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Managing The Professional Service Firm (Paperback)
by David H. Maister
| Category:
Professional service, Consulting, Consultancy firm, Management |
| Market price: ¥ 258.00
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MSL Pointer Review:
Full of indispensable advice, this book is for consultants is like "The Bible" for Christians or "Capital" for Marxists.
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Author: David H. Maister
Publisher: Free Press
Pub. in: June, 1997
ISBN: 0684834316
Pages: 384
Measurements: 9.2 x 6.1 x 1.1 inches
Origin of product: USA
Order code: BA01328
Other information: ISBN-13: 978-0684834313
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- MSL Picks -
If you manage or work in a professional service firm, this book can put your operation into perspective by explaining what drives the firm's profitability. Author David Maister uses his personal experiences to enliven some of the dryer parts of the text with a few case studies, first-hand observations and advice. He covers the whole range of essential practices encountered by any service firm, including governance, hiring, motivation, coaching, marketing and compensation. However, there is one important caveat: This classic book was first published in 1993, including the chapter on professional compensation, which particularly needs updating. Some chapters were published even earlier in various trade magazines and journals, some dating back to 1982. Is this information still fresh and accurate in today's business environment? Even if the personnel advice is, the compensation counsel and pre-Internet marketing advice probably is not. With this caveat, we consider this foundational work important for anyone working in or with a professional service firm.
(From quoting Rolf Dobelli, Switzerland)
Target readers:
Anyone effectively running or working or even considering hiring a professional services firm.
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- Better with -
Better with
Getting Started in Consulting, Second Edition
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David Maister, formerly a Harvard Business School professor, consults to professional service firms worldwide.
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From Publisher
For the first time in paperback, international expert and consultant David Maister offers a brilliant and accessible guide to every management issue at play in professional firms.
Professional firms differ from other business enterprises in two distinct ways: first, they provide highly customized services and thus cannot apply many of the management principles developed for product-based industries. Second, professional services are highly personalized, involving the skills of individuals. Such firms must therefore compete not only for clients but also for talented professionals.
Drawing on more than ten years of research and consulting to these unique and creative companies, David Maister explores issues ranging from marketing and business development to multinational strategies, human resources policies to profit improvement, strategic planning to effective leadership. While these issues can be complex. Maister simplifies them by recognizing that "every professional service firm in the world, regardless of size, specific profession, or country of operation, has the same mission statement: outstanding service to clients, satisfying careers for its people, and financial success for its owners."
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CHAPTER 1
A QUESTION OF BALANCE
One of the most interesting discoveries in my consulting work has been the fact that (apparently) every professional service firm in the world has the same mission statement, regardless of the firm's size, specific profession, or country of operation. With varying refinements of language, the mission of most professional firms is:
To deliver outstanding client service; to provide fulfilling careers and professional satisfaction for our people; and to achieve financial success so that we can reward ourselves and grow.
The commonality of this mission does not detract from its value. Simply put, every professional firm must satisfy these three goals of "service, satisfaction, and success" if it is to survive. Management of a professional firm requires a delicate balancing act between the demands of the client marketplace, the realities of the people marketplace (the market for staff), and the firm's economic ambitions.
Many factors play a role in bringing these goals into harmony, but one has a preeminent position: the ratio of junior, middle-level, and senior staff in the firm's organization, referred to here as the firm's leverage. To see the importance of this factor, we shall briefly examine, in turn, its relation to the three goals of the firm.
LEVERAGE AND THE CLIENT MARKETPLACE
The required shape of the organization (the relative mix of juniors, managers, and seniors) is primarily determined by (or rather, as we shall see, should be determined by) the skill requirements of its work: the mix of senior-level, middle-level, and junior-level tasks involved in the projects that the firm undertakes. Consider three kinds of client work: Brains, Grey Hair, and Procedure projects.
In the first type (Brains), the client's problem is at the forefront of professional or technical knowledge, or at least is of extreme complexity. The key elements of this type of professional service are creativity, innovation, and the pioneering of new approaches, concepts or techniques: in effect, new solutions to new problems. The firm that targets this market will be attempting to sell its services on the basis of the high professional craft of its staff. In essence, their appeal to their market is, "Hire us because we're smart."
Brains projects usually involve highly skilled and highly paid professionals. Few procedures are routinizable: Each project is "one-off." Accordingly, the opportunities for leveraging the top professionals with juniors are relatively limited. Even though such projects may involve significant data collection and analysis activities (normally performed by juniors), even these activities cannot be clearly specified in advance and require the active involvement of at least middle-level (project management) professionals on a continuous basis. Consequently, the ratio of junior time to middle-level and senior time on Brains projects tends to be low.
Grey Hair projects, while they may require a highly customized "output" in meeting the clients' needs, involve a lesser degree of innovation and creativity in the actual performance of the work than would a Brains project. The general nature of the problem to be addressed is not unfamiliar, and the activities necessary to complete the project may be similar to those performed on other projects. Clients with Grey Hair problems seek out firms with experience in their particular type of problem. In turn, the firm sells its knowledge, its experience, and its judgment. In effect, they are saying, "Hire us because we have been through this before; we have practice at solving this type of problem."
Since for Grey Hair-type projects the problems to be addressed are somewhat more familiar, at least some of the tasks to be performed (particularly the early ones) are known in advance and can be specified and delegated. The opportunity is thus provided to employ more juniors to accomplish these tasks.
The third type of project, the Procedure project, usually involves a well-recognized and familiar type of problem. While there is still a need to customize to some degree, the steps necessary to accomplish this are somewhat programmatic. The client may have the ability and resources to perform the work itself, but turns to the professional firm because the firm can perform the service more efficiently, because the firm is an outsider, or because the client's own staff capabilities to perform the activity are somewhat constrained and are better used elsewhere. In essence, the professional firm is selling its procedures, its efficiency, its availability: "Hire us because we know how to do this and can deliver it effectively."
Procedure projects usually involve the highest proportion of junior time relative to senior time (and hence imply a different organizational shape for firms that specialize in such projects). The problems to be addressed in such projects, and the steps necessary to complete the analysis, diagnosis, and conclusions are usually so sufficiently well established that they can be easily delegated (under supervision) to junior staff. For Procedure projects the range of possible outcomes for some steps may be so well known that the appropriate responses may be "programmed."
The three categories described here are, of course, only points along a spectrum of project types. However, it is usually a simple task in any profession to identify types of problems that fit these categories. The choice that the firm makes in its mix of project types is one of the most important variables it has available to balance the firm. The choice of project types influences significantly, as we shall see, the economic and organizational structures of the firm.
Consider what will happen if a firm brings in a mix of client work such that its "proper" staffing requirements would be for a slightly higher mix of juniors, and a lesser mix of seniors than it has (i.e., the work is slightly more procedural than the firm would normally expect). What will happen?
As Figure 1-2 suggests, the short-run consequence will be that higher priced people will end up performing lower-value tasks (probably at lower fees), and there will be an underutilization of senior personnel. The firm will make less money than it should be making.
The opposite problem is no less real. If a firm brings in work that has skill requirements of a higher percentage of seniors and a lesser percentage of juniors, the consequences will be at least equally adverse: a shortfall of qualified staff to perform the tasks, and a consequent quality risk.
As these simple examples show, matching the skills required by the work to the skills available in the firm (i.e., managing the leverage structure) is central to keeping the firm in balance.
LEVERAGE AND THE PEOPLE MARKETPLACE
The connection between a firm's leverage structure (its ratio of junior to senior professional staff) and the people marketplace can be captured in a single sentence: People do not join professional firms for jobs, but for careers. They have strong expectations of progressing through the organization at some pace agreed to (explicitly or implicitly) in advance.
The professional service firm may be viewed as the modern embodiment of the medieval craftsman's shop, with its apprentices, journeymen, and master craftsmen. The early years of an individual's association with a professional service firm are, indeed, usually viewed as an apprenticeship, and the relation between juniors and seniors the same: The senior craftsmen repay the hard work and assistance of the juniors by teaching them their craft.
The archetypal structure of the professional service firm is an organization containing three professional levels. In a consulting organization, these levels might be labeled junior consultant, manager, and vice president. In a CPA firm they might be referred to as staff, manager, and partner. Law firms tend to have only two levels, associate and partner, although there is an increasing tendency in large law firms to recognize formally what has long been an informal distinction between junior and senior partners.
Responsibility for the organization's three primary tasks is allocated to these three levels of the organization: seniors (partners or vice presidents) are responsible for marketing and client relations, managers for the day-to-day supervision and coordination of projects, and juniors for the many technical tasks necessary to complete the study. The three levels are traditionally referred to as "the finders, "the minders," and "the grinders" of the business. The mix of each that the firm requires (i.e., its ratio of senior to junior professionals) is primarily determined by the mix of client work, and in turn crucially determines the career paths that the firm can offer.
While the pace of progress may not be a rigid one ("up or out in five years"), both the individual and the organization usually share strong norms about what constitutes a reasonable period of time for each stage of the career path. Individuals who are not promoted within this period will seek greener pastures elsewhere, either by their own choice or career ambitions, or at the strong suggestion of the firm.
This promotion system serves an essential screening function for the firm. Not all young professionals hired subsequently develop the managerial and client relations skills required at the higher levels. While good initial recruiting procedures may serve to reduce the degree of screening required through the promotion process, it can rarely eliminate the need for the promotion process to serve this important function. The existence of a "risk of not making it" also serves the firm in that it constitutes a degree of pressure on junior personnel to work hard and succeed.
The promotion incentive is directly influenced by two key dimensions: the normal amount of time spent at each level before being considered for promotion, and the "odds of making it" (the proportion promoted). These factors are clearly linked to a firm's leverage structure (and its g...
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Rune Antonsen (MSL quote), USA
<2008-04-15 00:00>
If you have ever worked in, been a partner or managed a consultancy firm, this book will not only answer a lot of your troubling questions, it will also explain matters that you did not know the questions to - just the obnoxious frustration of something that was not working.
It is with incredible ease, yet depth and understanding that David H. Maister plough through the important issues that concerns not only managing partners in a consultant company, but anyone who wants to climb up the ladder. He explains why you got to balance your workcrew (juniors up to partners) and why it is so vitally important to mix people on the right combination of projects (brains, grey hair and procedure projects) as this builds up the firm's human capital, and provides the means and profitability to continue to grow steadily. I could go on but space does not allow me to. This book is not filled with theoritical babble but practical and useful information, no - knowledge and experience!
The book is divided into seven parts (personal highlights inside brackets): basic matters, client matters (quality work does not mean quality service!), people matters (building human capital, the motivation crises), management matters (creating a strategy), partnership matters (the art of parner compensation), multisite matters (the collaborative firm, hunters and farmers, etc.) and asset management. All in all it comprises of 32 chapters.
You won't find many books that explains service business any better than this one. I know because I went searching.
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Therosen (MSL quote), USA
<2008-04-15 00:00>
This is the top book on the subject, by the one author who specializes only in the niche of Professional Services Firms. There are numerous tactics in the book for improving one's practice, but it is a couple theoretical points that have the most value.
First, the book describes the pyramid nature of the professional services firm, describing how the profitability of a firm is derived. (A partner bills out the pyramid below him) Therefore, the two drivers for profitability of a partner are how much he can bill his (or her) people out for, and how big the pyramid beneath her (or him) is. There are many tactical points presented for improving these, but it really helps focus the energy of the partner to think about the two main drivers. What about growth? In and of itself, adding partners with their own pyramids will not help the profitability of other partners.
What good is growth, then, if it doesn't drive profitability? Growth is needed to encourage top employees to stay with the firm. A firm that is growing 10% a year has many more opportunities than one growing 5% a year. This counterintuitive idea (growth is more important for career advancement than size) is a great cue for picking the right place to work. If the growth stops, it is time to move on.
The book is near timeless - perhaps the only way time has passed it by is in the ownership structure of professional services firms. At this point in time, many (most?) top consulting and financial services firms are public. Does this change the assumption that growth no longer benefits the shareholders?
Any employee or leader of a professional services firm is well advised to read it! |
Voiceguy (MSL quote), USA
<2008-04-15 00:00>
I devoured this book when it first appeared almost ten years ago, and still turn to it from time to time because it is still the best thing out there on its topic. Maister considers a number of major issues within professional service firms (such as firm positioning, type of work, recruiting, training, up-or-out promotion, partner compensation, coaching, and self-development) and within each one presents a lucid exegesis that is at the same time profound and simple. His analysis rivals Stephen Covey's "7 Habits" in its depth and elegance, and, like Covey, Maister makes his discoveries more accessible by frequently including a personal side to them.
Professionals working in large law firms, accounting firms, architecture firms or consultancies will immediately find both themselves and their firms within this book. They may not always like what they see, as Maister discusses some of the hard choices that are required by the traditional, meritocracy-based firm model. Notably, Maister illustrates clearly why much of the heartache within such firms comes from failing to make such choices and trying to be too many (inconsistent) things at once.
Maister does not spend a lot of time trying to defend the traditional merit-based, up-or-out, partner/associate model of professional service firms, nor does he insist that we pledge allegiance to that model. He is well aware of, and points out, the hazards and potential injustices of that model. It is clear, however, that whatever its faults, Maister believes it is the best model we have right now, and that his job is to help people make it work as best they can. This book represents a giant step in that direction, and should be required reading for anyone in a position to influence management at a professional service firm.
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Ivanov Mikhail (MSL quote), USA
<2008-04-15 00:00>
For consultants it is like "The Bible" for Christians or "Capital" for Marxists.
This book is like a Bible for all professionals, regardless of whether they are working on their own or for a company. It can be read again and again and every time you can find something new. I think that even Maister did not suspect how great it would be. I feel able to declare that everybody who wants to be called "a consultant" must read this book.
Although this book consists of articles by different years it can be read without any difficulty. Maister also used international English and therefore it is easy for non-native English speakers to read.
I found especially interesting the following chapters:
1. Marketing to Existing Client
2. Attracting new Clients
3. Managing the Marketing Effort
The core ideas of all these chapters are:
1. Demonstrate you ability do not declare (Marketing works when it is demonstrative not
assertive)
2. The most effective type of marketing is client-level marketing (face-to-face meeting not to-
broadcast marketing)
3. Existing clients are the best sources of new business (and often the most profitable ones)
4. Marketing activities represent an investment and therefore should be budgeted for.
The author puts all these principles into practice. In this book (and all the rest of his books) he demonstrates his quality. He treats all his readers if we were already his clients and which means he shares some top secrets of this business.
All in all, I can say that it is amazing how many new ideas I managed to get from this book for so little money. Buying this book was one of my greatest investments. I only regret that I did not read this book in the eginning of my career in consulting.
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