Choosing a "Relactional" Model of Delivering Professional Services over the Prevailing 'One Off' Transactional Model

Todd Wilkowski

Todd Wilkowski, Frost Brown Todd
February 2016

In the words of the late great Yogi Berra, “It’s like déjà vu all over again.” Decades ago, most companies in the private sector relied on an outside lawyer as a trusted business advisor to advise and guide them on myriad legal and non-legal matters involving their business strategy and risk management issues as well as personal family matters. These trusted business advisors had deep and well-established relationships with the company’s decision-makers at all levels and spent a great deal of time developing a deep and profound knowledge of the company’s business operations and its industry challenges and opportunities. While these individuals were adept at assisting their clients in the daily “firefighting” inherent in the company’s ongoing operations, they remained focused on encouraging and equipping the company’s leaders to not lose focus on long-term growth strategy and opportunities. Over time, for one reason or another, many of these relationships transformed into “one off”, sporadic transactions with hired gun specialists who largely operated in a reactionary mode to a company’s problems or who were just called in to “paper the deal.” Frankly, this largely describes the current delivery model of services within many professional service industries, from legal to accounting to banking.

However, many companies that are growing and focusing on how to structure and scale to best ensure long-term sustainability and address strategic risk issues and opportunities are again seeking trusted business advisors with practical experience and knowledge to provide them with proactive problem resolution and “get to yes” advice. They want advisors that will equip and empower them to make good business decisions that facilitate new opportunities, not impede them. Many of them want their advisors to invest in deeper relationships with them and develop a more profound understanding of their business to better ensure that any advice is customized and tailored to their particular issues and opportunities and their risk appetite (both from a defensive and offensive posture). Most entrepreneurs eat “risk for breakfast” and most companies understand that risk is necessary and correlative to better return and margin. They know they can’t “wrap themselves in bubble wrap” and insulate themselves from and avoid all risk; rather, they need to leverage risk for greater opportunity and growth.

These trusted business advisors invest significant time upfront in the relationship so they can intimately know the companies’ challenges, risks and opportunities. Despite the nuances in different industries, these private, closely held and/or family-owned companies face many of the same issues: (1) developing and implementing a business succession/exit strategy; (2) winning the “war for talent” by attracting and retaining the best talent (by providing incentives to share in the company’s growth besides an equity grant; (3) deepening the company’s leadership bench; (4) growing profitably, i.e. organically or by acquisition or merger; (5) better identifying and refining their “Blue Ocean”, decommoditizing value proposition and services niche; and (6) proactively addressing a host of other strategic issues that continue to keep their leaders “up at night”.

Fortunately, what’s old is new again. Companies still need outside business advisors in all disciplines who truly how the company makes money and have built trust with key decision makers. Based on my experience as general counsel of a large private business, I observed a growing trend that many larger companies increased in-house legal counsel hiring to directly address a lack of comprehensive, integrated support from outside lawyers. However, many private, closely-held companies are neither culturally nor financially ready to hire someone to provide these services in-house, especially as they attempt to remain “lean and mean” and control overhead.

Successful and sustainable companies understand that profitable business is based on relationships, not just a series of “one off transactions”. In fact, the strength of the relationship typically is the best “decommoditizing” factor since trusted relationships cannot be simply replaced overnight, largely based on the time that have been invested, the struggles and challenges that have been shared, and the advisors’ intimate knowledge of the company and deep relationships with its leaders at all levels.

So, this begs the question, why shouldn’t companies insist upon these types of trusted relationships with all of their outside business advisors? Answer: they should! After all, this is where outside advisors can best ensure they are best providing value and “thinking ahead” for their clients, not getting stuck in reactionary mode. Companies should move towards “relactional” relationships with these advisors, i.e. a deep relationship, from which transactions naturally emanate versus settling for a series of “one off” transactions with no underlying relational foundation. After all, this is not what these companies desire in their client relationships so it shouldn’t be acceptable in relationships with their outside service providers.

Hard to believe that we’re over a month into 2016. Most New Years’ resolutions are long-forgotten but it’s not too late to make a new one: transition from pure transactional dealings to “relactional” relationships with your outside business advisors. If they are unwilling or unable to make the transition, it may be time to look for new ones. Implementing this one initiative will better ensure greater value add for your outside spend and significant corresponding positive impact to your bottom line.