child care; educational reimbursement; skills training; and so on. Many of these can be bundled into so-called cafeteria programs where, up to a certain dollar amount, employees can choose their own benefit cocktail. Unemployment insurance and workers compensation are also considered benefits and need to be considered. Long-term benefits include long-term disability insurance, 401(k) plans, Simplified Employment Pensions (SEPs), profit-sharing plans, and so on and often pick up when short-term benefits expire. Most benefit plans are offered to all employees, typically after a short waiting period.

Principals and professionals in most professional services firms are also accorded perks, which may include reimbursement for certain entertainment and business development expenses and participation in community activities and networking costs. For some, there are company cars or car allowances. For others, there are club dues. The list goes on. Who participates and to what extent is a decision for firm leaders. Perks represent out-of-pocket money. Each expenditure should be periodically reviewed and its value reassessed.

Leadership team members typically have additional perks associated with their roles in guiding the firm. Often these perks are associated with privilege, but if the funds are well spent, it is in the interest of the business to accord them.

All costs associated with compensation need to be viewed both comparatively to ensure marketplace competitiveness and discretely because they are a major component of the firms pricing structure. How much to bill and how to support pricing decisions are covered in detail in Chapters 7, 9, and 10. The higher the labor content (total costs measured against individual performance) in any firms capital structure, the more difficult it may be to compete. Costs should be justified by a value proposition that provides an attractive profit margin. In all, a professional services firm is trading hours for dollars. With a finite number of hours in the year and a variety of overhead and necessary investment commitments that eat into those hours, the firm (and individual professionals) must be cautious how billable hours are spent (Exhibit 3.3).

How the professional services firm makes its collective business and policy decisions is extremely varied from firm to firm. Because of the nature of professional services, rigid hierarchical models seldom work for long-professionals tend to want a collaborative environment. Some firms gravitate to a model featuring a moderate leader working collegially with a larger group of influential peers who, in turn, represent critical practice areas or profit centers. Others are attracted to a strong leader moderating the discourse among a larger leadership group. In some instances, professional services firms have reached out and hired professional managers for all, or most, operational functions while reserving practice issue decisions to internal peer groups.

The term decision management is appropriate because many professional services firms engage in a less formalized process of decision making. This

365 days

Weekend days

>

Holidays

Sales

15%-25% of time

Weather/sick/other days @ 11

220 days

>

Service delivery

55%-75% of time

Nets 121-165 days to sell

Short gigs and lots of travel eat days

Overhead, budget, and your cut

Your daily/performance rate

Vacation days

Administration

10%-20% of time

Exhibit 3.3 The Time Professionals Have to Sell

informality allows for a broad discussion of ideas and issues before decisions are made. Often a general consensus is reached through the attrition of options rather than in response to a targeted call to action. In this peer environment, such an approach helps promote a sense of participation, although it can tend to slow problem resolution. Those firms that have documented their processes and follow consistent procedures further enhance their decision flow while at the same time allowing concerned professionals to focus only on problems as they arise.

Many professional services firms that have attempted to adopt corporate, top-down models for decision making in a quest for efficiency have found that this approach is met by great uneasiness within the ranks and may, in fact, be vigorously resisted.

Home Office/Branch Office Model

In the first application of this two-part model, the firms main office sets broad policy guidelines, including profitability and burden targets, then typically stands back and allows broad autonomy to the various branch office leaders. This approach can work well when branch offices and the home office are relatively independent and the branches depend on the home office only for items such as systems support, financial services, and research. Under this system, branches have maximum latitude and minimum regulation.

In the second application, the main office provides orthodoxy throughout the practice with all branches replicating main office policies, procedures, and processes. In this application, branches operate more like franchise units in a chain. The economies of scale generated by consistency are intended to make up in profit what they take away in creativity. This works well for narrowly focused and/or easily systematized professional services and less well for those with much discretion and a broad array of services.

Managing Partners and/or Chief Executive Officers

Some firms choose to keep as close to the traditional corporate profile as possible, by choosing a managing partner, president, or CEO to lead the firm. Typically, the leader takes on the additional role of chairman of the board. In this structure, a single leader manages policy and operational performance. The benefit of this approach is that the firm is led by one of its own. The disadvantage is that the leader often goes from being a key rainmaker and performer to a cost center, and an expensive one at that.

Some firms lessen the impact on the firm by selecting an able, but not stellar, performer for this role and support this leader with a strong executive