| Summary: | Professional Service Firms (PSFs) have become increasingly prevalent in today's society due to increased demand for consultants, lawyers, accountants and other individuals who utilize abstract knowledge to solve organizational problems (Abbott, 1988). Despite their importance to the U.S. economy, little research exists on managerial practices within PSFs, particularly on promotion practices, an area which needs to be explored since these firms have substantially different advancement systems than their more traditional counterparts. This study explores the importance of technical skills, internal connections and external connections in making promotion decisions within PSFs. Using agency theory, social capital theory, and network theory as the theoretical base for the conceptual model, a number of hypotheses postulated that technical skills would become decreasingly important as one moves up the hierarchy whereas internal and external connections would become increasingly important. At the lower levels of the firm where advancement decisions are less risky to equity holders, it was hypothesized that technical skills would be the most important criterion used in making promotion decisions. As partners become more susceptible to agency problems such as goal incongruence and information assymetries, partners create relationships with promotion candidates, in order to understand if these candidates have similar objectives for the firm as the partners. Therefore, it was hypothesized that internal connections would be the most important promotion criterion for the penultimate promotion. Because the mere existence of the PSF depends on establishing client contacts and maintaining long term customers, it was hypothesized that external connections become the most important criterion for advancement to partner. A policy-capturing methodology was used to gather data for this study, which examined three different promotion decisions: Associate to Manager, Manager to Principal, and Principal to Partner. Participants consisted of 41 business consultants who were actively engaged in making promotion decisions for their respective firms. Results indicated that technical skills were the most important criterion at the lowest levels, whereas external connections were considered the most heavily for promotions to Partner. Internal connections were never the most important criterion in any advancement decision. Analyses also suggest that promotion criteria differ depending on the level of promotion.
|
|---|
