Professional Services Firms1

Profession

Elements of Profession

2

Professio (Latin)• Oath = I swear to serve public good• Client comes first

Professional Services Firms• Industry of selling knowledge (Information

Asymmetry)• Working on projects(Most important word)

Body of Knowledge(Quality of services offered)

e.g. MBA students

Code of Ethics(Enforceability of Mission)

e.g. Discharge methods

Certification Body(Mastering knowledge)

e.g. CFA, CPA, Publications

Commitment to Public Good(Mission Statement)e.g. Hippocratic oath

1

3

2

4

Source: Khurana, 2007

Money Making Machine

PSFs = Money Making Machines

3

Market for Professional Workforce

Feed with consultants

Market for Firm’s Services

Feed with new clients

Firm’s Economic Structure

Firm’s profitability

Firm’s Organizational Structure

Partners’ profitability

Source: Maister

The PSF Management Circle

4

Managing Strategy

• Industry evolution• Network /Alliance strategy• Corporate strategy• Business strategy• Functional strategy• Growth/Change/M&A

1 Managing Professionals

• Recruiting• Training• Reviewing & Promoting• Remuneration• Retention & Retirement• Motivation• Managing stars

2 Managing Intellectual Capital

• Creating knowledge• Sharing knowledge• Applying knowledge• Retaining knowledge

3

Managing Clients/Projects

• Managing existing clients• Acquiring new clients• Managing expectations

• Negotiating projects• Managing projects• Quality Assurance

4 Managing Economics

• Balance Sheet / P&L• Fee Capacity • Calculating projects• Measuring services• Managing pricing and fee pressure• Valuation of PSFs

5 Managing the Organization

• Legal form• Corporate governance• Corporate culture• Values and philosophy• Organizational structure• Managerial systems

6

Source: Lechner & Kreutzer, 2006

Main Challenges for PSFs

5

Managing Professionals

• Recruiting• Qualification• Training• Motivation• Commitment

1Client Acquisition

• New customers• New projects

2Client Maintenance

• Customer retention• Customer orientation• Customer satisfaction

3

Pricing strategy

• Price decline• Client budget decline• Price/Performance ratio

4 Quality

• Quality assurance

5

Source: HSG-IfB study (Results in order of importance)

Top 3 Challenges