- Elgar original reference
Edited by Markus Reihlen and Andreas Werr
Chapter 15: Beyond dichotomies: a multi-stage model of governance in professional service firms
As Reihlen and Werr explain in Chapter 1, the entrepreneurial inclinations of professionals potentially represent a significant challenge to the firms that employ them. Whilst professionals typically lack the risk-seeking propensities of entrepreneurs, they share certain important qualities: namely, their resistance to managerial control, their expectation of building their own business, and their ambitions for ownership (Abernethy & Stoelwinder, 1995; Covaleski, Dirsmith, Heian & Samuel, 1998; Daicoff , 2004; Raelin, 1991; Shane & Eckhardt, 2003; Shane & Venkataraman, 2000). Professional service firms (PSFs) must therefore find ways of controlling and coordinating the entrepreneurialism of individual professionals to ensure that they serve the interests of the firm. The partnership form of governance represents a potential means of achieving this (see also Chapter 7). In partnerships, professionals themselves are owners of the firm and share unlimited personal liability for the actions of the firm. They are traditionally characterized by collegial clan control and informal methods of mutual monitoring and adjustment (Adler, Kwon & Heckscher, 2008; Covaleski et al., 1998). However, as professional service firms increase in size and complexity over time, professionals tend to delegate authority to an elected management group who start to introduce more explicit management systems and structures to control their activities (Cooper, Hinings, Greenwood & Brown, 1996). The innate entrepreneurial qualities of the individual professionals risk becoming subordinated to ‘corporate’-style systems and structures which serve to strengthen managerial hierarchies and centralize control (Empson, 2007). Numerous studies of PSF governance distinguish between professional service firms which perpetuate informal collegial clan control and those which adopt more explicitly ‘corporate’ governance systems and structures. The distinction is typically posed in stark terms: partnership versus corporation (Empson, 2007; Empson & Chapman, 2006), private versus public corporation (von Nordenflycht, 2007), adhocracy versus professional bureaucracy (Mintzberg, 1983) or professional partnership versus managed professional business (Cooper et al., 1996; Greenwood, Hinings & Brown, 1990). The PSF governance literature, therefore, emphasizes dichotomized perspectives on governance which tend to ignore the complex variety of forms of governance prevalent within the professional service firm sector.
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