Corporate Leadership: Lessons from Professional Service Firms
Damien O'Brien - Egon Zehnder International
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Professional service firms are very different from other commercial enterprises. They typically lack the hard-nosed bottom line focus and hierarchical management structure of most companies. Indeed, managing professionals has been likened to herding cats, or perhaps more meaningful in the Australian context, sheep dogging, not metaphors for strong top-down leadership. Professionals respond to client needs rather than develop "strategic initiatives". Their credo is "focus on delivering high value client service and the bottom line will follow".

Notwithstanding these differences, in many respects the leading professional firms have a model of leadership that is very relevant for other enterprises in today's world. In this article we look at three particular areas where these firms demonstrate what we believe to be best practice.

Talent Management

Take "talent management". Professional service firms have long understood the critical importance of attracting and retaining top talent. Long before McKinsey coined the term the leading professional service firms were in a war for talent.
Witness campus recruiting. These firms invest aggressively to identify and recruit the very best graduates. They compete with other professional service firms, with investment banks and the leading corporates.

Importantly, the senior professionals of these firms allocate a significant amount of their time to this process, sacrificing important fee earning hours. Indeed there is a very clear understanding that each professional is not only responsible for building the firm's client relationships and intellectual property, but very importantly, the firm's talent base. Often they are explicitly assessed for their contribution in this respect.

But these firms not only invest in the recruitment process. They invest in their people. Mentor programmes (professional apprenticeships) are real and important. The best professional service firms have explicit development milestones and provide regular feedback. Individuals who do not meet performance hurdles, or are deemed not to be a good values fit, are managed out as early as possible. This creates an upward flow of talent that becomes a virtuous circle: rapid career progression, high quality colleagues and exciting opportunities - a compelling value proposition for the best graduates and lateral hires.

Although many companies acknowledge the importance of attracting and developing talent most fall well short of the benchmarks set by the leading professional service firms. It is just not seen as a priority. Line managers often do not allocate the time and energy to recruitment nor do they have a clear sense of accountability for building the company's broader talent base. The annual appraisal process is a chore to be endured and regular feedback and coaching by line managers is patchy at best. Team building is often seen as a tactical measure, not strategic. People development often amounts to little more than expecting people to "sink or swim".

We do see striking exceptions to this. Companies such as Lion Nathan and ANZ have prioritised the development of talent as a key strategic initiative. The CEOs and Boards of these companies allocate a significant amount of their time to the consideration of talent. They have proactive programmes in place to ensure that individuals with potential, at all levels in their businesses, are identified and given the opportunity to grow and develop.

Importantly these companies develop deep and creative relationships with their search firm partners to ensure the best talent is recruited. Moreover, our firm is increasingly being called on to not only assist with recruitment but also to identify and develop talent already within these companies. We work with line managers to assess talent and build the management bench mindful of the broader succession planning agenda. In many respects these talent management initiatives mirror those long adopted by the leading professional service firms. The initiatives of these firms represent best practice in today's talent challenged environment.


High Performance Teams

For the leading professional service firms, recruiting and developing talent is only part of the equation. These firms also understand the critical importance of leveraging talent. Witness the deployment of young lawyers and strategy consultants on high-level projects with accountabilities and exposure well beyond their peers in other organisations.

Importantly, the leading professional service firms understand the power of teams. They understand the strength of diversity and depth of motivation that comes from the shared ownership of a highly skilled team for delivering outstanding results.

There are two key reasons for this. First, psychologists tell us that professionals are motivated primarily by the opportunity to achieve. They want to deliver outstanding results to clients. But given the increasing complexity of client problems, and the increasingly tight timeframes, they also recognise that no one individual can do this alone.

It follows then that multi-skilled client teams are the primary working unit of the leading professional service firms. Whether it be lawyers, strategy consultants or search consultants, diverse teams coalesce around specific client needs, dissolve and reform, seamlessly to work on the next client project. These teams are bound together by shared values and a strong client focus. This is a powerful combination that usually results in an extraordinary work-rate and outstanding results.

The second key reason for the power of teams in the professional service firm environment is the proprietary mindset. Typically professionals are owners (partners) or aspire to ownership (associates). This sense of shared ownership creates an extraordinary level of team commitment and results orientation.

In many respects these highly skilled, diverse teams, that have shared ownership for delivering outstanding outcomes, is an ideal model for business leadership in today's world. We know that increasingly a key success factor for business is the ability to build creative alliances with customers and suppliers in order to find better ways of doing things. To collaborate with other companies on complex or large-scale business opportunities that neither company has the resources to complete alone. And to move quickly and seamlessly to opportunities or execute initiatives. Many companies could do worse than look to their professional advisors for a working team-leadership model to deal effectively with such complex and fast moving challenges.

Strategic Leadership & Innovation

In the traditional corporate world strategic leadership is typically the domain of the Chief Executive Office and Board. This contrasts sharply with the world of professional services. It is true that the leaders of professional service firms must make decisions that impact on strategy - investment in infrastructure, development of knowledge management systems, where to open the next office, etc - but the real strategic decisions are made at the point of contact with the client.

In this context strategic leadership is about creating an environment that fosters and encourages innovation. It is about energising the team to understand and be responsive to client needs; to be creative in serving clients mindful of the limits of the firm's professional capabilities and specific value proposition. It is certainly not about telling people what to do. If the firm has succeed in attracting and developing the correct talent, then these individuals will have the skills, judgement and values to innovate successfully.

By facilitating this kind of client-focussed quest for excellence the leaders of professional service firms create an environment where strategy becomes organic; part of the daily flow of client work, practice development and team interactions. New ideas are tested; boundaries pushed and risks taken. As clients respond to, and value, such initiatives they are institutionalised into new practices or change the way existing practices are executed. In this process deep trust and shared knowledge is built with clients. This forms the basis of a relationship that is a significant barrier to entry for competitors.

Some large companies are coming to understand the importance of this bottom-up approach to strategic leadership. The "atomisation" of large corporates into small, strategic business units, with clear team based accountability for delivering business results, reflects this. These companies understand that the power of the strategic insights of customer facing teams that have ownership for building "their" business. They recognise that the rate of change in today's world requires rapid business realignment so that these insights can be quickly translated into new products or services and delivered to clients in a timely and efficient manner.

In this kind of world the most successful leaders are first and foremost inspirers, motivators and facilitators of business creativity. All the more in a world where top talent has options. One of our clients refers to such talent as "volunteers". He recognises that these individuals are motivated by much more than monetary compensation. They seek to achieve and have impact. The leaders of professional service firms have long understood this. They understand that talented professionals do not want to be told what to do. They want to be excited by their leader's passion and inspired by his or her vision. It is this kind of leadership that will attract and retain the best talent in a talent-constrained world.

Conclusion

As the nature of the corporation evolves, and the supply of top talent inevitably becomes more constrained, the great companies will be distinguished from the good companies by their ability to attract, retain and develop key people. In light of this challenge it will be the companies that are able to articulate a compelling value proposition, tailored to the specific needs of top talent, and create an exciting and challenging work environment for developing and leveraging that talent, that will win out. In this context we believe many companies could well learn from the experience of the leading professional service firms.

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