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THE
PROFESSIONAL
SERVICES FIRM
BIBLE
THE
PROFESSIONAL
SERVICES FIRM
BIBLE
JOHN BASCHAB
JON PIOT




John Wiley & Sons, Inc.
Copyright © 2005 by John Baschab and Jon Piot. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:

Baschab, John, 1968“
The professional services firm bible / John Baschab, Jon Piot.
p. cm.
Includes bibliographical references and index.
ISBN 0-471-66048-5 (cloth /cd-rom)
1. Service industries”Management. 2. Professions”Marketing. I. Piot,
Jon, 1966 “ II. Title.
HD9980.5.B368 2005
658”dc22
2004011607

Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
Contents

Preface ix
Acknowledgments xiii
About the Authors xv


SECTION I
Managing and Governing the Professional
Services Firm
1 Managing the Professional Services Firm 3
John Baschab, Jon Piot, and Robert H. Schwartz
2 Professional Services Firm Benchmarking 16
Gina Gutzeit
3 Partnership and Governance Structures 53
John J. Reddish


SECTION II
The Front Office: Driving Sales and Growth
4 Sales Management 77
Jana Carpenter
5 Marketing and Business Development 121
Bryan J. Wick
6 Service Line and Intellectual Property Creation 143
Thomas Marbach
7 Proposal and Reference Management 158
Tim Bourgeois
8 Strategic Partnering 180
T. Gregory Bender
v
vi Contents

SECTION III
The Organization: Attracting and
Retaining the Best Professionals
9 Organization Structure 197
Frank Ribeiro
10 Career Tracks, Compensation, and
Professional Development 217
John Baschab and Jon Piot
11 Professional Staff Recruiting and Retention 237
Brant C. Martin



SECTION IV
Services Delivery: Taking Care of Business
12 Service Delivery 265
D. Michael McDowell
13 Resource Management 284
Joe Santana
14 Risk Management and Quality Assurance 316
John Baschab and Jon Piot



SECTION V
The Back Office: Efficient Firm Operations
15 Finance, Accounting, and Human Resources 337
Jeffery B. Nemy
16 Purchasing, Procurement, Vendor, and
Asset Management 383
John Baschab and Jon Piot
17 Information Technology 431
John Baschab, Craig E. Courter, and Jon Piot
18 Real Estate and Facilities 466
K. Todd Phillips
vii
Contents

19 Legal Counsel 495
Scott M. McElhaney and Michael W. Malakoff
20 Office Management 517
John Baschab and Jon Piot
Appendix: About the CD-ROM 531

Index 535
Preface


If you assessed the available books on the topic of managing professional
service firms, you probably arrived at the same conclusion we did about a
year ago. You can find over a hundred books on the topic. Ninety-five per-
cent of these books are written for the independent consultant who wants to
learn how to incorporate, how to develop a proposal, how to sell themselves,
and how to individually deliver a project to a client. The other 5 percent of
the published books target the executives of large, national consultancies
with thousands of consultants/employees. There were no books available to
help the professional service firm with any where from 2 to 1,000 profes-
sionals. Yet, almost 75 percent of all professional services companies are in
this group. In the books for independent consultants, you learn the basics
(e.g., how to act on the client site, what the start-up costs are). In the books
for large consultancies, you learn how to expand internationally or about
developing philosophies. In this book, you learn how to grow an existing
firm. You learn at what points you need to make decisions such as adding
administrative support, opening another office, building another service
line. You learn how to determine what is the best sales organization struc-
ture for your firm. You learn what information systems you need to build
and when. This book is for the growing consulting company and its associ-
ates and management.
The bulk of our consulting experience has been in the technology consult-
ing and management consulting fields. We have had interesting consulting
problems involving 50,000-, 2,000-, and 500-person consulting organizations.
Significant input in this book has come from lawyers, accountants, doctors,
and many other professionals. The contributing authors have varied and suc-
cessful professional services backgrounds. This book consolidates the best
practices for the mid-size consulting company. We have observed consistent
patterns of success and failure in consulting and have been fortunate enough
to survive them. The main goal of any professional services company is to
add enough value to your clients that they will pay you enough to cover your
costs and make a decent profit. We have captured the lessons learned and
the tools, techniques, and practices that can help a professional services firm
as it grows to include more and more professionals.


ix
x Preface

Benefits for the Reader
From this book, you gain valuable skills, including:

• Identifying the main management areas of a successful professional ser-
vices firm.
• Understanding of the scope and key success factors in each manage-
ment area.
• Developing approaches for auditing current performance by area.
• Understanding the main sources of wasted resources.
• Identifying the industry average spending and investment commitments
by area and professional services type.
• Distinguishing the business of managing the firm from the delivery of
professional services.
• Understanding symptoms and sources of professional services firm inef-
ficiencies.
• Learning the critical improvement steps in each of the main manage-
ment areas.
• Learning how to make better decisions in firm strategy and direction
setting, hiring practices, operations, technology, marketing, and overall
management.
• Using specific cases and anecdotes from professional services firms to
illuminate and further explain the material.
• Becoming familiar with specific advice from well-known practitioners
in each of the service areas.
• Achieving higher utilization from their existing professional services as-
sets/consultants.
• Achieving higher ROI from capital and operating expenses.

In addition, you develop a keen understanding of not only the building
blocks of successful firm management, but also how to grow and leverage
current assets.


Language Specific to Professional Services
There are terms we use repeatedly throughout the book. These terms are
used throughout the field. They are:

• Backlog: The value of committed sales contracts that will be executed
in the future.
xi
Preface

• Bill rate: The average billing rate to the client achieved by a particular
or group of professionals. In many cases, firms will “set” standard bill
rates for classes of professionals.
• Billability: The total hours billed during a specified period (e.g., year)
divided by the total hours available in during the same period. For exam-
ple, a lawyer that bills 2,000 hours in a year where 2,000 hours are avail-
able for work would have 100 percent billability. Also called Utilization
rate.
• Billable: The status of a professional when they are billing time to
clients generally for a protracted amount of time.
• Client: The customers of a professional services firm.
• Firm: The professional services business or company.
• Gross margin: Calculated as Bill rate minus loaded pay rate.
• Leverage ratio: The ratio of junior staff to senior staff. If there are 10
professionals working under a partner, the leverage ratio would be 10
to 1.
• Loaded pay rate: Loaded pay rate includes the professionals base pay
rate plus taxes and benefits.
• Partner: Term used to describe a senior member of a professional ser-
vices firm. A partner typically has the same rights as an owner of the
business.
• Principal: Term used to describe a senior member of a professional ser-
vices firm that works just under the partner.
• Professional staff: Term for firm employees directly engaged in provid-
ing services to clients.
• Service revenue: Revenue associated with billable time.
• Staff: Term used to describe support personal (e.g., administrative as-
sistants) also called administrative staff.
• Utilization rate: See Billability.
Acknowledgments

Clearly, an endeavor of this type is the end-result of countless investments
by mentors, clients, friends, and teachers.
This book was a major collaborative effort on the part of many people. In

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