Strategic Management of Professional Service Firms, 3rd edition

Citation

Gemmel, P. (2006), "Strategic Management of Professional Service Firms, 3rd edition", International Journal of Service Industry Management, Vol. 17 No. 5, pp. 518-520. https://doi.org/10.1108/09564230610689803

Many of us are part of a professional service organisation such as a university, a business school or a (management) consulting firm. We all experience that these firms are confronted with “strong” individuals, called professionals, who do not like to be managed. In her book, Løwendahl puts forward that management and strategic management are an absolute necessity in these complex professional service firms (PSFs). She adds immediately that the nature of strategic management in PSFs is and should be completely different from strategic management in manufacturing companies for instance. Although we all feel that the traditional strategic management models do not work in our professional environment, we are eager to learn more about other models or practices which can be used to manage these PSFs. The reader will certainly find in this book a well‐developed guide mapping out what the challenges are in strategic management of PSFs.

What is a professional service firm? What makes it different from other service or manufacturing firms? Professional services can be described using four core characteristics: the use of highly qualified individuals; the delivery of idiosyncratic client services; a subjective quality assessment and information asymmetry. It is the combination of these characteristics which lead to many challenges in managing the value creation process in PSFs. Some examples of these challenges are that “professionals” as managers do not have enough time for “managing” that professionals have a tendency to under‐delegate, that professionals are like ten or 20 racing horses who try to pull a cart together.

The challenges clearly indicate that it is helpful to develop strategies to help professionals focus their attention on the areas that are given highest priority. Strategic management is critical to the professional service firm's success, but it should be clear that strategy must focus on other issues than long‐term planning or return‐on‐investment. Strategic management in PSF is described through three major activities:

1. 1.

   the strategy or domain choice prioritising customers and projects;

2. 2.

   service delivery; and

3. 3.

   management of the resource base.

As to the latter point, the author introduces a resource‐based perspective to further create insights in what strategic management means for PSFs. As a PSF, do you have the necessary resources? Are you able to leverage and accumulate resources? Last but not least do you have control over the resources accumulated?

The characteristics of the resource base utilised and the strategic focus or type of projects are further used to make a distinction between three generic types of PSF strategies:

1. 1.

   the client relation‐based strategy;

2. 2.

   the solution‐ or output‐based strategy; and

3. 3.

   the problem‐solving or creativity‐based strategy.

The book fully describes the characteristics of each strategy. A major point is that it is difficult, almost impossible, for any PSF to deliver superior performance based on multiple strategies simultaneously. The main reason is that there seems to be a fit between the type of strategy and the type of professional. It is therefore very important for a PSF to keep a consistent (“focused”) strategy, which is based on informed choice.

As one looks at the development and growth of PSFs, it becomes clear that the traditional way of doing business does not necessarily apply to PSFs. For example, it is not taken for granted that economies of scale exist in PSF. There is no automatic relationship between lower price and increased sales. Owners of financial sources have very little power because the most critical resource is individual expertise, performance is not only measured in terms of profits, but also in terms of projects, processes, people (and their competences) and profile (persuasiveness and credibility)(the five Ps). Furthermore, it is very important that the value creation process in professional services cannot be described through the traditional value chain model. There is no transformation of input into output, but rather a process of creativity and new solutions development.

One other example where it becomes clear that the traditional management models cannot fully explain why things happen is that of globalization. PSFs should pay attention to all the effects – the costs, the potential benefits and the risks involved – before going global.

The book of Løwendahl really convinces the reader that PSFs are different. They are different to such an extent that many of the frameworks and models from traditional strategic management theory need to be modified or even replaced. PSFs are competing on two markets: the market of clients and/or projects and the market of professional individuals. In order to be successful in this complex environment, the PSFs should stay focused on their value creation process and this assumes that they have a good knowledge of their value creation process. Although the author really convinces the reader that PSFs are different, the idea of keeping a focus and having a clear service concept is not that different from what has been suggested in strategic management of service firms. Of course the content of the strategy will be different.

“Strategic Management of Professional Service Firms” is a well‐structured and well‐grounded book. It becomes clear that Løwendahl bases her findings on a PhD research in which several managers of PSFs have been interviewed. Throughout the book, some clear and consistent messages are given. The last chapter “summary and implications” is a very nice summary of the whole book, where the most important messages are brought together and some more implications are put forward. The book is clearly written towards a group of PSFs such as management consultants, accounting firms/auditors, engineering consultants, advertising agencies, focusing not only the managers of these firms, but also the professionals. Many empirical examples based on interviews and observations with managers and professionals within these kinds of PSFs are used throughout the book.

As one of the many professionals in the world, I advise the reading of this book to the managers of my institution (university and business school), although those managers are not the primary target group of this book. Business schools are probably a different kind of professional service organisations than a management consulting firm. Nonetheless, for me, as a professional, this book was like a mirror, reflecting some of the main issues we live through every day. Are you as a professional working in a PSF also frustrated with your managers? Or do you have also the impression that you do all administrative tasks surrounding your core job yourself? If the answer on these questions is “yes” please read this book to better understand why this happens.

E‐mail: paul.gemmel@ugent.be