommodated.
• I am the firm: Some partners have made their profession their life’s work and it could be quite threatening for them to think the firm and the profession could continue on without them. It is also not unfathomable to think that they may even prefer to see their firm be less successful than succeed without their involvement.
• The firm is me: There are those who are financially secure, and can envision the continuation of their firm and the profession but have defined themselves by their career to the extent that the thought of retirement is, quite frankly, frightening – “I can’t retire, I don’t know how to do nothing.”
• It is not an issue (yet): Many firms have no succession policy in place or if they do it is a Clayton’s policy. Such firms are happy with the status quo and only deal with the need for succession as it presents itself (usually urgently, which also lends itself to crisis management and all kinds of stress). They also operate on the assumption that there is a ready pool of people looking to ‘take the next step’ if and when the time comes or that it will be easy enough to recruit.
• I’m not useless: Age should not have a direct correlation with the value someone can provide – a partner does not suddenly become an incapable shareholder, manager, rainmaker, mentor or lawyer as they wake on their 60th or 65th birthday. That said, age coupled with experience does change us. Physically, however, we cannot and should not do the same things we did at 35, 45 or even 55, but too often we find partners are expected to maintain the same level of grind (read ‘billable hours’) throughout their career.

The three choices:
Firms in my experience often choose to adopt one of three positions with respect to succession planning.

1. Some firms take the ‘ostrich pose’ and simply avoid any impending succession issue, often until it is too late and/or when it becomes someone else’s problem (e.g. the remaining partners or next of kin).
2. Other firms – and an increasing number of them, I am pleased to say – successfully deal with succession by planning for it and adopting any number of strategies.
3. Then there is a third category of firm whose leaders, with all the best intents, purport to plan for and deal with their succession issues, but for some strange reason never quite succeed in pulling it off. This is often, but by no means exclusively, the case in first-generation firms when the handing over of the baton is often fumbled or dropped. After the founding fathers leave or retire, the firm becomes a shadow of its former self or, worse still, withers and dies.

In trying to work out why succession planning in this third category often fails, a recent blog from Michelle Golden from the VeraSage Institute articulates far better than I could the problem – and suggests some solutions. She looks at the traits of the successful partner on the one hand (‘a natural at marketing’, ‘an expert or niche practice specialist’, ‘recurring referrals from the same sources’, ‘meticulous about work’ and ‘service quality, tight control of relationships’) and those traits common to the apprentice (‘highly valued right arm to partner’, ‘no book of business’, ‘full plate’, ‘non-equity partner or forever manager or associate’ and ‘subdued personality’).

So what is the problem, I hear you ask? Well as Michelle correctly points out, what is “frighteningly absent” is self-sufficiency on the part of the junior person. When the partner leaves or retires, things can start to unravel as the junior has not been taught and therefore has not learned the skills needed to successfully take over the reins.

In short, the traits Michelle identifies work well for both the partner and the junior, as well as for the firm and for the firm’s clients provided the two remain in their positions. As soon as one leaves, however, it all can fall apart pretty quickly.

Another VeraSage consultant, Jay Shepherd, in a recent post on Supervising Partners and Teaching Partners, adds to the reasons why succession does not always work. He highlights both the frustrations of a young lawyer as well as the roles a partner can play in contributing to or alleviating them – the ‘supervising partner’ again often being the source of much frustration.

In their blogs, Michelle and Jay provide some good anecdotes and advice, but for me the following extracts succinctly sum up why succession might not work in some firms:

• “The primary job of an associate is to learn how to someday be a partner.”If an associate is not working for a teaching partner, they are wasting their time.
• If you are the junior person: “Remember this as you progress in your career; it’s far better to get to the point where you bring in work that you don’t do than it is to always be doing work that you don’t bring in.”
• If you are the partner: “Seek out a strong worker who is also a people person. He might be harder to tame, but an entrepreneurial spirit will ensure the continuity of your practice.”

It is sage advice for any firm likely to be in this position. I guess the only exception might be those sole practitioners who choose to have no one in their employ who they can consider anointing as their successors, so it is not going to ever be an issue for them anyway.

The upshot is that successful succession planning requires both policy and practice. Here are five factors that, if adopted, may help your firm.

1. Active engagement in any plan by the partner (i.e. they are willing to leave the partnership within the planned timeframe). A policy might include:
   -  a change in role and rewards as a more senior partner moves into assisting in the development of their successor and other lawyers (via different KPIs for those partners on a succession pathway)
   -  valuable post-partnership roles as options to retirement
   -  assistance in the transition. Peer or external coaching and support may help with managing the adjustment on a personal level.
2. Communication and active discussion of succession. No policy can be effective if it is the elephant in the room, and no plans can be effective if nobody knows about them.
3. Work-life balance. Long working hours, taking work home, working ‘vacations’ – this realistically for many people means there is little outside their career to look forward to or with which to define themselves.
4. External training and mentoring as well as internal engagement for younger lawyers.
5. Provide options to partnership entry and exit. It should not be a ‘take it or leave it’ scenario. What works for one firm in succession planning may not necessarily work for another and, indeed, even in the one firm what works for one lawyer may not work for another. You have to adapt a plan for your own particular firm and your own particular circumstances, but plan you must.

If you do not plan for succession, do not expect to have any future leaders to worry about. If you plan but do not enable the apprentice to become the master, the art will be lost – as might be your firm.

John Chisholm is principal at John Chisholm Consulting. He has held senior executive positions in leading Australian legal and accounting firms for more than 17 years, including the chief executive role at Middletons and managing partner role at Maddocks.

Time billing was the way it had always been. If the system was to be abandoned, what possible alternative was there?”

David Vilensky discusses his firms transition to fixed fee pricing in his article which was published in the Law Society of Western Australia’s February edition of Brief.

The Benefits of Fixed Fee Pricing

OK, so in most professions we do not deal with issues that are life threatening or can cause physical harm or disease  like germ theory , but we do often deal with the symptoms of problems in our professions rather than looking at root causes.

It is no longer breaking news that the time based cost accounting and time based billing models are less than optimum and are increasingly being criticized both by those within our professions and those we seek to serve-our clients.

Like Germ Theory in the 1800′s, value based pricing and management without timesheets is not yet practiced by the majority of professionals. However overwhelming empirical evidence is out there and more and more innovative professional firms around the world successfully operate in a timeless environment. These firms are fully aligned with their client’s interests, their knowledge workers enjoy an atmosphere of collaboration and creativity, and firms profits are no longer capped by the physical hours their people can work.

Firms Of The Future do not seek to tweak their current business practices by, for example, improving the efficiency of their time recording processes, but instead look to replace the current model with a better, more effective business model .

Ron Baker – economist, best selling author, inspiring speaker, pricing expert, knowledge worker advocate and one of the world’s foremost thought leaders for professional firms-understands more than most that the business model that has served our professions well for decades is failing us, our next generation professionals and our clients . The organisational and management structures we all grew up with were modelled on an industrial age, command and control, paradigm.  The challenge, and the opportunity for firms that recognise it, is to understand how to transform their firm to accommodate the demands of the knowledge workers.

Attend one of the Firm of the Future Forums or Masterclasses in the coming weeks in Melbourne on the 5th & 6th March (Masterclass sold out), Brisbane 12th & 13th March and Sydney on the 15th & 16th March and find out how you can become a Firm Of The Future.

Go to www.firmofthefutureforums.com for more information to secure your tickets now. Still some places available.

Same Firm discounts available. Earn CPD points. Price includes copy of Ron Baker’s latest book Implementing Value Pricing: A Radical Business Model for Professional Firms.

Date: Wednesday 7th March

Location: Allens Arthur Robinson, Level 27, 530 Collins Street, Melbourne

APSMA Advanced is a series of topical invitation-only roundtable dinners for senior practitioners in professional services marketing.

Our 2012 APSMA Advanced series is facilitated by Colin Jasper of Jasper Consulting.

About the featured guest:

Ron Baker describes himself as an Economist, Author, Speaker, Value Based Pricing Guru, Knowledge Worker Advocate.

Ron started his professional career in 1984 with KPMG Peat Marwick’s Private Business Advisory Services in San Francisco. Today, he is the founder of VeraSage Institute, a think tank dedicated to teaching Value Pricing to professionals around the world. He is a member of the Professional Pricing Society and currently resides in Petaluma, California.

Author of best-selling books, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services (2003) and Implementing Value Pricing-A Radical Business Model for Professional Firms (2011)will be joining APSMA members to kick-off the 2012 APSMA Advanced dinner series

Australian Corporate Lawyers Association: Obtaining value and price certainty from your law firm

Date: 7th March, 14th March

Location: Melbourne: Harwood Andrews, Level 13, 15 William Street, Sydney: Marque Lawyers, Level 4, 343 George Street

See ACLA website for further information

In this 3.5 hour Masterclass, Ron Baker will challenge the largely out-dated current business model adopted by many in the legal profession with thought-provoking discussion and debate. He will present a new model that is being adopted by clients and their professional firm advisors worldwide. John Chisholm will provide hands-on assistance and anecdotes of the Australian perspective during this informative and interactive workshop.

Topics covered:

- The value curve for legal services
- The role of pricing in product and service development
- Cost-based pricing
- Why hours shouldn’t and don’t matter
- Value-based pricing and other forms of alternative fee arrangements and developments worldwide
- Importance of scoping
- Elements of a scope document
- Setting and managing expectations
- How do I know if the price is right?

Firm of the Future Forums & Masterclasses

Date: 2nd – 16th March

Locations: Hobart, Melbourne, Brisbane, Sydney

Ron Baker will be presenting a series of forums in Australia during March. Those of you that have heard Ron present before know what a brilliant, inspiring, entertaining and thought provoking speaker he is. Ron confronts the conventional wisdom embodied in traditional professional firm business models, which operate by leveraging people and hours. This old model works but is suboptimal.  There is a much better business model, offering bold, proven strategies for restoring vitality and dynamism to professional firms of all sizes and which is now being used by 1000’s of professionals all over the world.

See the website for further details – Firm of the Future Forums

You will find full details of dates, times, venues and ticketing information if you click on the Firm Of The Future Forum website.

In summary Ron will be presenting a Firm Of the Future Forum in Hobart on 2 March, a Forum and MasterClass in Melbourne (5th & 6th March), Brisbane (12th &13th March) and in Sydney (15th & 16th March).

This is an opportunity to hear and learn from one of the world’s foremost professional firm thought leaders.

These Forums though are not for everyone. Ron challenges many of the concepts upon which our current professional firm business model were based but which are now past their use by date. He does propose a new model that is much more effective and better for all of us – those of us that work in the professions and for our clients who deal with us.

Ron not only discusses the move from time based costing to value based pricing but covers other important Firm Of The Future topics including the importance of a firm’s purpose, value proposition, client selection, effective project management, key predictive indicators and why we should dispense with annual performance reviews.

The Firm Of the Future is not about tweaking our current business model- it is about embarking on a new mindset and implementing a better business model that benefits both you and your clients. There are 1000′s of professionals world wide who have already embarked on the journey to become a firm of the future.

There are significant discounts available for early bird registrations up until 17 February and a Same Firm offer if more than one person from your firm attends.

Every participant will receive a copy of Ron Baker’s latest book Implementing Value Pricing: A Radical Business Model For Professional Firms.

In line with Firm Of The Future principles there is a full service guarantee- so that if for any reason whatsoever you are not satisfied with the Forum you only pay for the value you believed you received.

If you have any queries at all please do not hesitate to contact me.

I look forward to seeing you at one of these Forums-I guarantee you will not be disappointed.

Ron will be presenting full day Firm Of The Future forums in Hobart, Melbourne, Brisbane and Sydney plus optional Masterclasses. The full details of dates, times and venues will be announced by the end of January.

These Forums will be primarily based around two of Ron’s best-selling books, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services (2003) and Implementing Value Pricing-A Radical Business Model for Professional Firms (2011).

Those of you that have heard Ron previously will know what a brilliant, inspiring, entertaining and thought provoking speaker he is. Ron confronts the conventional wisdom embodied in traditional professional firm business models, which operate by leveraging people and hours. This old model works but is suboptimal. There is a much better business model, utlilizing bold, proven strategies for restoring vitality and dynamism to professional firms of all sizes now being practiced by 1000’s of professionals all over the world.

A practice can be run more effectively when it becomes a knowledge firm rather than merely a product or service firm.

Together with Australian advocates of ‘firm of the future’ philosophies and value based pricing, these Forums will provide real life experiences and insights into how practices and their clients have and can adapt to this new and better business model.

Creating such a firm is not for everyone but if you are one of those who would like to learn more about a business model that has incredible benefits for you, your people and your clients then this will be a day you should not miss.