Friday, November 27, 2009

The Love-Hate Duality of Change

As we pass the 24th month of this turbulent economic climate, organizations have resorted to many different means to weather the storm. For some, the fare has been, slash and burn – the eradication of ‘unnecessary’ staff. For others, it is a complete retooling of business lines. Although the economic storm is weakening, the dawn of new economic vitality, according to some experts, won’t be seen until 2012. In one article I read, economic vitality won’t return until 2016. Regardless of the timeframe, organizations are doing what they can to survive.

Survival during these times demands more than sitting and waiting. For those organizations that have chosen this path, their chapter 11 filing is probably in the process. These are probably the most vibrant times for business consultants; where every snake oil salesman has ‘the’ remedy to fix the ailing business. Recently I had the opportunity to be part of one of these traveling road shows. I watched first hand how a major national law firm believed their huge investment in improvements would yield… change and ultimate survival.

I was contacted about 9 months ago to assist a national 800 attorney law firm retool its business for survival during these economic times. My contribution to this effort was very small; basically I had to revamp their current asset management processes (accounts receivable and work in progress). The general contractor equivalent of the project basically brokered all of the deals with the various contractors. The goal was, get the best of breed contractors to get the best practices possible in place and fast.

During the weeks and months of the engagement I watched as the broker racked up hundreds of hours in system upgrades and trainings. Through all of this I wondered when the business process of re-engineering would begin. Upgrading hardware, software and training people which button to press does not and never will generate positive bottom line results.

Unlike the training feeding frenzy, my contribution was to be based on some of the most cutting edge thought in the business community. At the onset and through the engagement I produced many documents demonstrating how organizations used current business intelligence tools to move their receivable and WIP management to a risk based model and in so doing, have had multi-million dollar gains.

The meeting took place in their mid-town Manhattan office. As the change broker ushered in her updates of all that has happened over the past several months. I was amazed that no one questioned the return on investment thus far. It seemed as if there was a fear to question her divine business wisdom. After the break and a brief introduction, I began my high level explanation of how the firm could reap huge savings by shifting their receivables management from an ad hoc approach to that of a risk based model.

The discussion focused around using their newly acquired Business Intelligence tools and their current receivables management system to educate their partners in making the most educated financial decisions about their clients. Empowered with hard facts, attorneys could make the decision whether to proceed with the engagement or cease. The model would remove the mystery about collections and look at the probability of default of certain clients and engagements.

After my presentation, the floor was open for questions and discussions. The concepts presented represented such new thinking that most everyone in the room cocooned themselves into their old lock step management style. With defendable figures I demonstrated that the firm could reduce their overall receivables by 30%, receive payment from clients much faster and reduce the interest on their operating line by $1M per year. Following what felt like hours, but was in fact minutes, the chief executive asked ‘How many AMLaw 100, firms are using this approach?’ Followed by a litigation partner who retorted ‘We cannot turn away work on the possibility of the client not paying?’ After fielding the questions, which were fired like arrows it became very clear that the firm who wanted change, wanted change only to the point where nothing would actually-change.

As I recounted the events of the past eight months while boarding my flight out of New York, I realized that the firm was sold onto the concept of change; a change that would not involve upsetting their current business practices. Change, and thereby survival, requires alterations be made that makes the organization more versatile. This firm had sought a means of survival in acquiring best practices, but instead it should have focussed reengineering their value to their community.

In a brilliant Harvard Business Review article by Susan Cramm ‘How are you defying Best Practice?’ Cramm clearly outlines that organizations should not be seeking the ‘best practice’ of others, but rather develop their own best practices. Best practices are developed by a specific organization within the realm of their culture at a specific time; therefore they are often not portable. Cramm also contends that sometimes the best simply isn’t feasible in terms of time, money or other constraints. For my client, having the best system and all the training, simply was not the best use of their resources at this time.

For many firms, consultants have all the answers. The need for change is at odds with the desire to change. These organizations need to have an introspective moment and build their own best practices based on their culture. They need to stop comparing themselves to others and define for their clients the best balance of quality service they are going to provide. But above all, change comes through experienced people who understand the fundamentals and know how to think critically, strategically, and creatively.