Managing Today’s Complex Firm

Source: David Maister—Professional Business, Professional Life

The modern professional firm is more complex than its predecessors. It often includes branch offices, departments, service groups, industry niche divisions, client teams, various committees, and task forces. Some repetition of activities and missions is inevitable. Many people serve on several teams, resulting in wasted meeting time.

These groups are burdened with increasing responsibilities—transferring information, training people, assuring quality client service, etc.

All this is further complicated by the emergence of the “virtual” organization. Members of these groups may never see each other.

Compared to other organizations, professional firms are less formally organized. This can foster creativity and adaptability (to client needs), but can also be inefficient.

Maister offers some essential approaches to the structural problems of the modern professional firm:

1. Select the right leaders—People are more important than organizational structure. Leaders must motivate, delegate, balance firm needs with the units they lead, and manage people who have technical skills they do not. Today’s leaders need more soft skills —interpersonal, political, emotional, psychological, and social skills. Unfortunately, key leaders often make assignments without regard to the significance of these skills, rendering group leadership less effective.
   
   
2. Prevent conflicting group purposes—Firms often allow various groups or teams to have ambiguous authorities and responsibilities. Functions of the various groups become defined by the power of their leaders. The advantage of this is the flexibility in allowing groups to adapt to changes in the market; however, it results in clients being served by the groups or teams with the most powerful leaders rather than by those with the most benefits to offer. Rules for resolving such conflicts should be created by the firm.
   
   It may be better to eliminate permanent departments in favor of passionate volunteer teams. Though less formally structured, these teams may be more effective. There may be a degree of chaos, but more diverse leadership and more energy.
   
   But firms must avoid the conflicts that arise when leaders believe their only responsibility is to their teams. Team leaders should adopt the viewpoint of the CEO—do what is best for the firm as a whole.
   
   
3. Assure agreement among team members—A decentralized firm will make conflicting decisions unless each team follows the firm’s guidelines. This may require a hierarchy within the team. For example, the membership might be assigned to these different ranks:
   1. Leadership responsibility.
   2. Consulting responsibility—to be consulted on decisions.
   3. Informed but not consulted.
       
4. Establish hierarchy of groups—In order of importance:
   1. Client industry groups.
   2. Key client teams.
   3. Functional niche teams.
   4. Geographic teams or offices.

The geographic groups were traditionally the most important, but this has changed. The office head might manage a group of people who belong to teams managed by leaders in other locations. This does not mean the head of the office has no power. The office leader can help resolve conflicts because he or she is not partial to any team.

Establishing a different organization structure along these lines requires some investigation and preparation. Firms must determine whether they are ready to change. They must evaluate the current level of relationships among groups. They must align their incentive compensation methods with goals of the firm and determine whether profit center accounting is causing conflict among groups. And they must shares values. The firm must have adequate managerial skills or develop them.

From David Maister—Professional Business, Professional Life 2006, http://davidmaister.com. For the complete article, click on the following link: http://davidmaister.com/articles/1/100/.