Achieving a balanced organizational structure in professional services firms: some lessons from a modeling project

While many factors affect the organizational shape that managers in professional services firms should achieve, one has the greatest importance: the ratio of junior, mid‐level, and senior staff, usually referred to as a firm's leverage. The tensions between short‐term (market demand and firm profitability—a static equilibrium issue) and long‐term issues (organizational structure and professional development—a dynamic equilibrium issue) were analyzed in a modeling for learning project. Managing a professional service firm implies important trade‐offs between satisfying staff development and financial performance. A hiring and promotion proactive policy aimed at satisfying professional staff development leads to an expensive organizational structure without any certainty for future growth perspectives. However, a reactive hiring policy is not better since it burns out mid‐level staff due to delays in training and hiring, which increase staff departures. Therefore, a widely applied “up‐or‐out promotion system” seems to be the right policy for managing professional services firms. Copyright © 2008 John Wiley & Sons, Ltd.