Organisational Structure for
Capital | Consultancy | Corporate
Hierarchy, a great model for manufacturing companies and other businesses, is a poor fit with talent-driven organisations such as professional service firms. How should a professional service firm organise to achieve its strategic goals in today’s business environment?
In a partnership, there is the belief that “we’re all in this together, no matter what.” This sense of shared destiny historically has been the source of power for partnerships.
The partnership structure proved useful to professional service firms because it fostered alignment between the professionals and the organisation and strategy of the firm. It achieved this complex alignment, almost unconsciously, and it could do so for two reasons – strong peer relationships and the participatory processes of partnerships.
Today, growth, globalisation, and changes in ownership are undermining the historic partnership structure and challenging the partnership spirit. Professional service firms must make decisions about their structure and governance that reinforce as much as possible the two essential attributes that partnership has always created: strong peer relationships and participatory processes.
Partnership of Peers
Talent-driven progressive firms, limit the height of their organisational pyramids and try to create a flatter structure that reinforces the sense of governing through a partnership of peers. Peers are not necessarily equals: Some partners hold larger ownership stakes than others, or deliver more outstanding performance year to year, or provide better counsel to their partners and junior staff. But despite these differences, the mindset is basically democratic – “we’re all partners here.”
So for all the healthy competition among partners, in the best firms there is an equally healthy measure of collaboration and cooperation in the interest of the firm.
The Power of Participation
The notion of participation, of actively involving senior stars who don’t occupy formal management positions (as well as those who do) in key decisions is firmly ingrained in the governance process. Senior stars expect to be consulted on decisions that affect them personally. If they are not, they will voice their dissatisfaction or show it by moving toward the door.
Therefore, by necessity, the governance of professional organizations must be more inclusive and participatory than traditional companies. There is a dark side to participation. Broad participation in decision-making and consensus building slows decisions down. It can also make it difficult to reach a definitive conclusion when so many players are involved in the decision process.Also, participation can diffuse responsibility. If everyone is in charge, no one’s in charge. In professional service firms where leaders are overly deferential to their partners’ views, the decision-making process often seizes up.
More than Structure & Governance
Organisational decisions that reinforce peer relationships and participation can help a firm nurture the alignment between its stars and objectives, but they are useless without the basic underlying belief in the principles of partnership.
How can firms maintain this belief and commitment to partnership when so many forces are at work eroding them? Ultimately, the answer lies in culture.
What is it about the organisation of professionals that allows some firms to adapt to marketplace turmoil and prosper, while others lose share and gradually decline? Why do some firms seem to thrive on change while others melt down?
In professional service organisations, leaders must focus on micromanaging the culture, not micromanaging the stars. Culture is not about a firm’s dress code, it is NOT about how you or your partners feel. It is never completely codified in a formal rule-book or policy manual. Culture encompasses beliefs about everything that goes on in a firm. It is a set of invisible guideposts that defines and shapes how people behave. A firm’s cultural beliefs guide the decisions that are made and develop the way the firm responds to internal and external threats.
The Cultural Core
Culture is an organisation’s greatest competitive advantage; it cannot be copied. Each firm has a different culture, five core beliefs that characterize the way that senior stars think about their organization and their own relationship to it.
“Belief in partnership” means that senior stars are the owners of the firm and regardless of the legal form of ownership; it must be governed as a partnership. Consensus must be built among partners before major decisions about strategy are made. The firm’s success is the result of the efforts of the group as a whole.
The work of serving clients is performed by constantly changing teams of professionals. A firm’s belief in extraordinary teams mitigates the tension among stars as they strive for personal success while simultaneously serving clients well together. Young stars learn that they must work together to succeed. Being an effective team member is what counts; that’s how you succeed personally.
Belief in community is the proposition that at the end of the day we’re all part of one firm, and we are expected to work together and help each other. The belief in community keeps everyone working together, regardless of specialty, level of experience, or geographic location. It includes everyone, not just partners or senior stars. This belief keeps in check the tension that naturally develops as people identify with the goals of their particular part of the firm (i.e., their practice area or office).
Progressive firms believe that stars and clients are equally important. You can’t have satisfied clients without stars, and you also can’t have stars without satisfied clients. The belief that both are equally important enables firm managers to work for a balance in meeting conflicting demands between clients and stars. If the firm is to succeed, both constituencies must be proactively managed, and each must think ultimately it occupies the number one spot.
The core belief in perpetuity refers to the shared understanding, at the senior level, that you and your peers are building a firm that will transcend generations. That you’re not only “in this together” with your current fellow partners, but also that part of your job is to help create a firm that will endure so future partners can succeed. It’s the long view, and it drives people to behave selflessly in ways that support the firm.