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ment tion of resources
among delivery,
business develop-
ment and capability
development

Exhibit 9.2 Pros and Cons of Each Organization Model
211
Organization Structure

Firm administrators are also heavily involved in recruiting, training, and
career development mechanisms for support staff. They should play a critical
role in the career development of employees and should have the ability to
ensure that support staff is exposed to much-needed project variation.
Because they make contributions to deliverables across a range of func-
tions and roles, it is critical to ensure that compensation and performance
metrics for support staff are accurately set and defined.


Setting Responsibility for Pricing,
Marketing, New Service Development,
and the Budgeting Process
Professional services firms tend to place significant decision-making author-
ity for pricing, marketing, new service development, and the budgeting pro-
cess on their practice teams.
Firms most often set pricing policy globally, including target margins or
billing rates, allowing local variations depending on organization structure
(particularly the geographic model). Ultimately, pricing authority lies with
the delivery team, although partner or higher authorization is most often re-
quired for discounts. It is important to include mechanisms for timely and ac-
curate view of revenues, gross margins, average billing rates, utilization,
investments, accounts receivable, and overhead costs; to be able to track
margin realization versus target; and to ensure compliance with discounting
and pricing policies.
Most organizations have a specialized marketing function providing sup-
port to individual practices. The role of the marketing function typically in-
cludes marketing communications, market research, sales support, and
branding. Customer-facing staff is central to the marketing process, how-
ever, both through adherence to the firm™s overall marketing and branding
strategies and through activities such as writing white papers and articles
and presenting at conferences.
Although firms may place responsibility for new service development with
delivery teams, the marketing function, or a separate development group, ini-
tial development of new services usually comes about when services that are
already done on an ad-hoc basis for one or some clients are turned into prod-
ucts or service offerings for use across multiple clients. Regardless of where
responsibility for development lies, the marketing support function is gener-
ally involved throughout the process.
Generally, “hard” investment decisions are made through a centralized
budgeting process with practice leaders accountable for their targets. How-
ever, firms often fund new service development and capability-building ac-
tivities through allocation of delivery staff time. Chapter 6 discusses the
process for determining investment priorities for new service lines.
212 Attracting and Retaining the Best Professionals

Career Progression
At most firms, progression occurs along an established continuum from
entry-level (associate) to stakeholder (partner); some models also support a
nonpartner track. As in other aspects of firm organization, the expectations
and responsibilities for progression within the firm need to be clear, explicit,
and well defined.
As an individual ascends the firm hierarchy, responsibilities shift from a
tight focus on delivery toward business development and other institution-
building activities. A recent study3 found the division of labor at typical con-
sulting firms is as follows:

Division of Labor between Partners and Project
Managers at Consulting Firms
Percentage of Time Spent
on Responsibility
Partners Project Managers
Client engagements 45 64
Business development and marketing 25 12
Administration 8 7
Thought leadership 7 4
Recruiting/training 4 4


The apprentice model, with fixed leverage ratios for junior to senior
staff, is dominant. It is important to make it clear to all new candidates in
an “up or out” policy that only a select few will travel the entire path
to partner. Other firms have a nonpartner track that provides long-term
career options for individuals with specialized knowledge or training. Re-
gardless of which model a firm chooses, training mentoring, work alloca-
tion, and feedback and evaluation are critical to ensure the professional
development and preparation of junior staff. Firm training and develop-
ment, both formal and on the job, are critical parts of preparing individuals
to assume the increased business development and administrative responsi-
bilities that accrue over time.
Typically, professional services firms use specific competency models as a
part of their organization model, with those moving on a partner track need-
ing the following:

• Project delivery: This competency follows an hourglass model where
entry-level generalists develop specialized functional or industry
213
Organization Structure

knowledge and then build expertise that can bridge many industries
and functions across projects.
• Project management: The lowest level staff begins as a team member,
developing the skills necessary to manage increasingly complex projects
and eventually evolving from a supervisory to advisory role.
• Account management: Over time, staff increase both their frequency
and quality (in terms of seniority) of client contact. Senior staff “own”
client relationships and are responsible for developing and maintaining
new relationships for the firm.
• Business development and implementation of marketing plans: Eighty-
six percent of consulting firms have no salesforce, relying instead on
the partners and other staff for business development. New staff ini-
tially contribute to client proposals, but over time their role evolves into
responsibility for revenue generation and the management of a portfo-
lio of clients.

In addition, over time, employees are expected to increase their competency
at firm administration and staff development, as well as to contribute to the
firm™s marketing efforts, initially by supporting the development of new
ideas through directed research but eventually as visible and internationally
recognized thought leaders (see Exhibit 9.3).


Organization Model Example
The general principles of career progression are similar across professional
services firms regardless of specialty.
Firms are generally organized by practice model, with practices identi-
fied according to industry and /or functional specialization. The leverage of
junior to senior staff is usually fixed. In a typical consulting firm, for exam-
ple for each partner, the firm has an average of five to six full-time equiva-
lent (FTE) professional staff as follows:

• 1.25 project managers (senior associates/principals at Booz Allen)
• 1.75 consultants (associates)
• 1.5 associates (consultants)
• 1 support staff

The organization structure usually includes an explicit career develop-
ment path with well-defined standards for promotion in relation to perfor-
mance, behavior, and client development. For a consulting firm, titles of
levels might be:
ADMINISTRATIVE/ SALES/NEW MARKETING &
PROJECT STAFF ACCOUNT BUSINESS THOUGHT
LEVEL DELIVERY MANAGEMENT DEVELOPMENT MANAGEMENT DEVELOPMENT LEADERSHIP EXPERIENCE
L5 Highly skilled indi- Responsible for May share in May manage over- May have respon- Internationally >12 years
vidual contributor, multiple large practice manage- all relationship sibility for rev- recognized
“guru” projects; provides ment and staff with some clients enue generation thought leader”
technical expertise development and building publishes articles,
and direction client base; sup- speaks at
port BD in writing conferences
proposals

L4 Multiple projects Share practice Manages relation- May have respon- Emerging posi- 7 to 12 years
or single complex management and ship with clients; sibility for rev- tion as thought
project staff development identifies and pur- enue generation leader; gaining
sues opportunities and building recognition in
with new and client base; writes select industries
existing clients and presents and regions




214
proposals
L3 Expertise or com- Smaller projects/ Supports Moderate to heavy Participates and Assist in develop- 4 to 7 years since
prehensive knowl- segments of contact with min- identified issues/ ment of new ideas; advanced degree
edge in particular projects senior clients opportunities; making major
technical area writes and pres- content-driven
ents proposals contributions
L2 Beginning to Member of team None Daily contact with None Support develop- 1 to 4 years since
develop expertise lower/middle level ment of new advanced degree
clients ideas through
directed research
L1 Entry level Member of team none Limited with lower None None
level

Exhibit 9.3 Professional Services Firm Competency Models. Source: Mercer Compensation Survey, Booz Allen Analysis.
215
Organization Structure

• Consultants, senior consultants (entry level to between one and four
years postadvanced degree)
• Associates, senior associates (four to seven years postadvanced degree)
• Principals (7 to 12 years)
• Partners, senior partners, and managing partners with ownership stakes
(greater than 12 years)

Some models also have a nonpartner track and provide long-term career op-
tions for individuals with specialized knowledge or training.
Because only a select few progress to partnership, hiring and promotion
model plans for natural attrition. If the workf low demand varies or changes
occur in the business environment, lateral hiring is used to replace associates
lost to attrition, or “up or out” policies are increased to diminish supply.
Under this career progression model, formal and informal training and
mentoring on every level are perceived as “investment” in the assets of the
firm and are expected to be core competencies of senior level staff.
In professional services firms, the management of complex interactions
among client staff and support staff is critical to ensuring overall quality of
work. Because under this model partners are the leaders and leading admin-
istrators of the firm, the ability to manage these complex interactions well is
another core competency expected of senior client staff.


Summary
A firm™s reputation and success depend exclusively on the talent and intelli-
gence of the people delivering it. The optimal organization model for profes-
sional services firms is the one that allows the firm to best leverage its
resources and intellectual capital for optimal competitiveness. Regardless of
which model the firm chooses, it must allow people the freedom to operate
effectively while supplying needed structure as well as checks and balances
to keep the firm on track. It must incorporate transparency throughout the
organization, clearly define roles and responsibilities, and make knowledge
sharing a part of the corporate fabric.


RESOURCES
FIDIC (International Federation of Consulting Engineers): The Professional Ser-
vices Firm: A Training Manual and Guide to Practice”see http://www1.fidic.org
/resources/capacity/wb_f lier_final.pdf for details on this publication.
Maister, David H., Managing the Professional Services Firm (New York: Free Press,
January 1993).
Maister, David H., True Professionalism (New York: Free Press, January 1997).
216 Attracting and Retaining the Best Professionals

NOTE
1. Philip Crosby, Philip Crosby™s Ref lections on Quality: 295 Inspirations from
the World™s Foremost Quality Guru (New York: McGraw-Hill, 1995).
2. Harold R. McAlindon and Michael Michalko, The Little Book of Big Ideas: In-
spiration, Encouragement & Tips to Stimulate Creativity and Improve Your
Life (Nashville, TN: Cumberland House Publishing, 1999).
3. Kennedy Information, Inc., Benchmarks in Management Consulting: Opera-
tional Metrics for Sound Firm Management (Peterborough, NH: Kennedy Infor-
mation, 2002).
10
Career Tracks,
Compensation, and
Professional Development
JOHN BASCHAB AND JON PIOT


I haven™t the strength of mind not to need a career.
”Ruth Benedict (1887“1948), U.S.anthropologist1

Show me the money!
”Cuba Gooding Jr.as Rod Tidwell in Jerry Maguire2




Of the internal operations issues affecting the performance and delivery of
services to clients, staff satisfaction and performance has an enormous im-
pact. The biggest predictor of that satisfaction and performance is happiness
with firm career path, compensation, training, and professional development.
However, the rewards of a well-articulated and deliberate career track, com-
pensation, and professional development plan to the firm are indirect and
often neglected.


Why This Topic Is Important
Professional services firms must have a systematic way to promote, train, and
compensate those who are best at executing and selling the business of the
firm. Effective measures will attract and retain the best professionals, as
well as ensure the future of the firm itself.
217
218 Attracting and Retaining the Best Professionals

Top professionals in any field generally have their pick of which opportu-
nities they pursue and are attracted to positions with well-defined paths that
will reward them consistently and objectively. They want to perform and to
be recognized for their achievement by their firm. They also know that firms
that have taken the trouble to provide clear career tracks to their profession-
als will attract other “A” players and are likely to be well managed in other

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