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Thursday, November 11, 2004

Professional Service Firm Excellence -Part II

In Part-I, we covered primarily Tom Peters outline of ideas for professional service firms and consultants working within.In this second part, we shall zoom out ans see how these ideas fit into the professional service firm ecosystem. Tom Peters once said, "The professional service firm is the best model for tomorrow's organization in any industry".
In Managing the Professional Service Firm , David Maister wrote, two aspects of professional work create the special management challenges of the professional service firm.
- First, professional services involve a high degree of customization in their work. Professional firms must manage customized activities where little, even management in- formation, can be reliably made routine. Management principles and approaches from the industrial or mass-consumer sectors, based as they are on the standardization, supervision, and marketing of repetitive tasks and products, are not only inapplicable in the professional sector but may be dangerously wrong.
- Second, most professional services have a strong component of face-to-face interaction with the client. This implies that definitions of quality and service take on special meanings and must be managed carefully, and that very special skills are required of top performers.

Further elaborating on the PSF characterisics and attributes, Maister came up with a variation on the DuPont formula that shows three paths to profitability (profits / partners): margin (profits / fees), productivity (fees / staff), and leverage (staff / partners). He recommends a framework to assess per-project profit measuring. Most firms make 120 percent of their profit on 80 percent of the accounts. The other 20 percent actually lose money! And usually the accounts that lose money are the ones that are seen as “high-profile must win” projects.
An employee’s value balance sheet is their accumulated inventory of skills and knowledge and client relationships. More so in the software/consulting industry, dominant part of the PSF space, skills and knowledge deteriorate at an alarmingly fast rate. So every employee argues Maister,must continually upgrade their current skills and add news ones in a process of continual learning. This process of continuous improvement is the income statement; what new skills or abilities are learned that can be put on my balance sheet. Tom Peters has covered almost all the elements that Maister has outlined in several of his writings about the professional service organisations.
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