within the pricing model established. For example, every year nurse practi-
tioners see a larger volume of patients. Why? Because the patientsâ€™ funda-
mental needs often can be served by a nurse practitioner at the nurse
practitioner â€™s price. They do not need to see the physician simply to have
their throat swabbed for a strep test. The strategically managed medical
practice will realize that it can still deliver its desired economic outcome,
but it must bring in staff who can serve the â€ślower-impactâ€ť needs of clients
at lower prices. As always, the right starting point when making this deter-
mination is the clientsâ€™ own needs and expectations when they visit the
The same is true for law practices. Staffing a project with a paraprofes-
sional rather than an attorney alters the law firmâ€™s economic model accord-
ing to the fair market value of the services the firm provides and the price
clients are willing to pay. Clients who are going to court are normally willing
to pay a much higher price to have their attorney with them than if they just
have a simple question about a trust document that does not require a high
level of expertise. In the latter case, the client may not want to pay a partner
billing rate for a partner â€™s answer to a question that could be satisfactorily
answered at a lower level.
When a firm understands its economic objectives and the choices it can
present to its owners and employees, it can set prices. But it remains essen-
tial to reach out to the clients and ask, â€śIs that fair market value?â€ť If the
client does not agree that the pricing for a given service is set at fair mar-
ket value, that does not necessarily mean that the firm has overpriced the
service; it simply means that the firm must create a more sophisticated
280 Services Delivery: Taking Care of Business
delivery mechanism, with different layers of pricing, to satisfy its clientsâ€™
needs, and that the firm must improve the perceived value for the service
in the minds of their clients.
It is generally an easy task for a professional services firm to find out what
the competition is charging. Most professional industries have support organ-
izations that provide survey results on pricing. Take a close look at these
studies. The respondents are usually fairly honest about the information they
provide. A firm can also ask clients, prospects, former clients, or friends
what they pay for the services provided by the firmâ€™s competitors. The an-
swers will be enlightening.
This again highlights the fact that firms have greater access to informa-
tion than ever before. Twenty years ago it was challenging for a professional
firm to find valid data on what its competition was charging. Now, a great
deal of price information is available on the Internet. Benchmarking ser-
vices, such as Integra.com or First Financial, also offer incredible amounts
of readily available and well-organized information.
It is less important whether a firm uses hourly rates, fixed fees, or some
other arrangement to price its services. What really matters is whether its
clients pay fair market value for the services the firm provides. The clientâ€™s
reaction to the bottom line on the invoice, however it was established, com-
pared to the services received determines whether fair market value was
provided. As noted earlier, many professional firms do not spend enough
time learning what their clients expect from their services, so they are gen-
erally unable to determine whether their pricing standards are at fair market
value. It is vital to invest time with clients, unambiguously defining the scope
of the services to be provided, setting the expected outcomes, and establish-
ing the value-added benefit that the client will receive. Spending this time
upfront will greatly reduce problems with prices or fee collection.
Fee agreements with clients should always be set forth in writing. The
professionâ€™s canons of ethics may already require this, but even if they do
not, the firm must have a written understanding of what it is going to do, why
it is going to do it, how it will satisfy specific needs of the client, and what
the full cost of its services will be. The firm should not begin work without
the fee agreement.
In any business, having a customer that never pays is the same as not having a
customer. In a professional services business, when the firm bills its client for
services rendered, the firm should, quite reasonably, expect to get paid. It is
when the firm determines how much it is going to bill that it should make the
decision about fair market value for services rendered. A firm cannot afford
to have clients that do not respect the agreement they have made with the
firm to pay for services consumed. If the firm has met expectations, under-
stood the clientâ€™s needs, and satisfied those needs, it has every right to expect
to be paid.
A zero-tolerance policy does not mean that a firm cannot have empathy
for a clientâ€™s difficult economic condition or that it should not work out pay-
ment terms with a client. But it does mean that a firm should not write off
billings because a client is exhibiting reluctance to pay in full. It is generally
better to press for payment and then consider â€śwriting off â€ť the client.
Slow-pay and short-pay clients are not the kind that the firm should build
its practice around. Having a strategic management plan for the firm can
provide the foundation for dealing with a nonpaying client when problems
arise. It is not difficult to review the firmâ€™s internal objectives as set forth
in the plan and conclude, â€śThis client is not satisfying our internal objec-
tives. We seem to be satisfying the clientâ€™s objectives, but it is not satisfying
ours. This is an unworkable situation.â€ť Adhering to this idea can be partic-
ularly difficult in a sales-oriented professional services culture. In such a
culture, the firm should ask â€śwhen was the last time we walked away from
a bad dealâ€ť or â€śwhen was the last time we culled a bad client from our list.â€ť
If the answer is never, then either the firm has no bad deals or clients, or it
is not being aggressive enough in managing its risk. The answer is most
often the latter.
A constant program of self-analysis is essential to ensure the quality of pro-
fessional services delivered. Client complaints should be channeled through
someone who is not directly involved in providing services to the client. If
the professional who is serving the client takes the complaint, the firm may
not get an honest and immediate reaction to the complaint. Client satisfac-
tion surveys and regular, focused discussions between clients and firm man-
agement should be used to create an independent channel through which
clients can give the firm their complaints or suggestions for improvement,
without the filtering bias of the service team that failed to meet expecta-
tions. Having an independent channel through which clients can contact the
firmâ€™s management is critical.
Training, continuing education, and appropriate credentialing are also es-
sential for quality control. Weak or unsuccessful professional practices usu-
ally do not have a dedication to the highest standards of training and
supervision. Such firms do not survive for long. No professional services
firm in any industry can enjoy sustainable success without a plan to ensure
the constant improvement of its professional staff through training and edu-
cation. The topic of training and professional development is addressed in
282 Services Delivery: Taking Care of Business
Tracking the turnover of the firmâ€™s professional staff is another important
part of quality control. If a firm has high turnover, it is clearly not meeting
the needs of its professionals. Unhappy professionals can, unfortunately,
often be translated into unhappy clients. The firm needs to understand how
internal staff issues affect its client relationships. Consistently successful
professional services firms do not have high turnover of professional staff.
Professional staff retention is discussed in Chapter 9.
In a professional services firm that understands the needs of its clients, busi-
ness development strategies are really just techniques for broadening the
scope of the firmâ€™s market base. In other words, business development is a nat-
ural by-product of understanding the needs of the firmâ€™s clients. If the profes-
sionals in the firm understand how they are or are not satisfying the needs and
expectations of their clients, then as the firm adjusts its service delivery
model, it also affects its ability to compete and differentiate itself in the mar-
ketplace. The more proficient the firm is at meeting the specific needs of the
markets it serves, the greater its ability to expand its business base.
That is what is so revolutionary about the process of strategic firm manage-
ment. A firm that understands how to manage itself first, and do so strategi-
cally, gives every professional in the organization a strategic mind-set. When
they are making contact with the firmâ€™s constituencies, they are automatically
asking the right questions, inquiring about the strategic needs of their clients
or prospects, and developing new business naturally. Itâ€™s typically the same
people developing new business who are delivering services because the two
processes are integrated.
When professionals and administrative staff are managed in this way, the
strategic perspective on professional services becomes a natural part of the
way they think. When they are at lunch with a potential referral source or
prospective client or they are speaking at a conference or seminar, they will
adopt the strategic perspective: â€śHow do I attack that problem with that
client? How do I attack that need of the marketplace? How do I think about
that issue? How should they think about it?â€ť Staff who understand how to
convey the message of the strategic approach of the firm ensure that the
professional services delivered will be of consistently higher quality than
those provided by competitors.
A firm, however, needs traditional marketing support to help grow its client
base and sustain the clients it currently serves, but the firm must act strategi-
cally in the way it markets. It should also take some risksâ€”redesign profes-
sional services and reach out to the marketplace that the firm currently does
1. Anthony Greenback, The Book of Survival: Everymanâ€™s Guide to Staying Alive
and Handling Emergencies in the City, the Suburbs, and the Wild Lands Be-
yond (New York: Harper & Row, 1968), p. xi.
2. Eliyahu M. Goldratt and Jeff Cox, The Goal: A Process of Ongoing Improvement
(Aldershot, Hampshire, England: Gower, 1993), p. 337.
3. Edi Osborne, CEO, Mentor Plus, phone interview by the author, Pasadena, Cal-
ifornia (March 15, 2004).
4. Jim Collins, Good to Great: Why Some Companies Make the Leapâ€”And Others
Donâ€™t (New York: HarperBusiness, 2001), p 44.
5. Dale Cordial, CEO, PT Group, phone interview by the author, Greensburg,
Pennsylvania (March 20, 2004).
6. See note 3.
7. See note 3.
Nothing is denied to well-directed labor, and nothing is ever to be attained without it.
â€”Joshua Reynolds (1723â€“1792)1
In this chapter, we focus on the key ingredient behind the success of any pro-
fessional services firm: the effective and appropriate utilization of its people.
According to analyst firm Aberdeen Group, service-centric organizations
make up approximately 75 percent of the economy in developed nations. In
their report, Aberdeen states that â€śthese organizations are now realizing that
success hinges upon their ability to efficiently leverage their intellectual cap-
ital.â€ť2 Clearly, nowhere is Joshua Reynoldsâ€™s statement about well-directed
labor truer than it is in the professional services industry.
Why This Topic Is Important
Professional services firms are classic knowledge-based service-industry en-
terprises that have few physical assets and are built on a widely distributed
intellectual capital base. As noted by many in these consulting businesses, all
you really have as the engine behind your offerings in a professional services
business are people and their experience. If these people are utilized im-
properly, profitability will suffer, or at best it will be substantially lower than
it could be for a similar organization that is more mature in its people prac-
tices. To build their profitability and competitive advantage, professional ser-
vices firms, therefore, must (1) hire the best talent on the market in their
space, and (2) make the best use of the talent they have in-house. This chap-
ter focuses on the latter: how we make optimal use of the people already in-
side the organization.
To be successful and to gain and sustain a competitive advantage, profes-
sional services firms must specifically do four things very well with the peo-
ple they have in their organization:
1. Maximize productivity through optimal utilization and engagement.
2. Reduce the hard cost of turnover (e.g., cost of replacement) as well as
the associated soft cost (e.g., talent and experience drain).
3. Increase customer satisfaction through effective deployment and coor-
dination of talent.
4. Maintain a high level of quality control through an appraisal process
that ensures that only the best talent is kept in the organization.
In the balance of this chapter, we address how you can achieve these
goals by focusing on the following key areas:
â€˘ Identify your requirement profile.
â€˘ Assess the talents, skills, capabilities, and passions in your resource
â€˘ Determine the optimal level of individual sustainable capacity and po-
tential resource utilization.
â€˘ Install an employee pool performance ranking and management system.
â€˘ Manage your aggregate billable resources.
â€˘ Automate the administration of your resources.
â€˘ Develop engaging management skills.
Identify Your Requirement Profile
For people-centric professional services organizations, having top perform-
ers is clearly a critical part of gaining a competitive advantage. In some in-
stances, you may decide that for a small assignment with limited revenue
potential, it will suit you to hire someone at a lower salary level with less tal-
ent, experience, or knowledge in order to get the job done and make a rea-
sonable profit. Or perhaps part of your unique selling proposition to your
market is lower prices for a finite medium-level set of skills that can get the
job done. For example, the skills sought by a legal practice that specializes in
tax preparation and advisory for corporate clients versus the skills sought by
a tax preparation service for general consumers will be quite different in
terms of the level of tax-knowledge depth and sophistication they seek in
their employees. Unless you are pursuing the lower price end of the value
chain or resourcing for a low-margin, short-term project, you should, for the
most part, pursue the top talent in your field.
286 Services Delivery: Taking Care of Business
Many organizations, unfortunately, have a difficult time finding the top
performers they need because of a common misconception. This misconcep-
tion is often voiced when managers and executives speak of people as being
either top performers or low performers as if some people were naturally
born to excel at everything and others were doomed to plod through life.
Numerous studies, however, show that being a superstar performer versus a
poor performer is situational. More specifically, people generally perform as
superstars when their work engages their best talent, skill, capability, and
Talent is the natural endowments of a person, including special aptitudes
sometimes referred to as the personâ€™s gifts. The Gallup organization, which
has performed one of the most extensive studies in this area, has specifically