Do professional services networks have a future?

The professional services world is changing – and probably faster today than at any time in the past. The principal reasons for this are twofold; and these converging pressures create the perfect storm for change.

First, client needs are changing. One in five SMEs in the UK now trades overseas. And if you discount the high number of very small traders who are never going to look beyond these shores, then the proportion is clearly much higher amongst those businesses that many professional services firms would consider to be prime targets. Demand from clients for their advisers to be able to respond to an international enquiry has never been higher.

Secondly, the professions are changing. Of course, the professions are always changing, but the pace of change within the professions at a local and national level is now having a very marked impact on the way in which firms are able to service their clients overseas.

If you take these two factors within the context of many people, in both their personal and business lives, believing that big is not always best (just look at the shift in retailing patterns over recent years), then the need both for networks to look critically at themselves, and also for those firms that either within a network or considering joining one, to review their motivation, and see whether their objectives are being met, has never been stronger.

Let me put my cards on the table. I am absolutely committed to the network concept. I believe firmly that ‘organisations’ that enable like-minded professional services firms to retain their independence and yet service their clients’ needs in different countries and different jurisdictions without going down the route of unaffordable and unmanageable international expansion are not only good but essential.

However, I believe equally strongly that the traditional business model adopted by many networks of independent firms is fatally flawed.   Partnership is not a great management approach at a single office level. And when you translate that into the international arena, it is a disaster. Democracy within the typical network business model is all very well in theory, but in practice …

In future blogs, we will be looking at some of the idiosyncrasies that exist in many networks. For example, one firm, one vote on key (and not so key) issues; and the conflicts of interest that inevitably exist (but are normally ignored) for those managing member firms and the network as a whole. If you then consider the problems of reconciling the needs of those firms operating in developed countries with those operating in developing economies, not to mention the whole minefield of cultural differences, you will begin to get a feel for the broad range of topics that need to be considered.

The list is seemingly endless. Many of the problems are the result of an organisation’s inability to initiate change of a system or structure that is enshrouded both in history and also in various legal documents too. But those that ignore the problems do so at their peril.

Those that grasp the nettle will survive and prosper. Those that don’t will follow a number of networks that have already disappeared. We will consider how best to grasp the nettle in future blogs.

23 January 2015