Thought leader

Many of the practices that in the past seemed to be the very definition of what made a professional firm a different kind of organisation have all but evaporated. It may be time to ask: what is a professional service firm? What do firms gain and lose in becoming like ‘conventional’ businesses?

The core of the traditional model can be divided into two sets of organisational practices: horizontal (relations between partners) and vertical (relations between partners and non-partners.)

In the old days, the essence of the professional firm model was the partnership – a community of partners with a long-term, mutual commitment to each other. You might be employed by a corporation, but you were a member of a firm. This definition was not necessarily a legal one. Some firms, like consultants McKinsey, are legally a corporation, but are run on professional firm principles.

Partnership (or professional firm) principles implied a number of simultaneous privileges and rewards such as lifelong tenure, equity participation, the right to be consulted on major issues, and internal and external status. None of these were available to non-partners, and the very essence of the professional firm dynamic was to induce non-partners to compete, through an up-or-out system, to attain the privileges of partnership (some have referred to this as the ‘tournament’ system).

Partners gained the economic benefits of leverage in exchange (in theory) for teaching the non-partners their craft and mentoring them to become fully-fledged partnership candidates.

All this has ceased to be. As is clear to any observer, partnership no longer means tenure in any sense of the word. In many cases, firms are not loyal to partners and they, in turn, are not loyal to their firm. In today’s firm, there is as much competition between and among partners as there is common cause and mutual commitment. The firm, in many instances, is no more than a collection of powerful warlords, ready to jump ship to another firm if circumstances seem to suggest it is more desirable.

Paradoxically, at the very time when you would expect firms to work to make themselves attractive to junior professionals (due to the war for numerically less available talent and the shift in cultural expectations of more recent generations), firms have been working hard to make the risk-reward balance of the apprenticeship model look ever less attractive.

Partner workloads have increased, responsibilities (for such things as business development) have expanded and the single most common strategy for financial improvement in the past decade in most professions has been to de-equitise those who were formerly full partners, or at a minimum find some way to limit the numbers of full equity participants. Unabashedly, firms are saying that partnership will take longer, a much smaller percentage of those who try for it will be able to attain it, and the attractiveness of the partner life is generally considered to have diminished.

None of this is immoral or unethical, but these changes strike at the heart of the dynamics of a professional firm as a special form of organisation. If partnership now means no more than temporary employment and alliance as long as good times last, and ‘making partner’ is an ever more unlikely and undesirable future, then a whole host of assumptions about people’s motivations will need to be rethought. The old model of what it means to be a professional firm may be gone forever – and few firms are sure about what, reliably, will replace it.

The current recession may cause a lot of individuals, partner and non-partner alike, to conserve their bets, but when the market for talent opens up again and professional mobility is restored, many firms may be forced to ask themselves: what does it mean around here to be a firm?

David Maister is an author and consultant. He can be contacted at david@davidmaister.com