The Maraia Minutes
Trends to Watch in 2010
It's pretty clear that 2010 will be another year of learning and uncertainty for many in the professional services field. Here are five trends to watch for in the coming year.
1. Here's a blinding flash of the obvious: Change is guaranteed. Anyone that is hoping for the market to rebound to the heady days of two years ago will be very disappointed. Adapt or you will find yourself becoming increasingly irrelevant. Eventually, there will be a new normal, but not this year. You can start your own transformation by becoming more financially literate and business savvy. The lawyers who already possess these traits are very busy and will stay that way. The lawyers who can barely tell a balance sheet from an income statement are in big trouble. Here's a simple question to test your business savvy: Can you describe your client's business model and the business model of his two chief competitors? If not, you've got some work to do in 2010. Let me offer a stretch goal for your firm or practice group: Put everyone through training and coaching that increases their financial literacy and business savvy. This should not be a one-time only check-the-box action. It must be ongoing, continuous, and intense for the next two to five years or as long as it takes to eliminate the knowledge gap. Firms need way more business people and fewer technicians.
Here's the marketing angle: If you achieve this stretch goal (no small task) you can promote this fact to your clients and prospects. You will have NO competition. In my opinion, there is not a single large or medium sized law firm or accounting firm that does this effectively for its entire team of professionals. Heck, very few firms are even shooting for it. To make matters worse, these firms have been under-investing in this crucial form of knowledge for the last 20 years and will be looking for a quick fix. There is no quick fix.
2. Increase your professionals' "relationship literacy." So far as we know, we're the only coaching organization to use this term and have been doing so for several years. It means knowing how to grow your practice and your network through the creation and deepening of relationships both inside and outside the firm. It requires far more EQ than IQ. Both of my books and our programs are geared toward increasing relationship literacy. It's critically important that professionals increase their relationship literacy or face extinction. Too much low-end work is going to get outsourced to places like India, China, and the internet. The one thing you can't outsource is the human connections and skills needed to create them in 2010 and beyond.
3. Directly related to the first two trends are professionals who know how to create value. Creating value is much more difficult than delivering value or adding value. Don't get me wrong, being able to do these last two are very desirable. The best professionals create value by finding new opportunities for clients to make money and improve their operations. Value creators don't think of themselves as problem solvers; rather, they think of themselves as helping their clients succeed. Another thing you'll like about creating value is this: You'll have very little competition.
Creating value will become the means to thrive in 2010 and beyond. I would contend that it is nearly impossible to create value for clients if you don't have a solid grasp of their business and the people in it. Let me give you an example. A friend of mine is a corporate lawyer on the west coast. He has a client who is trying to sell his multi-billion dollar company to a buyer. My friend has to work diligently at keeping both sides of the deal talking to each other in spite of their prickly personalities. If he weren't there, the deal would unravel. He can find all kinds of people in his firm who can document and close the deal. The ability to hold the deal together is a skill set in very short supply in his 400+ lawyer firm. There are only three people in his firm who can do that today. I predict his firm will need 20 lawyers doing that in 2010 and 200 lawyers doing that in 2020.
4. Outsourcing to places like India and China has already accelerated rapidly in the past 12 months. You can bank on seeing far more of that happening in the next decade. Ten years ago during an ABA conference, Tom Peters predicted that 90% of professional service jobs in the U.S. would disappear in a decade. While his prediction may be draconian (and his timing was off) there is probably more truth in his prediction than any of us would like to admit. Let me start with an easy question: Can you name one or more of the top 10 legal or accounting outsourcing companies in the US? Do you know what services they offer, and their business model? If not, you're in trouble. Even if you can name all ten, the real value lies in knowing how to utilize these organizations to increase your service levels and value proposition to your top clients. Here is the real litmus test: How many have you called? Don't wait for the client to drive you to make this change because then you're reacting, not taking initiative. Call one of these firms today, and start finding out what it's all about.
5. Professional development will become huge. Professional development budgets had better expand rapidly. I've definitely seen a modest shift in firms away from business development and more toward professional development. Related to this trend is that fixed fees will become more common and the billable hour will eventually become a quaint absurdity. Why will the billable hour diminish? Because the interests of the client and the firm aren't aligned. The demise of the billable hour has been predicted for more than a decade. The fact that it hasn't happened yet doesn't mean it isn't going to. If you are forced to work with fixed fees it puts radically more pressure on your ability to push the work lower, collaborate and keep quality high. That puts a premium on lawyers having the ability to manage other lawyers and the work they do. Not surprisingly, this ability is neither valued nor rewarded in most firms. How many of your partners are outstanding at delegating work and developing your associates quickly? Based on our experience there aren't many! In fact, there are large numbers of partners who are hoarding work because their workload has dropped and they're afraid or unwilling to delegate work to increase efficiency because of compensation systems that aren't aligned with clients' interests. This behavior will accelerate your firm's demise.
It's been said that the best way to predict the future is to create it. All these changes spell unheard of opportunity for the organizations agile and flexible enough to make the investments that the marketplace is demanding. It will also require willingness. Adapt or perish. We're about to witness more change to law firm and accounting firm business models in the next five years than we've seen in the last seventy. The current business model is broken and under siege. My advice is to get on the bus before it runs you over.
Copyright 2010 Mark M. Maraia Associates