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• Oversee
• Gather data • Build
teams • Steer overall
analyses
• Perform intellectual direction of
analyses capital firm




Exhibit 10.2 Typical Career Responsibility Progression for Professional Staff




advancement. The promotion and appraisal process (discussed later in this
chapter) should also establish what levels in the firm are responsible for
determining when promotions are handed out (e.g., principals are responsi-
ble for determining consultants promoted to senior consultant).

COMPENSATION. A range of compensation (base salary, bonus, other
perquisites, and benefits) should be established for each level. Inevitably,
compensation information is shared within the firm as well as outside. Com-
pensation equity within a role will help minimize any dissatisfaction in the
ranks of the professional staff. A set of policies regarding compensation will
also reduce the amount of human resources effort that goes into setting com-
pensation for each individual staff member.
It is critical for the firm to define the preceding four parameters. Hav-
ing a well-defined career track will send a message that objective criteria
are used to evaluate, promote, and compensate professional staff. The work
of defining these elements will be recovered many times over in reduced
human resources effort for appraisal, promotion, compensation, and hiring
decisions. Firm recruiting efforts will be more competitive. The best pro-
fessionals are attracted to firms that have clearly established tracks for ad-
vancement, and firms with fair, objective promotion and compensation
systems retain those professionals.
A number of other considerations must be accounted for in designing the
professional services firm organization structure and career tracks. These con-
siderations are outlined next.
224 Attracting and Retaining the Best Professionals

Parallel Career Tracks for Nonpartners
The first area is differentiating partner track staff and nonpartner-track
staff. The skill sets required of staff in a professional services firm change
significantly over the course of their progression from consultant to partner.
Consultants are rewarded for data gathering, analysis, and individual effort.
Partners are expected to perform in very different endeavors: direction set-
ting, client relationships, sales, and business development.
Because of this disparity in requirements and expected skills, often firms
find that high-performing consultants and individual contributors are ill
suited for (or uninterested in) performing the duties and expectations of a
firm partner. This phenomenon can be driven by personality, work style, in-
terest, and capability of the individual staff member and means that firms
are forced to make a choice: Should high-performing professional staff who
show little affinity for the skills required of a partner be provided with a dif-
ferent professional track for advancement?
There are a variety of benefits to providing a parallel track. Depending on
the type of work being sold by the firm, the existence of subject matter ex-
perts who can be used for specific engagements can be a very powerful tool in
the firm™s business development arsenal. Furthermore, an individual with
proven project execution skills can be parachuted into difficult projects or can
be counted on to manage projects and minimize overall delivery risk, freeing
business-development-oriented partners to move on to more leveraged activi-
ties. A proven, high-quality senior level resource can be of immense help to
the firm.
On the other hand, a specialized and rare skill can quickly fall out of favor
with clients, leaving the firm with an expensive, difficult-to-retrain, and un-
billable resource to manage. Such individuals can also become disgruntled
with their career progress within the firm. If the parallel career track and
advancement for their role is ambiguous, they may feel that they have been
relegated to a backwater within the firm. This situation may eventually af-
fect their job performance, and they may leave on their own.
The decision for parallel career tracks for individual producers or subject
matter experts depends greatly on firm size, structure, type of work being
sold, and client needs. While there is no general methodology for determin-
ing what is best for a specific firm, what is certain is that firms should make
a clear-cut decision on whether they plan to support alternate (nonpartner-
track) career paths. Firms that find this issue difficult are usually the ones
that allow nonpartner-track individuals to stay with the firm but do not pro-
vide clear roles, responsibilities, and advancement paths for them. This puts
the firm and the individual in the worst of both worlds.
While recruiting and retention for firms are covered in Chapter 11, recruit-
ing is mentioned here because there are strong linkages between career track
development and recruiting. One of the most important factors in selecting a
225
Career Tracks, Compensation, and Professional Development

firm for professionals is the potential for learning and advancement. Therefore,
it is important that firm recruiting efforts and collateral ref lect the defined
career paths to set clear performance and promotion expectations with po-
tential candidates as early as possible. Convey the message that the firm is
well organized, and you will attract the best candidates.


Review and Update of Career Tracks
Like most firm governance structures, career tracks and promotion criteria
should be reviewed periodically to ensure that they remain relevant and
continue to ref lect reality. Typically, firms review these criteria annually
and make minor changes to the overall model. Complete overhauls of the ca-
reer track system are usually driven by major industry changes, large-scale
firm growth, mergers or acquisitions, large changes in the firm™s service of-
fering that occur over time, or changes in strategic direction. These major
adjustments are rarely executed and may happen only once every 5 to 10
years. Large changes to the career track and promotion plan affect every
professional in the firm and entail a resetting of career expectations by
nearly all.


Compensation and Benefits
As outlined earlier in this chapter, compensation is an important element of
overall employee satisfaction. Research has shown that as long as compensa-
tion is within reasonable (plus or minus 10 percent) range of employees™
marketplace expectations, other factors are more important determinants of
overall career and job satisfaction. However, when compensation strays out-
side those ranges, it becomes the number one predictor. Inattention to com-
pensation can quickly ruin a firm through mass exodus of key staff.
Compensation setting can be challenging for professional services firms.
Salaries and benefits are usually the largest direct cost by far in a profes-
sional services firm; therefore, controlling compensation expenses has the
largest impact on overall firm profitability. On the other hand, the firm™s ef-
fort to recruit the “best and brightest” and deliver the highest level of ser-
vice for clients can be severely hindered by an uncompetitive overall
compensation package.
Best practices for firms in the area of compensation include:

• Clearly defined compensation programs: Base salary, bonus, and other
compensation expectations for each level should be clearly set. While
firms may not elect to have an exact salary for each level, ranges of
compensation are appropriate as outlined earlier in the chapter.
226 Attracting and Retaining the Best Professionals

• Total compensation concept: Employee base salary and other cash
compensation are only a portion of the total employee expense for pro-
fessional services firms. Benefits, training, and other forms of compen-
sation can range from 10 percent to 30 percent of the total cost of an
employee. Because employees often consider only direct cash compen-
sation when benchmarking themselves against peers in other organiza-
tions, the firm should establish the concept of total compensation for
employees and highlight for staff the total package of compensation
and benefits costs incurred by the firm. One major consulting firm
sends employees a total compensation report annually and includes all
of the compensation components for professional staff valued appro-
priately in dollars.
• Periodic staff compensation reviews: Annual review of compensation
for each staff member. These reviews should usually be tied to the staff
annual appraisal. Periodically, the firm may perform market-adjust-
ment compensation reviews that are not linked to the appraisal cycle.
• Periodic compensation benchmarking: To avoid undercompensating staff,
the firm should benchmark professional and administrative salaries
against the market every three to six months. An annual schedule for
compensation reviews, usually tied to performance appraisals, is suffi-
cient. For certain high-demand skills, a six-month incremental check is
necessary to make sure the market has not changed significantly. Salary
adjustments can work both ways (i.e., down as well as up). If the market
has come down significantly, downward salary adjustments may be in
order. Downward salary adjustments can be incredibly demotivating and
should be avoided if possible.
• Publication of salary and benefit benchmarking data: Because profes-
sional staff will inevitably conduct their own benchmarking research,
the firm can mitigate any negative impacts by proactively researching
total compensation appropriate for the firm employees. Benchmarks
will vary by level, firm type, geography, and macroeconomic conditions.
This benchmarking should be used to set total compensation levels com-
petitively, as well as ensure that staff members are satisfied that objec-
tive criteria are used in assessing market levels.
• Linkage of compensation and billing: If salaries for a given level within
the firm are confined to a certain band, the firm can more easily set
bill rates with the expectation that staffing will produce a certain
amount of gross margin. For example, the firm may set a policy of
billing associates™ time at three times cost. The bill rate for an associate
making $75 per hour, thus, would be $225 per hour. The use of multi-
ples of salary standards to establish bill rates makes project estimating
and budgeting an easier process and can be facilitated through the es-
tablishment of clearly defined compensation for staff levels.
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Career Tracks, Compensation, and Professional Development

• Adherence to external constraints: Compensation packages should
comply with any applicable federal, state, or local laws, as well as any
other guidelines or regulations that may apply to the firm, voluntarily
or mandated.

Compensation Disclosure
A difficult decision is whether compensation information should be publicized
internally by the firm. Knowing the compensation ranges at each level can
serve as an incentive to junior staff, creates a culture of openness, and elimi-
nates time-consuming gossip and backbiting over salaries. However, there are
some drawbacks to this approach. Competitors can easily benchmark them-
selves against firm pay rates. Furthermore, if salaries are perceived by the
staff to be noncompetitive, attrition rates will be higher. If the salary ranges
are too wide or regarded by the staff as inequitable, public salary information
will be counterproductive as well.
Internal disclosure of salaries tends to work best in firms that have the
preceding compensation best practices implemented: levels and roles clearly
defined, easy-to-understand promotion criteria, and market-based bench-
marked salary and compensation packages that are relatively competitive.
Additionally, firms that disclose compensation information internally may
elect to avoid partner compensation disclosure or may intentionally obfuscate
the information for the higher levels of the firm.

Timing of Compensation Events
A retention technique related to compensation that can be employed by
firms is to structure the timing of significant compensation events so that
there is always a personnel event on the near horizon. For instance, the firm
can have appraisals delivered in Q1, compensation adjustments in Q2, stock
option vesting in Q3, and bonus payouts in Q4. With a real event taking place
every two to three months, employees have something to look forward to and
tend to do less looking for new opportunities.

Benefit Selection
Establishing a benefit package that fits all employees can be tricky. Staff
members at different points in their careers and personal lives care about
different things. For example, junior staff are usually focused on cash com-
pensation and training opportunities, whereas mid-career staff with families
may want more f lexible hours, lower travel expectations, and comprehensive
health coverage.
If possible, the firm should accommodate the wants and needs of different
constituencies by providing a menu of benefits that employees may purchase
228 Attracting and Retaining the Best Professionals

to suit their specific needs. For smaller firms, this may be difficult; as a firm
grows, such programs can improve retention, recruiting, and overall staff
satisfaction.

Perquisites
In addition to benefits, the firm may elect to establish specific perquisites
due for staff promoted to each level. These perquisites may range from the
simple, such as a dedicated executive assistant for all principal levels and
above, to more elaborate, such as paid country club memberships. Perquisites
serve as incentives for promotion, and they are helpful in improving the pro-
ductivity of the most senior staff of the firm.


Professional Development
As outlined earlier in this chapter, good professional development programs
are a critical contributor to overall staff satisfaction and retention in the ser-
vices firm. The three main components of professional development for staff
are the appraisals, training, and management feedback.

Appraisals: The Keys to Career Tracks
Appraisals are the mile markers along the career track laid out by the firm.
They serve as a forum for helping staff improve by providing a formal feed-
back mechanism, and a formal venue for promoting staff. A rigorous ap-
praisal process is also a good discipline for the firm as a whole, sending the
message that staff performance is important and that there is accountability
for performance at all levels.
To get the most value out of the appraisal process, it must be taken seriously
by the firm, the appraisers, and the appraisees. The very best firms have well-
defined processes for executing staff appraisals and invest immense internal
effort at all levels to complete comprehensive reviews every year.
While appraisals within a given firm may take many different forms, in
general, they are working to accomplish several things:

• Determine whether professionals being evaluated have the skills, capa-
bilities, and knowledge to do their current job well.
• Determine whether professionals have the skills, capabilities, and
knowledge to advance to the next level.
• Identify, inventory, and plan around any gaps that need to be addressed.
• Provide a formal process for documenting and revisiting these issues.
• Celebrate achievement and recognition through a formal process (pro-
motions are usually, but not necessarily, linked to appraisals).
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Career Tracks, Compensation, and Professional Development

While each firm should develop its own specific set of appraisals for
each level, which emphasize the skills required at that level, issues to con-
sider include:

• Does the individual have the core skills needed to execute the work?
• Has the individual demonstrated the necessary skills, capabilities, and

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