Who's in charge of your firm?

IN MORE THAN 20 YEARS of conducting research and consulting on various aspects of professional service firms (PSFs), I have consistently bumped up against the question of leadership. What does it mean and how does it work in organisations filled with highly trained and highly autonomous experts – who tend neither to want to lead nor to be led?

In the almost complete absence of systematic, theoretically grounded, empirically rigorous academic research in this area, I applied for, and was awarded, a major grant by the Economic and Social Research Council of Great Britain to study leadership dynamics in PSFs. I have been gathering data for three years as part of an in-depth study of three leading PSFs in three different sectors. There is much more to come but I have published some early stage insights in a report, Who’s in charge? Exploring leadership dynamics in professional service firms, launched at Cass Business School on 19 June.

Conventional models of leadership are predicated on the assumption that leaders, by definition, must have followers. But in a professional service firm the distinction between leaders and followers is problematic because power is widely dispersed.

Power in a professional service firm, as in all aspects of life, belongs to people who control access to key resources. In a professional service firm key resources are major client relationships, valuable specialist expertise, and a strong reputation, either internally or externally.

People who have this power are not necessarily the formal leaders of the firm. In a PSF, which is typically structured as a partnership or as a corporation that mimics aspects of a partnership, formal authority is “delegated” to an elected managing or senior partner, but it can be withdrawn if the partners believe their “leaders” have exceeded their authority. In fact, taking on a senior leadership role in a PSF is a highly risky affair. Your formal authority is contingent on the approval of the partnership, and because you have usually given up a large amount of client work in order to take on the role, your actual power has dwindled dramatically.

Or has it? My research has revealed, amongst other things, an intriguing interplay between formal authority structures and informal power dynamics in PSFs.

During the study I developed the concept of the Leadership Constellation to help identify the key actors in the leadership dynamics of professional service firms. These were revealed to be the senior executive dyad, typically a managing partner and senior partner, or chairman and chief executive; heads of major businesses, who are leading substantial fee-earning areas such as specific practices, offices, and market-sector groupings; some heads of business services, responsible for support functions such as finance; and key influencers. People in this last group may have no formal leadership roles but have power derived from their control of key resources.

Members of the Leadership Constellation do not form a leadership team in any explicit sense because the constellation as a whole has no formally defined boundaries or overt identity within the firm. Individuals may see themselves as leaders because they have important-sounding leadership titles but may not be part of the Leadership Constellation because they are not recognised or accepted as leaders by their colleagues.

The Leadership Constellation therefore expresses the informal power dynamics of the professional service firm that overlaps with, and sits alongside, the formal authority structure.

Within this context, leadership becomes a process of interaction among organisational members seeking to influence each other. And an effective leader is someone who is able to navigate the dynamics of the leadership constellation, influencing the other members within it, in order to achieve their objectives. Someone with this ability can exercise considerable informal power.

This is where the reality of leadership in PSFs diverges from traditional leadership teaching. Business schools teach leaders to create organisational structures with clearly defined roles and responsibilities, to design business plans with clear targets and measurable results, and at all times to have a clear vision of where you are going and how you will get there.

In contrast, my study revealed that, in professional service firms, where leadership is about influencing and negotiating, there is value in ambiguity. There is even power in ambiguity.

As the report describes, in one firm I studied the authority structure was relatively unambiguous. The senior executives possessed considerable formal authority but they were severely constrained because they lacked the credibility with certain members of the leadership constellation to be able to exercise that authority.

In another firm, its highly ambiguous structure, in which even the Senior senior and Managing managing Partners partners were unable to differentiate between their roles, enabled members of the leadership constellation to behave “as if” they had formal authority – although officially they had none at all. The cloak of ambiguity allowed them to spend five months planning the restructuring of the partnership unbeknownst to the partnership as a whole – to which they were reporting on a regular basis.

In a third firm, the ambiguity lay principally around the meaning of leadership. When I interviewed members of the firm, they repeatedly insisted that every partner in the firm was equal and that everyone was a leader – although interviewees were curiously reluctant to describe themselves as leaders. An internal cost- cutting exercise cut through their rhetoric to reveal the authority of the real leaders. However, these individuals managed the process so subtly that the rest of the partners were able to preserve their collective leadership “fantasy”.

In a cross-sectional study within the legal sector, management professionals such as the COOs and CFOs used similar tactics, allowing the partners to believe that they were still in charge, whilst subtly and systematically establishing their own basis of authority.

As I stated at the beginning of this article, in PSFs, as in most areas of life, power is derived from controlling key resources. But as this study has shown, power also derives from another source: possessing the interpersonal skills to understand and navigate the ambiguous authority structure created by the existence of the leadership constellation. If you are among the few who really understand the leadership dynamics within the firm, then you are in a particularly strong position to influence them.

It is important to emphasise that in all of the firms in my study, the leaders were not deliberately seeking to dupe their colleagues for their own advantage. They were doing what they thought they had to do to get things done. They had already sacrificed their client-based power. Perhaps it is not surprising, therefore, that they did not try to manage or minimise ambiguity, but instead actively constructed and celebrated it.

Laura Empson is professor in the management of professional service firms at Cass Business School, London