Masterclass: Getting more for your money

Reducing costs is now a necessity for most law firms. Laurie Young illustrates how marketers and business developers can keep expenditure under control.

The recession has prompted an urgent discussion about potential productivity improvements. The pressure is on to preserve cash and inch up revenues. There is a lot to gain in the marketing function and its interaction with the practice or more generally:how the practice goes to market. There are a number of ways in which marketers can contribute effectively to partnership profit.

Numeric analysis
In law firms, probably more than any other profession, there is an obsession with billable hours and utilisation rates. Yet, as every practitioner knows, effective utilisation depends on the amount of down-time for illness, training and administration. Included in these non-chargeable categories is the time taken for marketing or business development by lawyers to build their personal franchise. This can range from an informal lunch with a client, through more formal events (like presenting at seminars), to the enormous effort involved in publishing on a technical subject. It includes panel reviews with major clients and service quality meetings.
Not all this is time that is well spent. Practitioners spend time on both good marketing (talking to clients, for example) and inappropriate marketing more profitably left to others (such as personally writing invitations to events). Time wasted by client service professionals in inappropriate marketing (particularly during this recession when many are trying to sell because of a fall-off in billed hours) is an enormous hidden cost to the practice. So, a first step toward greater marketing productivity is a clear, numeric understanding of these non-chargeable hours. They need to be defined in unambiguous terms so that the whole practice records the appropriate hours in marketing time codes. It is essential to reach a consensus among the partnership that ensures they are recorded accurately. Partners’ attention needs to be drawn to this tedious but important administrative detail, demonstrating that it is significant to the practice’s profitability.
This is helped if the time spent on inappropriate marketing is calculated and converted into retail rates. Partners will often be horrified at the enormous opportunity costs; time wasted which could have been billed to clients. Once the information is reasonably reliable, sensible plans can then be laid to, for example, ensure that cheaper support staff undertake some activities, redeeming time for practitioners to spend on client work. Any time spent on work marketing professionals can perform ought to be identified and progressively transferred to them. One powerful aid in this is the use of time sheets by the marketing and business development (BD) function. If the cost of their time can be compared with the opportunity cost of unbilled practitioner time, the argument for skilled support staff plying their trade becomes irresistible; but it has to be based on convincing analysis.

Pet projects
Over time, every industry develops odd habits by which it generates revenue. For instance, law firms and indeed many professional services firms spend heavily on the extensive use of lavish client hospitality and outlandish sports sponsorship. Now, clearly the opportunity to spend time with clients in informal settings allows trust to develop, which leads to work. There are, though, a number of difficulties with hospitality. For instance, real decision-makers find it increasingly hard to find time for these sorts of activities and tend to turn up to only one or two a year. Invites can be delegated down to low-level people or, worse, they might cancel at the last moment. As a result, a number of practices spend more time entertaining their own staff than they would want.
There are similar difficulties with other marketing activities endemic in professional practices. It is not normally worthwhile, for example, to pay to speak at conferences. Attendees sense that this is merely a paid advert and treat it with the same contempt as advertorials in newspapers. Nor are the ubiquitous adverts placed next to articles in noble-sounding contract publishing initiatives worth the money. This is one of the least effective and most expensive forms of advertising, and almost a scam.
These habits are adopted as marketing approaches by practitioners who know no better. They can often be identified and cut out by people who know what they are doing. It needs shrewd judgment and experience to select activities which actually influence clients to give the practice work, but weaning partners off long-standing pet projects can release substantial funds for other uses.

Crimes and misdemeanours
There is no doubt that money is wasted in even the most elite professional practice on a range of dubious activities. They range from the mere bending of rules (such as using hospitality tickets for personal pleasure or inflating expenses claims like some Westminster MPs) to the criminal and fraudulent. I once came across an arrangement where a managing partner had ‘outsourced’ all marketing support to one individual. It was obvious, though, that very little was happening. An audit revealed that the partner was receiving a ‘kick back’ for the contract. Elsewhere, a group of partners were using their hospitality budget on some outrageous ‘sexual adventures’ with clients, oblivious to the risk to their firm’s reputation. Each of these cases, it must be stressed, occurred in practices which offer first rate work and are known the world over.
Marketers should initiate regular independent audits of expenses, supplier contracts and the match of intended expenditure to their firm’s general ledger. When they know what to look for, remarkable savings can be made.

Expertise
Quite often a partner with no marketing orientation or training is put in charge of the function because he or she is a voice to the leadership for a certain group of, otherwise unrepresented, partners. Or client service staff may be moved into marketing because they are ineffective, but can’t be laid off. If the firm’s market position and income flow is secure, this causes little real damage. In fact, knowledge of the law, client experience and common sense can be useful in marketing and business-development functions; but it can be damaging if ignorant amateurs are highly influential in this field.
Marketing is a little like education policy: as everyone has been to school, they all think they know how to run it. Yet there is complexity and technique behind marketing and business development which can improve the effectiveness of the practice’s income generation if harnessed effectively.
It is not as easy and obvious as it seems; and, often, untrained leaders make routine mistakes that cost their practice dear.
It is also unnecessary. Although marketing concepts became famous in consumer product markets, there are now a number of substantiated approaches that are relevant to first-rate service businesses and it is possible to recruit good marketing people, trained in them. There is difficulty, though, in introducing them to a practice. Partners might simply be too busy or too prejudiced to spend the necessary time with them, while the specialists themselves might not be used to private practice and might not adjust easily to partnership culture. They need help to acclimatise.
Those who succeed seem to progress through several clear steps. First, any new practice marketer should be expected to handle practical activities well. These will frequently be ad hoc ideas initiated by partners between client projects. Some will not have been properly planned and some marketing suppliers will not be providing competitively-priced work. A good marketer can tackle these issues and easily find viable cost savings. They can then shape a coherent programme that has a cumulative impact, increasing leads and referrals. Through this, the best marketers win respect and become advisers on market-related issues. But to succeed, they need good consultative skills (to treat their partner group like clients) and strong political backing. This approach generates revenue and saves costs at the same time. In other words it boosts productivity.

Clever stuff
Structuring marketing and business development activities around the way the business develops can improve revenue, maintain margins and keep costs under control. Practices grow mainly from the reputation that partners create through good work. If clients are pleased, they talk to others, and work comes in through repeat business and referrals (see Figure 1). Any marketing activities must plug in to this dynamic by measuring the competitive reputation of the practice and choosing marketing activities that amplify that natural reputation (if possible turning it into a brand). This will tend to keep the cost-of-sale down (because clients come to the firm) and prices high (because they are a consequence, not the focus of discussion). The reverse is also true. If the practice ‘goes out to sell’, cost of sale will go up and price will go down. So there is a direct link between ‘approach to market’, conduct of marketing activities and healthy margins.
Practice management can put in place sensible and practical programmes to ensure this function contributes to partnership profit. If the function has not received real attention to date, it should be possible to offer colleagues the chance to increase income, and, at the same time, reduce costs.

Laurie Young is author of Marketing the professional services firm. He can be contacted at lauriedyoung@aol.com