Achieving a balanced organizational structure in professional services firms: some lessons from a modeling project

Achieving a balanced organizational structure in professional services firms: some lessons from a modeling project

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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:
Keywords: system dynamics
Abstract:

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.

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