22 Jan 2008  Research & Ideas

New Challenges in Leading Professional Services

Professional service firms are being challenged as never before—by clients, associates, and the competition, just for starters. But old-style PSF leaders are not equipped to respond, says Harvard Business School professor Thomas J. DeLong. He discusses his new book When Professionals Have to Lead. Plus: Book excerpt. Key concepts include:

  • Today's leaders of professional service firms are being overwhelmed by demanding clients, human capital challenges, lack of organizing strategies, and perhaps most of all, unrealistic expectations of the task itself.
  • There is also on ongoing trend to focus on the development of only the highfliers and ignore a vast number of very competent professionals who are the heart and soul of the firm.
  • The integrated leadership model is built on 4 specific dimensions: setting direction, gaining commitment to the direction, executing on the direction, and setting a personal example.

 

Professional service firms—law firms, financial services firms, money management firms, private equity firms, hedge funds, management consultants, advertising agencies—are the most challenging and exciting organizations to lead, maintain the authors of a new book, When Professionals Have to Lead: A New Model for High Performance

But lately the challenges for professional service firms (PSFs) have been growing in size and complexity, and the excitement is more the type you need a stomach antacid to control.

The dilemma, says HBS professor Thomas J. DeLong, is that the entire PSF landscape is in upheaval. Associates are harder to recruit and keep; competition for clients is increasing from boutiques below and global firms above; the clients themselves are more demanding; and management time is focused on short-term issues rather than long-term strategy.

As DeLong puts it, "In the past, the work of PSFs was a gentleman's game—and now it's blood sport."

Adding to the problem is the fact that many current leaders are overwhelmed trying to balance their dual roles of producer and manager. What's needed, DeLong and coauthors HBS professor emeritus John J. Gabarro and Robert J. Lees argue, is a new approach to leading PSFs.

The book's "integrated leadership model" is built on 4 management activities: setting direction, gaining commitment to the direction, execution, and setting a personal example.

We asked DeLong to discuss their research for the book and the current state of professional service firms.

Sean Silverthorne: Why is a new definition of leadership needed in professional services? What has changed?

Thomas J. DeLong: Professionals in professional service firms are reporting greater frustration, unmet needs, lack of shared purpose, poor morale, etc.

PSFs promise one thing [to clients] and deliver another; clients are asking for more for less. The firms are becoming more global and more complex to lead. The professionals entering these organizations have higher expectations and more suspicion that leaders will treat them like cogs in the wheel.

So leaders in PSFs have been calling for a new way of thinking about leadership in their organizations.

Q: What differentiates leadership requirements in professional services from leadership in other professions?

A: PSFs are flatter organizations, can be highly leveraged, and attract very smart professionals with a very high need for achievement. Few want to make a career of working in the firm. These variables are different from regular organizations.

The economic model is different as well. And the service expectations are different in a total client-driven atmosphere.

Most important, professionals attracted to these firms want to practice their expertise, not necessarily to become managers and deal with human challenges. They have different goals and motives.

Q: What is the integrated leadership model you have developed, and how is it different from the traditional "bifurcated" model?

A: The new model (Editor's note: see book excerpt below) was developed by getting under the skin of these organizations and observing, collecting, and then responding with what emerged through our research. It is the combination of the 4 parts of the model that make it work.

Also, in the past, few leaders in PSFs took the time to gain commitment to the direction of the firm—they only talked about vision and then executed on it.

Q: You note that senior partners have often preferred to respond to challenges and opportunities as they arose, rather than plan for them. Why is strategic thinking more important today?

A: The competition is greater, clients are informed enough to be dangerous, and they ask for more for less.

In the past, the work of PSFs was a gentleman's game—and now it's blood sport. You cannot wait for clients to knock on your door. Now you must go and sell the business. And most firms are competing for the same kind of clients: large, complex, and global.

Q: You spend a lot of time in the book discussing high achievers, but also underscore the importance of "B" players in the success of any organization. How should PSF leadership be thinking of their B players?

A: These solid citizens are invaluable and underappreciated. Because they don't demand attention they often go unnoticed. The highfliers soak up all the sun. When leaders only have a finite amount of time they often focus just on the top professionals.

Leaders need to reach out in small ways and acknowledge the contribution of the largest portion of their workforce. Solid citizens don't demand much but the return will be enormous in terms of renewed commitment, output, and overall firm performance.

The Four Leadership Activities

Excerpt from When Professionals Have to Lead

The integrated leadership model is based on extensive observation of effective leaders in a wide range of PSFs. These include consulting, investment banking, public accounting, the law, investment management, public relations, advertising, academic institutions, and the medical profession. It is also based on years of observation of ineffective leaders. They are often excellent professionals, but as leaders they seem unable to create a clear sense of direction, inspire others, or get results; or if they do get results, they are attained at great organizational and human cost. Typically, ineffective leaders are professionals whom others hate to work for, even though they may be highly regarded experts in their field. In contrast, excellent PSF leaders create a sense of purpose and a clear focus on execution, while supporting and gaining the commitment of their people. As a result, they develop teams and work cultures that attract top people who want to grow and do an outstanding job.

The leadership framework we propose is activity-based in that it deals with distinctly observable actions. It describes actual, observable behaviors that leaders may learn to become more effective. The model consists of four distinct but highly interrelated sets of leadership activities:

  • Setting direction. PSFs often focus on the short term and spend little time providing direction on where the firm or practice is going and why. Since professionals are often solely focused on specific goals and tasks, they need leaders to articulate the organization's objectives and how their work relates to those objectives. Setting direction keeps everyone eyeing the same target and minimizes false starts and wasted effort. It is important in all organizations but critical in PSFs, especially at a time when associates and partners are moving in and out of firms at a surprising rate or are under so much pressure that they don't grasp where the firm is heading.
  • Gaining commitment to the direction. As we describe in chapter 3, professionals have an innate need to be involved and included. They want to be heard. Unfortunately, a sense of alienation exists among firm professionals at all levels who feel the firm has changed and that the current culture and leadership has left them out; many solid performers who are not the star players at a firm often feel as if their contributions are being undervalued. When professionals feel excluded—or that no efforts are made to solicit their ideas and objections—they feel alienated and fail to focus on the task at hand. Many will pull away from other professionals and become cynical. Over time, some professionals may actually sabotage firm goals if they do not feel committed to the desired outcomes. Gaining commitment increases the odds that people will work harder and more creatively to move a firm, practice, or project in the desired direction.
  • Execution. Follow-through and accountability cannot be left to chance, even though professionals are naturally task-driven. Execution is a key activity for leaders who are intimately involved in business development, selling, client service, and delivery. Balancing the need to get things done with the need to get professionals on board is a huge challenge for PSF leadership. Execution is about not letting dates slide. Execution is the process of meeting the financial goals that have been set and holding professionals at all levels accountable.
  • Setting a personal example. Providing a positive personal example is crucial when leading professionals. In the stress-filled, volatile environments of PSFs, it matters what leaders actually do through word and deed. Leaders must embody the firm's stated values and goals or those values and goals become meaningless for professionals. Gaining commitment requires that leaders display personal integrity, support their professionals, and take responsibility for their own actions—including mistakes. Nothing undermines the credibility of leaders as quickly as exhorting professionals to do one thing while they themselves do the opposite.

Figure 2-1: The leaders' role in professional service firms

© Source Thomas J. Delong

These four sets of leadership behaviors form what we term the integrated leadership model for PSFs. Figure 2-1 provides a description of how direction, commitment, and execution are the three basic leadership activities, with "personal example" at their center. As this figure suggests, these activities must be integral and natural aspects of managing professionals, projects, and practices in real time. Although the four leadership behaviors are distinct, they are also interrelated. Thus, firm leaders need to integrate all of them into their modus operandi. For instance, it isn't much use setting direction if one's personal example doesn't reinforce that direction. Building commitment is terrific, but it's worthless if execution of that commitment doesn't happen. In short, direction, commitment, execution, and personal example are not ancillary activities to doing the work, relegated to counseling sessions or pep talks. They are at the core of producing results.

Ideally this integrated model will help leaders manage the conflicting requirements, intensifying client demands, and other stress-producing factors that make leading other professionals such a challenge. Instead of desperately swinging back and forth between producer and manager responsibilities, this model posits that these four overarching leadership behaviors will make being a leader a more feasible proposition. Leaders who integrate these behaviors will find themselves leading more efficiently and productively; these behaviors will help them prioritize their actions as well as make decisions.

The integrated leadership model is a frame to guide both long- and short-term activities. Rather than caroming from one urgent call to another short-term demand, leaders who have internalized this model into observable behaviors find that other professionals waste less time and instead focus on real challenges. The model provides a leader with both perspective and focus at the firm or practice level. With more focus, a leader wastes less time feeling guilty about what she is not doing. Rather, the leader feels more in control and strategic in words and deeds.

Excerpted with the permission of Harvard Business School Press from When Professionals Have to Lead: A New Model for High Performance © 2007 Thomas J. Delong, John J. Gabarro, and Robert J. Lees. All Rights Reserved.

About the author

Sean Silverthorne is editor of HBS Working Knowledge.