British Journal of Management, Vol. 14, 85–99 (2003)
Archetype Change in Professional Organizations: Survey Evidence from Large Law Firms Ashly Pinnington and Timothy Morris* UQ Business School, The University of Queensland, Brisbane, Qld 4072, Australia *Said Business School, University of Oxford, Park End Street, Oxford, OX1 1HP, UK
Corresponding email:
[email protected] This paper examines the proposition that the traditional archetype of the professional partnership is said to have changed into a more ‘business-like’ entity, the managed professional business. It broadens the restricted case sample base on which much of the evidence has been adduced, by developing a survey questionnaire through which 197 large British law firms were sampled. Change, consistent with the notion of a more commercially oriented and consciously managed organization, is concentrated in the market-facing area of the firm but coexists with areas of continuity in the governance of the firm and its strategic management. The findings reveal a more managerial form of organization in which the core elements of the traditional form of professional organization have not been transformed. These results contest the assertion of either transformational or sedimented change found in other, case-based research and suggest that archetype change needs theoretically to be distinguished from the general phenomenon of greater managerialism within the professional service firm.
Introduction A key theme of much of the change said to be occurring in professional firms is the growing importance of ‘business-like’ behaviour and values (Brock, Powell and Hinings, 1999; Nelson and Trubek, 1993a). The changes have been interpreted as constituting a new archetype called the ‘managed professional business’ replacing the traditional professional partnership form (Cooper, Hinings, Greenwood and Brown, 1996; Brock, Powell and Hinings, 1999). Much of the evidence for change has been built on case research of a limited number of law firms and the largest accounting firms in North America. However, certain special contingencies contributing to the rate and nature of change raise questions of generalizability. Taking the legal profession, for example, these contingencies include the highly litigious nature of the US business environment and the ideological distinctiveness of the profesr 2003 British Academy of Management
sion (Galanter and Palay, 1991; Nelson and Trubek, 1993b). Together they mean that a highly commercialized ethos and mode of operating exists in the USA compared to many other jurisdictions. To what extent, therefore, does the argument that archetype change has occurred apply elsewhere? Are there other more convincing interpretations of what is observed? The research reported below addresses these questions. It extends the existing case-based research by surveying a large sample of law firms and it focuses on a separate but similar population to that studied previously and facing many of the same pressures for change. While the research finds evidence of change to more business-like ways of operating that is consistent with the archetype change proposition, it also finds important areas of continuity particularly with regard to the role of the partners in determining strategic decisions and controlling client relations. This leads us to
86 conclude that there is evidence of greater managerialism in professional firms, by which we mean the adoption of more formalized management practices and defined management roles but that this has to be distinguished from the more fundamental change implied by the adoption of a new archetype. We argue that casebased research which has focused on the extent and patterns of change in organizations may have neglected the extent to which there is continuity in form and practice.
Archetype change in professional fields Research on change in professional firms has developed from the notion of archetype or organizational configuration that is empirically observable and reveals a pattern or an overall coherence amongst its component elements. Archetypes are defined as a set of structures and systems that reflect and are underpinned by a single interpretive scheme or ‘set of values and ideas as to what ought to be’ (Greenwood and Hinings 1988, p. 298). As ideal-types, they summarize how organizations in a particular sector or field are configured. Archetype theory, as used in this way, suggests there are a limited number of configurations based on coherence between elements of organization (structure and systems). Coherence is not derived from the relationship with the environment so much as from underlying values or beliefs of dominant groups within a field taxonomy (Greenwood and Hinings, 1988, 1993). From the configurationist perspective, therefore, organizations within the sector will strain to conform broadly to the existing archetype (Miller and Freisen, 1984). Although no single organization may conform exactly to the general taxonomy, the elements of organization are meant to be empirically observable; in this sense, the ideal-type differs from the Weberian use of the term. Archetype change is transformational, involving a fundamental change in the underlying interpretive scheme and associated changes in the structures and systems of those organizations within a sector or field (Ranson, Hinings and Greenwood, 1980). Hinings and Greenwood (1988) argue that organizations change by shifting along change ‘tracks’ to another design type over time. This process occurs as contextual
A. Pinnington, T. Morris pressures are interpreted and acted upon at the level of the organisation but within the constraints of wider institutional expectations about appropriate ways of organizing (Slack and Hinings, 1994). Most change in professional fields is convergent, that is it reinforces the dominant archetype rather than changing it, but when radical change does occur, it is likely to be diffused quickly (DiMaggio and Powell, 1991) and ‘discordant’, fast paced and large scale in character (Greenwood and Hinings, 1996, p. 1028). This is a neo-institutionalist perspective which argues that there are very clear mechanisms for dissemination of change because normative, coercive and mimetic pressures for conformity tend to be high within professional fields. The traditional archetype of the professional partnership firm has been called the P2 model (Greenwood, Hinings and Brown, 1990). In this archetype, authority is widely distributed across the partners and there is an emphasis on consultation over major decisions affecting the partnership. Relatively loose control exists over the activities of senior professionals, and coordination of professional work is achieved by the standardization of inputs rather than processes, with extended training creating the appropriate skills and attitudes (Hall, 1968; Heydebrand, 1973; Smigel, 1964). The strategy of the firm is understood as broadly the aggregate of partners’ individual interests and there is little central strategic planning or direction of client-facing activities (Greenwood, Hinings and Brown, 1990; Jones, Hesterly, Fladmoe-Lindquist, and Borgatti, 1998). However, close monitoring is exercised over the financial performance (fee billing) of individual partners to limit the risks of free-riding or negligence (Gilson and Mnookin, 1985; Leibowitz and Tollison, 1980). The strength of this partnership model lies in it being responsive and flexible to diverse client demands and this is reflected in its structural configuration, which is largely decentralized. In more recent years, the traditional P2 archetype is said to have given way to a more consciously managed organization, the managed professional business (MPB) which expresses a different set of values or interpretive scheme (Brock, Powell and Hinings, 1999; Cooper et al., 1996). In the transition to the MPB archetype it is said that collegiality declines; the partner retains
Archetype Change in Professional Organizations formal ownership rights but tenure is conditional on performance, and strategic decision-making is accelerated by reduced consultation with partners. The emphasis formerly said to have been placed upon being professional changes away from deployment of expertise in public-interest activities to efficiency of the firm and its valueadded provision of a service. Contrary to the decentralising tendencies of the post-bureaucratic firm (Heckscher and Donnellon, 1994; Quinn, 1993) the reformed professional service firm is a more centralised and consciously coordinated organization. Strategic direction is increased by concerted attempts to define overall policy to which partners must adhere and a stronger analytic mode of strategic decisionmaking prevails. This includes preparedness to use formal planning methods, with more detailed target-setting and performance management systems, all extending financial control. Operating controls are increased by the development of explicit, centrally defined standards of quality, a more standardized processing of legal matters, when it is feasible, and coordinated marketing. These management systems and techniques are maintained by employment of non-lawyer experts from management disciplines such as marketing and human resource management. Structurally, the firm is subject to further specialization through continued growth of new areas of practice. However, business pressure to provide a range of services and present a seamless front to clients is said to prompt more formal methods of lateral integration via client teams and task forces and strategic integration through explicit management of the values of partners and their respective work groups. Consistent with these changes in organization and management are adjustments to human resource flow and rewards. The traditional archetype is based on strong internal labour markets in which ‘up-or-out’ promotion is the norm (Gilson and Mnookin, 1989; Malos and Campion, 1995). Profit sharing between equity partners is based on the seniority principle (Gilson and Mnookin, 1985; Morris and Pinnington, 1998a). By contrast, the new archetype permits more frequent inflow of lawyers through hiring from the external labour market, senior professionals with new or scarce skills and particularly people good at winning client contracts known as ‘rainmakers’ (Boxall and Stee-
87 neveld, 1999). It tolerates more exceptions to the ‘up-or-out’ promotion principle and profit sharing is based more heavily on methods of productivity assessment and comparative evaluation of individuals’ specific contributions (Morris and Pinnington, 1999). Drawing on descriptions of the two archetypes outlined above, Table 1 represents a simplification of the full list of characteristics given in Brock et al., (1999). They are selected to indicate major differences between them and thereby emphasize the changes involved in the move from the traditional professional archetype to the more contemporary managerial professional business archetype. Table 1 shows in underlining the characteristics researched within this survey of law firms. While archetype theory, in the contexts of public sector (local government) and privatesector professional firms of accounting (Greenwood and Hinings, 1993), has emphasized reproduction of existing traditional values on the one hand and radical change on the other, case studies of professional firms have interpreted change as being more complex or sedimented. Sedimentation arguments acknowledge the occurrence of archetype shift (e.g. Cooper et al., 1996, p. 634) but the geological analogy is intended by its authors to emphasize how novel values and organizational forms interconnect with earlier values and forms. These complex, sedimented organizational configurations are inherently unstable and inconsistent in their values, systems and structure (Gray, 1999). The metaphor of sedimentation is appealing because it prompts research accounts of change that attend to the complex ways in which radical archetype change might coexist alongside continuity of a traditional professional archetype. Counter to the argument outlined above of sedimented change comprising both P2 and MPB is the view that continuity in archetype persists in professional firms to the extent that sedimentation overstates the significance of newer elements. Theoretically, continuity would be expressed in the persistence of dominant underlying features of the firm that reflect the traditional interpretive scheme. There are grounds theoretically for arguing that the list of characteristics of the P2 archetype misrepresents its compatibility with other forms of organization and control in the
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Table 1. Characteristics of P2 and managed professional business (MPB)
Interpretive Scheme
Systems
P2 Archetype
MPB Archetype
Governance Fusion of ownership and control A form of representative democracy Revolving managerial tasks among the owners Local office at centre of commitment
Effectiveness/Efficiency Management Client service Competition
Primary task Professional knowledge Peer control Work responsibility as indivisible Strong links with clients Widely distributed authority Minimum hierarchy Strategic Control Interaction Consensus decision-making Marketing-Financial Control Specificity of targets Precise financial targets Operating Control Primary focus of involvement Professional standards and quality of service
Marketing and growth strategies Rationalization Productivity
Strategic Control Interaction More directive decision-making Marketing-Financial Control Specificity of targets Precise financial and market targets Operating Control Primary focus of involvement Professional standards, quality of service, planning, marketing and compensation. Quality Standards1
Source: based on: Hinings, Greenwood and Cooper, in Brock, Powell and Hinings (1999), Table 7.1, p.134. 1 Quality standards is our abbreviated term; not in the original.
professional firm. For example, previous research has shown that even where bureaucratic features similar to the MPB have developed, these have existed in conjunction with professional forms of control (Hall, 1968; Johnson, 1972; Ouchi, 1980; Smigel, 1964). Nelson’s (1988) study of Chicago law firms also showed that professional or bureaucratic forms of control can coexist within the partnership form. Continuity can also be expected in professional firms because the distributed nature of authority amongst partners makes the achievement of radical change particularly hard (Hinings, Brown and Greenwood, 1991; Jones et al., 1998). Those responsible for managing the firm may be unable to secure the agreement of other partners to change because they see it as a threat to their own power or as incompatible with perceptions of their role and rights (Cyert and March, 1963; Hinings et al., 1991; Pierce, Rubenfeld and Morgan, 1991; Pinnington and Morris 2002). On the basis of the above arguments concerning the balance of change and continuity, the
following research questions arise with regard to law firms: RQ1: Has there been a transformation away from the P2 archetype to one better represented by the MPB archetype, observable in firms’ current state of management and organization? A second perspective is that change has been sedimented in a complex arrangement of archetype characteristics. RQ2: Has sedimentation occurred whereby characteristics of the MPB archetype are observable coexisting alongside older characteristics of the P2 archetype? A third perspective argues that there has not been fundamental change to the P2 archetype and consequently the prevalence of MPB has been over-stated. RQ3: What is the extent of the current evidence for the MPB archetype?
Archetype Change in Professional Organizations
Method A postal questionnaire survey was circulated to the 756 partnership firms of solicitors in England and Wales with five or more partners in November 1997, and a reminder letter sent out in January 1998. One hundred and ninety seven (26%) usable returns were received. The questionnaire was addressed to the managing partner, or senior partner where no managing partner was listed in the Chambers Directory of firms of solicitors. Compared with the population of law firms in the size category using the Law Society (the professional institute) research reports, the survey sample is representative in terms of fee income, although our sample of firms appears to be slightly biased towards larger ones (i.e. above 20 partners) in terms of staffing ratios. The larger population of firms seems to have been changing in the same ways as our sample in fees and staffing profiles, suggesting that it is reasonably representative in terms of internal organization and performance of larger firms in the population (Law Society Annual Reports 1996–1999). Given that it is the largest firms that are said to have changed the most, our sample could be expected to provide a strong test for the continuity/change thesis. Using the survey method allowed sampling of a broader range of firms across the profession than can realistically be covered through intensive case-study methods of research. We concentrated on measures of change in policies, structure and systems that are reflective of the underlying shifts in archetype values, and where possible, we aimed to gain perceptions of how much change had occurred in practice rather than just documented formal policy. When undertaking survey research of professional firms, there are two significant obstacles to overcome. First, partnerships do not have a duty to report publicly their financial position. They have only recently begun to divulge information on financial or other measures of organizational performance externally and even, in many cases, to collect management information. This clearly limits the scope for data collection and analysis. Second, the overall methodological difficulty with investigating the research propositions is that there is no extant operationalization of the archetypes in the literature on professional firms. This means no prior guidance exists to interpret either the extent
89 of overall change or the weighting attached to any one dimension of change. Furthermore, the interpretive scheme and primary task categories of the two archetypes are neither strictly comparable nor commensurate (see Hinings, Greenwood and Cooper, 1999). To deal with these problems we worked from the literature to develop appropriate measures, bearing in mind the fundamental theoretical assertion that there will be clear and substantial evidence of change if MPB has become the norm as ‘the MPB archetype represents a real break with past practice’ (Cooper et al., 1996, p. 634; Hinings, Greenwood and Cooper, 1999, p. 143). We also asked a number of practitioners to review the questionnaire items to see if it was feasible to answer them and how best to capture the information on change we wanted, given the limits outlined above. From analysis of the empirical material describing examples of evidence of archetype change in Greenwood and Hinings (1993, 1996), Cooper et al., (1996) and Brock et al., (1999), this would include the cumulative effects of a multiple of factors, all of which were changing in the same direction. For instance, the adoption of formalized strategic planning by a majority of firms, introduction of a marketing plan and the adoption of rewards and promotion systems that place greater emphasis on individual performance, would be three such factors. Our research approach was to select areas of the P2 and MPB interpretive schemes likely to reflect substantial difference of archetype to investigate the research questions. For P2 characteristics, we chose three of the primary task characteristics: ‘strong links with clients’, ‘professional knowledge’ and ‘peer control’; for MPB characteristics we selected ‘management’, ‘marketing and growth strategies’ and ‘productivity’ (see Table 1). The primary task for P2 has no direct comparators represented in the MBP archetype. We considered the ‘competition’ and ‘rationalization’ characteristics of the MPB archetype unlikely to differentiate the two archetypes because the environment of all these firms became more competitive during the 1990s. Many firms rationalized their staff structures during that decade by making agreements with some underperforming partners to leave the firm. Moreover, firms had always been accustomed to either shed or freeze recruitment of support staff
90 and junior professional staff whenever there was a financial crisis or significant downturn in client work, not least due to the limited funds that are customarily retained in partnerships. In the primary task for P2, we omitted ‘work responsibility as indivisible’, ‘widely distributed authority’ and ‘minimum hierarchy’ because these typify most partnership firms where: legal work is still the ultimate responsibility of partners; authority is widely distributed across a number of areas of professional practice (e.g. professional work groups or departments such as corporate commercial, banking and finance, litigation, information technology, etc.); and the hierarchy of law partnerships’ essentially subdivides into just three main categories of people – equity partners, other professional staff (lawyers/solicitors) and support staff (which includes other professionals). In terms of systems, we chose characteristics commonly identified in the literature on the management of professionals, selecting one from each of the areas of – strategic, marketingfinancial and operating – control. There were others that are not listed in Table 1, and the interested reader is recommended to consult the original source (Cooper et al., 1996) which has seen some modifications in Brock et al., (1999). It is simply not clear how the researcher should operationalize some of these characteristics. To give just one example, Cooper et al refer somewhat unrevealingly to the ‘range of involvement’ being ‘low’ in P2 and ‘medium’ in MPB, without providing a basis for discriminating low from medium. The three characteristics of systems which we chose were as follows. For strategic control, we selected ‘consensus’ versus ‘directive’ decision-making, and for marketing-financial control we selected ‘precise financial and marketing targets’; for operating control, we selected ‘quality of service’. Table 2 lists the characteristics, labelling them P2 or MPB (the three ‘systems’ variables have been italicized for ease of identification). It is acknowledged that an important limitation of this particular application of the survey method is that its results are susceptible to problems created by common methods variance (Podsakoff and Organ, 1986) whenever data are obtained from same-source self-reports. The respondents, managing partners, would have a mental model that is sensitive to change and, given their management role, may be more
A. Pinnington, T. Morris committed to formal management methods than their peers. If anything, therefore, we assume that the picture of change drawn by surveying this group of respondents will be overstated, compared to the views of their peers. Consistent with Podsakoff and Organ’s (1986) recommendations for research using self-report measures, we aggregate it into larger units of data through factor analysis. To give more detail about our questionnaire before reporting the results in the next section, it inquired about respondents’ attitudes towards the internal and external environments of the partnership firm and about the organization’s management structure, policy and practice. Two questions were asked about how the firm had performed financially over the last three years – growth in fees (revenues) and profit-per-partner. A set of questions were asked on the extent of change over the last three years in policies and practices in order to test whether firms had become more managerial, that is more centralized and coordinated in the way they managed internal activities and client relationships. In addition, a set of questions was posed on management control systems for monitoring productivity, assessing partner performance, and partners’ responsibilities and involvement in the running of the firm. The questionnaire items included continuous and categorical items gathering demographic data on the firm. The majority of response items, reported in this paper, were ordinal data using a 4-point scale. In the next section, the frequency data is reported for the purpose of making an initial assessment of the evidence for the extent of MPB characteristics. To evaluate whether or not individual characteristics of the archetypes cohere in recognizable groups, the variables are then factor analysed and the resultant factors interpreted for MPB and P2 archetypes.
Results Description of sample The average number of equity partners was 14 and the mean number of assistant solicitors (nonpartner lawyers) was 21. The size range was from five equity partners to 187 and from four assistant solicitors to 527. During the period 1994–1997, this sample of firms increased in
Archetype1
Characteristic
N/A N/A
MPB MPB MPB MPB
sd
chi-square2
Questionnaire Items
Mean
Rating of firm’s performance over the last three years Growth-in-fees Profit-per-partner
1–5 scale indicating 1 5 much better; 5 5 much worse 2.19 1.01 N/A 2.39 0.84 N/A
Extent of change over last three years: a. More focused on meeting client needs b. Financial controls to monitor performance c. More professional marketing methods d. More coordinated approach to winning clients
1–4 scale indicating 1 5 a great deal; 4 5 not at all 1.81 0.82 86.6 2.24 1.10 103.6 1.88 0.95 11.5 1.98 0.90 67.1
e. Linked decisions about hiring and promoting more closely to the needs of the business f. Quality control policies g. Decrease scope for individual partners determining with which clients to work
1.98
1.01
53.5
1.79 2.96
0.98 0.86
52.2 58.3
MPB
client service productivity marketing & growth strategies precise financial & market targets management
MPB P2
quality standards strong links with clients
MPB MPB MPB
productivity productivity productivity
New policies to increase productivity introduced over last three years: h. Partners i. Other fee earners j. Support staff
1–4 scale indicating 1 5 a great deal; 4 5 not at all 2.24 0.84 94.2 1.98 0.77 114.7 2.21 0.91 52.1
MPB MPB MPB
management productivity marketing & growth strategies
Extent that partners are assessed on: k. How they perform (behaviour) l. Financial controls against budgets or targets m. Strategic goals e.g. key areas of client growth
2.14 1.98 2.29
P2 P2 P2 P2 P2 P2
peer control professional knowledge peer control peer control professional knowledge peer control
P2
consensus/directive
Importance of role of partnership in decisions: n. Determining overall direction and strategic position of the firm o. Promotions to partner p. Significant reorganizations or internal changes q. Merger with another firm or other forms of alliance r. Lateral hiring at senior positions s. Introduction of new performance measures such as quality controls t. Importance of high degree of consensus among the partners in management of firm
0.96 0.95 1.12
Archetype Change in Professional Organizations
Table 2. List of Variables
39.2 58.0 9.3
1–4 scale indicating 1 5 v. important; 4 5 unimportant 1.77 0.86 88.9 1.48 0.74 276.5 2.59 1.27 25.6 1.29 0.66 316.3 2.71 1.23 24.3 2.58 1.28 34.4 1.78
0.80
166.7
1
Indicates the archetype assumed to be evident the closer the score is to 1. 3 degrees of freedom. Following Zikmund’s (1997) Table 4 Chi-Square Distribution Appendix A-5, all scores above critical value at 0.1 probability level, except for variable m. Strategic goals (0.05 probability level). 2
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average size across all categories (equity partner, salaried partner, assistant solicitor, other fee earners and support staff). The average number of equity partners rose from 12 to 14. The largest increase in staff was in the category of support staff where the average rose from 49 in 1994 to 60 in 1997. The sample includes 96 firms (52%) that had increased their fee income since 1994 and 72 (39%) that had experienced a decline. The remainder (9%) did not respond to this question. Overall, fee income improved in nominal and real terms during the period 1994–1997, which coincided with a cyclical upturn in the economy after the deep recession of the early 1990s. (Table 3)
Descriptive statistics The descriptive statistics for the 20 variables provide a mixed picture of continuity and change. The average mean was calculated by taking the average of the mean scores. All of the mean scores on a 4-point scale – with 1 the highest and 4 the lowest (see Table 2) – suggest some change has occurred. The highest extent of change within this group has been in ‘quality control policies’ (mean 1.79) and ‘more focussed on meeting client needs’ (mean 1.81). Here, both items are consistent with MPB operating controls focused upon more explicit quality controls than in the P2 archetype, where there is an emphasis on standards and quality but primary responsibility for ensuring quality rests reliant on partners (‘Work responsibility as indivisible’) rather than quality control policies. Likewise, we interpret the mean score (2.14) on ‘new policies introduced to increase productivity over the last three years’ as albeit weaker evidence of change in a direction which is consistent with the MPB archetype. Furthermore, on closer inspection there is evidence of continuity of the P2 archetype. First, taking seven question items on the ‘extent of change over last three years’, the two lowest
Table 3. Description of sample: equity partners, all other solicitors and support staff Category
Mean 1997
Range 1997
Mean 1994
Equity partners Assistant solicitors Support staff
14 21 60
5–187 4–527 0–881
12 17 49
mean variables, ‘decrease scope for individual partners to determine with which clients to work’ (mean 2.96) and ‘financial controls to monitor performance’ (mean 2.24) suggest the traditional form of organization persists in terms of partners’ strong links with clients and a comparatively loose accountability for performance. Second, where we asked about the changes in productivity monitoring and partner evaluation, the results were consistent with the traditional P2 model insofar as change in productivity policies has been greatest for fee earners and they are the group that is most closely monitored (mean 1.98), then support staff (mean 2.21) and lastly, partners (mean 2.24). Third, a similar picture emerges for partner assessment. Again, the mean scores show change to have occurred but in a manner consistent with the P2 archetype, which would place strong importance on short-term financial controls (mean 1.98), some emphasis (generally informal, normative pressure) on behaviour (mean 2.14), and least importance attached to formal strategic goals such as specified ‘key areas of client growth’ (mean 2.29). Lastly, evidence on the role of the partnership in decisions provides what appears to be a sedimentation of P2 and MPB archetypes. The greatest change is in areas where the role of partners is high under traditional partnership governance: ‘merger decisions with another firm’ (mean 1.29); ‘promotions to partner’ (mean 1.48) and ‘overall direction and strategic position of the firm’ (mean 1.77). Under the P2 archetype, all partners would expect to be consulted in mergers, promotions to partner and major strategic decisions; often, these issues were part of the deeds of partnership. The least change concerns the role the partnership plays in ‘lateral hiring at senior positions’ (mean 2.71), these are particularly sensitive recruitment decisions because they subvert internal labour-market promotion systems such as ‘up-or-out’ (Morris and Pinnington, 1998b) and where unsuccessful, have the potential to reduce partners’ profit-share income. Relatively less change has also occurred in the role played by the partnership in ‘significant reorganizations or internal changes’ (mean 2.59), and in the ‘introduction of new performance measures such as quality controls’ (mean 2.58) which under MPB are both considered primarily matters of management prerogative. On the basis of the descriptive statistics there is an argument
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Archetype Change in Professional Organizations for some evidence of MPB characteristics. However, there is also evidence of continuity in the P2 archetype characteristics. We return to this mixed perspective, most notably on attitudes to partner responsibilities, in the factor analysis. Factor analysis The variables were factor analysed using the principal component analysis method of extraction and Varimax method of rotation. This was conducted to interpret the extent that these factors exhibited consistent grouping of the characteristics of P2 and MPB archetypes. We were able to demonstrate empirically two distinct archetypes of professional firms that are consistent with existing theory. The factor analysis converged in six iterations explaining 62% of the variance; the factor scores from the resultant rotated component matrix are reproduced in Table 4. We interpreted the six factors in relation to the P2 and MPB firm archetypes (see Tables 1 and 2). The first factor consisted of MPB change in ‘business management’, namely, client service, marketing and growth strategies, financial and marketing targets, management and quality standards. This denotes a group of general business and management changes representing nearly a quarter (22%) of the total variance. The second MPB factor, ‘productivity policies’, grouped three MPB variables all scoring greater than 0.75 concerned with productivity of partners, fee earners and support staff. Factors 3 and 4 have been interpreted respectively as MPB and P2 factors. Factor 3 is called MPB ‘business rationalization’ and, as was described above, it contains items that have lower scores in contrast with the other three, which we therefore interpret as more strongly consistent with the P2 archetype. Factor 4 is P2 ‘consensus management’ and combines these three variables with a negatively signed ‘financial controls to monitor performance’. This adds confidence to our interpretation because limited change in financial controls is consistent with P2 rather than MPB. Factor 5 comprises three variables on assessing partner performance and is called MPB ‘precise financial and marketing targets’. Factor 6 consists of two P2 variables; a negatively signed measure of MPB directive management style, ‘decrease scope for individual
partners determining with which clients to work’ and ‘importance of high degree of consensus among partners in management of the firm’. Qualitatively, this factor may be understood as the most obvious evidence of P2 by combining consensus management and strong links with clients. The results of the factor analysis are again consistent with some degree of change in the nature of these firms. Factors 3 and 4 are strong evidence that MPB policies and practices are eroding the traditional governance arrangements for partnership firms and are calling into question the role and extent of distributed authority amongst the partnership. Notwithstanding these MPB factors, the results indicate firms still remain within the P2 archetype and its preference for consensus management style and governance through peer control, persists. There is evidence for MPB characteristics in the interpretive scheme and systems, notably the greater use of coordinated marketing, explicit quality control standards and productivity plans. In addition, evidence of growth in the formal evaluation of all groups of staff including partners is a notable innovation, consistent with the MPB archetype. Thus, a picture emerges of selective systems changes and developments alongside distinctive characteristics of the old form, namely, ownership and strategic control by partners involving management by consensus and strong links with clients. Firms’ performance Finally, the two ratings of firms’ performance over the last three years (1. growth-in-fees and 2. profit-per-partner) were selected and analysed in relation to the 20 variables (listed in Table 2). Chi-squared statistics were calculated to determine the extent to which the two performance measures were related to each of the 20 variables. The pattern of significant results across these variables was similar for both performance measures. Cross-tabulation of the same five out of the seven change variables (‘extent of change over last three years’) and all three of the productivity policy variables (‘new policies to increase productivity introduced over last three years’) were significantly related to the performance variables at po0.001. The two exceptions in the change variables were ‘more professional
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Table 4. P2 and MPB factor analysis Factors Item
Factor 1 MPB Business Management
More focused on meeting client needs Financial controls to monitor performance More professional marketing methods More coordinated approach to winning clients Linked decisions about hiring and promoting more closely to the needs of business Quality control policies Decrease scope for individual partners determining with which clients to work New policies to increase productivity for partners New policies to increase productivity for other fee earners New policies to increase productivity for support staff Extent partners assessed on behaviour Extent partners assessed on financial controls Extent partners assessed on strategic goals Importance of partnership in determining overall direction and strategic position Importance of partnership in promotions to partner decisions Importance of partnership in significant re-organizations Importance of partnership in merger with another firm Importance of partnership in lateral hiring at senior positions Importance of partnership in introduction of new performance measures Importance of high degree of consensus among partners in management of the firm
0.64
Eigenvalue Percentage of variance
4.53 22.66
Factor 2 MPB Productivity Policies
Factor 3 MPB Business Rationalization
Factor 4 P2 Consensus Management
Factor 5 MPB Precise Financial & Marketing Targets
Factor 6 P2 Peer Control
0.56 0.77 0.84 0.56 0.51 0.60 0.78 0.84 0.80 0.79 0.84 0.58 0.60 0.74 0.80 0.64 0.80 0.70 0.81
2.01 10.06
1.49 7.42
1.27 6.35
1.05 5.22
A. Pinnington, T. Morris
2.13 10.64
Archetype Change in Professional Organizations marketing methods’ and ‘quality control policies’, which showed no significant relationship to the performance variables. For both performance measures, the variable ‘more focused on meeting client needs’ produced the highest chi-square value (Growth-in-Fees: w2(1) 5 59.355, po0.001; profit-per-partner: w2(1) 5 32.382, po0.001). Also, in both, the variable, ‘linked decisions about hiring and promoting more closely to the needs of the business’, ranked third highest in chisquare value (growth-in-fees: w2(1) 5 39.901, po0.001; profit-per-partner: w2(1) 5 18.584, po0.001). A limitation of these cross-tabulation results is that the performance measures are based on selfratings by the managing-partner survey respondents, and may therefore, be unreliable. Nevertheless, a minimal interpretation of the chisquared results would be that they indicate a link between perceptions of higher performance and higher amount of change. If this is the case, the results provide a plausible explanation for the rationale for pursuing managerial changes from the point of view of those partners with executive responsibilities for running the firm. The results are also intriguing because of the exceptions to the relationship between change and performance indicated above. Although we found the relevant changes – quality control policies and more professional marketing methods – were widespread it seems that they have not been associated with higher performance. These results point to the need for further work on firms’ relative performance and differences in the extent of change in their interpretive scheme, structure and systems.
Discussion Some of the data are consistent with the MPB archetype; the respondents reported deploying resources centrally to present a clearer market image, using marketing experts who bring techniques from other fields, quality control methods and tighter operating standards. Most firms had become more consciously managed organizations than would typify the traditional P2 archetype. Change coexists with important dimensions of stability. It is concentrated in the market-facing area of the firm, in its operating methods where more formal and centralized management has
95 emerged. This is linked to more elaborate and extensive performance management at the level of the individual. Continuity persists in the strategic arena. Also, client control remains in the hands of individual partners although it is modified by the addition of management support staff. Extensive consultation with partners over a range of strategic issues balances the power of a managerial group concerned to establish formalised modes of ‘rational’ planning. Therefore, structural and system change exists alongside the persistence of extensive partner consultation over strategic issues. The evidence points towards law firms remaining relatively traditional compared to the radical changes reported in research on the largest business advisory firms (Dirsmith, Helan and Covaleski, 1997), where in contrast it seems hierarchy is pronounced, corporate practices commonplace and partner influence on strategy is limited. The coexistence of archetype continuity and change may equate to sedimentation of form and values. To reiterate, sedimentation suggests radical change to another archetype has occurred but it remains incomplete or subject to reversal. Sedimentation would be plausible if one could conclude that characteristics of the MPB existed alongside the distinctively different P2 archetype. This constitutes a reasonable interpretation of our descriptive data whereby MPB characteristics are apparent in the factor groupings. However, the argument that there is underlying continuity in the way these firms are managed is more plausibly confirmed by the data. Although there is change, as outlined above, the question is whether this fundamentally alters the way law firms operate and thus their underlying values and interpretive scheme. We would contend further that MPB marketing arrangements, through the introduction of non-lawyer professionals, can support rather than challenge the partners’ role in getting client contracts. The underlying values of partnership are not erased by the MPB characteristics evident in the survey because the role of partners as the core producers, decision-makers and owners has not been altered. Our results suggest law firms have adopted some corporate management practices, but not changed fundamentally from the P2 archetype. The core elements of the P2 interpretive scheme have not been transformed by MPB characteristics but reinforced. The results
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indicate empirical variations around, and elaborations upon, the traditional professional firm archetype. These survey results, from a sample of British law firms, contest the general assertion of other case-based research that MPB predominates in professional firms. This may be because the focus of archetype case-study research has been on evidence for change in values, systems and structure rather than on what stays the same (Greenwood and Hinings, 1988; 1996) consequently creating a risk of bias in the basic framing of research problems and in the design of research methods (Donaldson, 1995). It should also be re-iterated that when Greenwood et al developed their archetype models for professional firms they referred specifically to the institutional field of accounting firms. While they have found evidence of sedimentation in two law firms in Canada, there are clearly limits to the generalisability of these findings and their own theoretical work has stressed that archetypes are to be seen as specific to particular fields (Greenwood and Hinings, 1993). One way of interpreting the evidence of continuity in these firms is that the degree of change necessary to create a distinctly different new archetype is so great that it is too difficult to
achieve. Such an argument would be consistent with those studies of change in professional firms that emphasize its slowness and complexity because of the need to gain consensus from partners (e.g Hinings et al., 1991). Another explanation may be that what we are observing is fundamental change occurring, but in an early stage of development. However, given the actual dimensions of change the survey outlines and the areas of relative stability, this seems less likely than the argument that the degree of adaptation we have observed reflects the preferences of those who control the firm and has been sufficient for these firms to be able to meet exogenous pressures. The law firm faces uncertainty from changes in the client market brought about by the growth in one-off transactions and greater complexity through increased specialization. It has adapted, we contend, by mixing high responsiveness in the strategic arena, with increased planning, control and coordination of its production process and technical base (its employees), achieved by retaining control in the hands of partners who are actually also involved in the production process and close to clients. This picture of persistence of the traditional interpretive scheme with more concerted management support systems is represented in Table 5.
Table 5. Persistence of professional control with management change
Interpretive scheme
Systems
P2 Persistence
MPB Change
Governance Fusion of ownership and control by partnership
Effectiveness/efficiency Formalization of management Client service Marketing and growth strategies Productivity
Primary task Professional knowledge Peer control Strong links with clients Strategic control Emphasis on consensus decision making High involvement by partners in strategic decisions Marketing-financial control Precise financial targets
Operating control Professional standards and quality of service
Strategic control More directive decision-making in day-to-day management matters affecting the firm
Marketing-financial control Market targets Centralization of marketing More planning of marketing More measurement of productivity Operating control Centralization of quality controls for a broad range of management issues (e.g. planning and marketing)
Archetype Change in Professional Organizations The implication of our research for law and other professional service firms is archetype change needs theoretically to be distinguished more carefully from the general phenomenon of ‘managerialism’, by which we mean the extension of management support systems and managerial positions in professional firms. Changes that are focused on performance evaluation, marketing coordination and productivity may all seem to add up to evidence of archetype shift but are not conclusive on their own. Introducing outside experts such as a human resources manager might make the firm more ‘business-like’ in its selection or promotion policies but unless they break the control of partners over decisionmaking they do not alter the firm fundamentally away from the P2 archetype. What we have are more managed forms of professional firm – more formalized in their evaluation systems, and with more central monitoring of work processes, thus undeniably making them somewhat more similar to other types of business organization. Yet, when looking at the balance of continuity and change, the critical point is that the capability of the partners to run the firm and to retain substantial control over the source of their power, client relationships, is largely undisturbed.
Conclusion Existing theoretical accounts, based on a limited number of case studies, have argued that archetype change in professional firms has occurred, involving a transformational change towards the MPB archetype. Surveying a larger sample of firms than has been conducted in much of the previous research, we found evidence of change in the direction predicted by existing archetype theory towards the more business-like form of organization. MPB outcomes appear to have coalesced around the operating control dimension of the firm, notably coordinated marketing and external orientation to clients including the management of quality control. However, continuity is evident in the P2 interpretive scheme whereby partners continue to control choices about client selection and business opportunities and maintain their influential role in governance of the firm by sustaining consultation of the partnership and a consensus-based approach for major strategic decisions. These findings chal-
97 lenge the assumptions of much of the practitioner press that promote an image tantamount to radical change away from the values and governance method of the traditional partnership firm. We also dispute the notion that change has been sedimented, because we believe there is more evidence for persistence in the bedrock of older forms of organization than there is for a transformational change towards the MPB archetype. While not dismissing the concept of the newer archetype of the professional firm which is best seen empirically in the large accounting (or now more often known as business advisory) firms, we argue that where change has occurred, it has proved compatible with the traditional model wherein partners decide strategic issues and control client relations. The dimensions of stability and change that we have observed in this survey of British law firms add up to a more managerial professional firm which balances its traditional methods of responsiveness to the client market with a more consciously managed and internally differentiated organization. The methodological contribution of this work is in the development of a survey instrument that allowed us to examine a large sample rather than rely on a limited number of cases to test the archetype change proposition. We were aware of a possibility that our finding of evidence of managerialism but not of archetype change simply reflected the design of the survey. In response, we would emphasize that we pretested the survey on practitioners and built upon our own experience of case-based research in this area to maximize validity, and we were able to find evidence in our factor analysis of constructs that are consistent with the theoretical constructs of the P2 and MPB forms. Our results suggest that the survey instrument proved capable of discerning the patterns and extent of change to operationalize the proposition of archetype change. As we noted above, however, these constructs are incommensurable and each is incomplete in some respects, which hampers validation of the survey method. Furthermore, while archetype change looks at the dynamics of change, more theoretical development is necessary to outline the process or processes whereby this takes place. Empirically, this requires time-series survey work across a panel of firms that were also subject to intensive
98 case-study work. In addition, surveys across firms in different professions would enable us to explore the extent to which the notion of archetype change is contextual or relative. For instance, a radical change in law or architecture may be considered incremental in accounting or engineering. It may also have to take into account the proposition that several types of archetype can coexist within the field of professional firms (Brock, Powell and Hinings, 1999; Gray, 1999). Finally, we would have no hesitation in asking for full disclosure of financial performance were we to repeat the questionnaire today, because the atmosphere of financial transparency has been transformed in the last few years by extensive journalistic coverage of estimated profits and fee income. The receipt of such data would enable more robust testing of the findings reported in this paper that change is generally positively associated with higher performance, at least in the views of the respondents. Better data on financial and other measures of performance should enable researchers to pursue more precise analyses on the outcomes associated with particular organizational forms used by professional service firms and therefore help to explain why firms pursue particular patterns of change.
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