In the face of political and economic uncertainties, professional services firms may feel compelled to focus on cost control to protect near-term earnings and maintain competitiveness in the long run. In doing so, firms must remain mindful of the unique characteristics of the professional services industry and ensure that any actions taken do not adversely affect the strategic operating model.

What makes professional services firms unique

In his seminal work, “Managing the Professional Services Firm,” David Maister identifies two key characteristics that make professional services firms unique:

1. Customizable work that is tailored uniquely for each client, regardless of tools, management information or data used
2. The importance of nurturing client relationships

The foundation of effective management is a human capital leverage model that requires careful calibration across the firm's various layers. The slightest miscalculation in such calibration would tip the balance of the firm’s profit formula.

Although Maister's insights were shared nearly three decades ago, they remain relevant for all professional services firms today, regardless of ownership (public vs. private) or revenue models (pure-play consulting vs. consulting as an adjunct to a software platform).

All firms must be attuned to their solution set, client relationships and leverage model. Differences arise in how firms recognize revenue and profit. On one hand, pure-play firms recognize these through billable time and efficient delivery. Most pure-play firms have explored rightshoring of delivery teams and are heavily invested in exploring how artificial intelligence can significantly enhance delivery efficiency.

On the other hand, firms selling software or technology platforms may intentionally operate the consulting business on lower revenue and margin to boost technology, product and licensing revenues.

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