Professionals are a unique blend of people who not only have to produce (i.e., service and manage clients), but also have to manage their flock (i.e., their people). When these professionals start assimilating management knowhow, they start shaping their firm’s destiny. Management knowhow usually comes very late in the day to most professionals and often from one’s own experiences and pitfalls; which means that the firm may have suffered multiple consequences till then. These could be in terms of stagnant growth, losing talented professionals, making do with mediocrity, or becoming a second rated firm for their “target” client segment.
Some of the questions that need to be soul searched are:
1. What is it that makes “running a firm” so difficult?
2. Why do we often hear that he is great tax professional, but a lousy leader of people?
3. Why do we often hear that he is a good people person, but lacks the technical skills to become a partner?
4. Why do talented professionals leave good firms?
Similarly, there are questions that abound within professionals that merit serious consideration.
The one word that seeks to address all of the above is “Leadership”.
When professionals have to run their firms…… how can you empower professionals to run their firms? Are they born with such talent? Can these abilities be imparted? Do these abilities need to be upgraded every few years? The answer is a resounding YES.
Almost everyone can be trained to be a good manager. And each good manager can develop himself to become a great leader.
A true professional will primarily concern himself with knowledge acquisition and upgradation, synthesis of facts and solution formulation for clients, and set a precedent for others to be inspired from and emulate. Additionally, he will be looking at market forces – competitors, new players, regulators, associates and other stakeholders, and constantly evaluate and reposition his firm’s strategy. He will be constantly mentoring his team and providing them valuable feedback on how they should be motivated to embrace the challenges of the profession. Professionals who excel at all of these are running their firms successfully.
In pursuit of the above goal of running a firm successfully, there are challenges galore:
? Analysis and interpretation of professional standards, law and regulations
? Human resources management
? Client servicing and delivery
? Risk Management and accountability
? Ethics and values
? Professional upgradation – Life Long Learning
ATTRIBUTES
One can look at the following attributes for a professional who is trying to lead his professional service firm (“PSF”) and the way to think about implementing and executing:
Focus:
Often when professionals are asked “what is the vision of your firm” and someone says to be the market leader or to be the best or to excel in so and so, it is often an empty rhetoric. There is no vision statement written nor do the other partners and/or the managers or even the associates are completely clueless on the founder/ partner’s vision for the firm. It is of paramount importance that there is laser focus (relentless) on the goals of the firm. The firm leadership in an inclusive manner defines the goals. It is the collective responsibility of each member of the firm to ensure that the goals are met. When there is an intent backed with adequate time and resources and coupled with “tone at the top”, goals will get executed. The quality of the execution is purely a derivative of passion and relentless focus.
Planning:
Planning comes naturally to professional service firms who manage projects, e.g., an audit firm is used to planning an audit engagement where there is deployment of resources (team members) and there is a time bound expectations of the final audit report. A well planned engagement is more likely than not going to result into a successful engagement. Conversely, professionals, especially sole practitioners and smaller firms who do not plan adequately often run into cost over runs due to delayed and inefficient completion of engagements. Project management principles always suggest efficient planning as the corner stone of any project.
Execution:
This brings us to execution. No professional service firm can grow or even sustain itself without quality execution and the resultant client satisfaction. Again, one has to remember the mathematical model of clients pay for lack of knowledge or ability. Execution drives the fair market value in the equation. At the end of the day what every client wants from a professional is a solution to their problem. Execution directly impacts the professionals’ perception in the eyes of the client. Professionals who deliver solutions to complex problems are considered premium professionals i.e., the high end intellectual class of professionals. Those who provide expertise and experience are the second category who command a relative premium over the general practitioner. This category primarily comprises of professionals with grey hair i.e. professionals with solid experience and a fair degree of expertise. The rhetoric is “trust us: we have been through this before”. The final category is out friendly neighborhood, general practitioner. He is the go to guy for all first level problems and for the bread and butter solutions.
Now, execution is laser focused in the first category of the premium expert as it is time which is very scarce and therefore commanding a very high premium for these professionals. Their processes are geared up to provide high quality focused execution. No wonder they are at the top of their game.
In the second category, execution is clinical and professional.
In the third category of the general practitioner, execution standards greatly differ from one professional service firm to another. Those firms that practice a high degree or high quality of execution focus will outshine the rest.
Solution:
Professional service firms have to learn to be solutions focused and not be perceived as problem creators or query raisers. Each business has its own dynamic of the professional problems and challenges. A professional service firm that believes in problem solving and thinking about solutions for its clients is a hands down winner. It is this solution centricity that brings us closer to client centricity: one of the key attributes of successful professional service firms. The culture of the firm has to encourage individuals into constantly thinking about client solutions. This again ties in to our model of clients pay for value.
Professionals get paid for the value they deliver. This is not just a clichéd statement. In the ever-growing complex environment, the larger organisations have in-house teams for all vital functions.
Example: It is not uncommon to have a separate M&A team that focuses on new acquisitions/inorganic growth opportunities. If insourcing is a given, why should a client pay to a consultant or a professional advisor? In a real world situation clients pay because either they do not know the solution or they do not know enough about the subject or even if they know, they may not have the ability to be sure about a final opinion – which is demanded by regulations or otherwise. Thus, when clients pay for value, what they are essentially doing is paying for the lack of knowledge and/or ability and/or time. Simply put,
Clients pay for value = Fair market value of lack of knowledge or ability or time
Value is what is perceived and what is delivered. A solution to a complex problem is value delivered, so also is out of the box thinking or innovative application of a tax position or a tax rule, such that it reiterates a client position or saves taxes for a client.
Often, clients are habituated to pay for what is not within their realms of expertise or functional subject matter area. Sometimes it is also to cover oneself from a potential risk of an adverse outcome.
Thus, when a professional demonstrates knowledge and ability to execute, if he delivers significant value, he can often command a premium on his normal charge out rates.
Dynamic Forces in Market Place:
Each country is constantly revisiting the relevance of accounting, tax and business rules and constantly looking at ways to keep them updated. Business transactions evolve constantly and the level of complexity keeps on growing. Demand and supply forces generate lot of incongruity between what is and what ought to be. In such a situation, the dynamic forces in the market place takeover and dictate how a particular profession will grow and respond to these forces. Businesses often reach out to the professional firms in terms of being the harbinger for change. It is upto the professional service firms to create systems that allow rapid response to these dynamic forces. A professional service firm has to be in alignment with the 7-S’ framework1 so as to seize the incongruency and the resultant opportunities that are thrown up.
Clients tend to expect real time responses to questions and day to day challenges. PSFs have to be organised and geared up to provide rapid responses to meet the client need and to answer “what is value to the client?”
III. Counseling vs. Advocacy
Advocacy by definition is all about articulating one’s professional ideals and channelizing the technical knowledge to a given client challenge and finally tying all of these together, to communicate the professional’s intent. It is of deep importance that a PSF leader wears a hat of an advisor when it comes to dealing with a client. It is often found that a deep dividing line can be created between completing a job versus providing professional advice/counseling. To meet this gap, if a professional wears the hat of an Advisor, it is far more permeable to further a client’s interest.
Counseling is all about conveying a point of view to a client. Thereafter, providing alternative scenarios of possible outcomes and associated results.
In contrast, advocacy is sheer representation of a client’s position before a target interest group (“TIG”). This TIG could be a regulatory authority, a court of law, an arbitration panel, a policy maker or even a client interest group. It is clear that when a client’s position is to be conveyed across this broad spectrum, it is the art of advocacy that helps remove all communication barriers and synthesises a technical argument in a manner that the TIG can see the underlying merit and accept the arguments.
Example: The eminent jurist, late Shri Nani Palkhivala, in the case of Kesavananda Bharati vs. the State of Kerala, articulated the matter before the Supreme Court and outlined the Basic Structure doctrine of the Constitution. The Basic Structure doctrine forms the basis of a limited power of the Indian judiciary to review, and strike down, amendments to the Constitution of India enacted by the Indian parliament which conflict with or seek to alter this basic structure of Constitution. Such was the power of his advocacy, that recalling Mr. Palkhivala’s performance during the hearing of the review petition, Justice Khanna remarked, “It was not Nani who spoke. It was divinity speaking through him.” Justice Khanna was speaking for an astounded and grateful nation.
It is therefore important for professionals to learn the art of advocacy as that will put them in good stead when providing representation and litigation advisory services to their clients.
Values, integrity, ethics
A professional is normally called upon for implementing any new policy or regulation. The members of the public trust a professional and inbuilt in that trust is integrity, values and ethics.
Integrity is a personal virtue, an uncompromising and predictably consistent commitment to honour moral, ethical, spiritual and artistic values and principles.
In ethics, integrity is regarded by many as honesty and truthfulness or accuracy of one’s actions.
Values can be defined as broad preference concerning appropriate courses of actions or outcomes. Values reflect a person’s sense of right and wrong or what “ought” to be. Types of values include ethical/moral values, ideological (religious, political) values, social values and aesthetic values. Values have been studied in various disciplines such as anthropology, behavioral economics, business ethics, corporate governance, political sciences, moral philosophy, social psychology, sociology and theology.
Nothing summarises this better than the phrase, “Doing the right things”..
Leadership is all about doing the right things….
management is doing things right, said Peter F. Drucker.
It is so important for the leader in a PSF to set the tone about doing the right things. This, by implication, clearly means that always a leader has to focus on the right path. This is often tough and full of obstacles. Pursuing the right path is never easy and is like traversing a road full of twists and turns. One can never know what to expect at the next juncture. One can expect several resistances on the way including from one’s own fraternity in the firm. It is during this gruesome journey when the mantle of leadership is tested to its core. At that point, a leader of the PSF should consider the right path.
It is normally easy to take a convenient way out, which is full of short cuts and is devoid of any long term substance or depth. To add to this, the temptation of short term positive results create an indiscretion in one’s mind and a leader is often tempted to follow this wrong path in pursuit of short term gains. It is here that a true leader amplifies the spirit of leadership by pursuing the right path and embodying the universally acclaimed principle of doing the right things. The result is often long lasting and sustained and helps creating a firm that lasts and endures generations.
Zero tolerance:
It is important for a PSF to set a culture of zero tolerance for inappropriate conduct, accepting delivery that is less than optimal and enduring professionals who show scant respect for the basic tenets of professional ethics. The survival of individuals within a PSF environment that is cultured with zero tolerance goes a long way in establishing the righteousness and forbearance of morality, ethics and values, integrated with the basic social fibre and the deep rooted belief in doing the right things for the PSF. Zero tolerance also sets a clear roadmap for growth and sustenance of a PSF. All the firms that have grown and sustained over decades have shown tremendous affinity to the concept of zero tolerance.
Fearless approach:
Absolute clarity in one’s technical abilities leads to conduct which is fearless. It is often said that when there is nothing to lose, there is nothing to fear. Once a professional accepts that the final results are not in one’s hands, and therefore one should not endlessly worry about the outcome of a particular matter. What is more relevant and important is that the professional has given his or her best to a particular client situation and there is no technical deficiency in the final product. Thereafter, if a different view is taken by a competent authority, it is not really a reflection of the professional’s quality of delivery. Thus, there cannot be a question of aspersing any doubt on the technical ability of the professional. At that stage, the professional can truly find a sense of equilibrium in his professional practice. His “Dharma” is to conduct himself fearlessly and the resultant outcome will always be optimum.
Client centricity:
Quality work is not equivalent to quality service. If a professional in a PSF can ensure that client service is accorded paramount importance alongside the quality of the client delivery, what he would have created is a culture of “Client centricity” in the firm. All teams of various practice areas would keep the client at the centre whilst rendering their professional services. The client should feel that his or her needs and sensitivities are being addressed contemporaneously by the client service team. Client centricity also deals with ensuring that we do a better job than our competitors at listening to our clients and working out at finding out what they like and don’t like about dealing with us. We also have thoughtful, well executed plans to invest our time and resources in growing relationships with key clients, thereby earning and deserving their trust and future business. Finally, it deals with laying a greater emphasis in the firm’s measurement and reward systems on growing existing client relationships, rather than just pursuing new accounts and “rain-making”.
In conclusion
When professionals have to lead and run their firms, a lot of the above needs to be implemented so as to sustain the firm. And to grow the firm, the leadership of the PSF has to connect the firm to the future and connect the professionals to the firm. Leaders will be expected to set direction, ensure execution, secure commitment and lead by example.
