policies and procedures that should be considered for inclusion in standard
employee handbooks.) Chapters 10 and 11 cover the topic of employee re-
tention and satisfaction in more detail.
Applications and Limits of Benchmarking
Benchmarking can be an invaluable tool for the professional services firm ex-
ecutives. While it can provide insight for improvement in areas such as qual-
ity, costs, revenue, and time, benchmarking does not provide the definitive
answer to every business problem. As with any analytical tool, benchmarking
has a number of limitations and can even pose potential challenges. How-
ever, none of these need be insurmountable. In fact, attuned executives can
use the following issues to their advantage during the early stages of the
48 Managing and Governing the Professional Services Firm
benchmarking process, when they can serve to clarify thinking and intent.
We have demonstrated a few areas that the professional services firm
may consider benchmarking. The senior executives within a given firm will
undoubtedly identify a variety of additional areas that can be improved and
monitored with benchmarks.
Common pitfalls that can cause potential problems in benchmarking include:
â€˘ Objective of the benchmarking process is not clearly defined.
â€˘ Level in scope set is too detailed or not detailed enough to be used for
â€˘ Confusing benchmarking with participating in a survey. Benchmarking
is the process of finding out what is behind the numbers, not just where
â€˘ Believes that pre-existing benchmarks can be found. These may not be
applicable to your firm; therefore, you must identify your own bench-
â€˘ The process is too large and complex to be manageable.
â€˘ Confusing benchmarking with research. Benchmarking presupposes that
you are working on an existing process that has been in operation long
enough to have some data about its effectiveness and its resource costs.
â€˘ Misalignmentâ€”choosing a benchmarking topic that is not aligned with
the overall strategy and goals of the business.
â€˘ Selecting a topic that is too intangible and difficult to measure.
â€˘ Not establishing the baseline. Analyze your own processes thoroughly.
â€˘ Not researching benchmarking partners carefully. Do not ask questions
that you should have been able to answer yourself.
â€˘ Not having a code of ethics and contract agreed with partners.28
â€˘ Not being open to change and seeking to understand benefits potentially
outside the firmâ€™s industry, geographic location, or organizational size.
The number of potential pitfalls versus benefits may seem to be a disin-
centive for undertaking the benchmarking effortâ€”is the potential gain
worth the pain? It is helpful to view benchmarking as a holistic process that
encompasses and ultimately benefits the entire firm; thus, the benchmarking
remedy may be more palatable to the entire organization.29
After Benchmarkingâ€”What Next?
According to Michelle Porter, Global Best Practicesâ€”Benchmarking Ser-
vices group manager:
Professional Services Firm Benchmarking
Understanding the business, establishing clear objectives, customizing a benchmark
group that is aligned with those objectives, managing the usersâ€™ expectations, and
being open to change are essential components for a successful benchmarking
project. Benchmarking results are the beginning of a continuous process for an
organization to further understand their business and identify their strengths
and areas of opportunity. It is equally important for the users to be open to new
ideas and consider best practices when evaluating the benchmarking results.30
A major rationale for benchmarking is to provide context from which meas-
urements and recommendations can be made to senior management. While
you can make the scope of the benchmarking as narrow or far-reaching as de-
sired, it should always have objectives that mesh with a business strategy, a
budget, and an expectation of return. It should elicit senior management ap-
proval and lead to senior management consensus about the reasons for con-
Therefore, when presenting benchmarking data, executives should consider
the business strategy of the firm and attempt to compare spending with the in-
dustry, taking into account the life cycle of your firm. Through identification
of the right areas to tackle for benchmarking and hard work on the firmâ€™s
benchmarking initiative, executives may be able to more easily implement the
findingsâ€”or not, if findings do not support the firmâ€™s business strategy.
An assessment that indicates that the firmâ€™s spending is low compared to
the industry may indicate that the firmâ€™s strategy is to increase profits. As a
result, this does not necessarily indicate that spending should rise in re-
sponse. A minimal spending approach may make the most sense for a com-
pany in a low growth mode, as opposed to an expansion and acquisition
strategy that would indicate higher spending levels than the industry
Just Do It!
Benchmarking is not just about identification of best practices, but imple-
mentation as wellâ€”putting the data to use. Changing the way a firm or de-
partment performs a business process generally requires the involvement of
both the human and financial resources dedicated to the task over a period of
time. In addition, successful implementation needs a single point of account-
ability, realistic goals, and the ability to track the progress toward those goals.
Best practices implementation requires mastering the ability to work
within your own firm once the benchmarking is complete. Successful imple-
mentation is possible only if diligence and focus are given utmost impor-
tance throughout the process, including:
â€˘ Establishing a project sponsor who is actively involved in key meetings
â€˘ Selecting a dedicated team with a defined role for the team leader
50 Managing and Governing the Professional Services Firm
â€˘ Clearly defining the roles and responsibilities of team members and
designating the team member in charge of communications
â€˘ Developing measures of progress and milestones for the implementa-
â€˘ Creating a budget for the project31
â€ś You must have a clear, consistent vision and dedicated, full-time teams
assigned to an implementation project,â€ť says Mark Krueger, managing direc-
tor of Ohio-based AnswerThink Consulting Group. â€śTechnology has to be
viewed as an enabler, not the change agent. You also need to have open, hon-
est communication and rely on leadership by example.â€ť32
Finally, it is important to remember that benchmarking is not just a tool,
but also a processâ€”not an end in itself, but a means to improving perfor-
mance. Thus, it should not be viewed as a one-time event, but as an ongoing
commitment to continuous improvement.
The lawyers, consultants, real estate brokers, and others who work for profes-
sional services firms may provide superior advice to their own clients, but
sometimes forget to apply basic management tenets and techniques to their
own firms. Yet, if professional services executives understand that benchmark-
ing helps improve delivery of client service and is a practical, cost-effective
tool that can help build consensus within the organization, they might be more
willing to consider using it.
The ingredients for successful benchmarking can be found in best prac-
tices, committed management, and a well-run business. Effective manage-
ment of a company or department is not achieved simply by reducing costs; it
is also demonstrated by managing and controlling the business. Whatever
pressure executives may be under to improve the bottom line quickly, they
also face the danger of eliminating key resources that are essential to manag-
ing or growing the business or practice. It is smarter and safer to strike the
right balance between functional cost and overall business value.
In a growing firm, it is easy to lose sight of the excessive costs, duplicate
support services, and lack of consistent processes and procedures. But in
todayâ€™s competitive environment, these costs canâ€™t be ignored, even in the
short term. The result of implementing best practices achieved by benchmark-
ing is greater operational efficiency and effectiveness.
For those who believe they should benchmark but are hesitant because of
time and resource constraints, some last words of advice: Do a quick mental
inventory of your firm. It is a safe bet that there are certain elements of your
operation that are not entirely satisfactory or could use improvementâ€”
Professional Services Firm Benchmarking
whether those areas manifest themselves through complaints from clients
about billing errors, a competitor charging higher rates with no trouble at-
tracting business, or a certain department in the firm isnâ€™t pulling its weight
in billable hours. Pick just one of those bothersome areas and begin bench-
You will find it easier than you could have imagined. Implement the
changes that seem appropriate. Then tackle the next area. Youâ€™ll wonder why
you didnâ€™t use this cost-effective tool earlier.
Practitioners and students who are interested in further reading and research
surrounding the topic of benchmarking are encouraged to consult the follow-
ing web sites:
www.abanet.org American Bar Association
www.ama-assn.org American Medical Association
www.globalbestpractices.com PricewaterhouseCoopers LLPâ€”Global
www.shrm.org Society for Human Resource
www.hackettbenchmarking.com The Hackett Group
1. Norman Vincent Peale, Words I Have Lived By (Peggy Pinson, 1993).
2. Robert J. Kennedy, â€śBenchmarking and Its Myths,â€ť Competitive Intelligence
Magazine (April 2000).
3. Jeff Stimpson, â€śThe Benchmarking Engagement,â€ť Practical Accountant (Febru-
ary 2003), p. 26.
4. Susan Leandri, Managing Director, PricewaterhouseCoopers, LLP, â€śGlobal
Best Practices,â€ť telephone interview by author, New York, March 8, 2004.
5 Mark Tibergien and Philip Palaveev, â€śAdvisors Are Better at Client Service
than at Practice Management,â€ť Journal of Financial Planning (October 2002),
6. â€śNational Interpretation Project: Definition of Project Terms,â€ť American Asso-
ciation of Museums [accessed July 2004]. Available from http://www.aam-us
7. PricewaterhouseCoopers LLP, http://www.globalbestpractices.com.
8. Catherine Lennon and Andrew Tank, eds., â€śBenchmarking in the Finance
Function,â€ť The Conference Board (1994).
52 Managing and Governing the Professional Services Firm
9. Charles B. Green, â€śBenchmarking the Information Technology Function,â€ť The
Conference Board (1993).
10. Altman Weil Inc., 2001 Managing Partner & Executive Director Survey (New-
town Square, PA: Altman Weil Publications, 2001).
11. Kennedy Information, Inc., Partner Billable/Nonbillable Hours by Firm Size
(Peterbourough, NH: Kennedy Information, 2002).
12. Altman Weil Inc, 2003 Survey of Law Firm Economics (Newtown Square, PA:
Altman Weil Publications, 2003).
13. Altman Weil Inc, 2002 Survey of Law Firm Economics (Newtown Square, PA:
Altman Weil Publications, 2002).
14. Kennedy Information, Inc., Quartile Analysis of Billing Rates by Position (Pe-
terbourough, NH: Kennedy Information, 2002).
15. Kennedy Information, Inc., Billable/Nonbillable Hours by Employment Level
(Peterbourough, NH: Kennedy Information, 2002).
16. See note 12.
17. See note 10.
18. See note 12.
19. See note 13.
20. PricewaterhouseCoopers LLP, Finance and Accounting Global Best Practices
(New York: PricewaterhouseCoopers, LLP, 2004).
21. See note 20.
22. See note 20.
23. See note 4.
24. Barbara Gomolski, Mid-Size Company Summit (Stanford, CT: Cartner Mea-
surement Services, 2002).
25. James Pickford, ed., Mastering People Management (London: Prentice-Hall,
26. Kennedy Information, Inc., Partner Leverage (Peterbourough, NH: Kennedy
Information Inc., 2002).
27. See note 12.
28. Anne Evans, Avoid These 10 Benchmarking Mistakes (Melbourne, Australia:
Benchmarking PLUS, 1999).
29. The Hackett Group, http://www.thehackettgroup.com.
30. Michelle Porter, Group Manager, PricewaterhouseCoopers, LLP, Global Best
Practices, telephone interview by the author, New York, March 8, 2004.
31. Christopher E. Bogan, â€śBenchmarking for Best Practices: Winning Through In-
novation Adaptationsâ€ť (New York: McGraw-Hill, 1994).
32. Iv y McLemore, â€śJust Do It! Part One of a Series,â€ť Business Finance Magazine
JOHN J. REDDISH
What do we live for; if it is not to make life less difficult to each other?
â€”George Eliot, Middlemarch, 1871
This chapter identifies and clarifies the key issues governing the leadership
and governance structure of the firm: legal protections; allocation of equity,
compensation, perks, and benefits; and procedures for making and communi-
cating both policy and operational decisions. Each profession has its histori-
cal way of organizing, and within each profession, individual firms adopt
unique forms, yet the basic tenets of good management apply. Like any other
business, the professional services firm is engaged in two businessesâ€”the
business of the profession and the business of managingâ€”and both present
Traditional top-down management structures are the exception rather
than the rule, because firm performance encompasses the sum total of the
contributions of many peer professionals, professionals with other special-
ties, as well as other support personnel within its ranks. Most professional
services firms operate in project-based environments where individuals with
specialized knowledge come together in ad-hoc teams to handle an assort-
ment of individual and multiple projects and /or complex cases on a more col-
Outside business development or rainmaking activities, firm performance
is seldom attributable to a single individualâ€™s contributions. And, while indi-
vidual performance is always important, a better understanding of overall
54 Managing and Governing the Professional Services Firm
performance is achieved when everyoneâ€™s contributions are factored into as-
sessing organizational success. More likely, several professionals cooperate to
achieve the desired result. When cooperation is lacking and results are not