Article ID: | iaor200970520 |
Country: | United Kingdom |
Volume: | 24 |
Issue: | 2 |
Start Page Number: | 119 |
End Page Number: | 143 |
Publication Date: | Mar 2008 |
Journal: | Systems Dynamics Review |
Authors: | Kunc Martin |
Keywords: | system dynamics |
While many factors affect the organizational shape that managers in professional services firms should achieve, one has the greatest importance: the ratio of junior, mid‐level, and senior staff, usually referred to as a firm's leverage. The tensions between short‐term (market demand and firm profitability – a static equilibrium issue) and long‐term issues (organizational structure and professional development – a dynamic equilibrium issue) were analyzed in a modeling for learning project. Managing a professional service firm implies important trade‐offs between satisfying staff development and financial performance. A hiring and promotion proactive policy aimed at satisfying professional staff development leads to an expensive organizational structure without any certainty for future growth perspectives. However, a reactive hiring policy is not better since it burns out mid‐level staff due to delays in training and hiring, which increase staff departures. Therefore, a widely applied ‘up‐or‐out promotion system’ seems to be the right policy for managing professional services firms.