50,000 feet

35,000 feet

25,000 feet

5,000 feet

Eye level

Set the value objectives grow by 20%, profitability

Performance areas client centered services

Factors critical to success of each

performance area element

Key measurement standards current versus future state

Strategic change initiatives/activities

Owners/ shareholders

Leadership team

Department managers

Supervisors/ team leaders

Front line personnel

Exhibit 12.3 Top-Down Strategic Management Objectives

responsible for establishing the value objectives, to the front line people who are responsible for carrying out instructions, all the way down to the support group whose job it is to help the firm determine how to work more effectively and efficiently with clients. There is more integration and more top-to-bottom involvement in management today than there has ever been before, even in hierarchical firms.

Strategic Delivery of Professional Services

The strategic delivery of professional services is of paramount concern to the successful firm. It includes competitive response, results measurement, pricing, staffing, and managing the work. This section covers the topic of strategic delivery in detail.

Confront the Competition

In a professional services economy, there are few barriers to entry. Competitors do not need huge amounts of capital to buy manufacturing equipment or build large facilities. Practically anyone can enter the professional services marketplace tomorrow.

When Arthur Andersen, one of the worlds largest accounting and tax practices, went out of business, its partners did not disappear. They simply moved to other firms where they again are providing accounting and tax services. Their former firm has been broken down into new competitors in the mid-level marketplace. Accounting firms that did not compete directly with Andersen now find themselves competing with many of its offspring.

That kind of change in market dynamics can happen rapidly in virtually any profession. In the health care industry, for example, the evolution of HMOs has dramatically reshaped the traditional medical practice market, such that most sole practitioners were forced to join corporate medical groups to survive.

Ask the Clients

The number of clients a firm has and the revenues they generate are obviously critical to the firms success or failure. Logically, therefore, the most important source of information for shaping the service objectives and behavior of the firm should be its clients. Professional services firms need constant client feedback because their services are based on human interaction. Companies that build widgets in a factory and sell them to consumers through distribution channels do not have the same intimacy with the ultimate users of widgets. A professional services firm cannot be successful without having intense contact with its clients. Everything the firm does must be focused on satisfying the clients at the point of encounter. But the firm will not understand what clients need, what they value, what they are looking for, and what their highest priorities are unless it asks them.

Professionals are often out of touch with their clients real concerns. For example, if asked what their clients need from them or value most, most CPAs would say that clients want more services at a lower cost. But surveys of accounting clients reveal that what they expect and demand most from their accounting firms is concrete business advice that delivers value. If a firm provides value, price is not a problem. A firm that does not understand this simple fact is not going to be successful at satisfying its clients.

One option for gathering client input is to put together a focus group of clients and take them through a process of understanding what the firm does, what it thinks it is there to do for its clients, how it has designed its services, and how it delivers those services. Tell the focus group members what the firms philosophy is about quality and standards; explain how it deals with vendors, customers, and employees; and explain its philosophy on investing in its business.

Then ask the focus group for its feedback. It is amazing how much the firm will learn about itself using this process. A firm that does not do this will not understand the critical factors affecting its marketplace. But the process is never ending. Strategic management is a system that supports

constant improvement, introspection, evaluation, analysis, change, and then analysis, introspection, and change-over and over again.

There are many other ways of measuring your customers satisfaction, expectations, and demands. Mail surveys and face-to-face interviews are just two examples. However the firm decides to gather data about client satisfaction, the important point is to work from the viewpoint of the client. Firm personnel need to be gathering information about a clients experience with the firm every time they encounter the client. A strategically managed firm must be willing to accept criticism, input, and suggestions from the marketplace it serves.

Measure, Measure, Measure

A constant process of measurement and evaluation is critical for meeting the challenges that can break or make a firm. As Edi Osborne says:7

Strategic measurement is: The identification of activities (and their associated measures) that are most critical to the implementation of strategies designed to help companies achieve their goals.

Strategic Management is: The difference between doing things right and doing the right things.

For example, a strategically oriented employee would handle a customer complaint very differently than one who is not. The strategically focused employee would have the information and insight to respond:

Is this customer in our target market? If not, what is the minimum I can do to appease the customer? If yes, what is the best thing I can do to ensure the customers loyalty?

Depending on the gravity of the error and importance to target customers, they would also take the opportunity to kaizen (process of continuous improvement) the product or delivery system to ensure the error does not repeat.

A not-so-savvy employee would do the minimum in both cases (assuming they even know who the target customer is) and leave it at that, guaranteeing that the error would likely repeat itself sometime in the future.

Measurement is critical because it objectifies the behavior. It helps to identify the specific behaviors that need to be focused. The well-known 80/20 rule applies here. Rather than chasing every issue, measures help us zero in on the 20 percent that are causing 80 percent of problems.

Additionally, without measurement, managers are left to manage from a subjective perspective (what they think is going on-rather than really