Managing Professional Services Firms

The Professional Services Environment

I have spent over two decades in the services industry now, particularly in the professional services, spanning Management Consulting, BPO / KPO, Analytics, Technology, Accounting and Law Firms.

Prima facie there does not seem to be much in common across these diverse services. However, there are several common principles of managing professional services that emerge. I was drawn into thinking deeper about these comparisons some time earlier this year

CXO Structures in Professional Services Firms

I was invited to conduct a ‘Theatre Session’ on Benefits of CXO Structures for Law Firms at Lawserv in Mumbai. Having spent around 7 years as CEO of Anand and Anand, I thought to myself – “Are they kidding me? Wouldn’t people already know the benefits of CXO structures?”

This prompted a reflection on my experiences as CEO of the leading IPR firm and contrasting it with my experiences across other professions.

My first realization was that existence and benefits of CXO structures (similar to corporates) is not obvious. This is apparent not just in law firms, but also in other professional services firms. There are various underlying reasons for the same, but that is fodder for another day.

A Tale of Two Professional Services Firms

Some very interesting parallels emerged as I thought about my diverse experiences, particularly across management consulting and law firms.

Vivid memories from almost two decades ago raced through my mind. I visualized the Managing Partner of a niche management consulting firm trying to enforce ‘Time Sheet’ discipline. The subject matter were a bunch of people who were mostly top rankers from the top IIMs of the country (at that time I thought only 4 existed)! Getting these people to contribute to the KM portal on ‘Lotus Notes’ was another challenge. Water cooler conversations, particularly after appraisal cycles,  ended up giving him the title of ‘Managing Partner – Time Sheets’ (of course that wasn’t fair).

Now, I was on the other side of the table as a professional CEO of a leading law firm. I was only expected to go down the beaten path, but I already knew what not to do!

Key Differences

The key difference in the two organization structures was the fact that in the consulting firm, the Managing Partner wore both the professional (fee earner) and the managerial hats. This quite evidently detracted his abilities (or any person in that role) to perform the core job as the leading professional in the respective field.

In the current context, we have a law firm which is led by an eminent  lawyer in the role of Managing Partner and myself as a management professional (also tended to be labeled as non-lawyer in lesser evolved law firms) in the role of CEO.

This structure significantly enhances a firm’s capacity to progress on aspects relating to both areas, the core professional services as well as the business strategy and management oriented aspects.

Given the rudimentary nature of the question that I was required to address, I thought of going back to basics. Hence, I created a nine point framework that hinged largely on functional benefits of CXO structures or professional management layers in professional services firms.

Framework for Professional Services Management

The danger of creating and explaining a framework is that it might either end up being too context specific or may become too vague and broad to be of relevance.

I will try and balance the two extremes and provide a generic framework with illustrative pointers. The pointers are based on my experience and will hopefully serve as food for thought to enable you to apply some of these thoughts in your environment.

Without any further ado, here are the nine pillars on which value can be derived from putting in place a robust CXO structure for professional services firms. While this has been prepared in the context of law firm management, the principles and placeholders are equally applicable to other professional services environments as well.

Governance and Culture

The governance structures of professional service firms can be quite complex. The external forces call for collaboration within and across organizations and multi-disciplinary teams are required to succeed, even for niche professional services. This also requires a massive cultural shift.

Culture eats strategy for breakfast and the importance of setting the right examples at the top cannot be over-emphasized. The right set of behaviors need to be demonstrated (and emulated) and this is the biggest stumbling block for many professional services firms. Especially, if an organization has too many professionals who share the same cultural attributes, driving change and bringing about consistency can be challenging.

Some conundrums that can plague professional services firms could emanate from a tension between the following factors:

• Business vs Profession – A question that may be asked in law firms and most certainly in the medical profession. The answers are not as straight forward as they may seem!
• Collaboration vs Competition – An evergreen conflict that is unlikely to go away. All law firms struggle with Lockstep vs Eat What You Kill and it’s consequences.
• Conformity vs Creativity – A helicopter view shows you that both can co-exist, but not everyone gets on to the chopper!
• Control vs Autonomy – Letting go is difficult for first time managers in corporates….until you compare it to professional services firms; especially law firms
• Centralize vs Consensus – Can we decide how we are going to decide? Is consensus among lawyers in a law firm an oxymoron?

Rely on the ABCs of Culture – shared Attitude, Belief and Conduct and not on MAD Culture – one that is marketed, advertised and displayed

Strategic Initiatives

These could vary significantly depending on the organizational and external variables. It is important to have one eye on keeping the lights burning and another on looking at the future – maybe that’s why we have a pair of eyes!

Most importantly, one needs to go back to the basics and ensure that the strategic initiatives align with the Purpose of the organization. Needless to mention, the Purpose should not be confused with the commercial objectives and targets. They most certainly have a place, but you certainly don’t want to put the cart before the horse.

Interestingly, I have seen very few organizations that are able to introspect and determine; let alone, articulate; their purpose. It is not surprising that many of such organizations don’t sustain for too long.

Are you a Purpose driven Organization? Can you explain your purpose, in non-financial terms

Marketing

The concepts of marketing need to applied very differently in a professional services organization. In many such environments, one has to rely more on Content Marketing and Thought Leadership, rather than a Sales Organization aided by Advertising, Promotions et al.

We are at a demographic inflection point in terms of decision makers. One needs to contrast the profile of decision makers of the past, present and future. Which segment of decision makers are you catering to? Can you re-purpose content to cater to all segments; and yet justify the economics? More importantly, have you re-imagined your outreach initiatives in light of the changing digital environment? Maybe, ‘segment of one’ was not possible earlier, but can you conceptualize and implement this? What tools and skills do you need in today’s world where audience attention spans are lower than that of a goldfish?

While Fundamental Marketing Principles still hold good, there is a tectonic change in consumer behavior, communication medium and tools

Finance

I always wondered how Client Finance got very little attention at professional service firms a couple of decades ago. Oddly enough, this appears to have been on the slow track to change over the last few years.

Clients are undoubtedly at the centre of your universe. But is this true for the world of Client Finance? Have you ever wondered why pricing spreadsheets always focus on inside metrics such as margins and RoI? How many pricing templates build in the clients’ view of the value equation?

Putting the Client in Client Finance

MIS & Analytics

We are living in the Information Explosion era. It is a double-edged sword. Information glut can reduce attention spans and inhibit cognitive capabilities. At the same time, data can be the oil that can garnish existing services and also create new opportunities.

One of the most neglected assets in professional services firms is data, especially the treasure trove of unstructured text data. The advances in Natural Language Processing (NLP), computing power and Machine Learning / Deep Learning algorithms provide a unique opportunity.

I do not wish to get started on AI and it’s impact on professionals, especially on the legal fraternity. However, it is clear that those who will extract insights from information to supplement their professionals will be more successful.

TLDR – Instead of fretting about the impact of AI or justifying the reasons for minimal impact on knowledge workers, just get your act together!

Do you have Data Governance, Veracity and Integrity in your vocabulary? Or do you only talk AI, ML and Predictive Analytics?

Knowledge

Ironically, one of the biggest sources of value of management professionals in professional services environments is in the domain of managing and enhancing the core knowledge of the professionals. This is true, even if the management team is not from the same profession.

The knowledge architecture needs to keep pace with the times. One needs to leverage NLP and AI to provide smart, intelligent, timely and relevant information. Can you do this without making it burdensome for the fee earners? Is the architecture robust enough to cater to the future needs of the profession? If jargons keep changing every season, how can we re-aggregate information along newer dimensions?

If Knowledge is Power, Knowledgeable Insights are Omnipotent

 Operations

The devil is in the details and the operational maturity of a services firm reflects it’s true mindset. I continue to be surprised by how (otherwise logical, rational and intelligent) knowledge professionals rationalize their (nonchalant) attitude towards client service and operational quality standards.

Should one create a loose structure that promotes creativity? If yes, how does one enforce discipline and obtain economic efficiencies? If the structure is too rigid, how does one move ahead on the knowledge and learning curve?

The rise and rise of Artificial Intelligence and Robotic Process Automation (RPA) have made the issues even more complex. An unclear understanding of what is really happening under the hood of the most abused jargons doesn’t really help.

In short, the dynamic environment forces you to respond with agility. A new mindset is required to create the right operational frameworks for the VUCA world.

Who is at the centre of your universe when you are designing operations? How quickly can you make changes at minimal cost of failure? Have you considered Design Thinking?

People

Birds of a feather flock together. But what if you need multi-disciplinary teams in order to succeed in the marketplace?

Diversity has been holding a pedestal position in discussions around people. However, there is now diversity in the meaning of diversity. From gender to race to sexual orientation, discussions on diversity have come a long way. It is time to examine the cognitive diversity of organizations and teams.

The trick is to remain contextually relevant, while still leveraging experience and wisdom that was earned in a different era. Some fundamental principles of change and society have not changed over centuries. Technology landscape on the other hand seems to change every time you refresh your browser.

The only way to thrive in this turbulence is through autodidactual methods. Life long learning is the only way and ‘learnability’ of teams will certainly lead to sustained success.

Is Expertise = Experience? How can young experts gain from wisdom of experienced professionals? How can the latter catch up with the young guns? Are you encouraging this symbiotic relationship?

Technology & Infrastructure

These are the invisible foundational pillars that can make or break an organization. The agility of an organization is largely predicated on it’s technology choices. How quickly can you pivot your business model to changes in the tech landscape?

Should one go all out and build a scalable platform? Or, should one be nimble and fleet-footed, with a dip your toes approach? Can there be a sweet spot that allows scalability with agility?

Even if things are typically not rocket science, but they probably resemble Hovercraft Science!

Way Ahead for Leading and Managing Professional Services Firms

Let’s look back at some of the above (introductory) issues that really only form the tip of the iceberg.

Your ship needs a Captain who has the ability to look around the corners and differentiate between froth and icebergs, while still looking for the right opportunities.

The rapidly changing dyanmics, precipitated largely by technology and the information explosion, have profound impact on all aspects of running a business. Professional Services firms are no different (yes, I just said that) and need as much of a management structure as any other commercial organization!