Managing The Professional Service Firm
When the going gets tough, companies often get desperate. So it should be no surprise that during the coronavirus pandemic and the concomitant economic crisis, professional service firms (PSFs) have been chasing after all kinds of business just to keep the lights on. We see this over and over: consultancies, law firms, accounting firms, and the like offering services and signing up clients they should never have considered. This approach to shoring up billings is perilous.
Managing the professional service firm
Profitability of publicly owned professional service companies is driven by these four plus two additional drivers: debt to equity ratio, also known as financial leverage, and capital intensity, which is capital employed per senior professional.
Leverage is low for rocket science and gray-hair practices because their clients expect senior professionals to contribute significantly to service delivery. Clients of procedure and commodity practices, on the other hand, expect junior professionals to do most of the work under the oversight of senior ones.
There are two reasons for such misalignment. One is pride that sometimes borders on arrogance. Professionals often overestimate the distinctiveness of their offerings. The other is that over time a practice drifts to the left on the spectrum. It may have started out as specialized but gets commoditized as competitors copy its offerings, clients internalize some elements of the service, technology helps diffuse knowledge, and people move, taking their expertise to other firms. What was rocket science yesterday becomes gray hair today, procedure tomorrow, and commodity the day after.
Broadly, there are two client segments in this quadrant. The first are unwaveringly loyal clients. They deeply value the services provided and will pay a premium to keep getting them. This may seem irrational at the transaction level, but it makes sense when viewed through the lens of a long-term relationship. The clients are happy to reward a practice for past assistance and a guarantee of continued service. The costs of serving them can drop as a practice becomes better at acquiring and retaining professionals to support them.
Second, most professional services have a strong component of face-to-face interaction with the client. As a consequence, definitions of quality and service take on special meanings and must be managed carefully. Very special skills are required of top performers.
Managing the Professional Service Firm is a book by David H. Maister, a Harvard Business School professor and professional service firm consultant. The book is a compilation of 32 articles written over the preceding ten years and covers topics from strategy to profitability, marketing to motivating employees.
Two characteristics make professional service firms different from other companies. First, most of their work demands a very high level of customization. Second, practitioners engage in a significant amount of personal client interaction. As a result of these characteristics, professional service firms rely totally on the quality of their employees. Since qualified people are so critical, professional service firms frequently are engaged simultaneously in seeking qualified people and trying to create high-quality, customized output. To accomplish great work for their clients, these firms must balance "service, satisfaction and success."
To conduct business, professional service firms have to balance the number of junior, middle and senior level staff members against the type of work they produce. The kinds of services the firm delivers determines the number of people it needs in each category, and that determines its "leverage," that is, the "ratio of junior to senior professional staff." Generally speaking, professional service firms fall into three categories:
The Oxford Leading Professional Service Firms Programme is designed to provide a crucial market edge to the senior leaders and partners responsible for managing PSFs. Senior managers and partners working within consulting and professional services, and professionals from industries such as finance, law, and IT, will have the opportunity to optimise their skills by focusing on leadership, strategic planning, and innovation. Gain the skills to create a strategy for innovation and growth, and secure a competitive advantage for you and your firm.
As you may know, this requires some juggling. So, while the answer to another question may elude you, it won't for long: What is a compelling way to reduce the number of hats a small-business owner wears to wearing only one hat? Answer: by outsourcing the necessary tasks to professional services firms, which have perfected the practice of wearing only one hat.
This is one business definition that won't leave you scratching your head. Professional services firms literally offer professional services that can span multiple industries, including finance, legal, marketing and virtually every type of consultant you can think of.
With the exception of marketing and business development, many small-business owners pass off tasks to professional services firms that form the periphery of their business, outsourcing company Accountability says.
Managing the Professional Service Firm by David H. Maister is a must-read book for anyone running a professional services business. For too long, I thought that a digital creative firm like Barrel was somehow special and played by different rules than consulting, legal, accounting, or architecture/design businesses. Wrong.
It became quickly apparent in the first few pages of the book that Barrel operates in the same way as any other professional service firm and that core concepts such as client satisfaction, skill building, productivity, and getting better business were 100% applicable to the work that we do day in and day out.
Today, millions of people work at over onemillion professional service firms generating over $2 trillion inrevenue annually. These firms face unique issues that are not fullyunderstood by management thinkers and consultants. Making mattersmore complex is that many of these firms stand at a crossroads,searching for new strategies and practices to succeed in aradically new economy. In The Art of Managing ProfessionalServices, Maureen Broderick offers the solution.
I have spent my professional life in and among such firms, including eight years at McKinsey & Co., arguably the world's premier general-management consultancy. From first-hand observations and subsequent reflection, here are factors that distinguish the winners from the losers.
PEOPLE. People ought to come first, even before customers, in any organization. But professional service firms are their people. The care and feeding of consultants, accountants, programmers, lawyers, and the increasingly important support staff must be task number one for these concerns.
McKinsey also devotes equal time to formal evaluation. More important, continuous coaching occurs on the job, and coaching skill among those aspiring to partnership is a major consideration in promotion. As times and technologies change, formal training must play a more central role. Most professional firms push to book "billable hours," but not overemphasizing on-the-job training is increasingly perilous.
The chief argument for fresh caught is burnout. Many professional service careers are young men's and women's games. Travel and client demands abuse body and soul. A 35-year-old recruit, who worked at just one or two sites for one company, may have a tough time with the usual professional service firm tumult. On the other hand, management consultants are notorious for designing brilliant, but non-implementable, schemes. Real-world, first-hand experience is invaluable.
As to "up or out," professional-service firms simply cannot afford lethargic performance. But to make "up or out" work, the "out" result must be as painless as possible. McKinsey's senior persons pull every string to assist next-job placement. The firm also painstakingly nurtures its "alumni." The distinction between "quits" and "outs" among alumni soon fades, replaced by a "once a Marine, always a Marine" ethos.
I chuckled when the term "relationship management" came into vogue, with outfits such as IBM held up as paragons. Nurturing customer relationships over time, much like courtship and marriage, is the sine qua non for every successful professional service firm. Yet too much emphasis on relationship management can deteriorate into realization of the old consultant joke: "They borrow your watch, then tell you what time it is, and charge you an arm and a leg for the privilege of having them do so."
Over the last few months Openside have extensively researched the role of Millennials in professional services with regards to their attitudes and existing skills set and it has become clear that some firms have already started to adapt their policies and procedures to satisfy the unique attitudes, desires and expectations of their Millennial employees.
Is it possible for professional services firms to align the expectations of their Millennial workforce with their own expectations as an employer, which are, in turn, based on the expectations of clients?
In summary, strict rules, long hours, a process driven approach and a lack of career progression often associated with professional services is likely to kill off the adventurous and ambitious Millennial.
In defence of Millennials, it would be unfair to suggest that those entering and working in the world of professional services are not realistic about the world within which they have chosen to work. Recent studies suggest the majority of Millennials understand well the expectations of the business world they are entering.
This is an understandable position when one considers that each new generation over the years has often questioned the actions taken by those in authority and yet, professional services cultures have predominantly remained unchanged. 041b061a72