Why some client work will never pay
Firms should focus only on clients they want, trust their instincts and turn away undesirable work
This article focuses on the importance of following our instincts when we take on client work. We often know from the outset which clients will cause problems, yet often we take on their work, disregarding what our instincts tell us.
Some clients seem awkward to deal with. They seem to deliberately mislead or confuse us. Other clients are difficult and demanding. All firms have their “bad clients”. Most of the firm, especially reception, will know who they are. They are the ones who take up a disproportionate amount of our time, whose files grow alarmingly and who cause us a lot of anxiety. Most of them we knew at the outset would cause trouble. Why do we continue to act for them and why did we take them on in the first place?
At the firm level
Many firms still feel that they have to take on all types of work and all types of clients. Some of this stems from pressures on fee income experienced in the early to mid 1990s. The market is busier now but firms must not confuse being busy with being profitable. Having too much work at the wrong level puts pressure on everyone in the firm.
First of all we need to know what type of work and client is profitable. As we have already debated (September 2000), we need accurate and up-to-date information about the firm and its finances. This should include matching fees rendered and recovered against the actual cost of the work done by types of work. Clients can be graded into prompt payers and slow payers. Whilst it is not always possible to build in an additional levy for late payment, it is possible to encourage prompt payment by offering early payment discounts.
We need to be aware of where our profitable work comes from. As a result, we should know what clients or work we are prepared to take on and turn away what we do not want. It is important to act on this information - to look at what individuals and/or departments are doing, and who is doing what and how. Time recording is a useful tool and used properly can quickly allow comparison of work-in-progress with fees rendered - and recovered. Overheads should be correctly allocated to allow the firm to see the overall cost of providing that type of work. This has to include the cash flow implications of late or slow payment of fees rendered. The firm can then make an informed decision about whether to continue to do this type of work or not. It may decide that there are good reasons, other than financial, to continue to provide it.
And this is where our instincts come in. We all became professionals for different reasons. Some of us wanted to help the less fortunate, to protect minorities and/or uphold what is fair and equitable. Others of us wished to work with a like minded group of individuals who would provide mutual support. All of these are valid reasons why one type of work will be preferred over another. Financial considerations are only one of the factors involved.
It may be that the firm’s discussion of values (November 1999) identified some services that the firm wanted to provide to the community. Or at a strategic level, the partners may have decided to continue to offer services which are not profitable per se but because they want to use them as loss leaders or as an add-on service to key clients.
However, if such a decision is made, then it is equally important to continuously monitor that work and/or develop ways (through IT for example) to do it less unprofitably. Don’t assume the work is inherently unprofitable - instead look at the whole process to identify areas where time and costs can be saved.
At the individual level
There are some clients we have to work with but with whom we have trouble communicating. We seem to talk at “cross purposes”. There is continual ambiguity in what they understand of us and vice versa. In many circumstances, we cannot afford to offend or lose these clients and have to develop ways of communicating more effectively with them – not necessarily creating a miniature paper mountain on the way. If we have decided that the client is worth having (see above as to type of work, level of fee and prompt payment), we need to develop a way of working with them.
Client relationships are based on trust (January 2000). If we cannot and do not trust our clients, we will spend a great deal of time covering our backs. This costs us time and money and allows the client even more room to criticise and complain.
In general terms, we trust people who share the same values. Think of any partnership situation where people are prepared to risk unlimited liability. Think of how we select schools for our children and hospitals for our families. We choose those which we hope will deliver the same values as we have.
Eliciting client values is not hard to do. We have access to a lot of their personal and business information, and as a result, can recognise what is important to them. We know which clients are driven by profit regardless of the quality of the project and which ones fail to buy house after house because they are not prepared to pay the extra.
We need to ensure that we match these values in our service delivery. If we are uncomfortable about what they are asking us to do, this will affect how well we communicate with them.
It is important to ask clients what they want from us – how they define a good professional service. Client surveys can often be too simplistic asking clients whether they were happy or not. Instead it is important to focus in on what our clients value – why they chose us and why they stay with us. This may include speed of response, accessibility, and/or experience of their problems. In most cases, clients will emphasise what they see as appropriate communications - speaking to them rather than sending paperwork, responding to queries in good time, being “up-to-speed” with their file and being pro-active rather than reactive.
Another area to consider is the way that people communicate. This has been researched in detail by a process called Neuro Linguistic Programming. There are a number of experts and books in this well researched field (see for example, Harry Alder “NLP – The Art and Science of getting what you want” Piatkus 1994). NLP argues that people communicate in different ways. One of the easiest examples of this is to identify people who are “visual” and those who are “auditory”. At the risk of making a sweeping generalisation, many engineers and architects are visual and many lawyers are auditory. The best way to distinguish one from the other is to notice the words used. Visual people will often say “it’s nice to see you – you’re looking well”. Auditory people will say “it’s good to hear from you – nice to talk to you”. Intuitively we know that there are some people we have to see to get proper instructions or get a quick decision from. Other people seem content to talk over the phone. Recognising which type matches individual clients is important for effective communication and clarity of agreement.
Why some client work will never pay!
However, there are more fundamental client clashes. We are guilty of taking on clients who we should not touch at all. We are instinctively aware from the outset of the clients who will cause us trouble. These are the clients who tie up our time and energy without providing us with an adequate return for our efforts and any sense of achievement or satisfaction.
They might have unrealistic expectations about what we can do for them, they may have an obvious track record of being difficult with their professional advisors and/or they are unwilling to listen and respond to us. These are the clients that we would be better off without. We will never to be able to satisfy them and recover the cost of the file. We would in fact be better writing them a cheque to go away as they will in reality cost us a lot of money. They may even formally complain about us with all the time and worry that that entails.
We need to be aware of what type of work and client the firm wants to attract. We need to concentrate on those areas and turn away work we do not want. This decision should be reviewed regularly to check the underlying information. Where we want to keep the work, we need to be able to manage those clients effectively. We need to ensure that we communicate with them well and in a manner which suits them. We need to make sure that if we know that we can’t deliver individual client’s expectations then we shouldn’t even try. Where our instincts tell us that this is a client we would be better off without, we need to follow these instincts and not take the client on.
We need to be able to spend our time and energy working with people who value us and our support.
Overall these four articles have looked at a number of areas within our practices. Professional firms are not easy to manage and require different techniques than those contained in traditional management books. Professionals do not respond well to being told what to do. They need to be managed through their values and what is important to them. Managing and delivering clients’ expectations is an essential part of any firm’s success. We have to be responsive and accessible to clients and at the same time, manage our own time effectively. Firms should be comfortable with talking about money as this will lead to profitable work and strong relationships. We should be sure enough about the future of our firms to turn away unprofitable work and clients we instinctively know we will be better of without.
Fiona Westwood and her firm, Westwood Associates, specialise in providing management and training consultancy to the professions. More information can be found on her website www.westwood-associates.com or telephone 0141 339 0240.