Professional services firms are adapting quickly to a rapidly changing marketplace in the current challenging economic and business environment, with firms determined to build stronger and deeper relationships with customers.

However, our recent survey of 500 business leaders, including 50 from the professional services sector, suggests firms face a number of inter-linked challenges as they attempt to move forward.

“The sector is on a journey,” says David Weaver, our Head of Professional and Business Services. “As the partnership model evolves and businesses need capital to step up, firms are also grappling with a skills shortage and the focus on culture and values.”

Our survey, and interviews with industry leaders, underlines this point. Firms in the sector are beginning to embrace sustainability in the broader sense, it suggests. They’re trying to be more imaginative about recruitment and retention, and they’re looking at how technology can resolve issues and support growth. And firms already future-proofing their business are leading the way.

Professional services firms that do not move more quickly on sustainability risk losing competitive advantage. Some 80% of the firms in this research think they are at risk of losing customers if they cannot demonstrate their sustainability credentials. Of those, 37% expect these losses to occur within two years.

In your view, is your business at risk of losing customers if you are unable to demonstrate sustainability credentials? (% of professional services respondents)

The challenge, however, is to tackle sustainability in the broadest sense of the word. “Much of the focus is exclusively around the carbon footprint,” says Joanna Kingston-Davies, Group COO of The MAPD Group, a nationwide group of law firms underpinned by a sense of purpose. “I’m not for one moment minimising the importance of that, but we need to think bigger.

“The pandemic made us all question what we want from life and these questions are about your sense of purpose – we are constantly trying to raise the bar on everything we do.”

Certainly, professional services firms must embrace their environmental responsibilities – and while they may have relatively small emissions themselves, this will increasingly mean focusing on the supply chain too.

But firms also need to think more holistically about what being sustainable means. More than half the professional services firms surveyed (54%) agree they have yet to think of sustainability as more than just an environmental issue.

“We defined our values as an organisation two years ago and we’re in the process of touring our offices to update staff and reinforce the idea that we want to be known for is fairness and inclusivity, but also to consider how we interact with clients in these areas,” says Richard Medd, Managing Partner at law firm Browne Jacobson. “We are keen to positively impact the communities around us in lots of different ways.”

This approach reflects the personal values of Browne Jacobson’s management team, Richard says, but it is also a commercial imperative. Key stakeholder groups – staff, clients and regulators, for example – are looking to work with firms that share their values.

For some in the sector, this suggests there is catching up to do. While 72% of professional services firms see risk management as a key feature of sustainable businesses, they underplay other goals such as having a purpose-led working culture and a diverse supply chain.

• Look beyond environmental sustainability to a broader focus on purpose.
• Understand which aspects of sustainability are important to key stakeholder groups.
• Be ready to articulate the business’s mission and purpose in practical terms.

Professional services firms face a bitter war for talent, with more than half (56%) seeing skills shortages as one of the top three challenges they will face over the next one to three years.

One way to compete is to offer employees the opportunity to work in ways that suit them. For example, 64% of firms in the sector offer, or plan to offer, hybrid and flexible working and 52% intend to trial four-day working weeks over next three years – a higher number than in any other industry in the FutureFit research.

However, the sector’s leaders urge their peers to also think harder about what potential employees are looking for in an employer. An embrace of purpose could prove crucial to recruitment and retention, they say, particularly for younger generations who consistently report wanting to work for organisations whose values they share.

For now, however, only 42% of professional services firms have published a purpose statement.  “It helps to have an ethos that cares about people – and enabling people to get the most out of themselves, in ways that are important to them, rather than just focusing on salary,” says Joanna. “It won’t entirely protect you from attrition, but it does make a difference.”

Richard argues that professional services firms may also be selling themselves short by recruiting from an unnecessarily shallow pool of labour.

“We’ve challenged ourselves about where we look for talent,” he explains. “We’re the number one ranked firm on the social mobility index. We’re doing lots of outreach in schools and universities. And we’re considering different routes for talent to come through, such as apprenticeships.”

Joanna agrees. “We are focusing increasingly on how people with neurodiversity can have an amazing recruitment experience. Not every new recruit wants to fill in forms and come in for an interview, so we try to ask people individually how they would like us to approach the process. Some people would prefer to send us a TikTok than a CV!”

• Embrace new working models such as flexible and hybrid practices.
• Build a shared sense of purpose and values with employees.
• Expand the talent pool with more inclusive recruitment policies.

Technology-driven innovation is crucial for many professional services firms – 44% of the firms surveyed say they have already invested in digital transformation. Now they are looking to go further, as 52% plan to invest in artificial intelligence (AI) technologies over the next three years.

The key, argues Joanna, is to focus on business need. “We’re a business enabled by technology, not a technology business. That’s really important to us – where technology helps is by streamlining the process and workflows so that we have more time to talk to our clients.”

Indeed, clients are unlikely to be impressed by technology itself, Joanna says – they simply want a better service. She points to a knowledge transfer partnership with Manchester University through which MAPD is building an AI system to help it understand client personalities and how to work more effectively with different types of customers.

Other firms are also focusing on technology as an enabler of business development and strategic planning. For example, almost two-thirds of professional services firms (64%) are prioritising the use of data and analytics to give them a better understanding of their businesses.

The bottom line, says Richard, is to look through the claims of technology providers to understand what will deliver genuine advantage for the business. “Working out where to focus digital investment is challenging. Communication and collaboration tools have universal appeal, but if like us you have a diverse range of services and clients, you’ll need to explore which elements of automation, AI and other technologies will deliver benefits.”

• Focus on what technology can achieve for your business, rather than technology for its own sake.
• Use digital technology to streamline operations and free up time for value-additive work.
• Identify what is needed in different parts of the business, rather than applying identical solutions.

What does ‘future fit’ look like in the professional services sector? In practice, explains David Weaver, it means recognising that priority areas on the sector’s “to-do” list are inextricably linked. Focusing on purpose, for example, may help with recruitment and retention. Technology can strip out repetitive work, making for more fulfilling roles.

“To future-proof their businesses, trailblazers look beyond the most simplistic steps to a more holistic approach,” he says. “They’re focused on key issues – staff engagement, client attraction and engagement, productivity and agile working, and technology, including cybersecurity.

“They are also looking at firm finances – the pandemic underlined that you can’t be future fit without having strong financial foundations.”