Money
Issue No. 1 - July/August 2001
global game
Over the past decade, Mr Mason said, high volume manufacturers have been reformed by enormous pressure on margins and competitiveness in a buyer’s market. Professional service firms are only starting to feel similar pressures.
“To be competitive in a commodity market, continuous cost reduction is the only strategy,” Mr Mason said. “Every year costs must be reduced. Waste reduction is usually the first step, often yielding 15 to 20 per cent savings of operating costs.
“It is essential that complacency does not come with such savings, as annual cost reduction of 2 to 5 per cent is still available. Manufacturers strive to achieve error rates of 5 to 10 parts per million — an error rate of between 0.0005% and 0.010%.
“Manufacturers have a good understanding of their process capability. They know when any variation to the standard process is due to a normal cause or a special cause. They search for the special causes, not to blame someone but to remove the waste. They even more aggressively search for the normal causes, as these point to system problems.”
Mr Mason then challenged the Forum to imagine how professional service firms could emulate this rigor. Structural change is inevitable, because the partnership approach is outdated.
“Partners have three roles — shareholder, director and employee — and they like to choose what role they adopt whenever it suits them,” he said. “Common sense says ‘management by committee’ must result in inefficiencies, frustration and slow response to change.
“The structure of a professional service firm will be slow to change because many people will resist giving up the status of their position. It will be the small number of innovative firms around the world who will make the move first. The question is, move to what?”
Mr Mason argues that the corporate structure used by most busines...
