The Professional Service Firm: The Manager's Guide to Maximising Profit and Value

by Mark C. Scott

"This is a terrific book and the best I have read on the subject. Scott covers the economics and management issues in professional services with great authority and insight." Peter Doyle, Professor of Marketing, Warwick Business School

"What I find generally so praiseworthy is the balance of theory and practical application that runs throughout the book. Clearly, Mark Scott is someone well versed in the whole range of management sciences, yet able to ground this perspective in the world of real experience. This book accomplishes this in a natural, coherent and very readable way." John Zweig, CEO Specialist Communications Businesses, WPP Group USA Inc.

Spanning a diverse range of activities from accountancy to marketing communications, the professional services industry now accounts for up to 17% of employment in the Western economies and had worldwide revenues in 1999 of around $800 billion. It is continuing to experience one of the most spectacular growth rates of any Western-dominated industry and is progressively cornering an ever larger share of industrial value added.
Yet, it remains one of the most unanalysed and undocumented areas of business acitivity. It has been subjected to little scrutiny and received minimal attention from the capital markets. This book aims to change all that!

The Professional Services Firm is intended for three key
* managers and owners of professional services firms who want to understand the strategic options they face and how to improve their financial performance.
* investors who want to understand how they can exploit the largely untapped and misunderstood opportunity the industry holds.
* managers in industrial and service sectors who want to understand how to emulate the two critical skills mastered by PSFs - hiring, developing and retaining the best intellectual talent available and exploiting collective knowledge to achieve differentiation and to-die-for margins.
This seminal book provides not only the first real insight into the structure, strategy and economics of this huge and prosperous industry but also an excellent guide to understanding the challenges and opportunities it faces. Mark C. Scott's analysis of the professional services industry is an indispensible guide for anyone involved in these types of companies wishing to maximize performance and profitability.

202 pages, Paperback

First published January 1, 2003

Reviews

[Deniss Ojastu · Rating 4 out of 5]

A very good book, outlining some of the basic principles that one managing a (unit in a) professional service firm should remember, such as:

"If there is one single thing the professional service firms must do right it is attracting and retaining the highest-calibre individuals"

"Differentiation in the form of intellectual human capital is a barrier to new entrants"

"The highly competitive professional service firms will typically have a very low degree of client churn, as it becomes an indispensable part of the client’s value chain."

“The choice of client may dictate the professional development of the firm - it has to be made in full understanding that whatever else happens, the professional life of the firm will not be the same afterwards”

"The client relationships have “time economies”, the counterpart of industry’s “scale economies”. The firm does not need to incur acquisition, learning and start-up costs every time as with a new client."

"It is better to have an excellent general understanding of the issues facing a client and fashion the the professional service firm’s services to meet those needs rather than continuing to sell them the same solution to different problems. The power of the professional service firms is to customise, not to mass market."

"Most healthy PSFs compete on quality and not price. Their focus is achieving high enough levels of value added to sustain higher salaries that competitors and hence maintain the best professional talent."

I liked the systematic approach of the book: most of the principles (some of which are outlined in the quotes above) are substantiated by underlying economics, supported by charts or spreadsheet calculations.

The style of the book is rather dry, there are not that many examples - and those that are mainly come from the advertising industry. Many of the chapters are written with the focus on corporate finance, rather than company management - which might be too detailed if one is not concerned specifically about M&A.

All in all, a really good read and recommended for anyone willing to study economics of the service industry (as opposed to product-based companies / industrials that traditional economics focuses upon).

[Chayan Chang · Rating 5 out of 5]

A great resource offering deep insights into economic issues in professional services firms, striking a nice balance between theory and practical case studies.

It’s especially helpful for understanding how to manage professional talent and build strong client relationships.