Professional Services: Characteristics, Challenges, and Leadership Model
- Dec 28, 2010
- "The fundamentals of the professional service business are brutally simple; it's about talent, it's about clients, and it's about teaming to bring it all together to create and deliver value."
- —Jim Quigley, CEO, Deloitte Touche Tohmatsu Limited
- "Those corporations that get out ahead of the curve and take a page out of the playbook of successful professional service firms are more likely to be successful themselves."
- —Paul Laudicina, Managing Officer and Chairman of the Board, A.T. Kearney
Operating a professional service firm is very different from running a product-based business. Infrastructures, governance, talent management, compensation, and profitability vary significantly from traditional corporate environments. Firm leaders will tell you that managing a successful professional service organization is a challenging business that requires a delicate balance between structure and autonomy and a unique leadership style. Not to mention the enormous challenge of managing an organization of extremely smart, highly autonomous, and somewhat quirky professionals. It's definitely not a job for the faint of heart.
Common Characteristics of Successful Firms
During the course of our research, we identified several characteristics shared by the world's top professional service firms that offer some important clues about what works and what doesn't in a knowledge-focused business. Some are common traits typically found in most successful businesses, and others are unique to professional services. Collectively they tell an interesting story about the nuances of managing a professional service organization:
- Values and culture are inviolate. The leaders of the professional service firms we interviewed were passionate about their firms' values and culture. Values are the bedrock of the organization—the rules that govern behavior toward each other, clients, and the communities in which they serve. In successful firms, adherence to the values is cultivated and rewarded; failure to comply can result in expulsion. The organizations we studied devote an enormous amount of time and resources to embedding their values and reinforcing their culture. In fact, the leaders we interviewed agree that the preservation and nurturing of their firm's values and culture is their number one job.
- Everything revolves around the client. Clients are the dominant force, the raison d'être in professional services. Everything is driven by client service—vision, values, and culture; infrastructure and governance; equity and compensation; talent management; service development; brand, marketing, and sales. You live or die in a professional service firm by your ability to acquire, serve, and retain clients.
- They respect and invest in their people. You might expect that professional service firms would be good at talent management. After all, people are the product. Without committed, highly skilled people, there is nothing to sell. Some impressive best practices are discussed in Chapter 3, "People," but perhaps the most important lesson is that people are treated with respect. Their opinions are valued, they are trusted to interact with clients early on in their careers, and their contributions are expected and rewarded. The successful firms invest significantly in training and mentoring their professionals. Professionals are given a great deal of freedom—as long as they adhere to the values—and often are limited only by their ability and willingness to perform. People at the best professional service firms feel special and privileged.
- They operate in fluid, flexible teams. Professionals move in and out of client and project teams, report simultaneously to multiple team leaders, and must learn to be proficient in a host of skill areas. They are constantly stimulated and challenged by a variety of mentors and team leaders and are exposed to a wide breadth of clients and businesses. As a result, the people in professional service firms are extremely flexible and adaptive. They thrive on the diversity and variety of their work. It's one of the reasons why so many top business school graduates—65 percent according to a Harvard statistic—join professional service firms. It is an exciting place for a bright person to work.
- Organizational structures are extremely simple. Even the global, multibillion-dollar professional service organizations we studied are essentially lean, flat organizations with a few leaders at the top and minimal administrative layers. In professional services, autonomy and entrepreneurship are encouraged and valued. Most professionals aspire to practice their skills and work with their clients, not lead the organization. Too much bureaucracy drives them crazy. In fact, if the firm's structure becomes too cumbersome and rigid, more often than not people will simply ignore or bypass it.
- The senior team owns the business. In a partnership model, a group of professionals are invited through a rigorous selection process to buy into the firm and become owners of the business. Not all professional service firms are partnerships; in fact, many are corporations, and although most are privately held, a few are publicly traded. What is interesting is that no matter the structure, the senior leaders are treated as owners. Professional service firms have created an environment in which the senior team is empowered and committed to making their firm successful. Becoming a "partner" is considered an honor, awarded after years of challenging work, long hours, and intense training. It is a serious commitment, not only financially, but also emotionally.
- Everyone serves. "I serve at the pleasure of my partners." "My job is to be a custodian of our values and culture." "You know I don't get paid any extra to do this job—I do it because I love this place." Most of the leaders we spoke with in our study grew up in their organizations, and all are highly skilled and respected in their areas of expertise. All have managed some of their firm's most valued client relationships and have generated significant revenue over time. Many leaders continue to either actively manage or are heavily involved in client work. Unless you are in the industry, you probably can't name many professional service firm leaders. They largely work behind the scenes. Yet many of them have been at the helm of their organization for years—some for decades. They are, in fact, the epitome of business author Jim Collins' Level 5 leaders, described in his book Good to Great. Not only do leaders serve their partners and their organizations—everyone serves. Go to any website or pick up any professional service firm brochure, and you will undoubtedly see this word repeatedly. Professionals serve their clients, their communities, and each other. It is an ingrained mind-set within the industry.
- They stick to their knitting. Diversification is not an important concept in professional services. While many professional service firms offer a mix of service offerings and often tout multiple areas of expertise, they never venture too far from their roots. The Big Four accounting and consulting firms that work hard to distinguish between their audit, tax, and consulting services still remain firmly under the general advisory services umbrella. Even the major industry segment roll-ups of WPP, Publicis, Interpublic, and Omnicom stick to the related worlds of advertising, public relations, and market research. Many product-based businesses, particularly in the technology sector, have created consulting services or solutions businesses to extend their offerings and interactions with current customers, elevate their relationships to the C-suite executives, and capture the higher margins that services typically provide. In contrast, professional service firms have chosen not to venture into the product world, preferring to remain close to their core competencies.
- It's about the work more than the money. Profit is not the primary driver in professional services. People typically enter the business because they really like what they do and often have spent many years studying and training to perfect their skills. They typically don't join the industry to start their own firm or build a giant business. They want to do what they have spent years learning to do—practice the law, design and build a bridge, launch a global ad campaign, or solve a complex business problem.