When developing, managing, or expanding the human resources depart-
ment to meet a company’s changing needs, it is important to focus on the services HR provides. A firm’s approach to building and staffing its HR function should parallel its approach to client service and should be guided by some key qualitative and quantitative determinations. Service firms understand the need to not staff a client engagement or project with too many or too few professionals or too inexperienced or too senior professionals. Similarly, firms should seek the same balance of staff to handle the most important element
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Managing and Governing the Professional Services Firm
in its own organization—its people, also known as “the inventory that goes home at night.” Exhibits 2.16 and 2.17 illustrate target ratios of partner to professional staff for law firms and management consulting firms.26, 27
PARTNER LEVERAGE
For each partner in a typical management consulting firm, there are an additional five to six FTEs in other positions. This includes other professional positions, leveraged at 125 to 175, and a support staff position.
AVERAGE PERSONNEL RATIOS BY FIRM SIZE FOR LAW FIRMS
As the size of the firm increases, the ratio of associates to partners/shareholders increases. The most significant increase occurs when firms grow from 75 to 150 lawyers to greater than 150 lawyers. The ratio of associate to partner/shareholder jumps from 0.69 to nearly 1.
No organization achieves 100 percent satisfaction among employees; however, the firm must strive for high levels to ensure proper retention of professional staff and high-quality delivery of services. As a company grows, it is imperative to instill equality and to document the company’s policies and Exhibit 2.16
Partner Leverage
Professional Services Firm Benchmarking
47
1.00
.98
.90
.80
.70
.69
tio .60
Ra
.61
.57
.50
.52
.40
.30
.36
.20
Less than 9
9 to 20
21 to 40
41 to 75
76 to 150
Over 150
Number of attorneys in firm
Exhibit 2.17
Average Personnel Ratios
procedures. Whether your firm has 20 or 1,000 employees, you must have an employee handbook that outlines everything that affects how employees are treated. Rules are helpful both in sports and professional arenas, and employees want to know what the rules are and what happens when they are not followed. In many ways, a firm’s employee handbook mirrors its approach to business, where attention to detail and explanations of services are provided.
Consequently, an employee handbook can serve as a good benchmarking
tool. (The CD-ROM accompanying this book includes a sample listing of policies and procedures that should be considered for inclusion in standard employee handbooks.) Chapters 10 and 11 cover the topic of employee retention and satisfaction in more detail.
Applications and Limits of Benchmarking
Benchmarking can be an invaluable tool for the professional services firm executives. While it can provide insight for improvement in areas such as quality, costs, revenue, and time, benchmarking does not provide the definitive answer to every business problem. As with any analytical tool, benchmarking has a number of limitations and can even pose potential challenges. However, none of these need be insurmountable. In fact, attuned executives can use the following issues to their advantage during the early stages of the
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Managing and Governing the Professional Services Firm
benchmarking process, when they can serve to clarify thinking and intent.
We have demonstrated a few areas that the professional services firm may consider benchmarking. The senior executives within a given firm will undoubtedly identify a variety of additional areas that can be improved and monitored with benchmarks.
Benchmarkers Beware
Common pitfalls that can cause potential problems in benchmarking include:
• Objective of the benchmarking process is not clearly defined.
• Level in scope set is too detailed or not detailed enough to be used for implementation.
• Confusing benchmarking with participating in a survey. Benchmarking is the process of finding out what is behind the numbers, not just where you rank.
• Believes that pre-existing benchmarks can be found. These may not be applicable to your firm; therefore, you must identify your own benchmarking partners.
• The process is too large and complex to be manageable.
• Confusing benchmarking with research. Benchmarking presupposes that you are working on an existing process that has been in operation long enough to have some data about its effectiveness and its resource costs.
• Misalignment—choosing a benchmarking topic that is not aligned with the overall strategy and goals of the business.
• Selecting a topic that is too intangible and difficult to measure.
• Not establishing the baseline. Analyze your own processes thoroughly.
• Not researching benchmarking partners carefully. Do not ask questions that you should have been able to answer yourself.
• Not having a code of ethics and contract agreed with partners.28
• Not being open to change and seeking to understand benefits potentially outside the firm’s industry, geographic location, or organizational size.
The number of potential pitfalls versus benefits may seem to be a disincentive for undertaking the benchmarking effort—is the potential gain worth the pain? It is helpful to view benchmarking as a holistic process that encompasses and ultimately benefits the entire firm; thus, the benchmarking remedy may be more palatable to the entire organization.29
After Benchmarking—What Next?
According to Michelle Porter, Global Best Practices—Benchmarking Services group manager:
Professional Services Firm Benchmarking
49
Understanding the business, establishing clear objectives, customizing a benchmark group that is aligned with those objectives, managing the users’ expectations, and being open to change are essential components for a successful benchmarking project. Benchmarking results are the beginning of a continuous process for an organization to further understand their business and identify their strengths and areas of opportunity. It is equally important for the users to be open to new ideas and consider best practices when evaluating the benchmarking results.30
A major rationale for benchmarking is to provide context from which measurements and recommendations can be made to senior management. While you can make the scope of the benchmarking as narrow or far-reaching as desired, it should always have objectives that mesh with a business strategy, a budget, and an expectation of return. It should elicit senior management approval and lead to senior management consensus about the reasons for conducting benchmarking.
Therefore, when presenting benchmarking data, executives should consider the business strategy of the firm and attempt to compare spending with the industry, taking into account the life cycle of your firm. Through identification of the right areas to tackle for benchmarking and hard work on the firm’s benchmarking initiative, executives may be able to more easily implement the findings—or not, if findings do not support the firm’s business strategy.
An assessment that indicates that the firm’s spending is low compared to the industry may indicate that the firm’s strategy is to increase profits. As a result, this does not necessarily indicate that spending should rise in response. A minimal spending approach may make the most sense for a company in a low growth mode, as opposed to an expansion and acquisition strategy that would indicate higher spending levels than the industry benchmarking.
Just Do It!
Benchmarking is not just about identification of best practices, but implementation as well—putting the data to use. Changing the way a firm or department performs a business process generally requires the involvement of both the human and financial resources dedicated to the task over a period of time. In addition, successful implementation needs a single point of accountability, realistic goals, and the ability to track the progress toward those goals.
Best practices implementation requires mastering the ability to work within your own firm once the benchmarking is complete. Successful implementation is possible only if diligence and focus are given utmost importance throughout the process, including:
• Establishing a project sponsor who is actively involved in key meetings
• Selecting a dedicated team with a defined role for the team leader
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Managing and Governing the Professional Services Firm
• Clearly defining the roles and responsibilities of team members and designating the team member in charge of communications
• Developing measures of progress and milestones for the implementa-
tion team
• Creating a budget for the project31
“ You must have a clear, consistent vision and dedicated, full-time teams assigned to an implementation project,” says Mark Krueger, managing director of Ohio-based AnswerThink Consulting Group. “Technology has to be viewed as an enabler, not the change agent. You also need to have open, honest communication and rely on leadership by example.”32
Finally, it is important to remember that benchmarking is not just a tool, but also a process—not an end in itself, but a means to improving performance. Thus, it should not be viewed as a one-time event, but as an ongoing commitment to continuous improvement.
Summary
The lawyers, consultants, real estate brokers, and others who work for professional services firms may provide superior advice to their own clients, but sometimes forget to apply basic management tenets and techniques to their own firms. Yet, if professional services executives understand that benchmarking helps improve delivery of client service and is a practical, cost-effective tool that can help build consensus within the organization, they might be more willing to consider using it.