Why is it hard to grow a professional service firm these days? This is a relatively strong economic period. There seems to be more and more need for accountants, lawyers, consultants, trainers, writers, technicians, and engineers, etc. Owners of professional service firms don’t have to finance expensive machinery or inventory as their firms grow.
But, growing a professional service firm can be fairly challenging these days. It is just about impossible to HIRE a rainmaker. If a person is truly a rainmaker, he/she is probably leading his/her own firm. The unemployment rate is so low the headhunters aren’t just calling the top performers any more. They are calling everyone. So retention isn’t easy. Group dynamics prevent some firms from growing past the classic thresholds of 10, 25, or 60 employees. Growth can be stunted by a founder’s inability to let go of key accounts or decision-making authority. Obtaining outside financing for a growing professional services firm is a challenge because there is no inventory to use as collateral. Leaders of many professional service firms struggle with centralization versus decentralization decisions, so confusing organizational structure often sabotages sustained growth. Competition can freeze some service providers and today’s large, well-financed, aggressive firms represent intense competition. The list of challenges goes on.
If one were to rank order the challenges facing growth-oriented professional services firms, attraction and retention of talented employees would probably be at the top of most peoples’ lists. Human resource management techniques can help.
In the past, firms would place a simple want ad in the Sunday newspaper, publish a “position available” listing in an industry newsletter, or leaf through the pile of unsolicited resumes on their desks. Today, most firms have to provide financial incentives for their existing employees to recruit new people. They post attractive advertisements to on-line bulletin boards. They send representatives to career fairs. They even “adopt” nearby colleges to establish contact with future job candidates. Their public speaking is now done to attract new employees not just new customers. Recruitment and customer-oriented marketing campaigns are designed in parallel. Some firms have two versions of every direct mail piece, brochure, web site, and trade show display; one for prospective customers, the other for prospective employees. Many firms sponsor events that will get media attention to attract new job applicants. Firms are hiring their own in-house recruiters much earlier in their development than ever before. Larger professional service firms even post recruiters at major airports to lure employees from competing firms through “casual” conversations.
In the past, it was enough to provide employees competitive salaries, co-paid health insurance, a modest number of vacation days, small continuing education allowances, annual performance evaluations, and a reasonable workspace. To retain talented employees in today’s competitive market place, firms provide higher salaries, benefit packages that include fully-funded health, disability, life, and dental insurance, more vacation days, tuition reimbursement, state of the art hardware and software, flexible schedules, pensions, individual and team bonuses, and profit sharing. But that is still not enough.
If they want to compete, today’s professional service firms have tailored career advancement programs for each employee that include the assignment of mentors and ways to continually stimulate/challenge bright employees. The serious professional firm must demonstrate genuine support for the career advancement of its employees by distributing press releases as people are promoted. Annual performance appraisals of individuals have been replaced by 360 degree evaluations about the person and everyone around him/her. Today, many owners feel compelled to offer stock options and equity deals to key employees much sooner than they would have only a few years ago.
Sadly, the Managing Partners of many growth-oriented professional service firms are reaching the conclusion that even these techniques won’t be enough.
Where Else Can Creative Companies Look ?
Human resource management techniques help, but business growth strategies may be a better place to look for new answers to today’s challenges.
For example, growth through geographic expansion can help a firm diversify its work force, reduce travel time for employees, and offer new challenges for ambitious associates. Having multiple locations also encourages the firm to utilize today’s communication technology which is attractive to job candidates.
Franchising attracts serious people who are willing to pay for the privilege of working with you.
Strategic alliances permit access to an expanded pool of resources (including human) without the addition of overhead costs and long term commitments.
Joint Ventures often permit a firm to more aggressively offer new services to new markets which attracts top talent.
Interestingly, professional service firms that face recruitment/retention challenges often overlook the value of acquisition. Acquisition can bring bigger and better accounts while also expanding the service delivery team. Today, it can pay for a relatively small firm to acquire a larger firm especially when aging baby boomers who may not have addressed succession issues own the firm being purchased. Some firms are finding that their acquisitions are far less expensive than recruiting people one at a time. This is especially true when the acquisitions have been financed on receivables. In the past, the acquirer might tie the payments made to a former owner to the rate of retention of key accounts. Today, those payments are more likely to be linked to the retention of key employees.
These days, it’s not easy to achieve accelerated growth with sustained profitability®, so it’s important to look for strategies that simultaneously drive the growth of your firm and address tough problems.
Known as The Growth Strategist®, Aldonna R. Ambler, CMC, CSP helps rapidly growing midsized companies (typically $20 – 200 million/year) realize their goal of Achieving Accelerated Growth With Sustained Profitability® through opportunity/resource analysis, executive coaching, strategic working sessions, and her intermediary role regarding growth financing. Her clients are among the brightest, most ambitious business leaders whose names now appear on published lists of the fastest growing privately held corporations. The recipient of 23 prestigious awards for her success as an entrepreneur and industry leader, Ambler hosts a peer-to-peer Internet radio program, aptly called The Growth Strategist®, which features lively interviews with CEOs of midmarket companies who have successfully executed the growth strategy of the week. She can be reached toll free at 1-888-Aldonna (253-6662), by e-mail at Aldonna@AMBLER.com or online at www.ambler.com.