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January 22, 2005
Managing a Professional Services Firm
In the wake of the recent scandals that have engulfed the PR industry (willfully over billing a government entity, pay for play for a government agency), it is important to review how we manage our firms. These issues are obviously not limited to public relations. Note the disappearance of Arthur Andersen, one of the Big Five accounting firms, the major settlements reached with customers who were defrauded by commercial or investment banks, and now the revelation of kickbacks in the insurance brokerage business. In each of these cases, the fundamental obligation of the professional--to offer unbiased advice and outstanding client service--appears to be sacrificed on the alter of incentive compensation. These problems are only aggravated by problems of rapid growth into far-flung geographies. Here are a few ideas to consider in assuring that quality, not bonus, is the preeminent value of the firm.
1) Balancing Geography and Practice through the Client Relationship Management position (CRM)--Smart professional service firms recognize that they must execute globally for multinational clients, while maintaining a vibrant local practice able to offer counsel on trends in market. An entirely geographic focus creates silos preventing spread of best thinking, plus the risk of financial impropriety based on phantom billing (note the Andersen problem was far away from headquarters). An entirely practice focus makes the geographic offices simply a delivery mechanism for thinking done in a few global centers. What is required is a dynamic tension arbitrated by a client relationship manager who has the power to work the other arms of the triangle. The CRM can manage issues including fee levels, staffing and content, while assuring profitability. In short, this is "client at the center" thinking.
2) Culture of the Firm--This is a powerful guarantee of proper behavior. At our firm, my father, the founder, continues to come to the office every day and writes "Dan-o-Grams" to Edelman colleagues around the world. At Leo Burnett Advertising, account people use pencils in meetings and bowls of bright red apples greet you at the door. These are the subtle signals that imply continuity and importance of values. It is critical to grow and retain senior people who can tell stories about the firm. The senior partners of law firms who move to an of-counsel role are important glue for the younger staff. Successful engagements in the history of the firm should be touted on their Web site.
3) Labor Mobility--The Issue of Expatriates--We have found that many of our best people have spent time in other offices, particularly outside of home market. It is critical to have these foreign nationals defer to local staff on mattes of local culture. But in general, the expats bring energy, experience on global clients and a new way of thinking to their new homes.
4) Financial Integrity--We have moved to a system where our regional CFOs report to the global CFO, not to the regional geographic manager. This gives our finance team an independent reporting line and allows them to question account staff on any billing issue. This is new for us--but I believe it is best practice for our sector.
5) Training--Too many of our training modules focus on skills, not enough on ethics or finance. We teach our account staff to write, pitch media, hold a brainstorm. Financial skills are learned on the job. We are going to implement a case method for training. We are also going to move quickly to include an ethics segment in training.
6) The Importance of Community Involvement--We believe this type of "giving back" helps to keep our people grounded in reality. We call it "Living in Color." Life has to be more than billable hours and work, work, work.
7) Incentives--I don't believe in pushing people to make excessive profits. I feel there should be a reward for performance, but that it should not be anywhere near as much as the base compensation. We are not in a transactional business--we should perform in the long run.
I hope this is useful. As always -- welcome comments and suggestions on what you find works.
By the way, just a final word on the Ketchum issue. Bravo, Ray Kotcher, CEO, for stepping up. You are a mensch!
Posted by Edelman at January 22, 2005 7:59 AM
Comments
Richard,
I've enjoyed reading your blog and insight into the business of public relations. This entry on managing a professional services firm is of particular interest to me as I'm challenged with many of the same issues -- although at a much more modest level.
I work hard to gather together a group of highly talented professionals who share a desire to provide value to clients while building a professional services firm of significance. I suspect that all high quality PR agencies share this goal.
"Strategic Guy" Blog: http://www.gotostrategic.com/blog/index.php
Posted by: Marc Hausman at January 23, 2005 11:06 PM
Hi Richard,
Great to see a CEO blog and with the discipline that you do. I came across your posting while browsing though your corporate website and could not help notice the emphasis, both direct and indirect, on people. Your earlier writings also reveal your innermost feelings about family and personal values. You also mentioned elsewhere that your father's personal style--his ethics, values and honesty-- have formed the bedrock on which your global employee Vision, Mission and Values program is raised and thrives. However your list above does not directly talk about quality of people, both acquisition and retention of the right people and the significance of that in today?s scandalous times.
There is a great article from down under on www.ceoforum.com http://www.ceoforum.com.au/200310_leadership.cfm that mentions two out of three particular areas where Professional Services firms demonstrate to be best practice are talent management and high-performance teams. Allow me to quote a paragraph from that article that you may best identify with.
"In this kind of world the most successful leaders are first and foremost inspirers, motivators and facilitators of business creativity. All the more in a world where top talent has options. One of our clients refers to such talent as "volunteers". He recognises that these individuals are motivated by much more than monetary compensation. They seek to achieve and have impact. The leaders of professional service firms have long understood this. They understand that talented professionals do not want to be told what to do. They want to be excited by their leader's passion and inspired by his or her vision. It is this kind of leadership that will attract and retain the best talent in a talent-constrained world."
Given your management style, you may have well taken the above for granted because the ideas you have listed are great for a team already in place. Preventing errors in judgment on ethical issues can be addressed to some extent by providing training but do you think Professional Services firms could do better by selecting people who have a record of "quality" of service rather than looking mainly at the "quantity" of business they can bring in? Any other thoughts on the intake process are most welcome. Thanks.
Regards,
Sri Alathur
Posted by: Sri Alathur at January 24, 2005 3:37 PM
Hir Richard,
Since this is the third post that you had alluded to the 'cash for advocacy scandal' I thought that you may be interested in the following link from the New York Times
It does beg the bigger question of it is not only the PR industry that needs to get a swift dose of integrity but their clients as well.
On todays column:
- I saw that you rated continuity higher than values like creativity and innovation, yet the most powerful thing in the world is an idea
- How do you keep a culture 'fresh' to deal with talented companies that have more of a 'young turk' perspective?
- How do you move company values off a notice board or the acrylic block on their desk and into their own ethos?
I realise that there are more questions than answers here, sorry!
Best,
Ged
Posted by: Ged Carroll at January 27, 2005 4:40 AM
Marc,
This professional services firm approach is so much better than being considered an agency, a line extension of advertising. We are of counsel, not middle men
Posted by: Richard Edelman at February 1, 2005 10:15 AM
Ged,
The longer I am in this business, the more I revere company culture. Companies that have it tend not to have ethical violations. Those that import Change Agents to shake up the place--note Marsh McLennan. They get into trouble. Juicing the earnings too much focus on bonus. Ideas are key but nobody should forget whatthe basis of business must be. Ethical behavior and client focus teach the next generation well
Posted by: Richard Edelman at February 1, 2005 10:17 AM
Sri,
This is great
Exactly right too
We need to have people at our firm who embrace the culture
Which is client focus delivery of results continuous pursuit of excellence Creativity
I love the concept of volunteers those who really buy into the firm and its goals
We are just doing a train the trainers session in Chicago so we spread our culture We also do an annual Edelman Summer School for our best and brightest from all over the world So we are into this...big time.
Richard
Posted by: Richard Edelman at February 1, 2005 10:18 AM
Richard,
I'm helping a client prepare a e-newsletter article about professional service firms and how they align their go-to-market strategies with their culture. May I quote from your original post and your Feb 1 comment?
Thank you,
Andrea
Posted by: Andrea Harris at February 2, 2005 1:36 PM
Company culture is a basis for good business!
Posted by: Dilan at August 1, 2005 4:15 AM
Dilan,
Company culture is number one factor for successful firms, especially in professional services.
Richard
Posted by: Richard Edelman at August 1, 2005 10:03 AM