An article at Canada.com addresses the issues surrounding business models, client services, employee retention, and recruiting for knowledge based firms like attorneys, engineers, architects, and accountants. The assertion is that knowledge firms need to move to a more communal structure of governance to maintain their continuity and attract new talent.
the traditional model of billable hours and working your way up to partnership is under siege thanks to a blend of economic pressures, including new client demands, business consolidation and the fight for talent.
The preceding was uncovered through a survey of mid-sized legal, engineering, and architectural firms. Although accounting firms were not specifically surveyed, it seems that the issues addressed are similarly applicable to them as a knowledge based industry. The arguments set forth are rather similar to some of the same arguments set forth by proponents of value based pricing in professional service firms, especially with regards to the treatment of the staff worker in a knowledge based firm.
It appears that the new leaders within the knowledge based industry will be the ones that take the biggest steps in creating loyalty among their employees and an atmosphere that makes work a desirable location. One of the greatest costs and losses for a knowledge firm is when a major investment in time and education walks out the door for another opportunity and that human capital asset is replaced by one fresh from school that must undergo the process of time and capital investment to replace the prior employee.
However, not all partners will see a more communal environment positively (especially the “rainmakers” who are most enriched by the eat what you kill system). This dichotomy of interests is similar to the dichotomy of interests often faced by businesses with divided ownership interests. As accountants we know how we would advise our clients to handle situations where incentive packages do not promote the overall health of the business. We would tell them to change the incentive package so that the health of the business is aligned with the individual motivations within it.
Finally, would a more communal partnership or other system of corporate governance for knowledge based firms disincentivise the rainmakers and drive them away into their own businesses or to other firms where they are more enriched? Part of this depends on who the people are, how they are motivated, and how loyal they feel towards their current organization. Will a more communal system really improve the business environment and the services provided to clients or merely drive down revenues and profits as the rainmakers seek opportunity elsewhere?