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Introduction to the Art of Managing Professional Services: Insights from Leaders of the World's Top Firms

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If you’re not in the professional service industry, the introduction this book will help you gain insight into the inner workings of some very successful firms, many of which you have probably worked with during the course of your business career. Hopefully you will discover some practices to apply to your own company.
This chapter is from the book

The influence and clout of the professional service industry are immense. It would be difficult to find a business, government, or nonprofit organization that doesn’t rely to some extent on a mix of external professional service providers. Behind every successful global company you will undoubtedly find a team of outside experts who all play a role—sometimes a pivotal one—in supporting that company throughout its history.

With 2010 revenues estimated at close to $2 trillion and a conservative average annual growth rate of 10 percent over the past three decades, the industry is one of the fastest-growing sectors in the world. Accounting, advertising, architecture, consulting, engineering, executive search, financial services, law, marketing, public relations, real estate, research, staffing, and a host of other knowledge-based workers who provide advice and support to businesses are included under the enormous professional service umbrella. The industry employs roughly 20 million people who work in over one million individual firms that range in size from one-person businesses to the Big Four global accountancies that collectively employ over 500,000 professionals.

Yet, despite its enormous size and influence, the professional service industry remains largely invisible to most people. Most professional service firms are privately held businesses, managed for the benefit of their partner-owners. They prefer to work behind the scenes and let their clients take credit for their work. The industry has never been subjected to the same level of scrutiny facing most other sectors. Wall Street analysts don’t follow them, business reporters typically don’t write about them, and the sector has never been included in any major market research studies by popular business gurus. Only rarely does a professional service provider make the headlines, as was the case with now-defunct accounting firm Arthur Andersen and the Enron debacle.

This almost-clandestine nature of the industry is unfortunate for two reasons. First, professionals in the industry have very few places where they can turn for advice and best practices on how to run their business. Segment- and region-specific trade groups gather and share financial benchmarks and management tips and tools from their memberships, but only a few academic institutions, such as the Harvard Business School, Oxford University’s Saïd Business School, and the Cass Business School, City University London, have provided a forum for industry leaders across segments and geographies to study and share ideas.

Second, the general business world can learn a lot from professional services. Ten years ago Peter Drucker predicted that leadership in the world economic scene would shift to the countries and industries that have most successfully deployed knowledge workers. Professional services are, of course, the quintessential knowledge-based businesses. Most business and management gurus spent a good portion of the 20th century improving the systemization and productivity of manual labor. In contrast, professional service firms have been perfecting a business model that attracts, nurtures, and retains the best and brightest knowledge workers. Plus, as the old-fashioned mass-marketing and sales transaction models of the last century are replaced by customer-focused product development and relationship-based selling, who better to turn to than the masters of customization and client relationships? Professional service firms, with their talent savvy, fluid service structures, and relationship management know-how, are in many ways the model for the company of the future.

There are several compelling reasons why everyone in professional services and in the general business world should read this book:

  • A comprehensive study of the industry. Based on more than 130 in-depth interviews with leaders of professional service firms across seven major segments, this book offers an in-depth, behind-the-scenes look at this major global sector.

  • Management insights from the best in the business. The lineup of firms and professionals who participated in the study reads like a “who’s who” of professional services. The Broderick research team spent hundreds of hours with the senior leadership of these impressive businesses, all of whom were extremely candid and generous with their time and insights.

  • Tangible, practical takeaways. So many business books admire the problems without offering any practical, concrete solutions. This book includes 40 featured “Lessons from Leaders” detailing management practices developed and successfully deployed in some of the world’s most respected professional service firms. Firm leaders can shop through these practices and select programs, or components of programs, to tailor and adapt to their organizations.

The Research

Since our goal was to learn from the best, it was important that the firms we interviewed met three basic criteria. First, they needed to be acknowledged and respected by their peers. Because of our many years of work in the industry, we knew which firms were the leaders in each segment. But we confirmed our choices by reviewing the top-rated firms as defined by measures such as top revenue, most prestigious, and best place to work. These organizations were cited by trade associations, independent rating companies, and publications such as Vault, Fortune, and BusinessWeek.

The lineup of firms studied represents many of the top brand names in professional services, as shown in Exhibit I.1. Of the segments studied, consulting is the largest and most amorphous and represents the greatest percentage of interviews, as shown in Exhibit I.2. The consulting umbrella includes numerous subsegments, from the broad category of management consulting to narrower functional areas of focus such as human resources, operations, IT, marketing, business advisory services, and strategy. It also includes firms that focus exclusively on a single industry.

Exhibit I.1 Participating Firms

ACCOUNTING

Deloitte

Ernst & Young

Grant Thornton

KPMG

Plante & Moran

PwC

Wipfli

ADVERTISING/PR/RESEARCH

BBH

Burson-Marsteller

Cohn & Wolfe

Edelman

Euro RSCG Life

Fleishman-Hillard

Goodby, Silverstein

Incite

Ketchum

Landor Associates

McCann Worldgroup

MedPanel

Ogilvy & Mather

Ogilvy Public Relations Worldwide

Ozone Advertising

Peppercom

Young & Rubicam Brands

ARCHITECTURE/ENGINEERING

Black & Veatch

Dewberry

Gensler

Heller Manus Architects

HKS

HOK

Invision

Michael Baker Corporation

NBBJ

Perkins+Will

SmithGroup

Stantec

STV

CONSULTING

A.T. Kearney

Bain & Company

Booz & Company

Booz Allen Hamilton

The Boston Consulting Group

Celerant Consulting

Clarkston Consulting

Charles River Associates

CSC

ECG Management Consultants

ghSMART

Hewitt Associates

Hildebrandt Baker Robbins

Hill & Associates

Jones Lang LaSalle

Marakon

McKinsey & Company

Monitor Group

Oliver Wyman

The Parthenon Group

Pivot Leadership

EXECUTIVE SEARCH

Egon Zehnder International

Korn/Ferry International

Major, Lindsey & Africa

FINANCIAL SERVICES

Bain Capital

Duff & Phelps

Houlihan Lokey

Piper Jaffray

Raymond James

Thomas Weisel Partners

LAW

Allen & Overy

Clifford Chance

Cravath, Swaine & Moore

Cuatrecasas, Gonçalves Pereira

DLA Piper

Eversheds

Fish & Richardson

Freshfields

Jackson Lewis

Latham & Watkins

Mayer Brown

Morrison & Foerster

O’Melveny & Myers

Orrick

Seward & Kissel

Skadden, Arps

Slater & Gordon

Sullivan & Cromwell

Second, the firms interviewed had to be in business for a decent length of time—in fact, the older the better. We wanted to study firms that had survived a downturn or two, and, even more impressive, had survived beyond their founding fathers. As shown in Exhibit I.3, 84 percent of our responding firms are more than 50 years old, and 28 percent are more than 100—certainly a decent survival rate for any business.

Finally, the firms studied had to be financially successful. Most professional service firms are privately held businesses, so financial data is not readily available. Although all of our interviewees volunteered their top-line revenue numbers, we do not know, nor did we ask, for bottom-line profitability numbers or percentages. We viewed compliance with our first two criteria as evidence of financial stability. The top-brand firms in the business typically translate into the highest revenue generators. As a result, many of the firms we studied fall into the top revenue brackets in the industry. However, we also spoke to a selection of superbly managed small businesses that range in size from $5 million to $100 million in revenue, as shown in Exhibit I.4.

We interviewed the leaders of each organization, which included the chairmen, CEOs, and managing partners, as well as a mix of COOs; regional, service, or industry leaders; and nonbillable department heads in finance, marketing, and talent management. Typically, the chairman, CEO, or managing partner was the first in his or her organization to be interviewed, followed by others in the firm who were recommended for follow-up discussions. Sixty-two percent of our interviewees were the top leaders of their organization—chairman, CEO, or managing partner—as shown in Exhibit I.5.

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