Managerial capability in the professional firm - assessing competences in the city.

Introduction

For a long time common sense, character and background were, for the

British, more important for managers than any kind of formal training or

qualification. Experience was the only worthwhile school and personal

introduction or reference more valuable than any qualification[1, p. 163].

The City, perhaps more than most sectors, once exemplified the approach to management described by Handy. The investment banks, stockbroking houses and insurance brokers that originally constituted the City combined sophisticated professional and technical skills with relatively amateur management. Over recent years there have been changes (see Appendix). The top accountancy and consulting firms and the bigger banks, for example, have made significant investments in corporate management development. The large foreign banks have also brought change. German, Swiss and Japanese banks, for example, tend to have lower levels of turnover and better established traditions of "slow burn" management development, involving planned movement of individuals across technical functions and gradual exposure to executive positions.

But particularly among the large US and UK firms engaged in international wholesale financial services, neither "management" -- in the sense of a separate set of activities and functions undertaken by an identifiable and suitably trained group of managers -- nor "management development" have acquired the institutionalized status common, for example, among companies of similar scale in manufacturing and other service sectors.

Several characteristic features of professional firms' value systems help to explain why the development of managerial skills has not achieved high priority. The most important is the tendency to emphasize technical rather than managerial expertise. In terms of their work processes and organizational structures investment banks, foreign banks and securities houses may be described as "professional bureaucracies"[3]. These are relatively large scale organizations which co-ordinate complex work tasks in order to supply services. Indeed, it is the complexity of work at the operative-client interface and its resistance to procedural controls or external supervision -- which distinguishes these professional organizations[3, Chs 9,10].

Professional bureaucracies are dominated by professionals. It is their associations which set standards of competence and control entry; and it is often the wider professional peer group, rather than line management, from whom recognition is sought. In these organizations managerial hierarchies are relatively flat and typically staffed by "ex-professionals" rather than "professional managers". Other "back office" staff processors -- such as administration, audit and information services -- support the professionals, providing services as and when required rather than imposing standards or controls. Professional firms often display antimanagerial cultures. Typical management problems include:

* influencing standards among those who, in effect, train themselves;

* developing managerial and administrative skills when such work is seen as unimportant;

* encouraging corporate commitment when careers are built around mobility;

* co-ordinating individuals who enjoy high levels of autonomy;

* exercising control within informal, loose structures;

* nurturing team involvement among highly individualistic professionals.

In terms of skill development, professional firms may be characterized as follows:

* entry depends on professional credentials and academic qualifications;

* training focuses on the enhancement of technical/professional rather than managerial skills;

* professional associations determine appropriate skill standards and influence supply;

* management training is limited to middle managers and supervisors in "back office" support functions;

* professionals effectively pursue "occupational" rather than "organizational" careers (professional skills may be easily transferred between employers).

The development of managerial competences is further impeded by two other characteristics. First, there is the existence of strong entrepreneurial traditions. These characterize several City occupations (e.g. dealing, market making), institutions (e.g London Metals Exchange) and firms (e.g smaller businesses). Such traditions place a premium on "individualism", "instinct" and "opportunism" -- values which are not conducive to the long-term development of general management skills. Second, reward systems place high value on technical excellence and entrepreneurial capabilities and present potential barriers to management development. These include the opportunity costs -- for individuals and firms -- in moving technically excellent, revenue generating "stars" into more managerial roles; and the tendency for individuals with high performance track records and very high salaries to be unwilling to …