Ryan Dempsey

Student No: 40078927

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Managerial Behaviour
MGT 2008

Coursework Assignment
Option 1

Ryan Dempsey
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According to Drucker (1988) the organisation of the future will be staffed primarily by
professionals (knowledge workers). Drawing on recent discussions on the nature of the
professional firm in the academic literature, critically discuss how each of the three
main models of management (classical, human relations, open systems/contingency)
apply to professional firms.


The purpose of this essay is to critically discuss the relevance of the 3 main management
theories to the professional firm. A theory represents a more complex realityfocusing on
the essential elements and their relationships (Boddy, 2012, p.28) and therefore it is unlikely
that any given firm will be a perfect reflection of one particular theory. Firstly, I will define
the professional firm and what makes it unique compared to other non-professional firms.
Once an understanding of the professional firm has been established I will look at each
management theory, in turn, and critically discuss their relevance. In my discussion I will
make reference to the relevant academic literature on the professional firm and justify any
claims with real examples and cases. The earliest management theory is the classical theory.
The main theorists were Taylor, Fayol and Weber (Hannagan, 2005). Taylor spearheaded
scientific management, while Fayols research was the basis for administrative management
(Cole, 2004) and Weber developed the principles and characteristics of bureaucracy (George
and Jones, 2014). Boddy (2012) writes, The human relations approach is a school of
management which emphasises the importance of social processes at work (p.39). This
theory was developed by Mayos Hawthorne studies; Mary Parker Follett; McGregors
Theory X and Y assumptions; Herzbergs 2-factor motivation theory; and Maslows
hierarchy of needs (Cole, 2004). The open system/contingency theory views the
organisation as a system of interrelated activities which enable inputs to be converted into
outputs (Cole, 2004, p.74) and this was developed by Katz, Kahn and Thompson, with
further developments from Burns, Stalker, Lawrence and Lorsch. The main message of this
theory is that there is no one best way to organize (George and Jones, 2014, p.57).All 3
theories are likely to be relevant to the professional firm in some way so I will have to decide
the extent of their relevance and come to a reasoned conclusion.
According to Drucker (1988) the organisation of the future will be staffed primarily by
professionals (knowledge workers). Research by Von Nordenflycht (2010) identifies 3
characteristics of professional firms: knowledge intensity; low capital intensity; and
professionalized workforce. The professional firm is under scrutiny from external
professional bodies and is expected to balancecommercial success with professional
integrity (Scott, 1987, cited in Suddaby, Greenwood and Wilderom, 2008, p.989) which
creates problems for management. Examples of professional firms include: accounting and
law firms, medical practices, hospitals and universities (Brock, Hinnings and Powell, 2012).
The main difference between a professional and a non-professional firm is they produce
decisions rather than products as their raw materials are data and they engage in
production processes-called meetings (Martin, 2013, p.98). I will now critically discuss the
extent to which each of the 3 main management theories relate to the professional firm.
Classical theory is still relevant to the professional firm to a certain extent. Fayols
functions of management: Planning, organising, commanding, co-ordinating and controlling
(Hannagan, 2005) are still used in the operations of a professional firm. In the 2013 annual
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report of PWC state, Our strategic objectives are focused on achieving responsible and
profitable growth (PWC, 2014) which shows that a plan was created for the company
objectives. Also the analysis of KPIs, to control operations, links into the administrative
theory of management.
Remaining with the research of Fayol, many of the principles of management are relevant
to the professional firm. For example the division of work is apparent as Alan Morris, of
Simmonds and Simmonds law firm, says We have people constantly reforming in project
teams (Jackson, 1998), which is separating the employees between projects and also links in
with the Esprit de corps principle (Cole, 2004).
Max Webers Bureaucracy can be adapted to relate to the professional firm. Professional
bureaucracies have flat structures and give more autonomy to the workers due to their
specialized knowledge (Clegg, S., Kornberger, M. and Pitsis, T., 2011). Suddaby, Greenwood
and Wilderom (2008) state that management must surround its star performers with high
quality colleagues (p. 991), which is an alternate version of Webers bureaucracy, as the
purpose of the organisation is to support rather than enforcing authority.
Taylors scientific approach is mostly suited to low skill manufacturing jobs but can be
loosely related to professional firms. Microsoft (2009) states that To succeed in todays
climate, professional services executives are turning to CRM solutions which is essentially
creating a science for the operations with the clients in both accounting and law firms.
However this is coming from sellers perspective, Microsoft, so bias could be a factor and
Gold (2010) argues the insignificance for smaller firms.
The classical theory may be too impersonal an approach for a professional firm as they rely
heavily on human capital. Simon London (2005) in an article in the FT said, Knowledge
workers detest being told what to do, so managers have to be far more egalitarian. This is
supported in the recent research form Martin (2013) who stated that knowledge workers
have become not just an important part of the work-force but the dominant part (p. 99) and
identified the problem of structuring this workforce in the same way as a manual workforce.
This evidence, on the importance of the employees needs, points towards a greater emphasis
on a human relations theory of management.
The human relations management theory is relevant to the professional firm due to its
emphasis on employees as social animals (Cole, 2004, p. 32). Elton Mayos Hawthorne
studies drew attention to aspects of human behavior that scientific management had
neglected (Boddy, 2012, p.39) and concluded that group membership is important to
individuals (Cole, 2004). The group work aspect is reiterated in Martin (2013) as he said,
when a project comes in, a team is assembled to carry it out and the team is disassembled
when the project is complete. Peter Smith, of Coopers and Lybrand, said, You move people
from group to group, and organize around clients (Jackson, 1998) which shows the
importance of group and teamwork structure in the professional firm. Although this article is
from 1998, the underlying message of group life is still apparent.
There is a management issue in professional firms, in terms of authority, when dealing
with knowledge workers. Mary Parker Follett advocated, Authority should go with
knowledgewhether it is up the line or down (George and Jones, 2014, p.51) and Malhotra
et al (2006) wrote that knowledge intensive firms need to do more guiding, nudging, and
persuading than commanding (cited in Von Nordenflycht, 2010, p.160). The low capital
intensity of the professional firm reduces the need for outside investment and therefore
allows the firm to adopt more autonomy which satisfies employees (Von Nordenflycht, 2010)
and retains the authority of the firm with the knowledge workers. This is supported by the
fact that virtually all the largest 200 law firms in the US have LLP post-fix after their name
(Bierman et al., 2011, p. 181) which maintains the control of the firm internally.
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McGregors Theory Y Manager relates to the professional firm as employees are seen as
liking workdont have to be controlled or coerced (And) seek responsibility (Cole,
2004, p.36-37). These assumptions are linked to Maslows higher level needs such as esteem
and fulfilment (Boddy, 2012) which can be achieved through granting autonomy and
providing support. Brock, Hinnings and Powell (2012) state that, professional practice was
characterized by autonomyand role creation as professionals sought to define their own
roles (p. 5). This role creation is apparent in the NHS (2013) as 3% of staff are managers
(Although) a third of hospital staff have managerial roles (p. 4). Autonomy and support in
accounting firms is achieved through global networks, and all of the Big 4 Accounting firms
ranked in the top 35 Networks in a survey by AccountancyAge (2014).
The open system/contingency theory of management is relevant to the professional firm
due to the ever-changing environment. The input-conversion-output process (George and
Jones, 2014) is different in a professional firm compared to a manufacturing company.
Martin (2013) states that the inputs are data, instead of raw materials; the conversion process
takes place in meetings; and the final output is a decision, leading to a service. However, this
is not an exact description of all professional firm processes because in healthcare the outputs
can consist of medicine or treatment of an injury which is a tangible result.
The professional firm can be described as an organic system. Burns and Stalker believe
that organic systems are more appropriate to changing conditions (Cole, 2004) and therefore
relate to the professional firm. Martin (2013) said that professional firms have grown so
quicklybecause theyre organized around projects (p. 102) which allows them to better
deal with the changing environment. This claim, of a dynamic fast moving industry, is
supported in a report by Offshoring Research Network (2011) which shows that in order to
gain advantage in todays dynamic andglobal marketplace the professional firm must
become more like valued business partners (p.31). However, no firm will be truly organic
or mechanistic and, in reality, most firms will have characteristics of both types of system.
According to George and Jones (2014), the characteristics of the environment affect an
organizations ability to obtain resources (p. 57). Management face challenges from the
knowledge intensity in professional firms (Von Nordenflycht, 2010) as skills are scarce
andtransferable across firms (Teece, 2003, cited in Von Nordenflycht, 2010, p. 160)
which makes employees hard to retain. This is a contingency factor for the professional firm
and is the main reason why workers expect significant degrees of autonomy (Robertson and
Swann, 2003). This is supported by an increase in lateral movements by associates and
partners of law firms which shows competition for this professional talent (Henderson and
Bierman, 2009, cited in Bierman et al., 2011, p.181).
The structure of the professional firm is contingent on the cost of monitoring the activities
of the organisation and the risk level of the environment. The professional firm must adapt
the structure of the organisation to match external conditions (Boddy, 2012, p. 42) which is
the major aspect of the open systems/contingency theory. Bierman et al. (2011) discuss that
unlimited liability across multinational companies would expose partners to a high level of
risk if they are unable to monitor everyones activities. Accounting and law firms are made
up of a network of limited liability partnerships to prevent cross-liabilities and cap liability
exposure (Greenwood and Empson, 2003, cited in Bierman et al., 2011, p.181). For
example, PWC is the brand under which the member firms of PricewaterhouseCoopers
International Limited (PwCIL) operate and provide professional services (PWC, 2014),
which is reducing the monitoring costs and the risk of the company.
In summary, all 3 theories have relevance to the professional firm, but not to the same
extent. The classical theory is the earliest management theory (Hannagan, 2005) and,
therefore, there are underlying assumptions that follow through into the subsequent theories.
Fayols administrative management theory has relevance through the controlling of
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performance with KPIs (PWC, 2013) and Max Webers bureaucracy can be adapted into the
professional bureaucracy. Taylors scientific management is loosely related through the
adoption of CRM software (Microsoft, 2009), although its widespread adoption is up for
debate (Gold, 2010). The classical theory, however, may be too impersonal and could point
towards a greater importance on human relations. The professional firm relies on its human
capital and therefore the human relations theory is relevant due to its emphasis on employees
as social animals (Cole, 2004, p.32). This theory places importance on group involvement
and teamwork which is relevant as teams are assembled to complete projects (Martin, 2013).
Also, Follett advocated that, authority should go with knowledgewhether it is up or down
the line (George and Jones, 2014, p.51) and this is achieved due to the low capital intensity
of professional firms (Von Nordenflycht, 2010) allowing for greater employee autonomy.
McGregors Theory Y assumptions and Maslows higher level needs are relevant and can be
achieved by granting autonomy and providing support through a network structure such as
those found in the Big 4 accounting firms (AccountancyAge, 2014). The human relations
theory, on the other hand, does not take into account the external factors that can affect
management decisions. The open system/contingency theory is relevant to the professional
firm because of the ever-changing environment and the organic system that is needed to deal
with this. The process of converting inputs and outputs occurs through meetings as data is
converted into decisions (Martin, 2013) rather than raw materials used to produce a final
product. Due to the knowledge intensity of the professional firm (Von Nordenflycht, 2010)
employees are hard to retain so management must adapt their style or risk losing employees
to their competitors. Another contingency facing professional firms is the cost of monitoring
and the level of risk exposure which force management to adapt the structure of the
organisation to match external conditions (Boddy, 2012, p.42). They do this by creating a
network of limited liability partnerships such as PriceWaterhouseCoopers International
Limited (PWC, 2014). Overall, I believe that the human relations theory and the open
systems/contingency theory are the most relevant to the professional firm. The emphasis on
the employees social needs is vital to the performance of the firm and due to the ever-
changing, dynamic environment in which they operate; management will need to constantly
adapt their style. With further research, a new management theory could be developed
specifically for the professional firm which would benefit future managers due to the
widespread reliance on knowledge workers and the professionalization of corporations.


















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Bibliography

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Bierman, L., Chakrabarty, S., Panina, D. and Zardkoohi, A. (2011) 'Revisiting a Proposed
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184.

Boddy, D. (2012) Essentials of Management: A Concise Introduction, Pearson, London.


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London, S. (2005) 'The Difficulty of Managing Workers Who Know More Than You', The
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