Tuesday, 4 March 2008

What is the best structure for a professional services business?

Most professional firms start out with one or two people. If they are successful in winning enough business they may take on more, whether another fee-earner, a PA or administrative person, an IT or other support person, and perhaps even someone responsible for sales or marketing. When there are only a few people in the company, the relationships and systems don’t matter too much – everyone pitches in and does their best to help the company grow. What’s important is cashflow, customer service, and the distinctiveness of the firm’s offering.
But as you grow to a team of ten people or more, it starts to become important how this group is structured. So what does ‘structure’ mean?

According to the dictionary it is:
  • An arrangement of parts to make a whole
  • A repeatable or standardised way of breaking down an object into its components

In a business that means:
  • What different roles are there in the company
  • What business processes do they follow
  • How clear is the information that flows in and out of each role
  • Who is accountable for what
  • And ultimately, how predictable is the activity of the business?

These questions are especially critical for knowledge businesses. In a manufacturing or retail business the structure is more clearly forced upon you by the nature of the work you do. In a knowledge business, work can be very fluid unless you make the effort to define it.
  • Structure provides the following benefits:
  • You can reuse knowledge or skills developed on one project, across other projects or clients
  • Staff know what’s expected of them, and can improve their performance accordingly
  • The company’s performance becomes predictable. That in turn means:
    • Customers know what to expect and are therefore more able to buy from you comfortably
    • You can make investment decisions knowing what the return will be – this lets you grow the business
    • Your stress is greatly reduced


And so, the structure you choose for your business makes a big difference to how well it performs.

What are typical structures for professional services firms?

Partners/managers/administrators (common among accountants). Administrators handle routine work such as billing and reception; managers handle the bulk of fee-earning work such as preparing accounts for clients, or doing tax analysis; and partners oversee the work of managers, work with key clients, and carry out sales and marketing. In law firms the manager role is often called ‘associate’ but the structure is the same.

Account handlers/studio/finance (common with design firms). Account handlers act as the front-end interface with clients, winning new business and receiving client briefs. The studio delivers the actual creative work – often the studio itself is structured into a manager and staff, sometimes with a split between creative and production work, and sometimes with a planning person who schedules the work of their colleagues. Administrators handle billing based on timesheets, and other routine matters.

Expertise units. In larger firms particularly, there will often be a structure of teams which have expertise in particular areas – in a law firm these may be employment, commercial, litigation and property while in an accountant it may be tax, corporate finance and compliance. In these cases the partner/manager/administrator structure may be repeated within each team, often with the administrator resource shared between teams.

If the firm is big enough there may be teams focusing on industry sector groupings of clients. For example a team for pharmaceuticals, a team for petrochemicals and a team for finance. Again within these teams the partner/manager/administrator model is often used.

A structure that’s common within other businesses but less so in professional services is a split between business development, finance and operations. One team or person – business development – is responsible for the public visibility of the company – branding, generating new business, and perhaps negotiating with clients. The operations team delivers the work once a contract has been won by the business development function. And finance bills for it – often the financial role is responsible for support functions such as IT, facilities management and procurement. The closest analogue to this in the majority of professional services companies is the account handler/studio/finance model of the creative industries. However account handlers don’t usually see themselves as being in a marketing role – they often make a contribution to the creative strategy of the client and perceive that as being the main added value of their work.

A business such as a software or IT firm may be structured around a split between delivery and ongoing support. Certain people may be responsible for the specification and building of an initial piece of work, which is then handed over to others to support and maintain. These businesses can also have a marketing and a finance function, but the distinctive feature of the structure is the difference between the need for a big, short-term team to deliver a project and the need for a stable, efficient resource to provide ongoing support.

More mature businesses may have a specific function for the development of intellectual property. Again in a software firm, there can be a clear division between product development (IP), implementation (delivery) and product maintenance (support). Larger management consultancies may have an IP function but it seems rare for midsize professional firms outside of the technology field.

Business development/project manager/technical lead/resource. Often in an engineering company, there will be a specific role of project manager. This person typically acts as the lead and main client contact on a project, sets and communicates schedules, and checks progress internally. A technical lead is responsible for designing the solution for each project and usually for passing on that design to the resources, who implement it under the joint supervision of the technical lead and project manager. Business development is usually a separate function which may be assisted by the technical lead from time to time; finance and administration is also usually separate. Perhaps businesses which have distinguished the roles within their delivery team to this extent are more inclined to clearly separate the other roles.

So what other structures are there, and which of these is best? Naturally the answer will depend on the details of each business – there are good reasons why one system is used by accountants and lawyers, and another by creative firms. But have you considered all of the above models in your business and made a clear decision for one over another? Or have you just fallen into the default model for your industry?

I’d like to know what models you use in your own company and why you’ve made that choice. I’m also particularly interested in unusual models which do not fit into the classification above. I have a few examples which I’ll write up in a future article.

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