Lessons from Leaders

Client Portfolio Management

by Maureen Broderick

“If you’re serving the wrong clients, you don’t have a chance for success.”  Bill Hermann, former Managing Partner, Plante & Moran

For professional service firms the client base, in effect, defines the business. Clients represent much more than a revenue stream: They are the magnet that attracts other desirable clients as well as top professionals to the firm. They help shape a firm’s brand and have a powerful influence on its reputation and standing in the marketplace.

In our research for my book, The Art of Managing Professional Services, we asked over 130 senior leaders to rate their firms on client portfolio management. Fifty-five percent of respondents gave themselves a top grade on performance in this area, as shown in the chart below. However, most indicated that they are good at individual client management – their weakness is in overall portfolio management and measurement.

Virtually all firms, whether global enterprises or niche players, allow for opportunistic client acquisitions. However, many believe they have erred too much in that direction and are far too ad hoc in their approach to acquiring clients, allowing partners to bring in new business at their discretion or reactively responding to pitch opportunities with little or no strategic planning. Traditionally, professionals have sought and served clients as part of their personal book of business – and this “lone ranger” mentality is alive and well throughout the professional service industry.

By nature, professionals like to own and protect their client relationships. They possess a natural reluctance to sever ties with clients, particularly those with whom they have long-term working relationships, no matter how unprofitable a fact-based assessment may reveal them to be. This reluctance often goes hand in hand with an unwillingness to conduct an objective profitability analysis.

A number of respondents observed that they have fallen prey to the Golden Goose syndrome: overreliance on a handful of clients who provide a major contribution to the firm’s revenues but who also result in dangerous vulnerability. We heard a number of sobering war stories about near disasters from firms that unexpectedly lost a key revenue-generating client. Everyone who runs a professional service firm understands the danger of keeping too many eggs in too few client baskets, but it is difficult not to be lulled into complacency when deep-pocket, long-term client assignments come your way. Small firms in particular tend to throw all hands on deck to manage these engagements, while long-term planning and business development to keep the new client pipeline active are put on hold.

Mastering the client management life cycle

Based on our discussions and experience in the industry, we have identified five steps to successfully manage the client cycle from concept through acquisition, retention, and renewal. The cycle begins with strategically determining and planning the client mix. As clients come onboard, they are carefully introduced into the firm and are nurtured and managed throughout the relationship via a well-defined process to sustain, grow, solicit feedback, and improve the client relationship. The cycle is completed with regular reviews of client profitability, partner management, and relationship status. Each step in the cycle is integral to building a profitable client base that sustains and nourishes the firm and its professionals.

  1. Proactively strategize and plan

    “If you truly understand your clients, and you truly understand your mix within an industry or geography, you can more effectively manage the profitability of your portfolio.”  Rike Harrison, Chief Growth Officer, Wipfli

    Expecting your business to grow opportunistically with no cohesive strategy underpinning individual efforts is rarely a recipe for success. Firms that adopt this approach run the risk of never gaining critical mass or reputation in any particular market. Leaders of the best run firms agree that the most effective way to maintain and build a strong client portfolio is to proactively plan and manage it. The process starts with an annual review of the entire client base. We have found the basic SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) to be a reliable tool for portfolio assessment. Start with the strengths – which clients are the most profitable, which provide the most promising opportunities for cross-selling or integrating additional firm services, and what type of client work offers the best platform to develop new services and skills?

    The next step is to pinpoint portfolio weaknesses. Most firms have some clients that don’t make sense from a variety of standpoints. Perhaps the most obvious is low profitability, but this can sometimes be justified if current work has the potential to lead to future, more lucrative engagements. Less obvious weaknesses are strategic and cultural mismatches. Too many pieces of business that are off target and out of sync with the firm’s traditional skill base can confuse the market, and use up a lot of senior time that could be better focused on strategic clients.

    In the next phase of the analysis, identify new business opportunities. Almost every professional service firm that we have consulted with has multiple opportunities to expand business with current clients. Time and again when we talk to clients of the firms we are working with, we uncover potential new business. And in fact, a significant number of our interviewees admitted that they do not do a good job of identifying the potential for growing current client relationships.

    Finally, a classic SWOT analysis can pinpoint inherent weaknesses in a client portfolio. Relying on too few clients creates dangerous vulnerabilities, but other threats also can seriously affect a firm’s profitability and positioning. It is always difficult to predict an economic meltdown, an unexpected merger or acquisition of a key client, or the departure of a partner with a large book of business, but top firms are fully aware of their vulnerabilities to these threats and make every effort to ensure that they are not caught off guard.

    Once the current client mix has been thoroughly reviewed and assessed, the next step is to create a vision of the ideal mix of clients that will drive the firm’s strategic direction while meshing with its values and culture. The most successful firms – both large and small – focus services around well-defined functional and industry areas of expertise. Industry is often the first screen applied to the profiling process, followed by determinations based on size, geographic dispersion, functional buyers, the competitive landscape, and an assortment of characteristics such as marquee value, emerging growth potential, level of innovation, and degree of distress.

  2. Frame the client experience

    “Client relationship management is critical. You can take nothing for granted. It’s just like building a relationship with your spouse or your friends — you have to work at it.”  Ralph Baxter, Chairman and CEO, Orrick

    Savvy firms spend time discussing and documenting their philosophy and processes to create a client experience that exemplifies the firm’s work style, values, and culture. This is an inclusive process that involves partners across the firm in an evaluation of the factors that contribute to a successful client engagement, ranging from client early-stage needs, through the quality of interactions throughout a project, to follow-up activities to identify service strengths and weaknesses. Benchmarks and ROI metrics for determining client satisfaction and client service levels are captured and assessed frequently.

    Given the importance of clients in the life of a professional service firm, we are continually surprised and dismayed by the fact that so few firms have formal “welcome aboard” programs for new clients. Most firms rely on partners to introduce new clients to the firm. This casual approach works reasonably well for many of the firms studied because professionals typically don’t become partners if they can’t retain and expand client relationships. Yet many client managers readily admit that engagement start-ups can be rocky, both for the professional service team and its new client.

    An effective onboarding program creates positive expectations, builds familiarity and trust, and demonstrates value to a client early on with the goal of transforming an initial engagement into a long-term relationship. The best-led PSFs use a carefully selected mix of onboarding approaches that go well beyond standard “let’s get acquainted” letters and meetings. They view the initial honeymoon phase as the launchpad for a carefully orchestrated relationship-building strategy (For more onboarding practices listen to Four Tips for Bringing in New Clients).

  3. Sustain and grow accounts

    “Every client has a coordinating partner responsible for overseeing the delivery of services and managing the client relationship.”

    Firms strongly committed to developing a comprehensive client strategy recognize that someone must be responsible for developing and monitoring every aspect of an integrated client program. Although top management owns the overall strategy, responsibility cascades to business unit leaders and individual partners and professionals to manage and monitor client relationships, solicit feedback, and review and measure progress.

    Forward-thinking firms have a detailed plan for each of their high-performing clients — that 20 percent or so of their client base that typically provides most of their business. The primary goal is to build a framework for a consistent, client management plan aimed at cultivating optimal clients. A good client plan features a clearly delineated profile of client resources and service needs, includes a service progression map built around a revenue strategy, and has a tracking process and benchmarks for measuring progress against objectives. In a formal client plan, roles and responsibilities are clearly laid out. Client ownership is well defined — not just from a service perspective, but in terms of accountability for expanding the client relationship and generating additional business (see below: Client Management at Ernst & Young).

  4. Solicit client feedback

    “Clearly, getting feedback from your clients is like gold dust. It’s of immense value.”

    In the best-run firms, client opinions and recommendations are an integral part of service testing and innovation, structure and process improvements, and relationship management. Clients are contacted to solicit their viewpoints formally in periodic surveys or informally during regular engagement interactions. Some firms pilot new offerings and service delivery concepts with key clients to test-run ideas and deepen their commitment to and involvement with the firm.

    The most common feedback tool is some form of survey, whether face to face or online. Many years of conducting interviews both in person and via telephone have given us a bias toward having conversations rather than relying entirely on an online survey. However, some firms use online surveys as a first step, with in-person or phone conversations as a second-level vehicle if the initial online survey uncovers less-than-satisfactory results.

    A number of firms across the industry have well-defined and well-executed programs to regularly obtain feedback and mine it for relationship-building data. Some rely on their leadership team and staff to spearhead the feedback process, and others use third-party interviewers. Most who survey their clients do so annually.

  5. Review results, establish rewards and accountability

    “We don’t trust our data on client profitability. We’re working toward it. I’d say we do it well enough to be directional. We’re continually pushing to make our systems better”

    By far the most politically challenging stage in client life cycle management is assessing and fine-tuning performance. This involves reviewing client service results, taking definitive action based on feedback and financials, and rewarding good performance and mitigating average or poor performance. In general, firms review and measure performance across three dimensions: Are the clients happy? Are the partners doing a good job? Is the firm making any money?

    Client feedback programs provide input on relationship status, problem areas and needed service improvements. Some firms tie feedback results into personnel evaluations and flag areas for improvement, and others, with formal client plans, review plan goals against performance which in turn links to compensation. And some firms — not enough in our opinion — conduct formal profitability reviews of each client and actually terminate unprofitable relationships.

    Technology is markedly improving data gathering in this area. Dashboards, that offer real-time reporting, highlight the impact of increased profitability on effective portfolio management and spotlight the negative effects of low-return clients on the firm’s bottom line.


Client Management at Ernst & Young

According to Jim Turley, Chairman of Ernst & Young Global, “At EY, the client is the center of the universe.” As a major global PSF, the organization’s client base is large and diverse with a wide spectrum of needs. To deliver consistent service across the portfolio, EY adopted a multi-level, account-centric client approach to service delivery:

  • Account segments: The organization strategically classifies its clients into several categories based on the size and service needs of the client. The objective is to calibrate service levels to client needs or as Turley explains, “to better serve clients where and how they need to be served.” Major multinational clients, for example, require seamless service across the globe from a well-coordinated account team, while an emerging growth client needs hands-on attention from a team which is familiar with the needs of fast growing companies. The segmentation helps EY deliver the types of services required for each client. EY reviews the segment distribution on an annual basis and makes adjustments based on changing client needs.
  • Coordinating partner: Every client has a coordinating partner (CP) who is responsible for overseeing the delivery of services and managing the overall client relationship. The CPs are selected based on their specific skill sets and usually reside in close geographic proximity to the client — account teams for multinational companies are typically led by a partner based at the company headquarters. For the largest accounts the CPs are required to develop an annual client plan to address the service needs of the client and deepen the relationship. Account plans are reviewed and approved by senior leadership and are monitored regularly for service quality and staffing consistency.
  • Assessment of service quality (ASQ): EY monitors client satisfaction throughout the year through a formal and rigorous process called ASQ which is executed locally and monitored at the global level. A person independent of the account team meets with a number of senior executives — including the audit committee, board members and senior management — to assess the relationship status. The ASQ leader files a written report and any risk areas are promptly communicated to the CP and quickly addressed. For the firm’s largest accounts, the reviews are conducted annually; other accounts are reviewed on a rotating basis.

Turley emphasizes that, to grow the business, EY is looking for profitable work with clients it can serve in a quality way. The client management program supports this goal and creates a win-win situation for both the organization and its clients.


 Maureen Broderick is founder and CEO of Broderick & Company (www.broderickco.com), a consulting firm specializing in strategy, training, and research for professional services. Her new book, The Art of Managing Professional Services: Insights from Leaders of the World’s Top Firms was published in November 2010 by Wharton School Publishing.