Thoughts on ways to improve the management of professional services firms

Wednesday, September 13, 2006

Professional Mudmaps - Project Based vs Relationship Based

In my last post I used the term professional mudmaps as short hand to describe the personal mental models every professional uses to interpret and make sense of a complex external world. I suggested that these mudmaps were incredibly powerful and, once created, very slow to change. I suggested that these mudmaps varied across the professions creating sometimes subtle differences in culture, attitude and approach.

I have previously given one example of differences in mudmaps in my discussion on managers vs professionals.

Now to extend my argument I will take an interesting discussion on David Maister's blog on marketing in a one-off industry as a trigger point. Tim Burrows from GHD in Australia posed this question: "Across the spectrum of industries, there is a wide variety of client needs, ranging from repetitive and regular advice through to one-off projects. In the latter case, some of these clients you may never serve again. How do you market yourself if you are in a one-off industry? "

The discussion that followed contained some interesting ideas. However, I was also interested in the fact that the discussion seemed to me to slide over one of the key dividers within professional services, a divider that profoundly affects professional mudmaps. That divider is the difference between project based and relationship based approaches.

Some years ago I was involved in the establishment of a new consulting business. The business grew from a zero start to $A750,000 in annual fees within eighteen months. We were badly hit by the onset of recession in 1990, but then clawed our way back to annual fees of $A1,000,000 within twelve months. At that point we hit another fee decline, one that took me a little while to understand.

The business was established to provide an integrated suite of consulting, information and training services to a particular broadly based industry sector. We wanted to be able to supply a range of services to individual clients so that our offerings changed as their needs changed. So we invested in relationships, taking a longer term view of paybacks. That was our professional mudmap.

When I looked at the reasons for the decline, I finally came to realise that we had unknowingly moved from a relationship to a project based approach. The differences between the two are quite profound.

Project based approaches are common in certain sectors where jobs come in discrete lumpish units, often obtained through tender. They are also common among independent consultants offering a discrete slice of services - specialist training or HR services, for example. A key feature in both cases is that you meet a client need, but then have to find a new client. Yes, there can be repeat business, but this can involve long lags because it depends upon the client developing a similar need. So project based approaches fit Tim's one-off class.

In project based approaches there is a clear division between delivery and marketing. Delivery focuses on getting the job out the door to get cash in. Marketing focuses on getting new clients. The incentive to invest in a relationship with an existing client has to be tempered by the likelihood of getting work from that client.

In relationship based approaches, the focus is on getting new work from the existing client. This means that delivery and marketing are integrated since new needs are frequently identified during the delivery process, while the client's willingness to continue to use the consultant depends upon client satisfaction with the delivery process. The incentive to invest in the relationship is much higher because repeat work is expected.

Linking this back to the example I started from.

Because of the commercial pressures on the company, my own focus had shifted from relationship building to job completion to generate cash. As a consequence, my people's focus had also shifted from relationships to project based approaches. So our professional mudmaps had changed.

When I looked at the outcomes, the work mix had shifted from 80 per cent repeat business, 20 per cent new business to 20 per cent repeat business, 80 per cent new business. The marketing chains (the way one job leads to another) that we had depended on for so much of our work had largely vanished.

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