Professional Service Firms

Professional Service Firms (PSF) are firms that provide professional services as its core business and employs mostly professionals in providing solutions to clients (HaywoodFarmer and Nollet, 1994). Lowendahl (2000) tries to clearly detail the view of HaywoodFarmer and Nollet by indicating that PSFs should have more than half of its employees as professionals. Lowendahl further indicates that for a firm to be designated as PSF, giving solutions to clients should be high on her agenda as well as respecting professional norms. Such firms should also create and apply knowledge whilst having professionals make key decisions and also handle various activities. In other words, PSFs have a high concentration of professionals, both as leaders of the organisation and in dealings with clients.

PSFs have been considered as knowledge intensive firms and therefore, unlike manufacturing and other product oriented organisations, the capital needed to start is very small (Chang and Birkett, 2004; Kipping and Engwell, 2002). In view of factors such as these, there are several consulting firms and they continue to grow, especially those Kubr (2002) describes as small partnerships and independent practitioners, usually made up of 2-5 professionals. Kubr indicates that such firms make up 82% of consultancy firms in Europe. However, since clients usually get attached to the firms that provide the needed advice and assistance, old and well established large PSF have dominated the market, in terms of revenue and clientele base, for several years (Kubr, 2002).

The large PSFs are experienced and therefore have very strong and well established brands (Kubr, 2002) in their field of service. For instance, in Accountancy, firms such as PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG are strong brands and described as “The Big Four” (formerly big six before merger of Price Waterhouse and Coopers & Lybrand in 1998 and collapse of Arthur Andersen in 2000) (Clark and Fincham, 2002). Strategy and Management consulting also boasts of names such as Booz-Allen & Hamilton, McKinsey & Co. and Boston Consulting Group among others (Kubr, 2002).

These large and well established PSFs are faced with high competition within the consulting industry with increasing demand for service quality and dynamism (Kubr, 2002). Consulting firms have therefore resorted to advertisements and other aggressive marketing tools to attract new clients, which did not use to be the case in some years past. Greiner and Metzger (1983:42) caution that there is high competition in the consulting profession and therefore “without successful marketing by the consultant, there is likely to be little business walking in your door”. However, there is no indication of how to manage such jobs, once the marketing efforts bring them in. Kipping and Engwell (2002) indicate that the competition is not only for client orders but also prestigious client projects. It is without doubt that prestigious projects should be managed in a ‘prestigious’ way, hence a look at other project management approaches. Alvesson (2002) brings out another dimension of the competition when he hinted that PSFs do not only compete for clients but also for human resources. Greiner and Metzger (1983) describe how big and long established consulting firms seek to employ graduates from top business schools as a way of selling their expertise to clients, who are made to think that they are getting the best and latest management know-how as these new recruits are ‘unleashed’ on them. Bloch (1999) however, cautions that such new graduates are paraded as experts, though they only tend to learn on the job. The management of these human resource vis-à-vis client expectations all call for different ways of managing projects in PSFs.

Client expectations and other issues such as financial capability of the client to pay for consultancy determine choice between using consultant and in-house staff. Kubr (2002) reveals that where clients opt to use staff within the organisation, the staff is subordinate to the client and is affected by administrative decisions. Such effects may delay project implementation but has the advantage of responding appropriately to the client’s expectations since the staff is immersed in the organisation. On the other hand, the consultant’s independence - technical, financial, administrative, political, emotional (Kubr, 2002) - may enhance value to the project but responding to client expectations appropriately may be a challenge since they lack the collaboration needed to adjust to client expectations as and when it changes (Clark and Fincham, 2002). Notwithstanding, clients consider consultants as possessing specialist knowledge and hence PSFs are usually contracted to help deal with challenges clients do not have the expertise to handle (Lowendahl, 2000). Also, the high cost of contracting consultants (Sharma, 1991), especially in well established international firms (Kubr, 2002), are making some organisations resort to training their own staff to handle challenges that come up within the firm (Clark and Fincham, 2002). But these trainings are still handled by consultants! (Chickillo and Kleiner, 2007) It is obvious that client may not be able to do away with consultants but there is the need for the consultant to optimise the value to clients by being flexible to the client’s work environment and collaborate more with the client in order to best serve their needs. Such flexibility and collaboration demands a different approach to project management in consulting firms.

Changes in technology, globalisation and the drift towards information driven economies (Kubr, 2002; Stumpf et al, 2002; Kirsch et al, 2000; Sharma, 1991) have all contributed to growth in business for PSFs. Moreso, the issue of quality, after the failure of some firms, (Kubr, 2002) has increased client and regulators’ demands especially for large PSFs. Stumpf et al (2002) also adds that the decrease in large PSFs in recent times (after collapse of Arthur Andersen) has put a lot more pressure on the other big PSFs. Chickillo and Kleiner, (2007) sums it up by describing consultancy work as physically, emotionally and socially demanding. The victim of all these is the staff of PSF, who is constantly under pressure, working long hours (Greiner and Metzger, 1983) to meet targets. PSFs ability to retain the highly qualified staff they recruit, notwithstanding the big salaries (Clark and Fincham, 2002) offered, is therefore a challenge. Such challenges call for a new approach to managing client projects that will free-up staff and give them a good work-life balance, which staff of all types of PSF need.

Greiner and Metzger (1983) identify eight types of PSFs presented in Table 2.3 and mentions that each has some distinguishing features as determined by the market segment to which they serve.

It is worthy to note that firms that are classified by Greiner and Metzger as National have an international outlook since they have offices located in several countries as part of their expansion and growth drive (Nachum, 1999).

In summarising how these firms operate, Kubr (2002) indicate that PSF projects involve the following broad processes – Entry, Diagnosis, Action planning, Implementation and Termination. Kubr is however, quick to mention that PSFs may perform either some or all of these processes for specific clients on projects. Entry: This is where the consultant and client make initial contact. The client decides whether the consultant is the one best suited to perform the task and the PSF also decide whether they are willing to work for the client. At this stage, the terms of reference (ToR) or statement of work is shared with the consultant if it has already been prepared by the client. Otherwise a consultant is contracted to prepare the terms of reference.

Diagnosis: This is described as the problem and purpose definition stage. At this stage, the consultant research more into the issues raised in the terms of reference in order to be satisfied that the project is feasible within the time and budget constraints in the ToR. This demands a lot of data collection and analysis and ends with the firming up of scope and contract. This stage may also require a detailed plan in the proposal, which help in identifying the time needed for the project and fee chargeable.

Action Planning: This stage of consulting process deals with detailed planning of the project. It requires developing possible alternative solutions and presenting project plan to client. Implementation: This is considered at the phase that requires both client and consultant efforts. This stage deals with executing the plan or the alternative that has been agreed with the client as appropriate for the project. There are instances where the client may decide to take up implementation depending on the expertise needed and the alternative selected. This stage demands a lot of flexibility and monitoring in terms of team and procedures. It may also require training client staff in any new methods or systems before the project is finally terminated.

Termination: This is the final stage of any assignment and all assignments go through this stage. It demands evaluating the work done, learning lessons, final reporting and possible follow-up depending on the nature of project and agreement between client and consultant.

Generally, PSFs play a key role in client businesses and provide services to clients at various stages of the client business depending on need and ability of the client to pay for the services. PSFs are becoming crucial to businesses and therefore techniques that will improve on project implementation and management should be very welcomed.