The 7 Most Effective Uses of Organisational Development for Professional Services Firms Undergoing Digital Change

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When and why should your Professional Services Firm consider Organisational Development?

Many Professional Services Firms – whether they are in the legal, accounting, finance, property, wealth management, or any other consulting field – are now feeling the urgency of their need to adapt to changing circumstances.

The dynamic behind this is, firstly, digital technology; secondly, societal shifts in terms of expectations from both clients and employees; and thirdly, market demand and external competition.

With so much change coming at once, there is a need for a holistic and sustainable firm-wide approach. The pressure on Professional Services Firms to adapt is only going to grow. This makes it even more vital to keep people on track by enabling them to see through the noise and focus on where the firm is headed.

Embracing an Organisational Development method is an effective means to maintain levels of performance, address challenges and maximise opportunities within today’s rapidly changing environment.

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What is Organisational Development?

Organisational development focuses on achieving maximum value from the organisation’s resources. In a manufacturing context, development would hone in on mechanical efficiencies. In the context of Professional Services, where employees are the most important ‘resource’ in the business and a source of competitive advantage, development will focus primarily, but not exclusively, on people capabilities.

● Organisational development focuses on an organisation’s strategy, goals and core purpose. Where a firm’s main competitive advantage is delivered through their people, organisational development practitioners will apply behavioural science knowledge and practice, such as leadership skills, team performance and work processes.

Its aim is to enhance leadership effectiveness, improve team performance and develop individuals’ capabilities to respond to the demands of the evolving circumstances.

An organisational development approach integrates, aligns and strengthens the inter-connections between the ‘hard-wired’ components of a firm: strategy, structures, business processes, policies, practices, IT systems and performance metrics with the ‘soft-wired’ elements: common purpose, shared values, people capabilities, beliefs and behaviours.

The Organisational Development consultancy normally leads input when your firm undertakes an organisational development intervention. But they will place a strong emphasis on working with you. That means there is internal ownership, shared responsibility and collaboration. This is based on the principles of mutual respect, trust and firm-wide participation.

In the light of the digital and societal challenges facing Professional Services Firms today, the seven organisational development levers below can be used as:

  • A way of assessing how ready your firm is to change

  • A framework to assist with conducting change

The Organisational Development consultancy normally leads input when your firm undertakes an organisational development intervention. But they will place a strong emphasis on working WITH you. That means there is internal ownership, shared responsibility and collaboration.
— Pelorus Consulting

Lever 1: Your Firm’s Strategy

Any future strategy will need to set your Professional Services Firm apart and make it resilient and prepared for what is to come.

AI and automation is set to have a substantial impact on Professional Services Firms and knowledge workers in general. Whilst the scale of this disruption is yet to materialise, it will create winners and losers. As Mckinsey reports: "Early AI adopters that combine strong digital capability with proactive strategies have higher profit margins and expect the performance gap with other firms to widen in the future."

Risk-averse firms, however, tend to hold back on the type of changes they fear could disrupt their day-to-day business. This cultural characteristic is widely seen in firms in the areas of legal and accountancy. A reluctancy to embrace digital transformation and to focus solely on internal processes and short-term profitability means they are likely failing to address all of today’s social, demographic and technology threats.

Artificial intelligence is getting ready for business, but are businesses ready for AI?
— McKinsey: Artificial Intelligence. The Next Digital Frontier?
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Some firms, though, are breaking out of this mindset by successfully adopting a twin-track strategy. Rather than embracing wholesale digital transformation, they’re forming ‘pathfinder’ working groups to create digital channels offering high-value services to specific client sets.

Made up of digital natives, evangelists and converts, they have board backing and are funded to achieve results. These firms are also focusing on the key factors that differentiate them and that are driving these new services, namely:

  • Their people

  • Their culture

  • Their clients’ needs

By being less ‘organisation-centric’ and more ‘employee- and client-centric’, they’re putting people at the centre of their vision and changing their cultures. They are asking what type of firm do we want to be and who for? In this way, their new purpose becomes a key marker of differentiation.

In building these two areas into strategy, they’re able to respond to the impact of digital while also putting clear water between themselves and their competitors.

Lever 2: Organisational Architecture

In an increasingly digital environment, there’s an onus on firms to increase levels of collaboration, inter and intra-team working and focus on adding value to clients.

The ‘organisational architecture’ of the firm is an important lever here. We use ‘organisational architecture’ in two senses. The first is in terms of your firm’s organisational space and the influence of the spatial environment on your employees. The second is terms of organisational structure and the creation of hierarchical roles, processes, and formal reporting relationships in your firm.

Behavioural psychology shows that a firm’s organisational architecture, in both senses, impacts directly on employees’ behaviours. It needs to be looked at in three ways:

  • Physical: how people engage with the physical work space, how they experience it and how they interact with others. Is it a great place to work and be productive?

  • Virtual: is the virtual space effective and fit for purpose? Does it encourage people to coalesce, innovate and create? Does remote working dilute or strengthen the culture (or is it perhaps not viewed as ‘real’ work?)

  • Psychological: how does the way your firm is structured hierarchically create a positive meaning? Or does it separate, isolate and silo people?

Silos can exist to harness knowledge-based skills, or specific job functions, or they can be geographic. In many industries, silos are vital to productivity. But when organizational transformation is needed, silos mean that the very parts of your company that must work together are unaccustomed to doing so, and even unable to communicate with one another because they are culturally misaligned, or inherently mistrustful and territorial. These problems can complicate change efforts, or delay or derail delivery of their benefits.
— PwC: Dealing with Market Disruption

Lever 3: Systems, Practices and Policies

Moving towards digital transformation entails requiring people to be innovative, creative and collaborative. None of these are qualities normally associated with the professional services sector where preservation of the status quo is often an assumed behaviour.

Innovation depends a lot on a firm’s culture and its day-to-day practices. Some Professional Service Firms will now need to review their approach, with leadership steering a new course. Strong sponsorship at the level of the board is crucial if a company is to truly embrace opportunities presented by digital.

Many firms currently operate with systems, practices and policies that are restrictive and controlling. This is manifest through job descriptions, role profiles, performance management and a working to billable hours. Systems need to change to promote a culture that endorses flexibility and creativity and encourages people to try different solutions.

Innovation, collaboration and entrepreneurship can’t be scheduled. They need to be allowed to take root and grow in a supportive culture. Questions to ask are:

  • How does your reward system and people policy promote collaborative working?

  • Do they reward team working or individual achievement only?

  • Are your tech systems intuitive, easy to use and aligned to the way people and teams need to work?

  • Do they facilitate the move towards more flexible and remote working?

Lever 4: Leadership Behaviours

Technology is now something for every board to engage with – rather than leaving it to 'someone in IT'.

The role of leaders in a digital world is changing, even in the traditionally hierarchical Professional Services Firm. In future, there will be less emphasis on position, authority and time served, and more on influencing, collaboration and developing others’ capabilities through coaching and mentoring.

Leading agile teams requires a different skill-set to that of managing a service team. Leadership behaviours will be key with leaders at all levels needing to demonstrate more emotional/cultural intelligence and to distribute decisions and authority.

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Leadership needs to be able to lead by example and be comfortable to facilitate, coach and mentor employees and to give people a real sense of involvement in decisions that shape the future of the firm. The right behaviours to support these changes should come from the executive team, both individually, and in the way, they work together.

Their collective ability to communicate a shared future and create meaning for people will be key so everyone can see how their efforts help the firm achieve its vision, purpose and goals.

In this way, development and change becomes driven from within the firm and owned by all.

Lever 5: Organisational Learning

Going forward, learning and development (L&D) of people will be a game-changer. It requires L&D to be considered at a strategic, operational and individual level. It should be a standing reporting item at board meetings.

In the digital environment of today, people need to continuously re-skill, re-develop and re-invent themselves and their approaches. As strategy is continuously reviewed, so should the application of L&D. Doing this will keep the firm ahead of the curve and contribute value to clients.

What are the emerging skill areas where firms need to start focusing their L&D effort?

  • Developing leaders

  • Scenario thinking and what-if planning

  • Complex problem solving

  • Agile team and project working

  • Fostering of EQ (Emotional intelligence) and CQ (Cultural intelligence)

  • Promotion of creativity, intuition and entrepreneurship

  • Development of tech-savvy people who can engage with Artificial Intelligence applications

Advances in technology are also changing training and education by democratizing access to knowledge, enabling individuals to become lifelong learners.

Lever 6: Finding the Right People

It is both internal employees and external workers that enable firms to add value to clients and move the company forward. People, in whatever employment status form, are any Professional Services Firm’s key differentiator and the most important asset in creating a stand-out culture that clients value and want to invest in. This is why culture should come first to enable performance, collaboration and innovation to follow.

The firms who can view talent with a wider and longer lens will attract and engage the right people. Those who will thrive in the future of work are those who engage a mix of diverse people with the right skills, strengths and behaviours that machines cannot compete with – particularly for relationship and business development.

Increasingly, this will mean more non-traditional employees. Diversity, inclusivity, age and gender disparity will be more prevalent. Getting the right calibre of employees on board will be crucial via robust talent mapping and assessment processes.

A recent study by the World Economic Forum divided the ‘human skills and behaviours’ required to succeed in business into two groups: competencies and character qualities:

  • Competencies: critical thinking, problem solving, reasoning and communication

  • Character qualities: leadership, adaptability, social skills and self awareness

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By 2020, Millennials will form 50% of the global workforce. Millennials want ‘meaning’ at work and few want the old ‘job for life’. They crave autonomy, self-determination and to know their work is making a difference to both society and their clients’ lives.

Professional Services Firms will also need to be aware of the mindset of this new generation of young professionals. Accenture states: “Nearly three-quarters of future talent would choose to work at an organisation with an engaging, positive social atmosphere, even if it meant accepting a lower salary. Only one in seven graduates wants to work for a large company, believing smaller employers provide the opportunities and social culture they seek. Large corporations will therefore need to adapt their culture to attract fresh talent.”

In a digitalized world, reimagining what it means to be an employee and remodelling the value proposition for employees accordingly will be imperative.
— WEF: Digital Transformation Initiatives Professional Services Industry

Lever 7: Values and Ethics

Whilst the strategy of a firm should answer the ‘why’ and the ‘what’, it is the core values that steer people towards the ‘how’. This has been a blind spot for some high-profile firms, given recent media interest into professional standards and conduct at the highest levels.

All ‘groups’ have values they share with members. These values identify those objects, conditions or characteristics that people believe are important and embue them with social standing. In a firm, the ‘published’ values tell employees, suppliers, and, most importantly, clients, how the people in that firm are, and how they should be.

For people in firms to have ownership of these values, it is important that the values are genuine and grounded in the reality and culture of their day-to-day experiences.

Firms, instead, however, often tend to adopt ‘empty values’. These are bland words or phrases which fail either to distinguish the firm from competitors or to clarify expectations and unite people around a common set of behaviours, accountabilities and mindsets. These values are then not owned, held up or consistently deployed by everyone in the firm. These ‘value words’ tend to fall into a small, predictable, and generic range, such as ‘integrity’, ‘honesty’, ‘respect’, ‘customer-centricity’ etc.

For firms to get this right, values must actually capture the essence of what the firm is about – not merely what reads well on the corporate website. The result should be that these core values can be experienced and understood by a client, supplier or new employee through the actions of everyone in the firm they interact with.

The values should have resonance and be grounded in language and reality of the firm.

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The short-term fix is only ever … short-lived

Professional Services Firms need to move forward at pace with digital transformation whilst also differentiating themselves within a crowded market.

In the past, many firms have adopted an approach to organisational change which involves the adoption of an inspirational, top-down vision for the organisation, created by a few and thrust upon the many. This is only ever a short-term fix.

Firms today need sustainable long-term results, where change leads to agile working methods, a high-performance engaged-people culture, and organisational effectiveness.

These factors are at the root of an OD approach which focuses on a return on investment, improved performance, and long-term transformation.

Culture does not change or form overnight. It requires the 7 Organisational Development levers to act in unison.

Used correctly, it creates a resilient firm that both stands out from the crowd and is prepared for the future.

When you’re finished changing, you’re finished.
— Benjamin Franklin

Pelorus is an organisational development and leadership consultancy whose focus is the Professional Services Firm or Partnership. An Organisational Development approach can help address the complex web of people levers that digital transformation entails.

sarah monaghan