What do investment bankers Goldman Sachs, management consultants McKinsey, accountants Arthur Andersen, compensation and benefits consultants Hewitt Associates, and lawyers Latham & Watkins have in common? Besides being among the most profitable firms (if not the most profitable) in their respective professions? Besides being considered by their peers among the best managed firms in their respective professions? The answer? They all share, to a greater or lesser extent, a common approach to management that I term the “one-firm firm” system.
In contrast to many of their competitors, one-firm firms have a remarkable degree of institutional loyalty and group effort that is clearly a critical ingredient in their success. The commonality of this organizational orientation and management approach among each of these firms suggests that there is indeed a “model” whose basic elements are transferable to other professions. The purpose of this article is to identify the elements of this model of professional firm success, and to explore how these elements interact to form a successful management system.
The information on specific firms contained in this article has been gleaned from a variety of “public domain” sources, as well as selected interviews (on and off the record) at a number of professional service firms, including but not restricted to those named herein. However, none of the information presented here represents “official” statements by the firms involved. As with most professional service organizations, the firms discussed here are private partnerships with no requirement, and with little incentive, to expose their inner workings. Consequently, public information on the management practices (and economic results) of such firms is difficult to obtain.
This situation is regrettable because the professional service firm represents the confluence of two major trends in the U.S. (and worldwide) economy: the growing importance of the service sector, and the increasing numbers of “knowledge workers.” As a result, any lessons that can be learned about successful management of such enterprises could potentially be of importance not only to the professions but also to other service entities and organizations grappling with the problems of managing large numbers of highly educated employees.
In an attempt to discover the principles of “good management” of professional service firms, I have worked very closely with a broad array of service firms in a variety of capacities.