While the types of services delivered to clients are diverse, many of the mechanisms and operations of all professional services firms are similar. For example, a medical practice and a commercial real estate brokerage firm are very different in the services they provide. However, for much of their operational decision making, they have similarities—for instance, both firms might analyze whether they should promote a professional staff member to be a full partner in the practice/firm. The thought process and the decision framework for analyzing this question are very similar for both. How much profit will the new partner add to the practice? How dilutive will the new partner be to existing partners? Will the new partner have voting rights?
Many other operating aspects are similar for the firms as well (e.g., utilization, profit per employee, invoicing, record keeping).
Because of the comprehensive treatment of the business of managing
a professional services firm, this book addresses major operational and
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business issues that affect almost every firm manager, partner, or owner on a daily basis.
The approximate number of U.S. firms in each professional service category is shown in the following table:
A pproximate U.S. Firms
Segment
(Thousa nds)
Health care
35
Business consulting
35
Insurance
30
Legal
25
Financial services
25
Real estate
20
Counseling
15
Architecture
5
Political advisory
5
Marketing
5
Staffing services
5
Education
5
The first six segments are covered in depth in this book. We underscore, however, that the concepts can be applied to most professional services firms.
What Is Covered in This Book?
The intent of The Professional Services Firm Bible is to help professional services firm executives turn their companies into highly productive organizations, help readers become better managers of their firms, and solve many of the problems alluded to earlier. The book provides sharply defined, specific policies, practices, and tools for each important aspect of managing the professional services firm, from sales and marketing, to human resources (HR), to operations, to risk management. The approaches facilitate the assessment of current operations and the development of a step-by-step improvement plan designed to improve current firm management and provide measurable productivity improvements. The book will help firm management improve the financial performance of their practice by managing costs, getting the most from external vendors, and improving revenues.
Each chapter in the book is devoted to a key operational area of managing the firm, such as marketing, finance, HR, and risk management. Topics and features include:
• Identifying the main management areas of a successful professional services firm
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Managing and Governing the Professional Services Firm
• Understanding the scope and key success factors in each management area
• Identifying approaches for auditing current performance by area
• Understanding the main sources of waste
• Identifying 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
• Identifying symptoms and sources of professional services firm inefficiencies
• Finding critical improvement steps in each of the main management
areas
• Making better decisions in firm strategy and direction setting, hiring practices, operations, technology, marketing, and overall management
• Achieving higher utilization from existing professional services assets/
consultants
• Achieving higher return on investment (ROI) from capital and operating expenses
Specific cases and anecdotes from actual departments and consulting engagements illuminate and further explain the material. Quotes and advice from well-known practitioners in each of the service areas are included.
The book has five sections. Section I, Managing and Governing the Professional Services Firm, focuses on understanding the difference between the business aspects of operating a professional services firm and the actual delivery of the services. Additionally, the contrast between front office (sales and marketing) activities versus back office (operations) activities is drawn.
The section presents benchmarking research by functional area (HR, information technology [IT], finance), by professional services firm type (law, medical, etc.), and by size for spending and focus on each area. The section explains why the topic is important for the professional services firm manager and discusses what key operations, sales, and marketing processes all professional services firms have in common. Case studies and cautionary tales about failures of professional services firm initiatives or businesses where the fundamental business pieces were not well executed emphasize the importance of the topic. The section also covers the effective senior level management and decision-making structure for the professional services firm and topics such as partnership management and legal governance structure.
Section II, The Front Office: Driving Sales and Growth, covers the topic of sales and marketing. While most professional services providers are highly proficient in delivering their actual services, a common shortcoming for many
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9
is the often uncomfortable subject of effective selling. This section addresses the key marketing and sales issues for service providers, with specific tips and approaches for ensuring that the front office efforts are consistent with the specific market and industry under consideration. Key topics in this section include: sales management and tracking, marketing, service-line creation, qualifications and reference management, proposals and bids, strategic partnering, and intellectual capital development and protection.
Section III, The Organization: Attracting and Retaining the Best Professionals, discusses human resources and related topics. One of the top drivers of client satisfaction and successful delivery in the services industry is the quality of the professionals within the practice; we devote an entire section of the book to achieving world-class recruiting and retention. This section covers the topic in depth, including organization structure, career paths for professional and internal staff, training and professional development programs, recruiting, and on-boarding new employees.
Section IV, Services Delivery: Taking Care of Business, focuses on delivery of service to clients. While the services delivered in professional providers differ widely, many of the core approaches to successful management apply.
These approaches include service delivery (planning, building, and managing), project management, resource (bench) management, risk management, and project P&L management.
Section V, The Back Office: Efficient Firm Operations, covers all the activities that support the operations of the firm. The back office section outlines the specific back office operations that must operate smoothly to ensure that the professional services firm operates efficiently. Topics include finance, accounting, HR, purchasing and procurement, asset management, IT, vendor management, real estate/facilities, legal, and office management.
Unique Issues of Professional
Services Firms
Professional services firms are different from other companies because there is no tangible product to sell. Regardless of how services are billed, the professional services firm gets paid for expending labor time on behalf of a client’s problem or need. The input is time, and the output is thinking or documents in most cases. Since billings/revenues grow as the input grows (e.g., labor time), professional services firms are inherently labor, management, and HR intensive. This kind of firm may be contrasted with, for example, Ticketmaster, an online provider of tickets to sporting events, concerts, and theater.
At midnight on the U.S. East Coast, while everyone in the firm can be expected to be away from the job, Ticketmaster is selling hundreds, if not thousands, of tickets online to people all over the world. One additional ticket
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Managing and Governing the Professional Services Firm
sold does not equate to any labor input of one of its employees. Ticketmaster is a business that scales without a tremendous amount of incremental direct labor. Contrast this to a large law firm. If that law firm wins a new client with a large case, the law firm must provide enough attorneys to cover the case sufficiently. In most cases, the law firm will be paid for each hour that one of its attorney’s bills. As the firm hires additional lawyers, it has to find space, manage their careers, provide training and tools, and so on. The professional services firm, more so than any other type of firm, requires the balancing of a large number of variables. Thus, the trick in scaling a firm is to develop simple processes, a successful hiring formula, and a recurring sales model, and strike a balance between customer loyalty and employee satisfaction.
The tendency in most firms is to concentrate on “delivering” the actual expertise to the client at the expense of all other things. Architects by training and experience enjoy designing structures. They are not necessarily proficient at (or even interested in) managing a business. Yet, as the firm grows, it requires more management time from the principals, causing stress on the organization. Do the principals continue to bring in revenue at top rates, or do they spend time on internal management issues?
Not only is more time required on internal management, but also the individuals need to be “good” at management. For example, we worked with a graphic design firm several years ago. A principal of the firm called to ask if we could assist him with a business strategy. He was one of the best graphic designers in the city, and his firm kept adding more and more clients. He had around a dozen employees, and while his revenue kept increasing, he was perplexed about how to manage the business going forward without jeopardizing the financial well-being of the firm. He was the primary designer and the lead sales generator. His firm’s clients included a large airline and prominent sports team. Some near-term steps for improvement included carving off nonstrategic management items to an administrator, including all infrastructure, facilities, and operations issues; outsourcing nonstrategic areas where possible (e.g., payroll); and defining both sales and delivery processes and roles more clearly so that discrete activities could be delegated to junior staff more easily.