Satya Wacana Conference & Seminar, International Conference on Human Resource Management

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The evidence of high performance work systems in professional service firms
Yuliani Suseno, Ashly H. Pinnington

Date: 2016-09-27 10:30 AM – 11:30 AM
Last modified: 2016-09-15


Extended Abstract

Professional service firms (PSFs) play an important role in modern business (Rodríguez and Nieto, 2012). The Big Four accounting firms, elite law firms and leading management consultancy firms not only have become international with offices throughout the world, but they have also been able to exert their influence and dominance on institutionalising international accounting standards, universal corporate laws, and management practices. Even the mid-scaled PSFs outside the US and Western European regions have also embarked on internationalisation efforts beyond their domestic boundaries to be the providers of expertise in the regional and global markets as a response to globalisation and client pressures to deliver integrated services across the different regions where clients operate.

PSFs are unique in that their core output is intangible. Work briefings to PSFs are driven largely by the fact that professionals employed in PSFs are the source of current expertise, knowledge, and skills in terms of the technical procedures be it in legal, accounting, engineering or consulting (i.e., their human capital) (Pinnington et al., 2009; Pinnington and Sandberg, 2014; Starbuck, 1992). Moreover, engaging the services of PSFs may potentially provide safe harbour for clients against regulatory complications that may arise in commercial complex transactions (Suddaby et al., 2007). As such, multinational corporations are continuously engaging services offered by PSFs to address the various local and international challenges in their globally dispersed operations.

Existing research that focuses on the macro aspects of PSFs are relatively abundant. Extant literature in this area includes studies that are related to the institutional change or the shift in institutional power structures (e.g., Sherer and Lee, 2002) brought by deregulation, practice specialisation, corporate management approaches, globalisation of trade, and the advancement of technology and client pressure (Miozzo and Miles, 2002; Susskind, 2008). On the other hand, research investigating the micro issues of PSFs such as those that examine the formulation and implementation of corporate strategy and the challenges of managing the PSFs’ human capital, appear limited.

More significantly, an examination of human resources issues in PSFs has been relatively neglected (Kaiser et al., 2015). This is surprising given that PSFs are under pressure due to the ‘war for talent’ issue. A recent article published in the Australian Financial Review highlighted that legal firms are fighting for talent in the ever-changing and more competitive market (Walsh and Tadros, 2015). For these firms, knowledge embodied in their human capital becomes the source of competitive advantage. PSFs employ highly qualified individuals to create differences in their service offerings through offering knowledge-driven, value-driven, and relationship-based strategy for low client mobility (Lowendahl, 2005). However, while existing studies have found that human capital plays a role on strategy and performance of PSFs (e.g., Hitt et al., 2001; Pennings et al., 1998), there is still limited empirical evidence that provide specific challenges for the ‘war for talent’ issue that PSFs face in an era of increasing uncertainty in the global market.

Following these arguments, the purpose of this study is to examine the ‘war for talent’ for PSFs, focusing on law firms in particular. We focus on law firms as they present an interesting domain of study for PSFs. As is typical of other PSFs, law firms are knowledge intensive, and at the same time, they require intense client interactions involving trust and standards of delivery and quality of service (Brock and Alon, 2009). However, rather than examining the critical factors impacting the war for talent as has been thoroughly outlined by Beechler and Woodward (2009), we instead focus on the specific characteristics of legal firms that exacerbate this issue of the ‘war for talent’ (Morris and Pinnington, 2002). Drawing on von Nordenflycht’s (2010) taxonomy of distinctive characteristics of law firms which are characterised by knowledge intensity, low capital intensity, and a professionalised workforce, we establish a conceptual framework that illustrates how the distinctive characteristics of law firms create human capital challenges for them. Second, we evaluate the perspectives and opinions of law firms in terms of human resource challenges they face in the domestic and international markets. Third, we focus on how law firms specifically, and PSFs in general, could rethink their Human Resource Management (HRM) strategy in addressing these challenges in the global world.

The study addresses the ‘war for talent’ issue based on Australian law firms. Research on PSFs, particularly on law firms, from outside the US and Western Europe, is relatively scarce. Australian law firms are well-known as offering specialised expertise, knowledge and abilities in their service provision across Asia Pacific. As these firms internationalise and focus mainly in Asia Pacific, these firms face multiple challenges competing with other global and regional law firms in these markets. The examination of PSFs operating primarily within the Asia Pacific context is limited, making it a worthwhile attempt to examine this topic further.

The current study provides theoretical and practical contributions in several important ways. First, we contribute by providing empirical evidence on the distinctive characteristics of legal firms. Second, the study shows how the distinctive characteristics of law firms, through its notion on knowledge intensity, low capital intensity and professionalised workforce, contributes to identifying human capital challenges. Given the impact of PSFs on the economy as a whole, the study presents an instructive case for examining both the HR challenges and opportunities faced by law firms in particular and by PSFs in general. In so doing, we extend the literature on law firms and HRM literature, on the management of ‘war for talent’ challenges and how HRM respond to these challenges in the globalising world.

Keywords: challenges, human resource management, professional service firms, war for talent



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challenges; human resource management; professional service firms; war for talent

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