Professional service organizations have a new challenge today. They are experimenting with better frameworks for leadership that can help them to balance the conflicting demands on management.
Some frameworks are working well and some are not.
When leaders take a more inclusive approach to making business decision, it works well for the organization. This is often difficult for leaders who are used to setting their firm’s direction themselves with minimal or no input from others.
Firms run into trouble when the leadership doesn’t take the other key partners into confidence on some strategic decisions. They feel left out and may work against the interests of the firm.
Effective leaders need to be very clear on what the firm does and doesn’t do, and they cannot be ambiguous in the direction which they choose for their firm. Managing partners get into big trouble when they lack strategic clarity-or they give themselves too much wiggle room-because that creates anxiety for their followers.
When it comes to execution, effective leaders hold people accountable. But this needs honest conversations, setting of reasonable goals and a performance follow-up system to identify pitfalls. Surprisingly, many firms have ample scope for improvement on this basic imperative.
In the early phase, leaders led the professional firms on a generic model and assumed that it would work as well at any consulting or a law firm. But it is now evident that professional service firms are so unique and different that they need to be led differently.
What has now evolved is the integrated leadership model wherein the leaders need to integrate their leadership behavior in four interrelated areas: Setting direction; building commitment; ensuring execution; and setting a personal example. In this way they can balance two separate-and sometimes conflicting-roles: producer and manager.
Too often, firm leaders set a good strategy, but they panic when they don’t meet their quotas. As a result, they tend to accept work which they should not be doing. This was the case with one of the professional service firm-McKinsey & Company.
McKinsey was reputed for their focus on experience and advisory role. In the early 2000s, as their utilization rates declined, they pursued more of commoditized work. They have since struggled.
Management leaders normally do not freeze on their strategic goals. They plan their dependence on what the markets are doing and then tend to frame their differentiation strategy. Though all firms need to be responsive to market shifts, changing the strategy undermines the commitment of people as they end up doing something else that is contrary to their expectations. This creates retention problems.
There is a very high correlation between a professional’s level of commitment and high performance and also between commitment and retention. Disillusioned professionals hang out in organizations and they aren’t sure if they want to stay, but may not have a better alternative. Now these are resented by the real performers – those we often take for granted. Thus the virus of discontentment starts spreading.
There are some attributes that can set one firm apart from another.
The nature of the relationship between the partners is very important. It should be in a supportive way and not underlined with internal competition.
The firm must be good recruiting, compensation, promotion, and succession planning. Performance evaluations and some creative elements also impact the firm’s culture in a meaningful way.
Professionals must believe that all of these systems are fair and applied with the interest of the firm at the core. They should also believe that whatever they say about how they do things in their firm is actually the way it happens. The disparity between what they say and what they do causes tension, anxiety, anger, or frustration, especially when the professionals are overburdened.
Many managing partners judge the performance of junior people within the first two months and try to analyze whether a person is a star performer or a hiring mistake. This creates internal contention among the associates. Good leaders do their best to avoid creating that kind of environment.
Leaders also need to be as transparent as possible so that other partners say this is a person that I trust. Decisions about the strategic direction of the firm need to be consensus-driven. But many leaders are actually quite dictatorial about how to get there.
Commercial goals play a spoiler when leaders make exceptions for high performers who don’t live the values of the firm just because they bring in lots of revenue. If others begin to model that behavior, they generate resentment and gives rise to internal political groups.
Leaders should surround themselves with professionals who are better than them and who speak the truth. Actually, many firm leaders do not distinguish between having good people who speak the truth and have good people who figure out what they want to hear very quickly.
How many times we have seen this happening in our organizations? No prize for the best guess!.