One of themes at the BigHand 2024 Conference, both within the expert panel session I sat on and in the networking after, was around Commercial Business Partnering in law firms and how difficult it is to get traction with those teams.
As a consultant, I've seen my fair share of business partnering teams over the years and, with a stint as the Head of Business Partnering at Dentons, I certainly have a view on what tends to work and what tends to go wrong.
I'd emphasise 'a' view, rather than 'the' view; I very much encourage and enjoy the discussion around this topic.
Business Partnering 101
Worth starting with a brief history lesson; Business Partnering started gaining traction following a series of papers from David Ulrich in the late 1980s and 1990s. This was in the context of HR Business Partners based around, as all good things are, a 2x2 matrix:
This plots people vs process on one axis and operational vs future focus on the other, and the "strategic partner" in the future focus/process quadrant being the forerunner to the HR Business Partner, and Business Partnering more generally.
As this concept started to gain traction, we then start to see the move towards process improvement, automation and shared service centres in the early 2000s (2010s for law firms) as a means to reducing the cost associated with day to day operational aspects; notably the "Administrative Expert" in the above model.
Having started in the HR world, the model soon began to ripple out across other support functions, including the Finance, or Commercial, Business Partner that was the subject of discussion earlier this week.
Over the years, the 2x2 matrix turned into a three-legged stool, with Shared Services, Centres of Excellence and Strategic Business Partners comprising each of the legs:
So in the context of Finance teams, operational areas such as Accounts Payable, Billing and Payroll were typically contenders for Shared Services; heavily process driven in low cost locations.
Tax, Partner Accounting, FP&A sat in Centres of Excellence; close to specialist talent pools.
And the Finance/Commercial Business Partner role was retained or created locally, embedded within Practice Groups and Offices to support Partners in the more strategic aspects of their practice.
This is both the theory, and the practice - for both support services and legal delivery, you can see any number of north-shore operations in the UK with Belfast (A&O, Baker Mackenzie), Glasgow (Ashurst), Manchester (DWF, Freshfields), or offshore with Warsaw particularly popular (DLA, Dentons) and South Africa (Hogan Lovells).
Partial disclosure - I've helped set up and/or have managed teams in more than one of those.
From experience, the three-legged stool model works.
When it works.
But good ideas aren't always executed well, and ideas ripple through the market and are partially adopted.
When Stools Fall Over
Which sets us up nicely for the fundamental challenge in Business Partnering.
If one of the legs on a three-legged stool isn't there, or isn't effective, the stool falls over.
If those day-to-day operational processes aren't fit for purpose; whether that's through poor process design, antiquated technology or underperforming staff, it is always the Business Partner that picks up the slack.
So instead of engaging with strategic issues with key stakeholders, Business Partners get dragged into the weeds. For Finance/Commercial Business Partners, practically this looks like:
Hours spent in spreadsheets extracting data from multiple systems and then analysing, rather than having insights served up through dashboards, fit-for-purpose reports and management accounts
Time spent routinely chasing partners to get bills out and cash in the door, rather than an effective Revenue Control team and process
Chasing missing time. I... just... can't... even... with this one
Because Finance/Commercial Business Partners are close to, and trusted, by the fee earners and the partners in their practice groups they tend to roll their sleeves up and start plugging those gaps.
It's very well intended and, in a pinch, it's genuinely helpful. But over a prolonged of time it masks the underlying issues, which are structural.
Remember the three-legged stool; if one of the legs aren't there or is cut short, the stool falls over.
This is not to say, particularly for smaller firms, that you need an offshore captive shared service centre (in fact, I would generally counsel against this).
But you do need Accounts Payable, Revenue Control, Payroll, Tax, FP&A etc to be set up in such a way as to effectively manage those day-to-day operational aspects.
Once you've set out your stool, what's the next hurdle?
The next mistake I see is putting Finance/Commercial Business Partners into the Practice Areas to police central management policies and procedures. I've had Business Partners described as 'our man on the inside' by central finance teams before.
This is wrong.
It's an offloading of the responsibilities of centralised management (be that CFO/FD or Practice Group Leader type roles) onto the decentralised Business Partners.
You want the Business Partners to gain the trust of the fee earners and partners, with problems being brought to them proactively to be resolved.
This dynamic is never going to emerge, if the Business Partner is expected to tell the partner the thousand ways they've messed up, or if every meeting starts with a list of all the late time entries, unissued and uncollected bills.
You need to empower the Business Partner with a degree of autonomy, and to apply their professional judgement on how to resolve issues. You also need them focus their efforts on the areas that are material to the financial performance of the practice, not chasing a long tail of all the possible things that could be better.
Georgina Thorpe made this point well on our panel at the conference, when she described her pricing team at HSF being embedded within the practice and pricing being offered as a service to partners, not yet another person that needs to pushback on a proposed fee discount.
You've built trust, but how do you know the Business Partners are performing?
Where Finance/Commercial Business Partners are created from a more traditional finance function, I find there is a tendency to manage performance in the same way AP, billing etc teams are managed - by input.
How many expense claims did you process today, or how many bills did you raise, becomes:
How many partners did you meet with this month?
How many chasers for [insert process that you shouldn't really involved in] did you send?
How soon after month end did you present the financial results?
If we go back to the point of Business Partners, it is to be strategic and forward looking, not operational or transactional.
They should also be people, not process oriented.
Good performance in the short term, is likely to be around qualitative stories and quick wins, demonstrating that trust is being built within the group:
I sat down with Tom, who has the worst lockup in the team, and we've created an action plan with the Revenue Controllers to address this
I've started including a financial snapshot in practice group monthly internal newsletter
I ran an ad-hoc training session on pricing for the Senior Associates
In the longer term, this will start to translate into quantitative measures:
Over the past 18-24 months, we've increased gross margin from 50 to 53% as a result of a more consistent approach to pricing and write offs, and here are some specific client examples...
Lockup has reduced by 15% by bringing the Revenue Controllers into conversations with partners earlier in the work to cash cycle
Utilisation rates have increased by 5 percentage points, and we've more evenly distributed the work through partner education around resource management
Note here the shift from 'I' to 'we'. The clue is in the name - Business Partners. In practice, they need to work with the partners and fee earners to drive the performance, not in isolation.
As a manager of Finance/Commercial Business Partners you can then start to set realistic targets, specific to the strengths of the individual Business Partner and weaknesses of the Practice Group.
But if your BPs don't have the trust of their groups, you're not going anywhere fast.
In Summary
All of which is perhaps the long way round to some rather simple suggestions:
Finance/Commercial Business Partners are only as effective as the other legs of the stool; make sure your operational and specialist teams are set up for success as well as the Business Partners
Recruit excellent people and empower them with autonomy to do what's best for the specific context of their practice group
In the short term, look for signs of trust being built with partners and fee earners. In the longer term, look for meaningful improvements in financial performance and set objectives around these
It's a complex topic, and one that's come up a few times over the past couple of months. Always welcome thoughts and a discussion in this area.
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