Managing the Professional Practice

In the Built Environment

Hedley Smyth

• Publisher: Wiley-Blackwell
• Year: 2011
• Print ISBN: 9781405199759
• eBook ISBN: 9781444392357
• Edition: 1
• Topic: Arquitectura
• Subtopic: Práctica profesional en la arquitectura

The emphasis here is to explore the key issues influencing the culture, strategies and management operations of professional practices. The focus is upon established practices from growing ones to large international firms in the built environment. A key aim of the book is to promote aspects of management by function and activities, with discipline acting as context rather than the primary focus.

The book is structured into sections around 3 main themes: managing the organisation; and managing specific issues that affect operations, and a third section reflects upon management from practitioner experience.

Section I: 'Managing the organisation' looks at how the history of the firm creates both opportunities and rigidities for developing the practice, in terms of culture and market position, strategies and implementation, financial, marketing and HR management.

Section II: 'Managing specific strategic and tactical issues' looks at how these affect approaches a discipline and operational processes in practices. These issues compliment those covered in Section I.

Section III: 'Reflecting on practice' covers experience of those in practice and top practitioners detail how they are addressing key issues in their practice and for their discipline. Each chapter by a practitioner has a postscript from academic authors to make links back to research on theory and application.

• Addresses the key issues facing practice managers
• Collects latest research from leading academics
• Offers comment on current practice from top practitioners

Section I

Overview in Scope and Context of Managing the Professional Practice

Chapter 1

Structures, management and markets

Hedley Smyth

Introduction

The professions have a long history, including clerics, medics and lawyers, with varied modern origins, for example in the western part of the globe in the nineteenth century. Modern professional practice is typically defined by exclusive expertise captured in a body of knowledge (BoK). Such bodies are usually regulated institutionally and prescribe values, including:

• trustworthiness;
• formal association, certification and registration with the relevant professional body;
• serving the public interest.

The knowledge and codes of professional conduct provide a basis for operation that in many other areas of industry and practice would need to be established through management within the organisation (cf. Mintzberg, 1979).

The built environment professions, the focus of this book, are similar in these respects. Architects, engineers including various specialisations, surveyors in various forms and land use planners are established disciplines recognised by the institutional arrangements described, although the planning profession largely has its origins in the public sector activity rather than commercial activity, although recent times have seen a growth in private professional practice in this discipline. Project management and facilities management are emergent professions. For project management, there are several BoKs – for example the project execution emphasis of the Project Management Institute's PMBoK^®, the more strategic BoKs of the Association of Project Management and the International Project Management Association and the Japanese ENAA demonstrate a diversity of approaches and BoKs that are ‘thin’ compared to those of medicine or architecture. Therefore, practice is dynamic and diverse according to the maturity of the profession, and is also affected by the regulatory and market conditions by nation and professional institution.

In recent decades there has been a crisis in the professions, which has been evident within the built-environment professions too. Society has generally become more educated and confident to challenge professional ‘expertise’ (e.g. O'Neill, 2002a), which is reinforced by a multitasking mentality and a greater ‘DIY culture’ in some nations. In the built environment, there have been different challenges in different places. In China, for example, large municipal design institutes have been subjected to increasing commercial rigour and have also been evolving new forms of provision. In the UK, as another example, in the late 1980s and throughout the 1990s several changes were of note. The built environment professional fee scales became subject to competitive bidding, perceived poor project management from architects and poor marketing and financial control of professional practice were becoming critical whereby change became inevitable. Architects have narrowed their focus in the UK – as in many countries – on the creative aspects. There has recently been migration ‘up the food chain’ to put increased emphasis upon master and urban planning amongst some practices. Concurrently traditional quantity surveying practices transitioned to cost consultant and project management activities. Financial management, especially cashflow management, has improved, although marketing remains poorly understood, especially by architects. Human resource management is underdeveloped. Despite the common cry that ‘people are our greatest asset’, practice does not always match the rhetoric. Investment in people is low, which although understandable given labour market mobility and the multiplicity of firms, is also a real challenge, given how much effort practices make to keep clients compared to keeping good staff. More surprising is the lack of investment in social capital, specifically the knowledge and skills that are spread and embedded across the practice, frequently called core competencies that add value (e.g. Hamel and Prahalad, 1996) and dynamic capabilities that improve effectiveness and efficiency (Teece et al., 1997). This is surprising considering that professional practice is essentially a knowledge-based industry, much of the knowledge being embedded as tacit knowledge and skills derived from experience that comprise competency and core competencies.

These trends have led to less reliance upon professional expertise in the sense of being willing to pay for a basic service, especially where intangibility weakens bargaining positions: the effort and value of the inputs; the awareness of the contribution that the finished facility (outputs) will make to organisational (including household) well being and performance; and the value to wider society as onlooker and end-user. Bargaining positions are not strengthened for practices delivering high value, because added value from intangibles such as tacit knowledge and core competencies are difficult to assess at any time, especially before delivery. This is not helped by clients, even sophisticated ones, who switch from seeking firms with a differentiated focus in boom times, to having a price focus for selection under slump conditions.

New procurement forms have added to the mix over the decades, changing the power relationship between client and professional. Design and build, construction management contracts, various design-build-finance-operate forms of contract, including PFI and PPP contracts, tend to increase contractor power at the expense of the professions.

Yet buildings and built environment facilities are becoming more complex, and client demands more sophisticated. Value, especially added value, is in demand, particularly amongst clients where certain facilities form a vital element for their competitive advantage or public profile. Part of sophistication has been the focus upon accountability, especially performance measures. This is a double-edged sword – essential, yet if dominant over the trustworthiness ascribed to professionals adds to the challenge in that it conveys the message, ‘we don't trust you’, or as Anora O'Neill stated, ‘In the end, the new culture of accountability provides incentives for arbitrary and unprofessional choices’ (2002b).

Professionals end up concentrating resources and effort into satisfying key performance indicators (KPIs) rather than delivering what is really required – value and added value. This, coupled with the form filling to be placed on corporate and public sector panels of suppliers, plus satisfying procedures for prequalifying for competitive bids has a net corrosive effect. Whilst it makes reasonable sense for individual organisations to make such demands, the sum adds significantly to costs while margins are forced down by competition. The consequence is higher long-term prices, or compromises in quality – the very thing that clients are trying to reassure themselves about or insure themselves against. One solution is growth of the professional practice into larger companies to obtain economies of scale and scope in managing the growing set of bureaucratic demands, increasing the competence base in breadth and depth to meet complexity requirements and taking advantage of cost differences in different national markets – another notable trend of the past decade or so.

Geographical diversification of large practices has been a major trend, coupled with mergers and acquisitions. The peak of the recent boom saw a considerable number of mergers and takeovers as cash reserves were employed and pooled to increase market penetration and geographical spread. Large multidisciplinary practices have emerged in this trend. A further wave of takeovers has occurred near the bottom of the recession, 2009–10, as well-placed firms, which managed cash flow and built up reserves in the boom are buying up struggling practices, even large ones, as they reposition themselves with higher market share for the return of growth market over the coming years.

This corporatisation of professional practices carries its own problems. Increased market power and reduced national allegiance has the effect of reducing reliance on professional institutional requirements and norms. It also tends to render the firms more self-interested rather than their pursuing independent judgment on behalf of clients (cf. Chapter 2 by Graham Winch). Furthermore, it can distance them from the ethical issue of serving public interest. This is exacerbated by some professional bodies becoming more introverted and thus failing to adequately serve their members' interests, which is not an easy task where the disciplines are redefining their roles, as cited earlier for quantity surveyors in the UK (cf. Ormrod Committee, 1971).

There are a number of general trends – institutional context and the value of professional expertise, deregulation and intensity of competitive forces, new forms of procurement and market power, accountability and trustworthiness, self-interest versus broader stakeholder and societal interests, the importance of social capital and concentration at the top into large practices undertaking increasingly complex projects – that have led to considerable change in the professions, which have been, and are being, expressed in different ways in different regions and nations. These affect the way professional practices are structured and managed and hence operate in the market. The market too affects the management and structuring of professional practice. These trends will continue and be reconfigured as part of change. In other words, an ideal state does not exist, but that is not to say that people should not pursue ideals in their discipline and in managing professional practice. The important point is to be aware of the trends and prevailing conditions, and to pursue goals that will work in the current and emerging context, and that are informed by ideals and aspirations. The chapter will consider each of the main dimensions – markets, structures and relationships, and their implications for management – starting with markets.

Markets and Management

Services in general account for 70% of employment and value added in OECD countries (OECD, 2005, cited in Jewel et al., 2010). Growth is concentrated in the G7 countries (Brook, 2008; Jewel et al., 2010). Markets are further clustered into centres of activities.

World Clusters

Many sectors of economic activity are concentrated in centres of global excellence, often referred to as world clusters. The most well-known world cluster is probably Silicon Valley in California where expertise in IT development resides. World clusters typically embody forces of competition and cooperation in the market. Being in a climate of creativity, access to expertise in general and the benefits from drawing upon a labour market with specific expertise in domains of specialisation are key factors feeding off each other in self-reinforcing ways.

Where are the world clusters for the built environment professions? Los Angeles, New York, London and Tokyo are consistently recognised as such. Chicago was a key location but has lost a premier position, whilst Shanghai is arguably in the ascendancy. As will be argued below, world clusters are not defined by large international firms located in one place, although it is instructive to cite Knox and Taylor (2005) on the location of international architecture firms, who show London as the dominant location with nearly twice the score from their calculations of New York, with San Francisco, Singapore and Los Angeles following and Tokyo ninth; and, according to ENR data, over the past decade the UK generally has consistently captured 12–13% of the international design market in the built environment (Hetherington, 2008). Attention has also been drawn to detailed design and production information being undertaken in branch offices or outsourced to other practices in low-cost international locations (Tombesi, 2001; Tombesi et al., 2003; see also Chapter 2 by Graham Winch).

The reasons for geographical clusters in the built environment include:

• regional and national-level competitive advantages based on world cities as both strong domestic markets and links to global markets;
• network effects of each location as global financial hubs and skill concentration based upon cultural factors of creativity and communities of practice.

For example, London, as a cluster, was thought to finance, design or project manage up to 25% of global projects (Ive and Winch, 1999). Based upon ENR data (1999), they estimated 19 of the top 200 design professions were located in New York, and 12 were located in London. Therefore, the location of the projects is secondary to the mobilisation of resources to service and realise projects in the world cities and across the globe. Changes in technology and corporate strategy of leading multinationals in this sector tend to increase the proportion of these activities in the world clusters for the built environment, although the pressure to relocate routine activities, especially production information, to lower-cost locations will increase (Ive, c. 2001). This will potentially create discontinuity of service and may dislocate some key skills and could also inhibit knowledge transfer along the labour market chains that is necessary for maintenance and reinvigoration of the competitive advantage in the longer term. Ive states that much of the training and many of the skills are embodied in employees from overseas. This may be an important inhibiting factor to sustaining the competitive advantage of London in the long run without additional indigenous initiative and capacity development, but reinforces such centres as places to gain experience and enhance résumés or curriculum vitae amongst each new generation of professionals.

Evidence of innovation within professional firms, specifically the top 25 cost management consultants, was recently tested for the London cluster. A total range of innovation was present, and collaboration between the practices and service providers to them was found to be significant, although purely confined to very specific areas and organisations...

Table of contents

• Cover
• Title Page
• Copyright
• Preface
• About the authors
• Introduction
• Section I: Overview in Scope and Context of Managing the Professional Practice
• Section II: Managing Specific Issues in the Professional Practice
• Section III: Reflections upon Practice
• Conclusion
• Acronyms
• Index