Cross Selling Doesn’t Work – the culture and rewards in most firms work against it!

My thesis on cross selling is quite simple – it doesn’t work in most firms because the culture and metrics/rewards work against it happening.

One of the most fundamental influences on the culture of a law firm is the basis for partner remuneration. Most of my recent clients have been the traditional or modified lockstep firms. Their system works by aligning individual goals, aspirations and motivations with those of the firm and then managing tightly. They simply use what I would call social controls and motivate by saying things like ‘You owe it to the firm’ or ‘You’re letting the side down’. Management needs to practise what Maister calls ‘intolerance’. Most firms don’t do this enough in my view and non-alignment is tolerated for too long.

I did some research for a firm on how they won new clients which showed that, on average, five partners had contributed to putting the firm in the frame. For example, one might have visited the US head office. Another might have met key people at a conference and sent them newsletters. A third partner might have worked for the client in a previous firm and kept in touch etc. It would have been hard to say which one of these partners to reward for introducing the work. They all played their part. By just rewarding the partner that gets the first mandate from the client, you risk encouraging more selfish behaviour in my view.

We can learn from other professional service firms about how to crack this challenge. I know a lot about one of the global consulting firms. They are organised in a matrix by industry/service lines (eg outsourcing, CRM etc) and country. Management kept searching for how best to measure the performance of the business. The predominant and most successful way was thought to be by Industry focus, because this was most aligned with their clients. Partners were measured using quantitative and qualitative measures. The firm thought it was important to measure whether partners were good ‘corporate citizens’. One surrogate measure for this was whether client partners arranged client meetings with heads of service lines (eg litigation, IP etc). The overarching philosophy was ‘How can we bring the best to bear from our firm to our client?’

One rival global consulting practice introduced micro targets to encourage client partners to sell specific products. Partners in this firm felt they became salesmen and that they weren’t necessarily putting client interests first. Many became demotivated and some even left the firm.

In terms of measuring and rewarding for subsequent performance, this isn’t thought to be a problem for client partners (CP’s). They were rewarded for total sales/margin, not just the projects they were involved in. So the more they cross-sold, the better their figures, the more they were rewarded. The firm noted that exceptional performances often occurred when partners were CP’s and heads of service lines at the same time.

Pareto’s law was apparently much in evidence. About 20 clients produced 70% of the profits. Each of these 20 CP’s became known as ‘top’ partners. They effectively became the management group and had greater access to the board and were hugely rewarded. This status and reward heightened their motivation and the perception in the firm was that they were the best corporate citizens.

In the end, the critical aspect of their system was a philosophy… can we bring the best to bear? The firm didn’t provide any extra rewards for subsequent years. It was obvious to see the carry over. It most cases it was positive – more work, better margins -though in some cases it was negative. One partner was applauded at an annual partner conference for what seemed like a fantastic sales achievement. Three years later everything with that client was in a mess with massive write-off’s! He had over-sold!

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