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essional service firm. This is followed by the presentation of the research method and. ®ndings. The penultimate section discusses the results in more depth and ...
Evaluating strategic ® t in professional service ® rms Timothy Morris, London Business School and Ashly Pinnington, Exeter University

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olicy ® t is a central plank of much of the prescriptive and strategic HR literature because of the assumed performance bene® ts deriving from it (Guest, 1997: 264-266). Fit refers to the alignment of organisational policies with the requirements of the environment and alignment of second order policies, such as human resources, with the goals and strategy of the organisation to facilitate their implementation (Jackson and Schuler, 1995). In addition, there is assumed to be a cumulative and exponential bene® t from aligning individual HR policies and practices so that they interact appropriately and reinforce each other (Huselid, 1995: 667-668). Empirical research in HRM has increasingly concentrated on issues of fit, by testing whether ® rms’ policies are aligned or whether they gain the expected bene® ts, but few studies have looked at whether ® rms seek or achieve ® t in the development of policies. In particular, research on the adoption of policies across an industry or sector where ® rms are facing the same sort of environment is rare, not least because such events are unlikely to occur often. The article aims to bridge this gap by studying the adoption of formal evaluation across a group of ® rms in one sector. It examines the links to other HR policies in these ® rms, as well as the strategy of the ® rm. We also examine adoption in relation to other systems of control through which performance is monitored at the individu al and organisational levels, as evaluation has been seen as an important means by which managerial control over behaviour and attitudes may be established (Townley, 1993). The research site is a group of professional service ® rms in the legal sector. Recently, many professional ® rms have been said to be adopting more managerial methods replacing the loose professional controls on which they were traditionally run. These methods include more formal strategic planning, controls over the quality of work and productivity of staff, greater emphasis on coordinated marketing activities and more elaborate and centralised ® nancial systems. Pressure for change has come from more discerning clients and from the state, particularly as it seeks to curb the ever-increasing bill for legal aid. One bene® t of looking at these ® rms therefore is that it offers an opportunity to examine the extent to which HR policies, management controls and business goals develop together. Do the ® rms exhibit evidence of policy ® t in the process of change and how does their form of ownership and organisation structure appear to in¯ uence this? The article is organised as follows. The next section provides a review of the argument concerning the appropriateness of ® t and some of the evidence from previous empirical studies on the extent to which it can be observed. We go on to discuss the context in which the research was conducted, explaining the changing role that evaluation plays in the professional service firm. This is followed by the presentation of the research method and ® ndings. The penultimate section discusses the results in more depth and offers an explanation for them before we conclude by reviewing the implications of our main ® ndings. The concept of fit has been conceptualised in several ways in relation to strategic decisionmaking (Venkatraman, 1989: 423) and to HR policies and practices (Delery and

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Doty, 1996: 802; Guest, 1997: 271; Boxall, 1992: 75-76; Mueller, 1996; Snell, 1992; Arthur, 1994). Essentially, ® t varies across two dimensions: external and internal. External ® t (Becker and Gerhart, 1996: 784-789) concerns the link between HR policies and the external environment. This ® t may be moderated by another variable, namely the business strategy of the organisation and, as Guest points out, a central concern of strategic theories of HRM has been to test how well HR policies and practices fit the external context, the underlying assumption being that close ® t results in superior performance (Guest, 1997: 264). The fitting or matching of firm policies to the demands of the external environment is consistent with contingency approaches to the ® rm (Donaldson, 1995). Internal ® t relates to the notion of consistency between various components of an HR strategy (Baird and Meshoulam, 1988: 116; Iles and Salaman, 1995) or con® gurations of HR practices (Delery and Doty, 1996: 808-809). According to the proposition underlying the bene® t of internal ® t, companies combining their HR policies and, presumably, other second order policies such as marketing or production, so that they are mutually reinforcing, will achieve superior performance. Empirical work has produced mixed evidence on the existence and benefits of fit in company policies. For instance, research in one sector of the steel industry found companies that pursued a differentiation strategy adopted commitment-building HR policies and, conversely, cost-minimising business strategies were more associated with tight HR policies to maximise management control and ef® ciency (Arthur, 1994; Schuler and Jackson, 1987). By contrast, one of the few UK studies of ® t and performance by Guest and Hoque (1994) found mixed evidence of superior returns on green® eld sites that adopted a range of HR practices and had an HR strategy. Surveying UK-based work more broadly, Legge (1995: 135) concluded that internal or external ® t is the exception rather than the norm. Legge also noted that one of the problems of work on this area was that research could fall into the trap of adducing post hoc alignment between environment and policy where none had been intended. Further, while policy alignment may be found, this could conceal differences in either practice or intent. For example, ® rms might formally have similar recruitment policies but operate different practices, because managers either interpret them differently, operate them with differing degrees of effectiveness or ignore them (Delaney and Huselid, 1996). The research reported here aims to overcome some of the shortcomings of existing work in exposing the model of strategic ® t to empirical evaluation. First, by focusing on policy adoption across one sector, it red uces the variation in the environmen t to which organisations may be seen to be responding. Thus, if there are policy differences, these are more likely to be due to internal, management preferences than external factors. Secondly, the substance of the evaluation policy and other HR policies was examined to gain better insight into how they might link with the broad strategy of the business. Thirdly, the research aims to add to the limited empirical work on organisations’ adoption of policies that comprise the HR cycle. Recent work in this area has looked at the diffusion of HR policies, as part of the development of what has been called high commitment management, and found that there was stronger evidence for a universal rather than a contingent model of employee management (Wood, 1996; Wood and Albanese, 1995). In other words, the adoption of the set of employee management policies in their research was not based on external ® t with the environment. However, this work was based on manual workers from a sample of manufacturing ® rms in different industries and therefore the environments they faced will have varied. It also combined both new and existing policies and, because the research sample consisted of companies with a strong labour relations tradition, generalisation to the larger service sector and non-union sectors is limited. HUMAN RESOURCE MANAGEMENT JOURNAL ± VOL 8 NO 4

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Fourthly, the research examines how the adoption of formal evaluation may be influenced by the changing form of control in the ® rms in question. Thus we proceed by examining the role of evaluation among professionals and then by explaining how the adoption of formal evaluation ® ts with the way in which professional ® rms are said to be evolving. The adoption of formal evaluation can be seen as an important development for the management of professional firms. Theories of professionals and the professions have usually suggested formal evaluation was relatively unimportant as a form of control. This is because their long training was assumed to provide them with the necessary technical knowledge to carry out complex tasks unsupervised and the values which emphasise self regulation of behaviour and task autonomy (Friedson, 1986; Raelin, 1989; Aranya and Ferris, 1984; Derber and Schwartz, 1991: 81). Consequently, although bureaucratic forms of organisation have long been observed in large professional ® rms, they have mainly been concerned with scheduling work (Hall, 1968; Heydebrand, 1973; Montagna, 1968) and have coexisted with professional forms of control, which guarantee high autonomy to senior professionals in the way they carry out work and relate to clients. This has been reinforced by the considerable suspicion traditionally shown towards managerial techniques of control as they impinge on the autonomy of partners, who are the owners of the ® rm, and distract professionals from the key task of pro® tably resolving client problems (Hinings et al, 1991: 390-391; Maister, 1993; Nelson, 1988: 5). Further, the incentive systems in these ® rms have been assumed to minimise the need for performance monitoring. The central and long-term incentive offered to professional staff is promotion to partnership, which provides the right to a share of the ® rm’s pro® ts and a degree of in¯ uence over decisions affecting the ® rm. Such are the strengths of this incentive, it is argued, that high levels of effort will be produced by aspiring professionals without the need for close control. At the same time, partners, as owners of the ® rm, have a strong incentive to perform because they reap the pro® ts. They are also under pressure not to shirk from their co-owners who can monitor them closely because they are actively involved in the day-today operations of the business (Gilson and Mnookin, 1985; Greenwood et al, 1990: 733-734). Because of professionals internal values and the power of incentives in this organisational form, formal evaluation was therefore assumed to be unnecessary and counter-productive. However, managerial methods more commonly seen in the orthodox ® rm have been adopted in recent years by many professional service firms. This change has come in response to the problems of managing greater size and complexity, and under pressure from clients (Greenwood and Lachman, 1996; Cooper et al, 1996: 630-634; Galanter and Palay, 1992: 48-49). The old model of the professional ® rm wherein staff carried out tasks and chose appropriate solutions with only loose controls is said to be giving way to a more consciously managed form (Cooper et al, 1996: 631). In this new form, marketing and strategic planning occur more proactively in order to exploit the client environment systematically. This planning activity is linked to controls over an individual partner’s activities, the formal assessment of staff performance and the allocation of rewards based on this (Abernethy and Stoelwinder, 1995). There is said to be clearer planning of promotion and external hiring based on the need to meet demand for particular types of expertise, rather than the traditional use of internal labour markets to allocate promotions to partner on a seniority basis. Tighter ® nancial controls have been introduced alongside imported management techniques to handle quality and productivity. Indeed, what it means to be a professional in these ® rms has changed so that it now requires close attention to client needs, the proactive selling of ® rm services and making a ® nancial contribution (Cooper et al, 1996: 631). 78

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Theories of change in the professional service ® rm therefore suggest these organisations will exhibit evidence of policy formalisation as part of a set of wider changes in the mode of management control (Greenwood and Lachman, 1996). These theories would predict that the adoption of formal evaluation will be part of a general policy development in human resources and ® rms will seek to achieve alignment between their broader strategic goals and the second order policies through which control is achieved. This is explored in the research we report below. SAMPLE AND RESEARCH METHOD Following pilot work, a postal questionnaire was sent to the 406 law ® rms in England and Wales with 10 or more partners in June 1993. The data were gathered as part of a study of the management and organisation of professional ® rms. After a reminder letter, 144 usable returns were received, a response rate of 35.5 per cent. This can be considered a reasonable return rate, given that the chosen respondents are less accustomed to completing questionnaires on management policy and are often very guarded about releasing information on the ® rm, as they regard this as con® dential to the partners. The questionnaire was addressed to the managing partner who is in charge of day-to-day running of the ® rm and usually plays an important role in longer-term decisions affecting the partnership. From a sample of 40 firms, also with greater than 10 partners, further quantitative and qualitative data was obtained through interviews with the senior or managing partner. The interviews were also used to validate the questionnaire ® ndings. We could only gather indicators of ® nancial performance, as partnerships are not obliged to publish their results and are unwilling to reveal them, formally or informally. The questionnaire did, however, ask for annual fee income to be given in broad bands and whether pro® ts had risen or fallen over the past three years. The adoption of formal evaluation was analysed in terms of the time it was introduced for three different groups of staff: partners, other professional staff and support staff. First, internal ® t was examined by cross-tabulating different types of recruitment, reward and promotion policies with the presence or absence of formal evaluation. Secondly, ® t between the adoption of formal evaluation and other policies was assessed by cross-tabulating with performance measures and controls. Thirdly, ® t with the business strategy was also tested and the details of this are discussed further below. In addition, single-linkage cluster analysis of the HR policies was also undertaken to explore ® t, but the policies failed to group sufficiently to provide statistically significant and meaningful groups. To examine if predictors of formal evaluation could be found in line with theories of fit, a logistic regression was undertaken, using formal evaluation as the dependent variable and HR policies, the use of performance and management controls, and the use of a formal business plan in which HR policies were incorporated as the independent variables. However this, too, yielded no signi® cant results. FINDINGS Coverage and adoption of formal evaluation Contrary to trends on incorporated ® rms, where seniority is positively related to the use of formal review, professional ® rms are least likely to evaluate the most senior grades. Table 1 shows that the majority of ® rms use formal evaluation for grades below partner but only a minority use it for partners. The questionnaire did not ask for an explanation of this pattern HUMAN RESOURCE MANAGEMENT JOURNAL ± VOL 8 NO 4

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TABLE 1 Firms using formal appraisal for different categories of staff Proportion of ® rms Staff category

(%)

Partners

37

Non partners

82

Support staff (non professional)

65

n = 144

but our interview ® ndings suggested partner resistance to evaluation, on the grounds that it was an inappropriate form of control, was the main reason for coverage not being so wide. Most ® rms have introduced formal evaluation only recently, ie within the ® ve years prior to our survey, as the data in Table 2 demonstrate. It is introduced in sequential order, ® rst for support staff and non-partners and lastly for partners. Formal evaluation is therefore a widespread but relatively recent innovation, the use and introduction of which is negatively related to seniority. TABLE 2 Year of introduction of appraisal system

Year of introduction

Percentage of ® rms Partners Non partners Support

1993

10.4

13.2

13.9

1992

10.4

14.6

12.5

1991

7.6

11.8

12.5

1990

4.2

16.0

9.7

1989

2.8

11.1

6.9

This does not mean, however, that partners have been free from evaluation by their peers. The data reveal that what is occurring is a slow formalisation of existing practices from the bottom up; a set of questions on the substance of partner evaluation was answered by many more ® rms than those that operate formal schemes. Table 3 details the use of different ® nancial criteria for measuring partner performance and indicates that ® rms focus most frequently on targets for partners’ fees (86 per cent of respondents), cash ¯ ow (bills outstanding totalled 84 per cent) and new work and future income (work-in-progress). By contrast, the traditional measure of professional productivity, time utilisation, is less frequently measured, indicating that partners are primarily judged as business managers. The evaluation of TABLE 3 Measures of ® nancial performance of partners (percentage using measure) Performance measure

80

Percentage of ® rms

Fees against targets

86

Bills outstanding

84

Work-in-progress

72

Hours charged

69

Time recorded

64

Time against targets

52

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senior professionals’ actual work appears to be relatively rare, but co-owners do look at each other’ s business performance because of the strong incentive to ensure their partners are not `free-riding’ in terms of contributing less than the share of the rewards they take. Formal evaluation and ® t with other policies We ® rst looked at the adoption of formal evaluation for each group of staff, partners, other professionals and support staff and the association with other HR policies. We did not have data on policy usage at the point of adoption but we could contrast early and late developers to explore whether the timing was associated broadly with policy differences, as this might be indicative of ® t. Splitting the sample into pre and post-1991 groups, we investigated both partner and non-partner evaluation. For non partners, the timing of adoption was unrelated to other HR policies but, for partners, the use of external labour market recruitment was more likely to be linked to later adoption of partner appraisal. This suggests that the type of recruitment policy precedes and possibly prompts the introduction of formal evaluation, although different policy processes are at work for each group. Next, we split the sample between those that do formally evaluate and those that do not, to see if the adoption decision was related to different management policies. The results showed there were differences: those ® rms that evaluate are also more likely to monitor partner activity more extensively in terms of financial performance. Specifically, they 2 2 measure time recorded (chi 3.31; sig 0.069); check time recorded against targets (chi 3.55; 2 2 sig. 0.05); fees against targets (chi 4.6; sig 0.03) and work in progress (chi 5.58; sig 0.01). A positive but non-signi® cant result (< 5 per cent level) was also found for one other ® nancial 2 control measure ± bills outstanding (chi 2.2; sig 0.13). This suggested formal evaluation is a complement to direct ® nancial monitoring rather than a substitute for it, and is aligned with policies of tighter ® nancial control. To test this further, ® ve measures of management controls that had been introduced in the preceding five years were used to examine the extent to which evaluation is linked to internal ef® ciency measures. Firms were asked which of the following had been introduced or extended (see Table 4). Although no significant relationship was found between the use of formal partner evaluation and these controls, the use of evaluation for other professionals was positively 2 associated with the introduction of budgetary systems (chi 8.31; sig. 0.003) and quality 2 standards (chi 4.9; sig. 0.02). It was also positively related to new productivity measures at the 10 per cent level of signi® cance. Use of formal evaluation for less senior (non-partner) grades is therefore linked to the pursuit of internal ef® ciency via the general extension of managerial controls and it is accompanied by the use or extension of ® nancial measures of performance for senior professionals. TABLE 4 Management controls introduced or extended Management control

Percentage of ® rms agreeing

Productivity measures

48

Budgetary systems/controls

82

Client feedback

44

Quality standards/systems

57

Business planning

73

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Relationship to business strategy and HR policies Turning to the links between policy adoption and business decisions, we ® rst tested the relationship between the use of formal evaluation and existence of a formal strategic plan, which 48 per cent of ® rms in the sample indicated they had. This was not signi® cant. Then, for those ® rms with a formal plan, we examined whether it incorporated any HR policies. Fewer than one-third mentioned any type of policy: training was included in 31 per cent of the plans, recruitment in 29 per cent, promotion in 19 per cent and pay in just 10 per cent. We also examined whether those ® rms that did incorporate any of these policies were more likely to have adopted formal evaluation than others; no statistically signi® cant association was found. This indicates that ® t is not with formal strategic planning but with other control systems. However, professional service ® rms ± and others ± may act strategically whether they have a formal plan or not (Mintzberg et al, 1988; Mintzberg, 1994). We examined the adoption of formal evaluation in relation to two types of strategy used by the ® rm: either concentrating on its traditional group of clients and services or diversifying its client base and introducing new specialisms. These strategies are anchored in partners’ expertise (Mintzberg and McHugh, 1985) because what partners choose to focus on in terms of professional practice and clients determines the direction of the ® rm. An exclusive use of the internal labour market and traditional methods of pro® t sharing and promotion are the basis of the former strategy, while recruitment from the external labour market to introduce new specialisms is the main method by which the latter is adopted (Nelson, 1988; Tolbert and Stern, 1991). Three HR policies were therefore selected as proxies for the type of business strategy. These were the use of external labour market recruitment at or below partner; the form of promotion system, speci® cally whether the ® rm continued to use the traditional up-or-out method; and, thirdly, whether the ® rm rewarded partners on the basis of seniority or on partner performance. No relationship was found between adoption of formal evaluation and type of labour market policy (external hiring or use of an internal labour market) the best indicator of the different business strategies the ® rm has adopted. However, the other results were positive but contradictory in terms of the conceptual model: type of promotion system is linked to adoption of formal evaluation with those using the traditional method, up-or-out, more 2. likely to adopt it (chi 16.56; sig 0.002). On the other hand, evaluation is strongly linked to the 2 more innovatory pro® t-sharing method using performance-related rewards (chi 15.85; sig 0) although it is not related to the use of performance related pay for other grades. Overall, these results are hardly conclusive evidence of a linkage between type of business strategy and adoption of formal evaluation. They are more indicative that, when performance has to be evaluated for the purposes of sharing the pro® t pot or when ® rms seek to make the crucial promotion to partner a clear-cut choice (promote or force a quit), firms have formalised the evaluation. POLICY ADOPTION, STRATEGIC FIT AND NEW FORMS OF MANAGEMENT This study has shown that formal evaluation is a recent but relatively widespread phenomenon, at least in all but the most senior grades in these professional ® rms. Its principal uses are to assist the long-term career development of professionals and to assess the short-term performance of partners, but we found little evidence of alignment either with a set of HR policies or with broad business strategy, formal or actual. However, there was evidence of strong ® t with the other systems of control used by these ® rms and that the formalisation of partner evaluation had coincided with extensions to these controls. Thus, the results were 82

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not wholly consistent with the model of a reformed professional firm in which a more conscious management of resources and performance prevails; rather, traditional forms of control coincide with features of the newer one. The rest of the article addresses these ® ndings and offers an explanation for them, drawing on the interviews with managing partners we undertook in conjunction with the questionnaire survey. To recap, normative theories of strategic ® t would suggest ® rms should seek to align policies internally and externally because there are performance bene® ts resulting from this. Given that alignment was not found in this sector-wide study, was this because ® rms were not seeking to achieve ® t or was it that the intention existed ± at least at the top of the ® rm ± but it was not possible to achieve? Generally, our ® ndings incline us towards the former explanation. Most managing partners did not conceive of a strategy in terms of the sort of formal plan which sets out in detail the competitive position of the ® rm and how it will proceed to act over the medium to long term. Even in those ® rms where a formal plan existed, this was more likely to take the form of a ® nancially-driven document which set out the targets and growth of the ® rm and provided little by way of substance in strategic positioning. Strategy was seen as a broad statement of intent which emerged from the opportunities and preferences of other senior partners. This is because, in the professional ® rm, partners `own’ the clients rather than the ® rm owning them, in the sense that clients come to the ® rm for a speci® c transaction and liaise with the head of the area wherein the relevant expertise resides. Further, the firm frequently wins client business on the basis of the reputation of an individual or group within it, as much as the overall reputation. The ® rm’s strategy is therefore the aggregation of partners entrepreneurial activities in client markets rather than a blueprint from the centre; it emerges over time as professional expertise leads to success in some areas and decline or disinterest in others (Mintzberg and Waters, 1985; Starbuck, 1993: 737-738). Our interview work revealed that managing partners rarely had the authority to tell their peers and co-owners how to compete, nor took the view that this was appropriate, given the role of the partner as business-getter. Strategy, in the sense of a uni® ed plan of campaign, is also limited by the diversity of markets that ® rms of any size operate within. Thus, experts in corporate banking law face different types of clients and transactions to their colleagues in property law, litigation or construction. Similarly, in consulting ® rms, operations consultants have different types of client to, say, strategy or HR colleagues. This is consistent with theories of the professional ® rm that see it as a risk pooling device: that is, a means by which individuals selling their expertise can spread their risk in the market place by combining with other professionals who possess different types of expertise and face different market conditions (Gilson and Mnookin, 1985). As one managing partner of a medium sized provincial ® rm put it to us: When the property market dries up, you pick up work in divorce or probate to cushion the blow.

Strategies therefore exist as broad understandings of the strengths of the ® rm or ways to compete but could not be said to impose strict guidelines on functional activities such as marketing or HRM. Thus, most large ® rms have a marketing function, headed by a partner and often with a professional marketing manager, but this is essentially a support function to the critical marketing work done by professionals themselves of reputation building, through successfully executing professional work, client management, writing in the practitioner press and giving seminars and making presentations. If the entrepreneurial, partner-based management of clients and staff explains why ® rmwide strategic ® t is dif® cult to develop, then control can be seen as the counterweight in the system. Financial controls are there to ensure that the overall interests of the ® rm ± or its HUMAN RESOURCE MANAGEMENT JOURNAL ± VOL 8 NO 4

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owners ± are being maintained but do not get in the way of business-getting. Checks are necessary because co-owners have an interest in making sure their peers are not free-riding or undermining the reputation and pro® tability of their ® rm. The role of performance evaluation for partners is therefore to complement other controls over partners by checking the outputs of their activities. In this sense, the form of management which these ® rms have implemented is analogous to the strategic control model identi® ed by Goold and Campbell (1987) at the centre of M-form ® rms, allowing individual partners (businesses) autonomy over the running of the business but measuring outputs in terms of a mix of strategic and ® nancial results. Why, then, have only a minority of ® rms formalised evaluation for partners, while a majority have introduced it for other types of staff? This is a reflection of power in the professional ® rm. It is not that managing partners did not want to do this; it is more that they have been unable to do so. Partners have been able to resist formalisation by virtue of their ownership rights. Our responden ts indicated that resistance occurred because partners saw this as impugning their `professionalism’ and inappropriate given that a peer and co-owner would have to act as the evaluator. Where they have done so, the results suggest these partners have also been able to resist the application of other forms of performance evaluation, thereby limiting the extension of managerial control. Thus the model of professional control remains an important ideological framework, at least for those at the top of these ® rms (Abernethy and Stoelwinder, 1995). Without support from senior partners and preferably others, managing partners were usually reluctant to try and enforce change, although they had not abandoned the intention to do so through persuasion and reference to other ® rms. One would predict, therefore, that the incidence of partner evaluation will only grow slowly. In the much larger accounting ® rms, by contrast, partner power has been diminished by the development of extended partner hierarchies and the small size of an individu al’ s ownership stake. This has facilitated the extension of managerial control much further over partner activities and performance. For non partners, ie more junior professional staff and support staff, the use of formal evaluation has become the norm in the space of ® ve years. The function of evaluation is different for professional staff. Here, the purpose is to identify future partners by assessing performance and potential, rather than to facilitate the allocation of rewards or sustain control. Again, this long-term perspective is consistent with theories of the professional service ® rm because ® rms survive by ® nding good quality partners who will protect or enhance the reputation of the firm and thereby generate clients and profits (Malos and Campion, 1995). Somewhat counterintuitively, therefore, evaluation acts as a control mechanism on the most senior members and, more benignly, as a development tool for their juniors. CONCLUSIONS This article has examined the widespread adoption of formal evaluation as an HR policy in one sector occupied by professional firms. Such sector-wide changes must be rare and therefore dif® cult to study but, in this case, the adoption of formal evaluation was clearly widespread and rapid. By looking at a large number of ® rms operating in one sector, the research was able to consider policy ® t in the context of a similar environment. We argued that, from a theoretical standpoint, use of formal evaluation had to be understood as evidence of a signi® cant change in the management of these ® rms because it impinged on the traditional forms of professional control. Thus, adoption had to be seen in conjunction 84

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with the use of other managerial techniques introduced by professional ® rms as they have reformed internally. Little evidence of internal or external ® t could be found, even though we tried to test not just the existence of other HR or business strategies but also their substance. Rather, we found evaluation played two roles: for junior professionals it was developmental while, surprisingly, for senior staff/owners its function was more controlling. The fact that evaluation coincided with the adoption or extension of other forms of control for partners, rather than strategic goals, did not lead us to conclude that ® t was either impossible to achieve or not considered, but that it is a question of what ® rms are using HR policies for. In these organisations, the role of evaluation is to counterbalance partner entrepreneurialism which is characteristic of professional ® rms. Similarly, its function with professional staff is consistent with the requirements of such ® rms in building and assessing human capital over the long term, given that these organisations compete largely on the basis of their employees. The absence of close ® t with other policies does not imply managerial failure, so much as indicating that fit can take numerous forms and may be a highly selective exercise. We also found that adoption was a slower and more incomplete process for the most senior grades. This re¯ ects the importance of the traditional professional form of control through self-regulation and the power of partners, as the owners of the ® rm and its clients, to resist the imposition of closer controls. Thus, while these firms have been reformed internally in many respects in recent years with the introduction of managerial techniques from other sectors, they retain aspects of older forms of control as well. Traditional and new forms of management coexist, making change an incomplete and often `sedimented’ process as Cooper et al (1996: 623) have argued. This may well be why ® rms have adopted formal evaluation for partners in conjunction with other forms of control. Thus, the empirical investigation of ® t in professional ® rms presented here emphasises the importance of taking into account organisation form and functioning. Professional ® rms have to be understood as relatively decentralised organisations in which partners make strategies for their own areas of expertise and loosely co-ordinate activities where appropriate for clients. In such organisations, the model of top-down business strategy with underpinning functional policies in areas such as HR is inappropriate and would be dif® cult to achieve without the sort of centralised bureaucratic control ± and partner hierarchies ± observable in the largest accounting firms. Nonetheless, selective fit with other control policies has been achieved. The implication is that further research on policy ® t should also take into account the nature of control and the extent to which authority is decentralised, particularly in other professional or knowledge-based organisations. Acknowledgement We would like to thank the Leverhulme Trust for funding the research on which this article is based. REFERENCES Abernethy, M. and Stoelwinder, J. 1995. `The role of professional control in the management of complex organizations’. Accounting, Organizations and Society, Vol. 20, no. 1, 1-17. Aranya and Ferris 1984. `A re-examination of accountants’ organisational-professional con¯ ict’. The Accounting Review, Vol. 15, no. 1, 1-15. Arthur, J. 1994. `Effects of human resource systems on manufacturing performance and HUMAN RESOURCE MANAGEMENT JOURNAL ± VOL 8 NO 4

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