<<

. 46
( 92 .)



>>

268 Services Delivery: Taking Care of Business


Value objective * (in thousands of dollars)




250

Current
state

150




Today Time
* Value objective = Net earnings per partner




Exhibit 12.1 Value Objectives in a Professional Services Environment


Exhibit 12.2 shows that this practice has a future value objective
($250,000 of net earnings per partner) that exceeds its current condition. The
difference between where the firm is and where it wants to be is the direc-
tion and goal of change.
Most professionals are inherently reluctant to change their approach to
managing their practices. But progressive and successful professionals real-
ize that they must embrace the argument for change because it:

• Creates a strategic management environment
• Solidifies the organization™s commitment and focus
• Delivers incremental future value

The following section looks at the firm™s internal strategic management.
Without a strategically managed environment, the strategic delivery of pro-
fessional services, and the strategic building of a firm™s client base cannot be
successfully accomplished.


Strategic Internal Management
Strategic management systems work when they become the way business
is conducted, the way decisions are made, and the way new services are
269
Service Delivery


Value objective * (in thousands of dollars)


Future
state
250

Current
state

150




Today Time
* Value objective = Net earnings per partner




Exhibit 12.2 Value Objectives in Transition




developed and delivered to the market. In this manner, future value objec-
tives can be realized.

Engaging the Management Team in the
Strategic Process
Everyone on the management team in a professional services firm must learn
how to use the strategic process firsthand. There is great power in under-
standing how a strategically managed business functions. As so well put by
Eliyahu M. Goldratt, author of The Goal:

So, what are we asking for? For the ability to answer three simple questions:
What to change? What to change to? How do we cause the change? Basically what
we are asking for is the most fundamental abilities one would ask from a manager.
Think about it. If a manager doesn™t know how to answer these questions, is he or
she entitled to be called “Manager?”2

Equally important to strategic internal management is dedication to the
process. It has to be backed by the leadership of the organization. This takes
building a consensus among the leadership. Says Edi Osborne, principal of
MentorPlus in Monterey, California:
270 Services Delivery: Taking Care of Business

Professional service firms, by definition, are made up of individual professionals,
each with their own agenda, their own vision for the future. Professional service
firms tend to focus more on the individual and their personal production. As a re-
sult, most firms lose sight of the big picture or collective outcome. For a firm to
survive beyond particular individuals and their production, it has to adopt a sus-
tainable business model, one that is team- and goal-oriented. Herding cats to-
ward the same bowl of milk is much easier than trying to motivate collective
behavior when each has its own bowl to go to. This assumes that the collective
bowl yields more and better milk.3

Moving forward is not possible unless everyone is on the same page and
has come to terms with previous disagreement or dissension. Once this oc-
curs, the firm must define and understand its constituencies, which is dis-
cussed in detail in the following section.
Every business, whether professional firm or client, has at least four main
constituencies:

1. Owners/investors/founders
2. Employees/volunteers/human capital
3. Clients/customers/consumers
4. Vendors/suppliers

A strategic internal management system focuses on the key elements of its
relationship with each of these constituencies.

Owners/Investors/Founders
The focus on this group should be maximizing the return on investment
(ROI), creating better, greater outcomes from the capital available, setting
reinvestment parameters, and meeting the needs of all owners over the short
or long term. A professional services firm™s owners, that is, its partners, share-
holders, or investors, must understand what their end game is. Why are they
in this business? What is their value objective? If the value objective is to
maximize personal net earnings on an annual basis, the firm must confront
that objective in the way it manages its vendors, customers, and employees. It
cannot be the sole driving force in the organization, but as the expectation of
the owners, it will govern the way the firm spends money; provides incentives
for its employees; and plans, prices, and delivers its professional services.
Firm owners can, however, have other value objectives besides maximiz-
ing their personal income, for example:

• Creating a legacy
• Growing the business
• Attracting new owners
271
Service Delivery

Owners must decide whether they are willing to reinvest their capital
today in their business and let it appreciate for the future. If they are, that
willingness should govern the way the firm hires people, manages its ven-
dors, and delivers services to clients. If they are not, important management
decisions will be very different.
A firm™s ownership structure can include one or many owners and is typi-
cally governed by the size of the firm and its history. The partnership struc-
ture, for example, is common in law firms, accounting firms, advertising
agencies, and others. Most professional services firms have owners who,
whether classified as partners or not, are typically highly compensated and
share directly in the income of the firm. However, professional services
firms should not be afraid to share revenue and income. Associates and the
other professionals who participate in the delivery of services can have per-
formance standards that offer the potential to earn additional income on the
basis of performance. Performance-based incentives are a must for any pro-
fessional practice in order to encourage the professionals in the organization
to maximize their efforts. They may not be owners, but they should be paid
fair market value for the services they help the firm provide. Organization
and partnership structures are discussed in detail in Chapters 3 and 10.


Employees/Volunteers/Human Capital
The focus here is on fair compensation for performance, creating opportuni-
ties for advancement, participation in decision making, adequate resources,
and support to successfully meet responsibilities.
A strategic internal management system addresses each of these concerns
fairly giving due consideration to each side. Success is not possible without
the commitment of the management team.
A firm must also create rewarding professional experiences for its employ-
ees and provide growth opportunities that help them maximize their career
potential, yet match the organization™s goal of being successful from business,
operational, and economic viewpoints. The firm is sharing resources with its
employees, even though they are not owners, by compensating them.
The employees are often a good place to start when deciding how to im-
prove the management of a professional services firm, for example:

• Who is on staff, and what are their capabilities and qualities?
• How do the employees match up with the services the firm has de-
signed and wants to deliver?
• Are there realistic career opportunities for the employees at the firm?

Assuming that all professional credentialing requirements have been met,
selecting the appropriate staff members to deliver services to a client depends
272 Services Delivery: Taking Care of Business

on knowing what the firm™s marketplace says it needs from the firm (see
next section, Clients/Customers/Consumers) and then determining the skill
sets necessary to deliver services that meet those needs. Once the firm has
established what those skill sets are, it should be uncompromising in recruit-
ing, employing, and partnering with professionals who can supply the neces-
sary inventory of skills. As Jim Collins, author of the bestseller Good to
Great, emphasizes, “The main point is first to get the right people on the
bus.”4 A firm that compromises by, for example, looking to spend less on peo-
ple with fewer credentials ultimately will sabotage itself.
The goal is that a professional firm should adhere to a service delivery
policy that is similar to the McDonald™s hamburger concept. All over the
world, from Singapore to London to New York, McDonald™s objective is for
its hamburgers to be prepared, and taste, exactly the same. In a profes-
sional services practice, the idea is that whether it is partner A or partner B
or partner C delivering the services, the client should encounter a consis-
tent level of quality service. Every patient who comes into a clinic with a
complaint should leave the clinic having experienced the same high-quality
encounter with the physician or the physician™s staff. That™s the objective.
A firm that compromises on the skill sets, attitude, capabilities, or knowl-
edge of the professional staff behind the delivery mechanism will not
accomplish its objectives. This is a critical element to sustaining profes-
sional success.
It is acceptable to have less experienced, less qualified individuals within
the professional practice performing certain defined tasks in the firm™s ser-
vice delivery model. What is critical is that they are doing the right things at
the right time. Associates also need to recognize their potential for growth
within the organization and for career advancement opportunities. The firm
must constantly examine these issues and ensure that the way they are being
handled meshes with the firm™s organizational goals. Chapter 10 covers the
topic of professional staff development.
Mismatches occur when overqualified people are delivering a low-quality
task or service. This disrupts the firm™s pricing model, which cannot be at
fair market value in such cases. There is no economic value to having a race-
horse pull a plow. An even worse mismatch occurs when a less experienced
person tries to do something that requires a higher level of skill than he or
she possesses. The firm might temporarily make a greater margin on those
services because the cost to the firm is less than expected. However, the ul-
timate cost can be high if the firm did not deliver the highest quality ser-
vices, thereby jeopardizing its very existence.
There is a fundamental difference between an accumulation of individual
professionals in practice and a professional services firm. Every staff member
in a firm should understand that everyone in the organization is working to-
ward the same goal, which is to accomplish the firm™s value objectives. If the
firm has failed to establish a clear value objective, all of the professionals in
273
Service Delivery

the firm will be possessive about clients because they will not understand
how they will benefit from pursuing the good of the organization. Individu-
alistic attitudes”“This is my client” as opposed to “This is the firm™s
client””are still too prevalent in professional services firms. That attitude
undermines the long-term health of the organization. It reduces the firm to a
mere collection of professionals who have rented space together and are
sharing common overhead. In a highly competitive, professional services-
based economy, sole practitioners or small, loosely organized firms are at a
distinct disadvantage. Every professional in a firm must learn to think, “Our
firm is our best and most important client.”

Clients/Customers/Consumers
The key question for this group is: “Can we provide a better service at a lower
cost?” An absolutely critical element of a strategically managed practice is
the focus on the customer. It is essential that we understand what the cus-
tomer needs and expects to develop successful services that add real value.
The key issue that a firm must address with its customers is whether they
are in a position to demand higher quality services at a lower cost from the
firm. If they are, the firm must respond both internally and externally.
This evaluation should start with every professional services firm asking
this question: “ What do our clients really want from us?” If a firm has not
had focused discussions with potential clients, if it has not conducted surveys
of the marketplace, if it has not taken a look at what its competition is doing
and how they are packaging their services, or if it does not know the key indi-
cators of what the marketplace is ultimately saying it desires, then the firm
will not be able to design services around the expectations of the con-
stituency it wants to serve. The firm is going to be disappointed by the mar-
ket share that it gets. It will be disappointed by the value the marketplace is
willing to pay for the services that it provides, and it will be distressed that its
competition is far more successful. Success with clients depends on how well
the firm satisfies their needs.
Dale Cordial, CEO of the PT Group, is a highly successful physical ther-

<<

. 46
( 92 .)



>>