There’s been a shift. Many professional services firms are being forced to rationalize costs and find innovative ways to do more with less.
"A lot of professional services did well in the last couple years, but those tables are turning. They're seeing the need to consider their operating costs, in addition to personnel costs, as they work down the P&L.”
“A lot of professional service organizations did well in recent years, but those tables are turning,” said Grant Thornton Audit Managing Director Moises Sanchez. “They're seeing the need to consider their operating costs, in addition to personnel costs, as they work down the P&L.” Employee resignations and other cost changes have created turbulence in profits, even if revenues stayed steady.
“I think ultimately it comes down to reducing the cost of delivery and developing new ways to serve your clients — ways that differentiate you from the competition,” said Grant Thornton Enterprise Transformation National Managing Partner Joseph Brown.
“Automation is absolutely an avenue to do that,” Brown said. “It provides an opportunity to reduce your cost while modernizing your service offering — modernizing the way that you go about solving a problem.”
Better ways to solve problems
Professional services firms usually focus on solving problems for their clients. However, they can often reduce their costs and differentiate their services by solving either internal problems or by improving the solutions they currently have. For example, many of today’s firms can recover costs by improving their decision making, recruitment and remote productivity.
Faster data-driven decisions
“When I'm working with management teams at professional service firms, we often need to consider the information being delivered to the decision makers in the firm,” Sanchez said. “We consider how that information could be improved upon, either with a dashboard interface or other types of reporting, to help leaders make decisions more quickly and more efficiently.”
More competitive recruitment
“It's also about being attractive to potential lateral hires,” Sanchez said. “Law firms often recruit partners from other firms. So, what's making you more attractive than other firms?” By automating work and streamlining processes, firms can effectively increase the billable hours they have available. Even better, they create an environment that helps recruit and retain the highest performers.
“Really, you can't have mobility without automation … the ability for remote staff to open an app, see dashboards and understand where things are — and where things need to be.”
Improved remote productivity
“Really, you can't have mobility without automation,” said Grant Thornton Professional Services Industry National Managing Partner Frederick Kohm. “From an operation standpoint, that includes the ability for remote staff to see dashboards and understand where things are — and where things need to be.”
Brown agreed that remote productivity requires more than an infrastructure which enables remote access. “It’s not only tech from an infrastructure perspective. I think it also requires an innovative approach, if your goal is to increase your bottom line.”
Many firms can trim costs in these and other areas, even solving multiple problems simultaneously. “We've seen a number of law firms lay off employees but, at the same time, there is this need to recruit talent in a tight labor market,” Sanchez said. “Leaders need decision-making data to determine the right workforce balance, and to effectively forecast the headcount needs for the organization. If you make a decision, you need to know what that does to workforce needs. You need the ability to forecast staffing and plan decisions.”
Brown added that today’s workforce issues amplify the need for internal efficiency. “Folks are leaving the industry, right? We have to do the same work, or more, with less.”
Do more with less
Doing more with less is never easy. There are always barriers that require smarter solutions and new approaches.
For example, many firms have a high volume of manual transaction processes. These firms often struggle to send bills and collect payments efficiently. Likewise, they might not manage their vendor payments effectively, sending payments early when that money could still be earning interest. Automating these processes — or not automating them — can come with unanticipated costs.
You might encounter unanticipated costs if you:
- automate some manual processes.
“The challenge is usually the 20%,” Kohm said. “The 80% are the usual transactions that you can standardize and automate — it's a matter of automating the smaller bucket of transactions that are outliers.” These outliers can come from legacy processes, contracts or other past decisions.
- don't automate some manual processes.
The losses from lingering manual processes can add up or create larger issues down the road. “Manual transaction processes can break down and create a significant challenge for organizations — whether they are write-offs at some point, issues with outside auditors or issues with their board around their controls,” Kohm said.
So, how do you find the right answer? To determine which processes should be priorities for automation, firms need to understand the real costs. That requires knowledge beyond automation technology. It requires business knowledge that can evaluate and document the problem processes to address.
“What happens is that people throw use cases at the two or three people who have the skillset to develop solutions. Those people just get bombarded.”
“Some firms are capable of automating, but they struggle with the intake and prioritization of the wide pipeline of processes to automate,” Brown said. “They have limited resources, and they don't have a structured process that manages intake, ROI and the workflow for the project. What happens is that people throw use cases at the two or three people who have the skillset to develop solutions. Those people just get bombarded.”
When firms establish a process that determines the ROI for a potential automation up front, they can prioritize their opportunities. “If you have limited capacity, you have to be very careful to choose the areas that are going to bring you the highest ROI,” Brown said.
Surprisingly, some of those best rates of return can come from some of the smallest solutions.
Open the bottleneck
“One challenge that firms have is not letting their big solutions get in the way of smaller solutions,” Brown said. “When you take on a high-touch big build, it often bogs down your resources. So, while you're spinning on getting something big done, you're not solving a lot of small and medium-sized problems.”
“I think it's really important for firms to focus on using no-code and low-code automation to solve problems for themselves or their clients, often in days or weeks, while also staying focused on the larger problems that are going to take months or more to implement and solve.”
To unblock this transformation bottleneck, you need to keep your large initiatives moving while also solving smaller problems. That requires a new approach. “I think it's really important for firms to focus on using no-code and low-code automation to solve problems for themselves or their clients, often in days or weeks, while also staying focused on the larger problems that are going to take months or more to implement and solve,” Brown said. “It's a careful balance.
Brown said that Grant Thornton has overcome a transformation block with its alyx® platform and an initiative to train employees across service lines to develop no-code and low-code solutions. “We use alyx® to understand the problems that our people are facing and route them to get solved, if they can be solved. Sometimes they can be solved very quickly, but before they would've just been stalled because they were stuck behind big initiatives. Then, with our automation initiative, we’ve taught our people how to fish.” The initiative provides training and certifications on technologies that employees can use every day. “Over time, people get up to speed on no-code and low-code capabilities, and start solving problems they're having on internal work or at client engagements.”
Professional services firms can use these smaller solutions to solve problems at three levels: internally for the firm, to deliver services for clients, and to help clients with their problems. The ability to solve smaller problems at multiple levels creates powerful potential. However, firms still need to drive the appropriate change management and adoption for these solutions.
Drive the change
Even small solutions need to be managed appropriately, sometimes including a plan to drive user adoption. “We see that a lot with attorneys,” Sanchez said. “They don't want to change the way that they're doing work, and the way that they've done it in the past. It's a people-first business.” Plus, IT and cybersecurity teams will have important questions about how to ensure the security of the firm’s data and systems.
To help manage and drive the success of small and innovative solutions, firms need to show that the solutions are secure, profitable and supported.
New solutions must not access data, enable users, or introduce APIs and other external elements in a way that the firm’s cybersecurity plan did not anticipate. “Get buy-in on the cybersecurity around the data that's being used, which might be big data that is being housed somewhere else,” Sanchez said.
Show the money
“I think if you put metrics behind the benefits, it can really help drive adoption,” Sanchez said. “Show those achievable results — where does this impact a partner, like distributable earnings, or how do they see it in their pocketbooks? That helps you build the case around the need for it, and the benefit of it.”
Pave the path
“You need to have a structured methodology for determining what you believe your ROI is going to be,” Brown said. “Make your best attempt at a type of formula your organization agrees to use.” This standardized calculation can come from the stage where you prioritized the process for automation.
Lead the way
“A new solution needs to be championed from the top, as well as having champions within the organization to drive both adoption and the direction of the solution,” Sanchez said. An economic downturn may help solidify support for digital transformation, so now could be the perfect time for leaders to drive tech efficiencies that are both small and large.
Together, these tactics can help feed a flow of new solutions that open the bottleneck of transformation. “That's the only way you can effectively manage a pipeline of automation that you want to get done, short of the loudest voice or the most senior person getting what they want,” Brown said. “If you want to democratize it, then you need ROI, you need folks on your team or within your organization that are sponsoring that, and you need to have the capability to actually get it done.”
The need for “now”
“I think the need for cost reduction is going to be a continual trend, where firms are looking at how to minimize costs in this recessionary period,” Sanchez said. “It's a real trend that we're seeing in the marketplace, and something that we'll continue to see — organizations investing in ways to be leaner and weather the storm through economic upturns and downturns.”
What are some of the things that you can do to identify the costs you can trim, and what are some of the things that you can do once you've identified them? The potential for cost savings from automation solutions is powerful, from internal business services to external client services.
“Ultimately, professional services is a competitive space,” Brown said. “When you're talking to customers, they expect to see a combination of not only subject matter knowledge but technology as well. You can be assured that your competitors are showing clients how they're solving problems with solutions that are anchored in not only in the subject domain and brand reputation, but also in technology.”
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