Managing the Professional Service Firm.

In this column, members of the College's Vantage Council review books that they have identified as being of interest and value to the medical management profession. Reviews from other sources are included in Physician Executive as space permits.

David H. Maister. New York, N.Y.: The Free Press, 1993. 376 pages. $39.95.

There is no doubt that providing a service differs in many aspects from providing a product and that providing professional services has its differences from delivering nonprofessional services. The goals of "service, satisfaction, and success" may be a common thread in business survival, but professional services also demand certain knowledge, skills, and abilities--often customized to clients' needs.

The author of this book begins his approach to professional service management by looking at areas such as growth and profitability (e.g., there is not necessarily a relationship between growth and profit) and discusses leverage and life cycles. For the reader not used to a prior diet of accounting and strategic planning, this section may be hard to move through, but it offers a unique and important view of the service world. Perhaps the most important early message is that a service business may concentrate on one of three areas: expertise, experience, or efficiency. Expertise depends on individual talent; experience depends on institutional reputation; and efficiency depends on cost reduction, speed, and reliability. Being oriented to all three is extremely difficult and may defocus the fit of services to the client.

In determining if a service business is successful, one must look at "profits per partner" (based on revenues, costs, and staff sizes per partner). Leverage is determined by the nature of the services provided (skills must match requirements).

Because profits per partner involve costs, one natural aim is to reduce wasted motion by removing bad habits. One common bad habit is "systemic underdelegation." How much time is spent by a senior person doing what a junior person could do? The more that can be delegated, the more free time the "expert" has to pay attention to really important activities. The problem for the "expert" is that he or she will have to spend some coaching time up front to get his or her own "more productive time" later. Sometimes this is hard for professionals (the author, however, does pass along some useful tips to overcome this bad habit).

As the book goes on, the importance of marketing and listening to clients is stressed. Methods are presented, with the aim of reaching the realization that, for the customer, "satisfaction equals perception minus expectation" (the corollary being "people don't care how much you know until they know how much you care"). The caring image becomes a key point in the success of the service organization.

Because service organizations depend on human interaction, motivation is an important part of keeping the business alive and well. Some useful lessons in supervisory style are discussed. For example: Goals must be clear, feedback must be prompt, rewards must occur quickly, people must be involved in decisions affecting their job activities, and an appropriate level of autonomy and responsibility tends to motivate people.

The latter part of the book covers recruitment, performance appraisal, compensation, governance, and networking. This leads to a discussion about collaboration and growing the service organization in a profitable way. The balance in service worlds is often one that must be found between "hunters" and "farmers." Hunter businesses are entrepreneurial, internally competitive (individual-oriented), and financially oriented toward the short term; have less emphasis on client relationships; and provide the same service while looking for new markets. Farmer businesses are collaborative, team-oriented, and financially oriented toward the more long term; have a high emphasis on client relationships; and develop new services in the same market.

Because hunter and farmer orientations are in conflict, firms that attempt to be both will end up with somewhat schizophrenic management practices, resulting in less productivity. As the author notes, "professional firms must decide (or discover) whether they are hunters or farmers, and learn to capitalize on the strengths of their chosen model."

Searching for literature on methods of managing the professional service firm has been generally difficult. Small pieces could be gained from journals, but no concise book had previously pulled together all of the material for the professional service world. Finally, there is a single source that deals with professional service management.

Once one works through the early leverage discussions and enters the broader discussions and "how to's," it becomes evident that this book is a piece of art. It is complete with tables and questionnaires that many service organizations will find useful. On a digital rating scale, it gets two thumbs up. No brief summary can replace the actual book. I highly recommend it.