Scaling up Professional services firms in India – An Insider’s perspective
In this column, I will attempt to give you a sneek peak into the DNA of a fast growing professional services firm – what sets them apart and the challenges the firm needs to address
The “Startup” Professional Firm – the Battle for Mindshare
I suppose a professional services firm can also be “starting up”; of course, there’s a difference when compared to an e-commerce venture. For one, the age of founders is a very important criterion. It’s very difficult – if not downright impossible – for rookies to start a professional services firm. I do believe, a desired level of expertise comes only after having put in a certain number of years. In fast growing firms, the easier access to clients of the firm’s leadership team goes a long way in building trust. When clients choose to engage with larger and more established professional services firms, there’s an unwritten understanding that they are paying a significant premium for the brand. There’s no gainsaying that in large set-ups, the accessibility to founders/partners comes at a premium.
Brand power is what sets large firms apart. That plays a major part in attracting the best talent and top-notch clients. At times, the heft may even be strong enough to provide a cushioning, in case the delivery falls short. In general, fast growing professional Services firms (FGPSFs, let’s call them) has negligible room for error as they don’t inherit any legacy and brand-building starts bottoms up.
The Funding Angle
Professional services firms in general may not require external equity funding, as compared to some of the new age businesses. In most cases, the customer’s money can sustain it – granted, the pace of growth is very different in new age businesses. Particularly in the B2C segment, the customer gravitates towards high eyeballs and to sustain it, companies have to spend money to build momentum. A B2B business does takes time to mature and get established. The “customer story” is very powerful. They are the most potent brand ambassadors and only high quality sustained delivery can keep the narrative going. You can’t “buy” customers, in the B2B segment.
The Significance of Org Structures
While the firm is still young, the core team is responsible for everything – i.e. getting business, delivery, internal accounting functions, and even HR. It’s a 24/7 job where the partners have a very high sense of ownership spanning across functions. However, this approach – i.e. business development & client delivery done by the same set of people also has its own disadvantages. Client relationships centered with one/few individuals can tend to have the effect of the clients moving away if these individuals part ways with the firm, a fast growing firm can ill afford that
As the business matures, one of the ideas could be for business development and client delivery to get delinked, which means that you are building a matrix organisation and not a linear one. In a Matrix structure, it necessitates that client acquisition teams and client servicing work very closely along with other support functions. No stragey is without risks, however this has the potential to reduce risks to large extent. People (in general), are more comfortable working in a linear structure. Sustaining cross-functional professional relationships aren’t easy and that’s why it’s so important to get the balance right.
Diverse Markets – Characteristics
Interestingly, the clients’ expectations are never uniform. For instance, in India, it can be unreasonably high and at times, it can be even trying on one’s patience. While this may sound contentious, it puts enormous pressure on delivery and the risk of losing the account looms large. Interestingly, the standards of delivery expected are not in any way lower in other geographies, but the manifestation is different. In the US (for e.g.) the client won’t micro-manage and demand updates with overbearing frequency. Once deadlines have been agreed upon, they don’t necessarily breathe down your neck all the time. The US clients don’t expect the professional firms to comprise of superhumans. In India, emotions run high and success/failure is greatly influenced by relationships. The best way to deal with this is to have one service delivery standard (which is high) and then to be able to tailor make this depending upon the geography, type of client and circumstance
The Talent Landscape
FGPSF aren’t engaging with talent as much as they should. When it comes to generating revenues and expanding the client base, the efforts are relentless. The same cannot be said for talent engagement. To give you an example: People do not know enough about Professional services firms outside of the names that they have heard of and the career growth opportunities they provide. It doesn’t cost a lot of money to make one’s presence felt especially now with social media and position the brand accordingly to attract good quality talent. FGPSF’s that offer differentiated services have a better chance of attracting the right talent if the USP is differentiated adequately and the ‘Whats in it for me’ is articulated clearly.
The other challenge with FGPSF is about a few members from the leadership micro-managing and refusing to let go. Excessive control is stifling and creates an environment that is unsuitable for ambitious people who need adequate legroom for growth. At times, it is seen that the idea of democracy remains only on paper, but in reality, the leadership style is autocratic. The leadership in these firms must engage in the process of facilitation with an eye on building an org structure for the future and not merely control.
Being Nimble & Agile
A simple test to apply to establish whether an FGPSF is nimble and agile is whether ‘senior’ executives have the authority to make pricing decisions independently. In most FGPSF’s, decisions on pricing rests with a handful thereby not giving them any competitive advantage as compared to a large firm where bureaucracy and process makes them slow.
However, nimbleness and agility are beyond pricing decisions alone. It should be about democratizing the decision-making process where the power is not concentrated in the hands of a few. It brings about a healthier organization where individual goals and aspirations are also addressed. In effect, it sets a pathway for succession planning.
One has to see this aspect of the business through two lenses – internal and external stakeholders. While a matrix structure appears ideal, the challenge for the leadership is to be able to constantly engage with talent across functions. A dotted line reporting makes it difficult to balance contrasting demands. Towards this, a sense of empathy and an acknowledgment of value-creation by others is important. For example, business development and delivery need to appreciate each other’s efforts, strengths including limitations. This way, the risk of over / under-commitment to the client is minimized. On similar lines, HR needs to engage deeply across the organization to understand the challenges that diverse functions face and pave the way for talent nurture.
Due to crunch in niche talent availability, FGPSF firms engage with gig workers. Technically, they aren’t part of the direct workforce and yet, they play an integral role in the firm’s growth. Engaging with this talent and aligning them with the overall organisation’s purpose is key to making the model work. Similarly, engaging with external stakeholders, be it the digital agency is an external stakeholder but they have to dovetail with the firm’s overall value and vision. A substantial amount of leadership bandwidth needs to be invested in tying these ends.
Tech Adoption – Strategy
At times, driven by the belief that their requirements are unique, FGPSFs tend to build technology solutions from scratch. In a landscape that is shifting rapidly, this may not be the most efficient approach. It has been observed, often, firms are unclear about where exactly they stand in a complex value chain – from a tech standpoint. Before embarking on the journey, firms need clarity on tech strategy. Is it going to be a business enabler or is the firm going to sell technology as a separate offering? Availability of 3rd party technology tools on the cloud makes possible, the adoption of best in class technology which doesn’t leave a hole in the pocket.
The Government’s Role
One of the reasons why professional services sector have done well is because government has been hands-off. It should remain that way – Government should focus on policy making rather than running or interfering in businesses
- Help people understand their influence within the organization, especially as to how they can move things irrespective of one’s position or power. It’s also very important to understand INFLUENCE is NOT EQUAL to POWER. People at any position can influence in an appropriate manner to generate optimum impact within the organization.
- For leaders, the ability to spend time and engage with people is critical. This is not just with the direct reportess but even a level or two lower in the organizational hierarchy.
- A quarterly rating system is far more effective than an annual cycle. It’s a two-way street really. The leader gets to communicate what exactly she wants and also what the reportees have to say. The ability to listen is as important as the ability to communicate.
- Identify areas that will have a long-term impact. However to get there – periodical tweaks will be required, given that the business environment is rapidly changing.
- Leveraging technology to differentiate the firm from the rest
- A quick response to change is required across the organization. It’s NOT about a few taking ownership.
Crystal Ball gazing – Sneek Peak into the future
- Fundamental changes to the business model would imply that a new set of people would have to be accommodated within the organization. They will augment the existing talent base.
- Productization of services. Not too many services companies have addressed this but I believe this to be a strong trend for the future. Of course, the services DNA is very different from products but it is possible to productize a smaller services portfolio and offer it separately to start a whole new revenue stream. The future is here and its exciting