What is the best structure for a professional services business?

Many companies in various points in time, are struggling with the question of how to best structure the company in general, and the Professional Services in particular, in order to best support the business. What is this best structure? Is there really a one best structure?

Most companies start out with one or two people, usually the founders. If they are successful in fund raising, and winning enough business they may take on more people, whether a PA or administrative person, an IT or a support person, or a person for sales or marketing. For few people in the company, the relationships and structure don’t matter too much – everybody does everything, and everyone pitches in and does what they can to help the company grow. The company structured as an elite “Commando” unit, lean and mean - What’s important is cash flow, customer base, the distinctiveness of the firm’s offering, and bringing more and more business in.

As the company grow, and the team passes the amount of ten - fifteen people, it starts to become important how this group is structured.

Several points needs to be addressed:

• What Different roles are required

• What are the Roles & Responsibilities of each role

• What are the business processes

• How is the information shared between the roles

• Who is responsible and accountable for what

• And how does the company ensures a positive cash flow

Structure provides the following benefits:

• Knowledge share. The company can reuse knowledge or skills developed on one project, across other projects or clients.

• Professionalism. Each function focuses on training and knowledge of the specific role with accordance to the responsibilities of the role (R&R).

• Performance Indicators. Each role is set with its own Key Performance Indicators (KPI). Each function can be measured and scored.

• Every person know what’s expected from him, and can improve his performance accordingly.

• The company’s overall performance becomes predictable. That in turn means:

• Customers know what to expect as far as scope, price, commitments and KPI, as well as who are their focal points for the different areas, and are more comfortable to buy.

• The company can make investment decisions knowing what the return will be.

• There is a clear owner for each and every task.

The chosen structure makes a big difference to how well the company performs going forward. The options the company has to choose from include variants related to long or short chain of command, narrow or wide span of control, etc.

There are several common structures, with “mechanistic” at one end and “organic - flat” at the other. The mechanistic structure represents the traditional, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach.

Burns and Stalker claimed “a mechanistic management system is appropriate to stable conditions” whereas an “organismic form is appropriate to changing conditions, which give rise constantly to fresh problems and unforeseen requirements for action which cannot be broken down or distributed automatically arising from the functional roles defined with a hierarchic structure.”

There are several common structures that we can look at from holistic view, and look at them from Professional Services perspective:

• Functional Structure – The most common structure based on common job functions. From Professional Services perspective, professional & customer services people are placed together in one group. Easily scalable, and allows for a high degree of specialization. Downside -Creates a “firewall” between functions, and less efficient for companies’ with multi-products and various markets.

• Product based structure – Consists of several functional smaller structures. Each functional structure is dedicated to a specific product line. From Professional Services perspective, each functional product structure has its own resources and functions. Each functional structure is basically a standalone Business Unit and P&L. Downside - The company may end up with duplicate resources.

• Market based structure – The Business Units of a company are based around markets, industries, or customers. Used mainly with companies targeting for a specific market, with a market specific knowledge or product. From Professional Services perspective, like as with product based structure, each market based structure has its own resources and functions. Downside - Can lead to duplicated activities and internally incompatible solutions and systems

• Geography based structure - The Business Units of a company are based around geographies. Specific regions, territories and countries. Used by companies that operates around customers in specific locations. From Professional Services perspective, each geography has its own resources and functions that are used for deliveries and onsite support. The proximity to the customers and the business has high value. Downside - creates a potential duplication of resources with other geographies.

• Matrix structure – The employees of a company have dual reporting. One of them is a functional direct reporting “solid line”, and a product- based “dotted line” indirect reporting line. From Professional Services perspective, it can provide flexibility, balanced decision making, and ease of resources mobility from one project to another in case of need. Downside - this structure is complex with solid and dotted reporting, that can create confusion and authority issues.

Naturally there are other structures, and a combination of structures. Which of them is best? The answer will depend on the business – there are good reasons why to choose one structure over another, and why go from one to another at a certain point in time? Perhaps even sometimes go with one, move to another, and go back to the original one. But have you considered all of the above structures in your business and made a clear educated decision for one over another? Or have you just fallen into a structure for your industry? A structure used by your competitors? Or just a structure that was used when your company was small, lean and mean, and figured you can live with the same one for a triple sized company?

What is the structure that you use in your company or the one you work for, and why? Is it one of the above or maybe a different one? I’ll be interested to get your perspective and feedback.