24/10/2008 | MBA Recruiters

Corporate leadership: lessons from professional service firms

By: Damien O'Brien - Egon Zehnder Intern

Professional service firms are very different from other commercial enterprises. They typically lack the hard-nosed bottom line focus and hierarchical management structure of most companies. Indeed, managing professionals has been likened to herding cats, not a metaphor for strong top-down leadership. Professionals respond to client needs rather than develop strategic initiatives. Their credo is "focus on delivering high value client service and the bottom line will follow".

Notwithstanding these differences, in many respects the leading professional firms have a model of leadership that is very relevant for other enterprises in today's world. In this article we look at three particular areas where these firms demonstrate what we believe to be best practice.

Talent Management

Professional service firms have long understood the critical importance of attracting and retaining top talent. Long before McKinsey coined the term the leading professional service firms were in a war for talent. Witness campus recruiting - these firms invest aggressively to identify and recruit the very best business graduates. They compete with other professional service firms, with investment banks and the leading corporates.

Importantly, the senior professionals of these firms allocate a significant amount of their time to this process, sacrificing important fee-earning hours. There is a very clear understanding that each professional is not only responsible for building the firm's client relationships and intellectual property but, very importantly, the firm's talent base. Often they are explicitly assessed for their contribution in this respect.

But these firms not only invest in the recruitment process. They invest in their people. Mentor programmes (professional apprenticeships) are real and important. The best professional service firms have explicit development milestones and provide regular feedback. Individuals who do not meet performance hurdles, or are deemed not to be a good values fit, are managed out as early as possible. This creates an upward flow of talent that becomes a virtuous circle: rapid career progression, high quality colleagues and exciting opportunities - a compelling value proposition for the best graduates and lateral hires.

Although many companies acknowledge the importance of attracting and developing talent most fall well short of the benchmarks set by the leading professional service firms. It is just not seen as a priority. Line managers often do not allocate the time and energy to recruitment nor do they have a clear sense of accountability for building the company's broader talent base. The annual appraisal process is a chore to be endured and regular feedback and coaching by line managers is patchy at best. Team-building is often seen as a tactical measure, not strategic. People development often amounts to little more than expecting people to "sink or swim".

We do see striking exceptions to this. Companies such as Lion Nathan and ANZ have prioritised the development of talent as a key strategic initiative. The CEOs and Boards of these companies allocate a significant amount of their time to the consideration of talent. They have proactive programmes in place to ensure that individuals with potential, at all levels in their businesses, are identified and given the opportunity to grow and develop.

Importantly these companies develop deep and creative relationships with their search firm partners to ensure the best talent is recruited. Moreover, our firm is increasingly being called on to not only assist with recruitment but also to identify and develop talent already within these companies. We work with line managers to assess talent and build the management bench mindful of the broader succession planning agenda. In many respects these talent management initiatives mirror those long adopted by the leading professional service firms. The initiatives of these firms represent best practice in today's talent-challenged environment.

High Performance Teams

For the leading professional service firms, recruiting and developing talent is only part of the equation. These firms also understand the critical importance of leveraging talent. Witness the deployment of young lawyers and strategy consultants on high-level projects with accountabilities and exposure well beyond their peers in other organisations.