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 result, 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 sustainable business model, one that is team- and goal-oriented. Herding cats toward 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 occurs, the firm must define and understand its constituencies, which is discussed 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 firms owners, that is, its partners, shareholders, 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 maximizing their personal income, for example:

Creating a legacy

Growing the business

Attracting new owners

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 vendors, and delivers services to clients. If they are not, important management decisions will be very different.

A firms ownership structure can include one or many owners and is typically governed by the size of the firm and its history. The partnership structure, 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 performance standards that offer the potential to earn additional income on the basis of performance. Performance-based incentives are a must for any professional 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 opportunities 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 employees and provide growth opportunities that help them maximize their career potential, yet match the organizations 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 improve 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 designed 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

on knowing what the firms 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 recruiting, employing, and partnering with professionals who can supply the necessary 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 people 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 McDonalds hamburger concept. All over the world, from Singapore to London to New York, McDonalds objective is for its hamburgers to be prepared, and taste, exactly the same. In a professional 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 consistent 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 physicians staff. Thats the objective. A firm that compromises on the skill sets, attitude, capabilities, or knowledge of the professional staff behind the delivery mechanism will not accomplish its objectives. This is a critical element to sustaining professional success.

It is acceptable to have less experienced, less qualified individuals within the professional practice performing certain defined tasks in the firms service 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 firms 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 firms pricing model, which cannot be at fair market value in such cases. There is no economic value to having a racehorse 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 ultimate cost can be high if the firm did not deliver the highest quality services, 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 toward the same goal, which is to accomplish the firms value objectives. If the firm has failed to establish a clear value objective, all of the professionals in