Managing organisational change in professional service firms
A new study from the Novak Druce Centre for Professional Service Firms (PSFs) at Saïd Business School, University of Oxford reveals that the transformation of PSFs from traditional partnerships to professionally managed businesses depends on the critical relationship of two forms of power - that exercised by individuals within the firm, and the power embedded with the firm itself. The authors of the study, Professor Tim Morris, Professor Thomas Lawrence and Dr Namrata Malhotra, show that both forms of power play important and interdependent roles in achieving such radical change.
"Understanding the role of power in carrying out successful organisational change is an immensely important issue for those managing the process," says Professor Tim Morris of the Novak Druce Centre at Saïd Business School. "Managers attempting to guide their firms through major transformations must recognise the essentially political nature of the process. They must unfreeze the entrenched political alliances that might otherwise block change without alienating colleagues who ultimately need to support the transformation."
The research is based on an analysis of three London law firms going through major organisational changes arising from very different circumstances. The study makes two key observations.
Firstly, transformation is best achieved by changing the patterns of authority within firms in order to disrupt the traditional rules and assumptions within the organisation. In PSFs where influence has been distributed across a wide range of individuals and where centralised authority is weak, centralising the decision-making, power and authority can help bring about transformational change.
Secondly, achieving legitimisation of the power shift is critical. While centralising power and bringing an end to longstanding power bases is a necessary step to realise change, obtaining buy-in from key individual partners is crucial for that change to be legitimised. The authors demonstrate that, to succeed, change must be firmly grounded in the cultural traditions and values of the firm. Persuasive words and symbols, appropriate to the organisation, communicated by those implementing change can stimulate a cultural shift, prompting acceptance among those needing to be won around. Emphasising the firm’s values can defuse opposition from those who would otherwise claim they are being undermined. By championing change, influential evangelists can create the broad acceptance needed to cement the initiative. Conversely these individuals at the forefront of the change must know when to step back and let the new system work without undue interference.
Each of the firms examined in the research had differing degrees of success in bringing about change. The authors found that different factors were key to achieving their goals. One firm, for instance, found it helpful to completely separate professional and managerial roles. Seeking to achieve greater efficiencies and take advantage of opportunities in the corporate finance sector, the firm put its partners’ activities under the control of a Chief Executive, formerly the Managing Partner, and its business services under a Chief Operating Officer. The resulting division of authority and the firm’s new commitment to managerial control, rationalisation and productivity, prompted a change to a more corporate mindset within the firm.
"The pluralistic nature of PSFs demands that change initiatives take full account of the individual nature of the firm, its partners and practices, and are explicitly framed to appeal to the vested interests of individuals where power has been rooted," says Professor Morris. "Managers have to think about power more broadly than they might be accustomed. Power should be thought of in organisational terms, working continuously through technologies, practices and systems, rather than one-off isolated initiatives, or as focused on individuals. Change must be embedded in the day-to-day routines of colleagues while avoiding the dangers of over-focusing on systems. Every step is inextricably tied to a form of power, and failing to utilise that power appropriately will result in failure."
Whilst the study focused on law firms, it is clear that the findings are relevant to other professional bureaucracies such as hospitals and universities, and more generally apply to pluralistic organisations where power is dispersed and shared.