Leading Professional Service Firms

Firms in the $80 billion professional services industry all face the same fundamental challenge: aligning their most valuable assets—the talents of their employees—with the strategy and organization of the firm. In this interview, HBS Professor Jay Lorsch, chair of the Executive Education program Leading Professional Service Firms, discusses the role these firms play in the world's economy and the keys to their success.

The HBS Executive Education course Leading Professional Service Firms (LPSF) is an intensive, one-week program that focuses on management issues unique to these firms. It provides a forum for participants from around the world to apply the concepts and real case studies presented in the classroom to their own professional lives. In this conversation with a member of the Executive Education staff, Professor Jay Lorsch, program chair, discusses the course, the significant role professional service firms play in the world's economy, and the keys to success for these firms in any field.

EE: What motivated you and your HBS colleagues to develop a course specifically for leaders of professional service firms?

Lorsch: Professional service firms represent an $80 billion industry worldwide. In the US and Europe, they comprise 17 percent of the GDP. Professional service firms serve the major companies of the world. In this course, we recognize the significance of the professional service sector and what sets it apart from other industries—and we provide its leaders with the tools to manage effectively.

EE: Are there management challenges unique to professional service firms?

Lorsch: What separates professional service firms from other businesses is that the employees are their most important assets. Yet professionals in any field — independent-minded, creative individuals—can be difficult to manage. In LPSF, we use an old analogy that likens managing professionals to herding cats. It's a funny image that touches the underlying anxiety some firm leaders express about managing and maximizing human resources. When their people get on the elevator at night, there's no guarantee they'll be back the next day. More than in any other industry, professional service firms must create an environment in which employees are constantly motivated and can effectively balance their commitment to the firm and to the client, as well as to themselves.

EE: What are the factors that make professional service firms successful?

Lorsch: The two essential keys to success in the professional service industry are human talent and alignment.

The work of professional service firms depends exclusively on the talent and intelligence of the people delivering it. Good firms hire the absolute best people and develop them, motivate them, and build careers in which they'll stay committed to the profession and the firm for a long period of time. They develop organizational practices that motivate these outstanding people to serve clients well. Getting this right is what we mean by alignment.

Leading Professional Service Firms concentrates on this concept of alignment—the issues firm leaders need to resolve in order to create strong links between employees and the kinds of things that motivate them, the firm's strategy, and the way the firm is organized to deliver the strategy.

EE: LPSF attracts participants from a range of professional service firms worldwide. Is there significant variation in the kinds of management challenges faced by professionals in fields as distinct as, for example, law and computer software design?

Lorsch: Program participants represent the full range of professional service industries including: accounting, investment banking, law, marketing, advertising, consulting, architecture, engineering, research, and, increasingly, computer software development and technology systems integration firms. We also seek an international mix of participants. About half come from the US and the other half come from Europe, Latin America, Asia, and Australia.

All of these people have very different backgrounds and skills—clearly lawyers are not like software developers—but they have a lot in common too. Fundamentally, professional service firm leaders grapple with the same kinds of management issues. It's reassuring for managers to know that their peers face similar sets of challenges. For example, in one case study I discuss, participants have to make some decisions about a law firm's overall compensation policies as well as how the firm's partners should be compensated. The participants quickly discover that everyone in the classroom finds this a familiar problem—and everyone wants to talk about it and share experiences and solutions.

Bringing together a diverse group of professionals creates a powerful learning environment precisely because we can draw on a wide range of professional, geographical, and cultural perspectives. Everybody learns from everybody else—a rare opportunity for professionals who often have few chances in their usual work lives to interact with others outside their own firms, much less outside their own professions or countries. Feedback from past participants shows that anyone who manages professionals and is responsible for delivering professional services would find this course interesting and useful.

EE: Leading Professional Service Firms is fast-paced and intensive. How is the one-week course structured to maximize learning opportunities?

Lorsch: We've been refining the program since its inception five years ago, but the core components remain extremely effective. The curriculum resonates strongly with course participants because it deals with exactly the kinds of issues professional service firm leaders face daily.

As in all HBS courses, we employ the case study method as one learning component to discuss the ways in which real managers in real firms grapple with significant decisions affecting their businesses. We discuss cases that reflect a mix of professions as well as firms of different sizes and supplement them with additional reading material, faculty lectures and guest speakers from outstanding firms.

The faculty are drawn from Harvard Business School's Organizational Behavior and Service Management groups and have expertise researching professional service industries, providing consulting services to major firms, and in some cases, heading firms themselves. The team includes myself; John Gabarro, an expert on human resources management; Tom DeLong, who studies organizational change and globalization in professional service firms and served as Chief Development Officer of Morgan Stanley Group; Herminia Ibarra, who focuses her research on career development in professional service firms; and Ashish Nanda, who researches management issues and strategic alliances among professional service organizations and formerly served as an executive with the Tata Group of companies in India.

The program also facilitates out-of-class discussion among course participants where they can reflect on the material and ideas discussed in class and apply it to their own situations. This is a rich opportunity for sharing information in an informal atmosphere in which participants can build relationships with each other that extend beyond their week at HBS. Ultimately, participants become a resource for each other in their professional lives when they return to their offices.

EE: What will participants gain from Leading Professional Service Firms?

Lorsch: Past participants tell us they've gained a better understanding of how to make their firms function more effectively, how to motivate employees, how to think about issues like strategy and firm governance, and how to address change. They gain new tools to employ in making decisions in these arenas, as well as new insight into how to negotiate their dual roles as both firm leaders and practicing professionals.

Without underestimating the complexities involved in delivering professional services, we want participants to emerge from the course with an understanding how all the components fit together.