Professional Services Organizations

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The Unique Challenges of Intangible Products

Unlike other types of organizations, professional services firms sell knowledge and expertise ? not tangible, physical products. So these firms have different needs, and face different challenges.

For example, consider a manufacturing plant. Once a product has been designed, mass production can create units 24 hours a day on machinery that's monitored by low-wage workers. Manufacturing managers emphasize the importance of standardization, quality, and productivity in their teams.

But how does this compare with an accounting firm? While managers should still stress quality and productivity, they can't standardize or 'mass-produce' their services. Their profitability comes from 'face time,' or billing hours, with clients ? all of whom have different needs and demands. If team members don't meet with clients or work on specific projects, they don't earn money for the firm.

If you're a manager at a professional services firm, it can be difficult to balance high productivity, personalized service, and knowledge management. And one of your primary tasks is to maintain your 'human capital' ? in other words, keep your staff motivated and productive. Manufacturing plants spend a lot of effort maintaining their machinery and warehouses. Services firms must spend time and energy coaching their teams ? and actively ensuring that the most talented workers stay with them (more on this below). Without expert professionals and a strong reputation, the firm may fail.

This is a simplistic comparison, but it shows just how different professional services firms are from other types of businesses ? and why managing these firms needs a different approach in order to succeed.

Staff Motivation

Motivation can be a major problem, especially for a team of junior professionals, and it's becoming tougher for many firms to retain their top talent.

In the past, the goal of most junior managers was to become a partner. This usually created a competitive environment that, in turn, led to high-quality work. As time passed, the 'stars,' or strongest workers, were promoted ? and the weaker team members either left or gave up.

These days, however, partnership is not always the ultimate reward. Younger professionals sometimes question whether the extra work is worth it. Long hours, heavy workloads, and difficult clients are often unappealing to people who are seeking work-life balance.

And today, young professionals in the services industries have far more options than they used to. It's no longer considered unethical for a young lawyer or financial adviser to change firms every few years in pursuit of better opportunities.

Because of this motivation challenge, professional services firms must create ways to attract ? and keep ? the best and brightest workers. After all, their people are what they sell. So if those people aren't fully motivated and producing top-quality work, then the firm is at a competitive disadvantage.

Scheduling and Billing

Professional services firms are profitable only when their team members bill hours to clients. Therefore, new work is often assigned to the person who's currently not working billable hours. Although this maximizes revenue in the short term, it can often lead to a decline in quality and client service.

For example, imagine that your law firm has a 'superstar' who is particularly skilled at tax fraud cases. If the firm gets a new tax fraud case, and your superstar is involved in another case, then chances are high that the new case will be assigned to someone who isn't busy. Keeping everyone productive, billing their time to clients, is extremely important. But if you don't schedule people in the right way, it can have a negative impact on client satisfaction.

The future holds even more challenges for professional services firms. Due to the impact of retiring older professionals, and an increasing number of younger professionals choosing work-life balance, firms will have to compete more to keep the best staff. Because their 'human assets' are limited, these firms must develop strategies to attract, motivate, and retain key talent.

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