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Business management

Life after coronavirus: professional services

A new research project by NatWest group principal economist Stephen Blackman looks at the five areas of our life most likely to be impacted by the coronavirus pandemic.

A year ago, professional services firms were piloting ideas from the leading edge of the digital transition. Digital signatures. Blockchain. Cloud-based document repositories. Virtual audits. Document review by artificial intelligence. Even drones for claims management.

At the time, they could have expected a cautious, smooth evolution. It’s correct to be cautious about these changes. In many cases, they would revolutionise structures and processes that have been in place as long as the firms that use them. For our professional services customers, the quality and professionalism of their work is the foundation of their success. It is who they are.

Fast-forward to today. As for every business, the Covid-19 learning curve has been steep, and the transition accelerated. Perhaps one of the encouraging things that lawyers, accountants, consultants, architects and surveyors can take from this challenging time is that not only is change possible, but a digital-first approach could also be a catalyst for their business.

But if some of the traditional ideas are modified or even discarded, what replaces them? While this is an uncertain time, trends both inside and outside the sector give us a good idea.

Nation & Society

If we rely more on the government to support our businesses, communities and families, or to keep us informed, then there will be even more of an emphasis on how to contextualise and analyse data, and present it in a timely way. For firms that are working with the public sector – or wish to do that – there’s clearly even more need to emphasise this aspect of their business. This is likely to favour those firms with the scale and scope to take on what could well be fundamental, multi-year projects.

For professional services firms, it means accelerating their investment in these abilities. For example, the pandemic has shown the need for accurate, real-time data in health and the economy – the sort of insight that AI and automation can help deliver. But it will also require unprecedented agility from those firms that are working on these projects. That means flexible teams, the ability to work anywhere and increased levels of specialisation.

Work & Play

These are not easy things to deliver within hierarchies and management structures that were designed many years ago, partly to provide continuity and stability. The challenge now is to provide those attributes while also empowering a new generation focused on how best to change working practices and, perhaps, the entrenched attitudes that would slow down this evolution.

An example of the debate around new working practices is whether working outside of the office harms productivity. When a partner, or a business unit, is measured by its billings, anything that damages productivity is a first-order problem. But in speaking to our customers in professional services, we hear that lockdown has delivered some good news in this respect. Freed from the need to commute, and maybe sleeping a little more, fee-earners have often improved their productivity.

Long-term, if the skilled staff that are the foundation of any professional services firm are dispersed, the information they need to do their jobs must reach them securely and in a timely way. Reorganising workflows to eliminate paper, or to automate drudge work without reputational risk, is an innovation that will take many months. But the firms that do this well will reap incredible benefits. Not only will they be more resilient and able to respond quickly to changed circumstances, but they will also cut overheads and be able to scale up and down.

Place & Community

Already, as part of this, many firms we are working with are re-evaluating their office space requirements. It will still be essential to have places to meet and collaborate, to speak with clients, to be creative. This is particularly true for new members of staff, who must be able to forge trusted relationships and use collaborative time to learn the undocumented skills they will need. Business development also relies on some face-to-face contact with clients.

Perhaps one of the encouraging things that professionals can take from this challenging time is that not only is change possible, but a digital-first approach could also be a catalyst for their business

So professional services firms will undoubtedly want a central location – though one that may be reconfigured to favour teamwork over desk work. But, over time, will they need several locations in large cities? Unlikely.

Economy & Finance

This may well encourage a different financial arrangement for many in the sector. Many professional services firms limit the amount of profit they retain because it is shared among the skilled people who create sustainable success – for example, among the equity partners. This has always limited the amount of debt that firms can take on. In the medium term, this may not be optimal: seizing this opportunity may require increased investment.

One way to achieve this is to focus more on the finance side of the business. In the early months of the pandemic, many firms that we work with prioritised cash flow in a way they never had before, for example collecting fees in a more timely way. The result was to significantly improve their cash position almost overnight.

Health & Meaning

The challenges are daunting, but the rewards are exciting. Talented staff will be drawn to a firm that is investing in its future, prioritises flexible ways of working that attract a diverse workforce, and leads the way in delivering the essential services that support both public and private sectors in their own development. The transition may force a fundamental re-evaluation of business priorities and client relationships, but it will also create sustainable, resilient firms that are fit for the future.

Megatrends: five essentials for professional services
  • Evaluate existing innovation initiatives and accelerate those that will deliver the most value.
  • Adapt to changing workflows using technology that supports flexibility with security.
  • Rethink the need for, and function of, your office space.
  • Adjust professional development to suit flexible working and the next generation.
  • Consider whether you need to fund investment in the firm, improving cash flow, taking on debt, and ensuring the pipeline of future business is protected.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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