Baschab J., Piot J. – The professional services firm. Bible

T H E

PROFESSIONAL

SERVICES FIRM

B I B L E

JOHN BASCHAB

JON PIOT

Contents:

Preface

ix

Acknowledgments

xiii

About the Authors

xv

SECTION I

Managing and Governing the Professional

Services Firm

1

Managing the Professional Services Firm

3

John Baschab, Jon Piot, and Robert H. Schwartz

2

Professional Services Firm Benchmarking

16

Gina Gutzeit

3

Partnership and Governance Structures

53

John J. Reddish

SECTION II

The Front Office: Driving Sales and Growth

4

Sales Management

77

Jana Carpenter

5

Marketing and Business Development

121

Bryan J. Wick

6

Service Line and Intellectual Property Creation

143

Thomas Marbach

7

Proposal and Reference Management

158

Tim Bourgeois

8

Strategic Partnering

180

T. Gregory Bender

v

vi

Contents

SECTION III

The Organization: Attracting and

Retaining the Best Professionals

9

Organization Structure

197

Frank Ribeiro

10

Career Tracks, Compensation, and

Professional Development

217

John Baschab and Jon Piot

11

Professional Staff Recruiting and Retention

237

Brant C. Martin

SECTION IV

Services Delivery: Taking Care of Business

12

Service Delivery

265

D. Michael McDowell

13

Resource Management

284

Joe Santana

14

Risk Management and Quality Assurance

316

John Baschab and Jon Piot

SECTION V

The Back Office: Efficient Firm Operations

15

Finance, Accounting, and Human Resources

337

Jeffery B. Nemy

16

Purchasing, Procurement, Vendor, and

Asset Management

383

John Baschab and Jon Piot

17

Information Technology

431

John Baschab, Craig E. Courter, and Jon Piot

18

Real Estate and Facilities

466

K. Todd Phillips

Contents

vii

19

Legal Counsel

495

Scott M. McElhaney and Michael W. Malakoff

20

Office Management

531

Index

535

Preface

If you assessed the available books on the topic of managing professional service firms, you probably arrived at the same conclusion we did about a year ago. You can find over a hundred books on the topic. Ninety-five percent of these books are written for the independent consultant who wants to learn how to incorporate, how to develop a proposal, how to sell themselves, and how to individually deliver a project to a client. The other 5 percent of the published books target the executives of large, national consultancies with thousands of consultants/employees. There were no books available to help the professional service firm with any where from 2 to 1,000 professionals. Yet, almost 75 percent of all professional services companies are in this group. In the books for independent consultants, you learn the basics (e.g., how to act on the client site, what the start-up costs are). In the books for large consultancies, you learn how to expand internationally or about developing philosophies. In this book, you learn how to grow an existing firm. You learn at what points you need to make decisions such as adding administrative support, opening another office, building another service line. You learn how to determine what is the best sales organization structure for your firm. You learn what information systems you need to build and when. This book is for the growing consulting company and its associates and management.

The bulk of our consulting experience has been in the technology consulting and management consulting fields. We have had interesting consulting problems involving 50,000-, 2,000-, and 500-person consulting organizations.

Significant input in this book has come from lawyers, accountants, doctors, and many other professionals. The contributing authors have varied and successful professional services backgrounds. This book consolidates the best practices for the mid-size consulting company. We have observed consistent patterns of success and failure in consulting and have been fortunate enough to survive them. The main goal of any professional services company is to add enough value to your clients that they will pay you enough to cover your costs and make a decent profit. We have captured the lessons learned and the tools, techniques, and practices that can help a professional services firm as it grows to include more and more professionals.

ix

x

Preface

Benefits for the Reader

From this book, you gain valuable skills, including:

• Identifying the main management areas of a successful professional services firm.

• Understanding of the scope and key success factors in each manage-

ment area.

• Developing approaches for auditing current performance by area.

• Understanding the main sources of wasted resources.

• Identifying the industry average spending and investment commitments by area and professional services type.

• Distinguishing the business of managing the firm from the delivery of professional services.

• Understanding symptoms and sources of professional services firm inefficiencies.

• Learning the critical improvement steps in each of the main management areas.

• Learning how to make better decisions in firm strategy and direction setting, hiring practices, operations, technology, marketing, and overall management.

• Using specific cases and anecdotes from professional services firms to illuminate and further explain the material.

• Becoming familiar with specific advice from well-known practitioners in each of the service areas.

• Achieving higher utilization from their existing professional services assets/consultants.

• Achieving higher ROI from capital and operating expenses.

In addition, you develop a keen understanding of not only the building blocks of successful firm management, but also how to grow and leverage current assets.

Language Specific to Professional Services

There are terms we use repeatedly throughout the book. These terms are used throughout the field. They are:

• Backlog: The value of committed sales contracts that will be executed in the future.

Preface

xi

• Bill rate: The average billing rate to the client achieved by a particular or group of professionals. In many cases, firms will “set” standard bill rates for classes of professionals.

• Billability: The total hours billed during a specified period (e.g., year) divided by the total hours available in during the same period. For example, a lawyer that bills 2,000 hours in a year where 2,000 hours are available for work would have 100 percent billability. Also called Utilization rate.

• Billable: The status of a professional when they are billing time to clients generally for a protracted amount of time.

• Client: The customers of a professional services firm.

• Firm: The professional services business or company.

• Gross margin: Calculated as Bill rate minus loaded pay rate.

• Leverage ratio: The ratio of junior staff to senior staff. If there are 10

professionals working under a partner, the leverage ratio would be 10

to 1.

• Loaded pay rate: Loaded pay rate includes the professionals base pay rate plus taxes and benefits.

• Partner: Term used to describe a senior member of a professional services firm. A partner typically has the same rights as an owner of the business.

• Principal: Term used to describe a senior member of a professional services firm that works just under the partner.

• Professional staff: Term for firm employees directly engaged in providing services to clients.

• Service revenue: Revenue associated with billable time.

• Staff: Term used to describe support personal (e.g., administrative assistants) also called administrative staff.

• Utilization rate: See Billability.

Acknowledgments

Clearly, an endeavor of this type is the end-result of countless investments by mentors, clients, friends, and teachers.

This book was a major collaborative effort on the part of many people. In addition to our contributing authors, we would like to thank the following people for their invaluable contributions:

• John Martin

• John Rosenbaum

• Manish Limaye

• Chris Loope

• Audrey Penrose

• Jay Espaillat

We would also like to thank our agent Neil Salkind and the team at Studio B, as well as Matt Holt and Tamara Hummel, at John Wiley & Sons. Their continued support and expert counsel is much appreciated.

We’d like to recognize the special people in our lives who lose us for weeks on end with an endeavor like this: Susan, Lauren, Allison, and Will Piot, and Mary, Emily, and Will Baschab.

xiii

About the Authors

This book was a major collaborative effort that involved untold hours on the part of many people. We were fortunate to have some of the best minds in professional services contribute to this book. All the professionals listed here contributed significantly to the entire process from design, content, to writing, editing, and publishing.

Primary Authors

JOHN BASCHAB began his career with a degree in MIS from the University of Alabama, where he was selected as the top student in his major by university faculty and was awarded the prestigious Seebeck Award for achievement in computer science. John continued his career in the IT department of Bell-South and at Intergraph Corp. After receiving his MBA with honors in behavioral science from the University of Chicago Graduate School of Business, John worked as a technology consultant to Fortune 500 companies in the Chicago office of management consultancy Booz Allen Hamilton. John is a cofounder of Impact Innovations Group, a privately held management and technology consulting firm. Impact Innovations employs over 400 consultants in offices in Dallas and Atlanta and manages Impact’s IT optimization practice.

JON PIOT received his degree in computer science from Southern Methodist University and joined Andersen Consulting, developing computer applications and providing technology consulting services to Fortune 500

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