Professional service firms (PSFs) come in all shapes and sizes, from single office sole practitioners with a few staff members to multi-partner, multi-office organizations, with significant staff complements. We typically encounter these PSFs in the professions of accounting, law, engineering, architecture, dentistry and medicine. Regardless of the industry in which the practitioners operate, the path to success requires these entities to be operated as businesses.
As the former Managing Partner of Soberman LLP and as an advisor to many such organizations, experience has taught me that there are three fundamentals that characterize a successful professional services firm: governance, investment and culture.
If you liken a PSF to the human body, these fundamentals are essential to the life of the organism. Where governance is the skeleton and organization's structure, investment is the muscle and tendon which are its strength and durability and that which connects the parts to make the whole. Lastly, culture, like blood, is the lifeline that courses through an organization allowing it to thrive.
Further into this article, I will define success from the perspective of a PSF's stakeholders.
Governance is present in an organization through its policies, processes and the decision rights of, and for, the owners.
Typically, a professional services firm will create a document such as a partnership agreement, which details how the business will be administered, who will make the decisions and the financial consequences arising out of the various stages of an owner's life: withdrawal, retirement, disability, death, and so forth.
The partnership agreement is the organization's foundation, much like a constitution is the governing document for a political body. An organization with good governance is characterized by consistent management.
A successful firm's appropriate investments in its people, its products and its premises, (three P's), typically take the following form:
- Training and learning programs
- Performance management – feedback to measure performance and to improve skills
- Mentoring and coaching
- Recognition programs
- Recruitment to hire the best and the brightest
- Social programs to build the team
- Infrastructure to ensure that premises and equipment tools meet the needs of the staff
- Marketing and business development programs to secure a revenue stream
These investments are self-fulfilling. Typically, they will produce higher staff morale, which leads to an energized and engaged work force, which in turn results in lower turnover rates and absenteeism. Further, such investments result in teamwork, which enables higher quality work and satisfies existing clients and their other advisors. This success will lead to new clients, as word of mouth spreads strong reputation of the firm.
Making an investment in the three P's improves the bottom line, enabling the organization to re-invest in its people, products and premises for further growth and development.
Culture is not a process but rather the way people in an organization treat each other, at all times and in all places. A business can acquire commodities, such as technology, furnishings, technical skills and the like, but culture cannot be purchased. It is the single most important competitive advantage and differentiator that an organization can possess.
An organization with good culture has the following attributes:
- The core values are articulated, celebrated and form part of the belief system.
- The career planning processes are inclusive of all personnel in the organization.
- The firm works in a collaborative manner with clear objectives.
- Each person understands his/her individual role, what is expected of him/ her and what the rewards can be.
The three fundamentals require constant nurturing; it's a never-ending job but a rewarding one. The successful implementation of governance, investment and culture will provide the elements of success. As you think about how you might utilize these fundamentals, you could start by writing down your vision for your organization.
Below, I offer some examples of what we define to be success, at our firm:
- Good clients, who respect what you say and do
- Owners and staff who live the firm's vision and values
- Good reputation in the wider community
- Track record of admitting new owners
- Comfortable working conditions
- People who say honestly that they look forward to coming to work and collaborating with their colleagues
- Recognition as an employer of choice
- Year over year growth in revenue and profitability
When a PSF is building its organization or re-engineering its environment, based upon the three fundamentals, it also builds trust.
At the end of the day, an organization will thrive where trust abounds, not only among the owners but amongst all stakeholders – the employees, the suppliers and the clients.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.