There are several different models for professional services firm organization, but they all have the same key success factors:
• They align systems, structure, and governance to forge strong links among employees, the firm, and clients.
• They manage and measure performance to establish firm priorities, articulate firm culture and values, and ensure employee buy-in.
• Systems and processes are stable enough to facilitate effective management, yet f lexible enough to ensure responsiveness to changes.
The overall purpose of the chapter is to examine how to build these key success factors into the organization model for the professional services firm.
It does so by discussing:
• Common organizational components of professional services firms
• How to determine organizational goals in order to choose the best organization model
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• The three organizational models most professional services firms adopt, including the strengths and challenges of each
• Why ownership and governance issues have special significance for professional services firm organizations
• How an effective organization can support creativity while simultaneously facilitating the firm’s business success
• Key responsibilities and typical promotion paths
• The role of support staff within the organizational model
• The importance of building training and career development support into the firm’s culture to strengthen and reinforce the organizational structure
• How to create mechanisms that encourage knowledge sharing and eliminate as many boundaries and fiefdoms as possible, regardless of which organization model is used
Professional Services Organization Overview
Professional services firms are first and foremost service businesses. By their nature, they, and the professional staffs they employ, are customer facing.
The responsibility of any professional services organization is to identify the specific nature of the customer ’s problem, define it in meaningful terms by focusing on the business impact to the customer, and offer meaningful solutions. As valuable as this is, the “product” being sold is intangible, the result of processes that f low through the organization, from customer inquiries to project delivery. Thus, the selling of professional services and the rendering of those services can seldom be separated. The firm must present a consistent face to clients throughout the entire sales/service cycle. All professional and administrative staff, though they may not have direct customer interaction, are a part of these processes, and, regardless of which specific model is used, organizational structure must ref lect, support and sustain this.
Firms must develop integrative systems that aid in this process. This is true regardless of which organization model a firm chooses.
There are other key components of all effective firm organization models.
Because they, in essence, sell knowledge and expertise, firms must be learning organizations. Because they must be able to balance increasing client demand for specialized knowledge with need to develop generalists and maintain high levels of employee utilization and productivity, firms must create structured processes and methodologies to transfer knowledge and expertise throughout the enterprise. Because by their nature, they need creative, intelligent, individualistic people. They must create structures that attract and retain talent. Because the most successful professional services employees tend to be people who may not respond well to rigid bureaucratic
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structures, firms must systematically use other methods, such as compensation tactics, to change cultural attitudes and motivate behavior.
Organization Structure
The choice of organizational governance and structure has critical implications for professional services firms. In a typical corporate enterprise, roles and responsibilities are highly defined. But that model will not work in professional services firms where the key constituencies—owners, managers, and employees—are often overlapping groups of people. Senior people, generally partners, are not only the owners of the business and the leaders of the business but also the salesforce and the administrative leaders. Even employees with less seniority must be f lexible and able to take on multiple roles. Generally, only the most junior staff members are focused exclusively on specific job content and delivery. Almost immediately, job responsibilities begin to expand to include managing client projects, identifying and developing important client relationships and opportunities, and taking on more and more responsibility for internal firm management. From an early point in their career, staff must begin to learn how to coordinate marketing efforts, as well, to present a unified face to clients. These topics are also addressed in Chapters 3 and 11, which should be read in conjunction with this chapter.
The organization model must provide the freedom to allow people to take on more and more responsibilities. While guidelines and standards are needed to keep the firm on track, it’s important not to constrain professional staff with artificial boundaries. They must understand their roles and responsibilities, but they also need the freedom to explore and push their boundaries a little bit. This is best done by broadly defining roles and responsibilities, rather than narrowly defining specific jobs. Because it is counterproductive to limit individual potential, promotion of staff from one level to the next must focus around core competencies or skills that, once mastered, indicate readiness for the next level. That requires the firm to develop a clear path with explicit requirements and competencies for each level of promotion. Booz Allen, for example, has defined a set of core competencies and behaviors that professional staff are expected to master at each specific level. This gives them a benchmark for their current place within the firm, based on their capabilities, as well as clearly defining what will be expected of them at the next level and beyond.
The clear definition of roles and responsibilities is a business imperative as well. Process responsibility, or the explicit definition of roles, is critical to ensuring that all firm resources are harnessed and efficiently coordinated to best respond to the requirements of the enterprise and its clients.
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Because professional services are knowledge businesses, training is a critical piece of the organizational structure that requires ongoing commitment and investment. Most firms give inadequate attention to staff training, and training can easily be viewed as an expense rather than a necessary organizational investment. This is a mistake because good training across the firm and from new level employees through senior partners reinforces and supports the firm’s organization. It introduces the corporate culture and customer-facing approach to new employees. It develops intellectual capital among senior professionals. And it keeps the firm competitive by helping members keep current with new technologies, industry trends, and client issues. Chapter 11
discusses both career tracks and professional development in detail.
Another consideration when determining a firm’s organization is that ownership and governance decisions, which determine the incentive structure and set the organization’s “cultural tone,” have a significant impact on the firm’s ability to recruit and retain talent. Chapter 3 discusses the concepts of partnership structures and governance in detail.
There are four main organization models common to professional services firms: practice, functional, hybrid, and geographic. Each has its strengths and weaknesses, and choosing between them requires trade-offs primarily between economies of scale and degree of delivery staff involvement in customer relationships. On top of those four models, there are two types of ownership structure. Partnerships are the most common, although some professional services firms are publicly owned.
Ownership and Governance
Partnership, where firm management is the responsibility of senior partners and practice leaders, is the dominant ownership model in the professional services arena. This model has numerous benefits. For one, potential partnership is a big incentive for junior employees. This ensures employee buy-in regarding firm development, as they will reap the rewards of a strong, successful firm when they earn a partnership stake. In addition, in partnerships, managerial decisions are made by customer-facing staff, which facilitates more rapid decision making and engenders less bureaucracy. These are all good reasons for the dominance of the partnership model.
However, partnerships have some significant challenges. Whenever owners are also managers, whether in a family-owned business, a start-up, or a professional services firm, there is the risk that leadership won’t have the skill set or knowledge to maximize the firm’s potential. In partnerships, each new partner generally moves up through the ranks and has their own ideas about how things have been done and should be done. It can be difficult to step outside preconceived notions about the firm to remain f lexible. Another
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challenge for partnerships is that partners feel they have a proprietary stake in the firm, which can hamper their ability to be efficient and equitable managers. In addition, partners report to, and are appraised by, other partners, which clashes with the underlying concept of equal ownership by peers.
To overcome these risks requires a conscious effort to incorporate effective checks and balances into the organization model. One place to start is to look at some of the good lessons learned from corporations about governance. For example, partnerships often have outside boards that can help by playing the role that shareholders would play in a publicly owned company. A good outside board can help keep a firm on track, keep it from becoming too insular and provide objective, third-party advice that is in the best interests of the entity. It is a good idea to include members of the firm’s leadership team on the board. Booz Allen has an outside board that includes internal members from across the company. The internal leadership team, which meets regularly on operational matters, also has membership on the board.