JOHN BASCHAB JON PIOT

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1 T H E PROFESSIONAL SERVICES FIRM BIBLE JOHN BASCHAB JON PIOT John Wiley & Sons, Inc.

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3 T H E PROFESSIONAL SERVICES FIRM BIBLE

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5 T H E PROFESSIONAL SERVICES FIRM BIBLE JOHN BASCHAB JON PIOT John Wiley & Sons, Inc.

6 Copyright 2005 by John Baschab and Jon Piot. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. Designations used by companies to distinguish their products are often claimed as trademarks. In all instances where John Wiley & Sons, Inc. is aware of a claim, the product names appear in initial capital or all capital letters. Readers, however, should contact the appropriate companies for more complete information regarding trademarks and registration. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) , fax (978) , or on the web at Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) , fax (201) Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services please contact our Customer Care Department within the United States at (800) , outside the United States at (317) or fax (317) Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at Library of Congress Cataloging-in-Publication Data: Baschab, John, 1968 The professional services firm bible / John Baschab, Jon Piot. p. cm. Includes bibliographical references and index. ISBN (cloth/cd-rom) 1. Service industries Management. 2. Professions Marketing. I. Piot, Jon, 1966 II. Title. HD B dc Printed in the United States of America

7 Contents Preface Acknowledgments About the Authors ix xiii xv SECTION I Managing and Governing the Professional Services Firm 1 Managing the Professional Services Firm 3 John Baschab, Jon Piot, and Robert H. Schwartz 2 Professional Services Firm Benchmarking 16 Gina Gutzeit 3 Partnership and Governance Structures 53 John J. Reddish SECTION II The Front Office: Driving Sales and Growth 4 Sales Management 77 Jana Carpenter 5 Marketing and Business Development 121 Bryan J. Wick 6 Service Line and Intellectual Property Creation 143 Thomas Marbach 7 Proposal and Reference Management 158 Tim Bourgeois 8 Strategic Partnering 180 T. Gregory Bender v

8 vi Contents SECTION III The Organization: Attracting and Retaining the Best Professionals 9 Organization Structure 197 Frank Ribeiro 10 Career Tracks, Compensation, and Professional Development 217 John Baschab and Jon Piot 11 Professional Staff Recruiting and Retention 237 Brant C. Martin SECTION IV Services Delivery: Taking Care of Business 12 Service Delivery 265 D. Michael McDowell 13 Resource Management 284 Joe Santana 14 Risk Management and Quality Assurance 316 John Baschab and Jon Piot SECTION V The Back Office: Efficient Firm Operations 15 Finance, Accounting, and Human Resources 337 Jeffery B. Nemy 16 Purchasing, Procurement, Vendor, and Asset Management 383 John Baschab and Jon Piot 17 Information Technology 431 John Baschab, Craig E. Courter, and Jon Piot 18 Real Estate and Facilities 466 K. Todd Phillips

9 Contents vii 19 Legal Counsel 495 Scott M. McElhaney and Michael W. Malakoff 20 Office Management 517 John Baschab and Jon Piot Appendix: About the CD-ROM 531 Index 535

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11 Preface If you assessed the available books on the topic of managing professional service firms, you probably arrived at the same conclusion we did about a year ago. You can find over a hundred books on the topic. Ninety-five percent of these books are written for the independent consultant who wants to learn how to incorporate, how to develop a proposal, how to sell themselves, and how to individually deliver a project to a client. The other 5 percent of the published books target the executives of large, national consultancies with thousands of consultants/employees. There were no books available to help the professional service firm with anywhere from 2 to 1,000 professionals. Yet, almost 75 percent of all professional services companies are in this group. In the books for independent consultants, you learn the basics (e.g., how to act on the client site, what the start-up costs are). In the books for large consultancies, you learn how to expand internationally or about developing philosophies. In this book, you learn how to grow an existing firm. You learn at what points you need to make decisions such as adding administrative support, opening another office, building another service line. You learn how to determine what is the best sales organization structure for your firm. You learn what information systems you need to build and when. This book is for the growing consulting company and its associates and management. The bulk of our consulting experience has been in the technology consulting and management consulting fields. We have had interesting consulting problems involving 50,000-, 2,000-, and 500-person consulting organizations. Significant input in this book has come from lawyers, accountants, doctors, and many other professionals. The contributing authors have varied and successful professional services backgrounds. This book consolidates the best practices for the mid-size consulting company. We have observed consistent patterns of success and failure in consulting and have been fortunate enough to survive them. The main goal of any professional services company is to add enough value to your clients that they will pay you enough to cover your costs and make a decent profit. We have captured the lessons learned and the tools, techniques, and practices that can help a professional services firm as it grows to include more and more professionals. ix

12 x Preface Benefits for the Reader From this book, you gain valuable skills, including: Identifying the main management areas of a successful professional services firm. Understanding of the scope and key success factors in each management area. Developing approaches for auditing current performance by area. Understanding the main sources of wasted resources. Identifying the industry average spending and investment commitments by area and professional services type. Distinguishing the business of managing the firm from the delivery of professional services. Understanding symptoms and sources of professional services firm inefficiencies. Learning the critical improvement steps in each of the main management areas. Learning how to make better decisions in firm strategy and direction setting, hiring practices, operations, technology, marketing, and overall management. Using specific cases and anecdotes from professional services firms to illuminate and further explain the material. Becoming familiar with specific advice from well-known practitioners in each of the service areas. Achieving higher utilization from their existing professional services assets/consultants. Achieving higher ROI from capital and operating expenses. In addition, you develop a keen understanding of not only the building blocks of successful firm management, but also how to grow and leverage current assets. Language Specific to Professional Services There are terms we use repeatedly throughout the book. These terms are used throughout the field. They are: Backlog: The value of committed sales contracts that will be executed in the future.

13 Preface xi Bill rate: The average billing rate to the client achieved by a particular or group of professionals. In many cases, firms will set standard bill rates for classes of professionals. Billability: The total hours billed during a specified period (e.g., year) divided by the total hours available in during the same period. For example, a lawyer that bills 2,000 hours in a year where 2,000 hours are available for work would have 100 percent billability. Also called Utilization rate. Billable: The status of a professional when they are billing time to clients generally for a protracted amount of time. Client: The customers of a professional services firm. Firm: The professional services business or company. Gross margin: Calculated as Bill rate minus loaded pay rate. Leverage ratio: The ratio of junior staff to senior staff. If there are 10 professionals working under a partner, the leverage ratio would be 10 to 1. Loaded pay rate: Loaded pay rate includes the professionals base pay rate plus taxes and benefits. Partner: Term used to describe a senior member of a professional services firm. A partner typically has the same rights as an owner of the business. Principal: Term used to describe a senior member of a professional services firm that works just under the partner. Professional staff: Term for firm employees directly engaged in providing services to clients. Service revenue: Revenue associated with billable time. Staff: Term used to describe support personal (e.g., administrative assistants) also called administrative staff. Utilization rate: See Billability.

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15 Acknowledgments Clearly, an endeavor of this type is the end-result of countless investments by mentors, clients, friends, and teachers. This book was a major collaborative effort on the part of many people. In addition to our contributing authors, we would like to thank the following people for their invaluable contributions: John Martin John Rosenbaum Manish Limaye Chris Loope Audrey Penrose Jay Espaillat We would also like to thank our agent Neil Salkind and the team at Studio B, as well as Matt Holt and Tamara Hummel, at John Wiley & Sons. Their continued support and expert counsel is much appreciated. We d like to recognize the special people in our lives who lose us for weeks on end with an endeavor like this: Susan, Lauren, Allison, and Will Piot, and Mary, Emily, and Will Baschab. xiii

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