Research

Managing a Professional Services Firm's reputation - benefits and difficulties

In a recent article for Professional Marketing magazine, Cass Professor of Consumer Marketing Vincent-Wayne Mitchell et al discussed the benefits reputation brings to Professional Services Firms (PSF).

Reputation is a vital intangible asset that can provide firms with competitive advantage. Reputations are difficult to achieve, hard to copy and perceived as highly desirable.

One benefit relates to a PSF's workforce. A positive reputation improves a firm's ability to attract and retain talent. Firms with strong reputations receive a greater number of quality applications from potential employees. Existing employees are also less likely to seek work elsewhere because their own professional identities are linked to their employer's.

The attraction of working for a highly reputable company also bolsters employee loyalty. This is integral to the competitiveness of PSFs because of high recruitment costs, potential knowledge loss, and the time required to build and maintain relationships with clients.

Research suggests that firms with good reputations achieve improved financial performance owing to:

  • reduced learning costs,
  • the ability to command higher prices for their services,
  • the tendency for clients to commission further business from advisors they have experience with.

Working for a firm with a strong reputation can also be an incentive for staff to work harder and for lower remuneration, the status of the firm bringing its own reward.

A strong reputation is useful for winning new business. Clients may have limited experience of purchasing professional services. The inclination therfore is to assume a reputable firm will offer a better service over one less well-known. For this reason, marketing costs at highly-reputable firms may be lower too.

A partner from a well-respected PSF will likely have extensive links to decision making executives through its client network, facilitating effective selling. This is important as anecdotal evidence suggests that as much as 70% of new business comes from existing clients from within these networks.

However, to fully understand the benefits, the level of analysis of reputation must be considered. For example, at the service-offering level a PSF may have a reputation for producing high-end work but at the same time be considered difficult to work with at an individual level. An important question therefore is "whose reputation is it?" and where within the firm benefits from it? This can be problematic as there is rarely one person with the authority to manage a firm's reputation, and this problem is more pronounced in 'celebrity' PSFs which operate in multiple regions and are subject to media scrutiny. This level of complexity can be intellectually rewarding yet frustrating at a practical level. These issues are explored further in the chapter "Marketing and reputation within professional service firms" in The Oxford Handbook of Professional Service Firms.