Does Your Organization Add Any Value? How Do You Know?
post # 54 — April 21, 2006 — a Managing, Strategy post
In yesterday’s post, there is the beginning of a discussion about networks or ‘hubs’ of professionals . I don’t want to bring that discussion to a halt, but in this post, I’d like to explore one specific question that arises from the discussion.
If you are an organization (let’s say a company or a firm) made up of professionals who are mobile and can take both their skills and their book of business elsewhere, how would you go about judging or measuring whether your organization was adding any value above and beyond the sum total of the individual talents (or books of business) of all the individual players?
In other words, how do you tell whether the organization is contributing anything?
It’s been a long time since I was an academic, but I do remember that there was a lot of work around measuring the EVA (economic value added) in corporations. Does anyone know if this can be readily be applied to professional environments?
I can imagine asking people whether they THINK their organization is helping them succeed more than they could either on their own or (probably a better question) at another firm. I can then imagine asking them IN WHAT SPECIFIC WAYS do they think they are benefitting from belonging to one organization. But that’s pretty sooft stuff.
I know there are real differences between firms in this regard. My old model of “Hunters and Farmers” (written in 1985 but included in Managing the Professionals Service Firm ) analyzed the difference between firms of autonomous entrepreneurs (‘hunters’) and firms where the value was emebedded in the organization and everyone worked to make the overall entity succeed (‘Farmers’ or ‘One-Firm Firms’)
I can usually tell pretty quickly when I visit a firm where on that spectrum they are, but I haven’t (yet) thought through a way of assessing it so that (a) managers inside the firm can judge whether they are making progress in building a firm that is cohesive and adds value beyond bringing in the right warlords and (b) observers and analysts could compare the progress of different firms in this regard.
Does anyone want to propose some metrics on measuring or judging ‘value of the organization?’
This is an excellent question.
The best measure of the value added by the firm is the satisfaction of clients with their interactions with (and the quality of services provided by) non-rainmakers. Difficult to quantify, but very important: Associates and “Service partners” performance in the eyes of the rainmaker’s client is the only way to tell if the firm is seen as more than the sum of its parts.
Another difficult to quantify but important factor would be the ratio of ancillary matters to core business services. Every big corporate client has its typical core business transactions, but they also generate ancillary personal and other non-core billable work. That’s a good metric for value added, because it serves as an assessment of the level of trust clients feel with the firm’s overall competence.
posted on April 21, 2006