The Intangible Industry: Professional Services

What type of organization sells no products, and yet charges some of the highest prices anywhere? Where can the “items” a company sells simply walk out the door? And what kind of company finds it almost impossible to achieve economies of scale on the “cost of goods sold”?

The answer: professional services firms. The unique nature of these organisations creates management and leadership challenges that many other companies typically do not deal with.

How Professional Services Work Professional services firms exist in many different industries. They include lawyers, advertising professionals, architects, accountants, financial advisers, engineers, and consultants, among others. Basically, they can be any organization or profession that offers customized, knowledge-based services to clients.

Many professional services are regulated by a body that, among others, regulates entry to the profession, upholds members’ standards of practice, and provides continuing education to its members. Examples include the Bar Council for lawyers, the Association of Chartered Certified Accountants (ACCA) for accountants, and regulatory boards for architects.

With these regulations in place, the professional services organization can be compared to a medieval craftsman’s shop, as David H. Maister does in his book, Managing the Professional Service Firm. Today, just as in the Middle Ages, there are “apprentices” (junior managers or new hires), “journeymen” (mid-level managers or experienced professionals), and “master craftsmen” (senior partners or upper management).

Most professional services firms use a leveraging system to maximize profitability. For instance, junior employees (“apprentices”) usually earn a relatively low salary. They accept lower pay because they want to gain experience, and have the opportunity to work closely with senior partners (“masters”) to acquire their valuable knowledge.