Lessons from Leaders

Strategic Planning for Professional Services
by Maureen Broderick

“You know the phrase – the cobbler’s children have no shoes. We’re great at putting together and evaluating and analyzing a strategic plan for Domino’s Pizza, but not so good at doing it for ourselves.”

Many professional service firm (PSF) leaders say they have a hard time applying the same rigor and resources to strategic planning for their own enterprise that they exhibit on behalf of their clients. As one CEO admitted, “It is challenging to treat ourselves as a client and put our strategic minds in service of our own business.” Strategic planning takes nonbillable time, and it is a battle for leaders to get professionals to focus on what many see as a time-consuming distraction from client service and billable hours. And when it comes to implementation, finding the right levers to pull, whether formal or informal, to incent professionals to execute against the plan can be a delicate task.

Despite the challenges, planning in PSFs is growing in both importance and sophistication. Seventy-one percent of the 130 firm leaders interviewed for my book, The Art of Managing Professional Services, indicated that they have a formalized institutional planning, review, and measurement process that ties results to compensation, as shown below.

The majority of firms have a formal planning process

Many valuable benefits flow from engaging in a thoughtful, constructively debated planning process:

  • Focus. The most obvious benefit of strategic planning is its role in keeping a company firmly aligned with, and focused on, its organizational vision. A carefully conceived and designed plan translates a firm’s vision into a clear road map so that professionals at all levels know where the firm is going and how it intends to get there. In contrast, a strategic vision without a strong execution plan creates confusion rather than clarity.
  • Discipline. Engaging in a strategic planning process forces a firm’s leadership team to put aside daily concerns and client work and ask themselves tough questions about the future. It also encourages top management to reevaluate previous decisions in light of new circumstances and to refresh firm direction. The rigorous analysis that results from stepping back and assessing how to best respond to different conditions or contingencies can be immensely valuable. Many see strategic planning as a core top-management responsibility. In their view, adopting a long-term perspective, assessing potential obstacles and opportunities, and evaluating firm positioning with the goal of capturing maximum competitive advantage are all central to a leadership role.
  • Motivation. The psychological benefits of planning are among the most important for professional services and are one of the key reasons to engage in a broad-based, inclusive strategic planning process. Planning is a tool to stimulate collaboration, rally the troops, and create a sense of renewal and mission around organizational goals. A coherent plan provides the opportunity to generate excitement and buy-in by reenergizing professionals about the firm’s potential for growth and profitability – and their role in bringing a strategy to fruition.

Many leaders believe the journey is more important than the destination. The process that a firm engages in to arrive at a strategy is actually more valuable than the strategy itself. A substantial number of those interviewed pointed out the strong link between a vibrant planning process and effective execution. The process builds trust, commitment, and enthusiasm among the leadership team, which is vital to successful implementation.

Five essentials for successful strategic planning

Five common characteristics emerged from our interviews that are fundamental to successful strategic planning:

  1. Integrate long-term strategic planning with annual plans
    “The challenges to planning well are the very traditional ones that we hear from our clients. ‘I don’t have time to do this’ on the one hand or ‘I already know the answer’ on the other hand.”

    Many firms favor a comprehensive approach to strategy formulation that combines periodic long-term visionary planning events with annual operational and financial planning exercises and goal-setting. In general, the issues dealt with at the highest strategic planning level have to do with decisions that have major implications for firm direction, service delivery, internal investment, and resource deployment. These high impact issues range from geographic expansion and investments in intellectual capital to adding new services or restructuring from a country-centric operating model to one based on practice areas. In contrast to broad issues such as these, annual operational and financial planning exercises tend to be more tactical in nature, mapping out short-term goals and revenue targets.

  2. View strategic planning as a continuous cycle, not a one-time event
    “There is a certain discipline that comes from forcing the exercise to anticipate what the future will bring and how to respond to it which provides great value to the firm.”

    Many firms favor a comprehensive approach to strategy formulation that combines periodic long-term visionary planning events with annual operational and financial planning exercises and goal-setting. In general, the issues dealt with at the highest strategic planning level have to do with decisions that have major implications for firm direction, service delivery, internal investment, and resource deployment. These high impact issues range from geographic expansion and investments in intellectual capital to adding new services or restructuring from a country-centric operating model to one based on practice areas. In contrast to broad issues such as these, annual operational and financial planning exercises tend to be more tactical in nature, mapping out short-term goals and revenue targets.

    Sometimes a lightning-rod event or external environmental issue surfaces with the potential to transform the firm’s business in some fundamental way. When this happens, it’s inevitable that long-term plans will be affected; in certain situations, the firm may even be forced to rethink its current operating model. At times like these, flexibility is essential. A firm has to be willing to take stock, regroup, go back with a blank piece of paper, and really challenge the entire plan. In anticipating circumstances like these, scenario planning – an underutilized tool in the professional service business – can be especially helpful.

  3. Incorporate external as well as internal analyses into strategic planning
    “Some firms have gotten a long way by just putting one foot in front of the other. It’s going to take a lot more planning than that to survive going forward.”

    It is vitally important that service firms avoid organizational navel gazing. They must look beyond their own windows and walls to identify long-term trends and market forces that could affect their businesses or point the way to unmet client needs and new service offerings.

    Savvy firms are constantly taking the pulse of their clients and the industries they serve. Planning is never done in a vacuum, with a group of leaders sitting in a room talking to themselves. Incorporating solid external data into a realistic assessment of internal strengths and weaknesses is the foundation for successful business planning and decision making. Many professionals we have worked with have been adamant that they don’t need to talk to the market, because “they know their business.” Although this is largely true, surprises almost always come up when the firm conducts a bit of research. The market perception of the brand is weak or spotty, clients are not interested in buying some of the services the firm is selling, or opportunities to expand into a new service or market have not been explored.

  4. To ensure buy-in, collaborate with stakeholders to develop plans
    “It doesn’t matter what your job in the organization is; you should be able to figure out how it leads to the firm’s strategic imperatives and its success.”

    Generating support at all levels for the strategic plan is as critical for professional service firms as it is for the clients they counsel. As many of the leaders we spoke to noted, in a partnership, collaboration is the touchstone of strategic planning. If partners don’t feel they’ve been heard and don’t own a plan’s objectives, they feel no obligation to embrace them or measure their performance against them. However, as many respondents stressed, achieving total consensus on goals and directions is rarely possible. After feedback is solicited and processed, it is up to the firm’s leadership team to move forward decisively, usually without unanimous support.

    Knowing when to discuss, debate, and, finally, decide on a clear strategic direction is a sensitive timing issue. Firms charting strategies on a global scale face a further challenge in orchestrating inclusive planning and review processes. CEOs at the helm of enterprises with global footprints find it immensely demanding, but critical, to ensure that major stakeholders at country and regional levels are actively involved in planning. It’s also vital that any strategy envisioned is tested – not just in current markets, but in emerging ones as well.

  5. Communicate constantly, and regularly review progress against goals
    “Vision without a plan is nothing.”

    Once key stakeholders are onboard, it’s equally important to keep them fully engaged and in the loop during the execution phase. Many leaders also strongly advocate driving the key elements of a strategic plan down to the staff level so that employees in support positions have a clear view of the direction the firm is taking and recognize the importance of their own roles in helping the firm stay on track.

Orchestrating the planning process
“Trying to get people to understand, number one, that looking at the financial performance is important and then, number two, that it can lead to consequences has been quite a long-term process.”

The best run PSFs are committed to a dynamic, inclusive process that embraces a multiyear time horizon, annual execution initiatives and objectives, quarterly or monthly reviews, and ongoing review and adjustments. Most firms collaborate across the planning process, with the leadership team setting multiyear goals for strategy and growth and partners providing substantial feedback.

The planning process generally unfolds in four broad stages, as shown below. It progresses from long-range planning through the updating and fine-tuning of both long-term and annual plans.

The PSF planning process

Maureen Broderick is founder and CEO of Broderick & Company (www.broderickco.com), a consulting firm specializing in strategy, research, and training for professional services. The Art of Managing Professional Services (www.theartofmanagingprofessionalservices.com) was published in November 2010 by Wharton School Publishing.