Factfile 35
Why customer relationships are central to business
Relationships with customers are central to all businesses. For service businesses this extends way beyond customer data and analysis: the relationship between the company and the client and the quality and nature of the service are necessarily a major part of the product proposition and the client's experience.
This is true above all for professional services (such as law firms, accountancy practices, consultants and other business advisers). The impact of effective customer relationship management (CRM) is potentially huge and, conversely, the risks and penalties of mismanaging - or failing to manage in a conscious, planned and informed way - can also be enormous.
The centrality of CRM to professional service organisations and the essential simplicity of their business model mean that their experience can be helpful to organisations in other business sectors.
Professional service firms as a model
Professional service firms present some unusual characteristics that create interesting management challenges.
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As partnerships rather than companies, those that have the prime interface with clients (the partners) often enjoy a high level of autonomy and normal management authority is reduced: new initiatives and programmes have to win the support of partners if they are to have any chance of being implemented.
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Partners often have a strong sense of personal ownership of client relationships and are unused to taking a team approach.
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Any non fee-earning activity can be seen as a distraction.
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There is often a general suspicion of management initiatives and a strong dislike of business jargon.
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In some professional service firms - in particular traditional law firms - a lock-step system of remuneration (whereby financial rewards are determined solely by length of service) removes the possibility of offering financial incentives for involvement in CRM programmes or for the achievement of specific goals.
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While these characteristics are particular to partnerships, they do mean that an approach that succeeds in such a challenging business context may well have something to offer a more conventional and receptive business environment.