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cally stands back and allows broad autonomy to the various branch office lead-
ers. This approach can work well when branch offices and the home office are
relatively independent and the branches depend on the home office only for
items such as systems support, financial services, and research. Under this sys-
tem, branches have maximum latitude and minimum regulation.
In the second application, the main office provides orthodoxy throughout
the practice with all branches replicating main office policies, procedures,
and processes. In this application, branches operate more like franchise units
in a chain. The economies of scale generated by consistency are intended to
make up in profit what they take away in creativity. This works well for nar-
rowly focused and /or easily systematized professional services and less well
for those with much discretion and a broad array of services.


Managing Partners and/or Chief
Executive Officers
Some firms choose to keep as close to the traditional corporate profile as
possible, by choosing a managing partner, president, or CEO to lead the
firm. Typically, the leader takes on the additional role of chairman of the
board. In this structure, a single leader manages policy and operational per-
formance. The benefit of this approach is that the firm is led by one of its
own. The disadvantage is that the leader often goes from being a key rain-
maker and performer to a cost center, and an expensive one at that.
Some firms lessen the impact on the firm by selecting an able, but not stel-
lar, performer for this role and support this leader with a strong executive
72 Managing and Governing the Professional Services Firm

committee (see later discussion). Still others rotate the position among the
executive committee group.
Other firms choose to hire a professional manager, an administrator (not
one of the firm™s professionals), to oversee all administrative and marketing
functions. Practice management is still usually controlled by the firm™s pro-
fessionals, either in the form of a broad-based committee or through the
managing partner for the specific practice area.
Candidates for these positions, who often carry a chief operating officer
(COO) title, come from all disciplines. Those with marketing and adminis-
trative experience, often having earned an MBA or similar degree, are typi-
cally the firm™s best choice. Policy decisions typically remain with the firm™s
inner circle of professionals.

Rebellion in the Ranks

While professional services firms have traditionally sought ways to max-
imize profitability and demonstrate strong leadership, it can be a strug-
gle. One early client, a professional services firm with several offices
and more than 800 professionals, was being run by a chairman and an ex-
ecutive committee. Committee members were unhappy with the amount
of time managing the firm took away from their billable time. The
chairman was so busy with his management duties that his practice was
declining. Consulting intervention pointed to some process improve-
ments and recommended the hiring of a professional manager as CEO.
The leadership group agreed with this strategy and a search was con-
ducted. A candidate was found at a large financial institution and was
hired. The chairman was delighted and very supportive. Committee
members were initially pleased but were in open rebellion within eight
months, forcing the ouster of the CEO and leading to the chairman™s res-
ignation from the firm. The partner who led the rebellion was soon serv-
ing as the new chairman, and the firm retained this model until several
years later when they were acquired by a large financial institution. The
reason cited for the rebellion was that the professional manager never
absorbed the culture of the firm.



Executive Committees
Many professional services firms use an executive committee approach to
firm governance. Firms large enough to have a professional administrator
often use the executive committee as a mini-board of directors to interface
with the administrator and moderate his or her decisions. In the smaller
firm, this committee frequently serves as a virtual office of the president,
73
Partnership and Governance Structures

making day-to-day decisions for the firm and submitting these decisions for
ratification by the board of directors when they meet or by poll. Most often,
executive committee members are also members of the board of directors of
the firm, and operational and shareholder issues are handled simultaneously
(though specific resolutions may be required to meet legal requirements).
Firms that do not follow the bylaws they have established or fail to maintain
complete and accurate records open the firm and themselves to potential
risk. When in doubt, it is always better to draft a simple resolution and get it
approved by the larger board than to take the risk of a future challenge to an
oral decision.


Practice Management Teams
In this model, members typically rotate on and off a small team that may
focus only on service quality or may involve itself in both service quality and
business results. Decisions are often determined by consensus, and few sub-
stantive issues are decreed by the team™s chair. The span of control for the
team may entail only setting goals for their specialty and monitoring progress
against plan, or the committee may oversee all issues related to specific per-
formance of the practice specialty.
This model allows those closest to the work to manage the creative and
work product unencumbered by the disparate concerns of other firm mem-
bers, who often operate in different specialty areas that may not share the
same operational or profit guidelines. In a consulting firm with a litigation
support practice, for example, the work f lows and processes differ sharply
from those of an applications™ engineering practice focusing on problem solv-
ing and code generation.
Representatives from each of the practice management teams within the
firm usually constitute either the board or its executive committee.


Summary
Managing the professional services firm has never been easy. The analogy of
herding cats comes to mind. Firms that adopt an effective structure for gov-
ernance, wealth accumulation, and equity transfer give themselves the best
chance for prosperity and growth. Whether the firm begins with one princi-
pal or a key group, creating a structure using one of the models identified
will enable rather than constrain opportunity and is a first step in increasing
the likelihood of long-term success.
Building on this structure, initial equity is allocated fairly, and the
processes of the firm govern the f low of equity into new hands. This process is
the lifeblood of the professional services firm. In the Four Stages of Business
74 Managing and Governing the Professional Services Firm

Growth7 (survival, liquidity, profit, and sustained growth), we see a cycle
that many businesses in general, and professional services firms in particular,
fail to master. Few survive into a second generation of leadership. But those
few firms that do survive have mastered the f low, and their vitality is evi-
dent, both professionally and financially.
Principals and professionals in these firms have been nurtured both in
terms of equity participation and performance recognition. Sound and pro-
gressive compensation programs provide a stable environment that nurtures
and sustains high performance professionals. Such policies also facilitate re-
tention and, coupled with a full array of competitive benefits, encourage both
the best and the brightest to cast their long-tem lot with the firm.
Successful firms have also identified and documented their workf lows
and supported those workf lows with decision management techniques de-
signed to facilitate process. Mastery of workf lows allows for leveraging the
potential of each professional and support person within the firm.
Finally, successful firms typically acknowledge that there is no shortcut to
improved performance, no magic pill. Success is earned on a day-by-day basis.
Structure supports ownership and facilitates reward. Defined processes make
the going easier and propel the firm into its future. In speaking to clients in
professional services firms over the years, I have often asked what most facili-
tates growth, given a talented group of professionals. In hard times and pros-
perous times, the answer is the same: f lexibility.

NOTES
1. John J. Reddish, CMC, IPO Decision Tree (included in the Resource CD).
2. Mark J. Gundersen, Esq., PSI 2004 Technology Conference, 2003, pp. 5, 6.
3. Robert Morris Associates, Annual Statement Studies (also known as the Ratio
Book) includes comparative historical data and other sources of composite fi-
nancial data categorized by SIC code, available from www.rmahq.com.
4. U.S. Department of Labor, Bureau of Labor Statistics, www.bls.gov.
5. Several online sources provide individual salary surveys, including www
.salarysource.com.
6. One national source for site selection and local demographics is available from
www.developmentalliance.com.
7. John J. Reddish, CMC, press release and article, © 1995, 2004 (included in the
Resources CD).
SECTION II


The Front Office:
Driving Sales and Growth
4
Sales Management
JANA CARPENTER


If there is no wind, row.
”Latin Proverb




This chapter introduces a totally unconventional concept: The formation of a
separate sales organization within your professional services firm. While the
direct salesforce model is a generally accepted practice in technology consult-
ing, performance consulting, and product-driven companies, the formation of
a separate sales organization does not have serious traction in the professional
services industry. Buckle up. This chapter”through guiding philosophies, an-
ecdotes, and case examples”demonstrates why going against the mainstream
is good for your business. In fact, a professional salesforce is required for any
professional services firm looking to grow with velocity. This chapter provides
you with the steps, tools, and insight to build and manage an effective sales or-
ganization in your firm.
It is very easy for people to understand the need to hire salespeople to sell
a product; however, professional services firms are typically not trained to
put a structure around selling intellectual capital and the process of consult-
ing, nor do they often want to. An Economist article notes that consultants™
professional skepticism teaches them to “dig holes in constructive new
ideas,”1 and to many practice leaders, a dedicated salesforce is a new idea.
Reasons for the reluctance to hire and work with sales professionals are many
and include the stigma associated with sales; the belief that sales is personal-
ity driven, thus a formal organization and sales “professionals” are not neces-
sary; and, most importantly, sales conf licts with the rainmaker mentality of
the “expert” industry. Traditionally, partner status, esteem, and big money in
the professional services industry are associated with strong sales ability.

77
78 The Front Office: Driving Sales and Growth

The highest status for a consulting professional is to be identified as one who
can make rain, and bringing in salespeople creates conf lict.
To illustrate the pervasiveness of these challenges, I share a story that de-
scribes the process navigated as I introduced a sales organization into FTI
Consulting, Inc.

Coming Out
Three years ago, FTI posted an online employment advertisement for a
director of sales for the Chicago office. The Chicago office was looking
at different ways to drive revenue. They built their business on a few
major client engagements, did extremely well, and grew exponentially. In
2001, as litigations pushed and settled, the practice leaders found them-
selves with a good-size organization of outstanding professionals, but not
enough clients. One creative and innovative practice leader understood
the need for new revenue streams and decided to try an experiment. He
hired one experienced sales professional and identified and dedicated
two current employees with great client facing skills to outside sales. In
2000, I joined FTI as their supervisor and FTI™s first director of sales
(or so that was my impression coming in). However, as I began my career
with FTI, I saw that I was identified as a senior consultant, even in the
language contained in my offer letter, and not as a director of sales. As a
new employee with a background in sales, this struck me as, “ Yikes, what
have I gotten myself into?” Here was a company in need of new revenue
streams and not ready to “go public” about the hiring of a sales manage-
ment professional.
I continued in the sales management role, with the support of my di-
rect supervisor. Focused on generating new revenue, we dug in and did
the hard work. After one year, the sales team was performing exception-
ally well, and the division president asked my supervisor, “How did you
get these budget busting months?” Even with demonstrated results, my
supervisor was hesitant to “come out,” but the time had come to disclose
the truth”that a sales team, in concert with the consulting professionals,
was responsible for the tremendous revenue growth. When I met the divi-
sion president and shared our methods, he said to me, “But, I thought you
were a senior consultant.” While the division president was ecstatic with
the new revenue stream and improved sales performance, he still found it
hard to believe that a salesperson could sell professional services. In his
disbelief, he put the sales team through rigorous tasks including recalcu-
lating our forecasts repeatedly and testing our ability to sustain the
growth. Even after our group brought in $13 million in self-originated en-
gagements that year, the division president still did not want to acknowl-
edge the need for salespeople. Slowly and hesitantly, the firm leaders
came to acknowledge the impact a dedicated sales organization within a
79
Sales Management

professional services firm could have on the bottom line, and today FTI™s
sales organization is viewed as a tool for success.
The lesson I learned from this journey is: While there is still an enor-
mous stigma attached to the word salesperson and a fear that sales pro-
fessionals and professional consultants cannot mix, you can establish a
sales organization in your firm, no matter how biased it is against such a
measure, as long as you have the support of at least one person who is
willing to sustain you until you prove yourself. Today, I am a respected
leader in FTI and a vice president in charge of sales and marketing,
where I lead an organization of 30 sales and marketing professionals.

If you™re convinced of the value of forming a direct sales organization in
your firm, this chapter will help you greatly. While the “Coming Out” sce-
nario might convince your of the challenging nature of the task, the fact is
that more and more professional services firms are experimenting with the
direct sales model, with wider industry acceptance. In the context of main-
taining an awareness of the challenges of instituting a sales organization
within the professional services firm environment, this chapter gives you in-
sight and actual tools to enable you to:

• Organize, build, manage, and coach your sales team.
• Understand your sales process and sell effectively.
• Track, measure, and promote your results.
• Choose the systems and technologies that will best benefit your firm.
• Generate revenue!

Whether yours is a firm of 10 or a firm of 10,000, a sales organization is
an effective tool for revenue generation and enhanced client service.

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