The “Professionalization” of Service-based Industries

I spent several days in mid-February at Imperial College in London.  I was a speaker and panel member at an event sponsored by Design London, the multi-disciplinary innovation initiative between the Royal College of Art and the Imperial College engineering and business schools.  The event - The STEM of Service Experience, - focused on the role of Science, Technology, Engineering and Math (STEM) on innovation in services. 

The following day I conducted a seminar on Technology and Innovation in the Service Economy with doctorate candidates in the Business School.  We had very stimulating discussions on the impact of STEM on service-based organizations, in particular, how increased access to information and sophisticated analysis and modeling tools can help managers make better business decisions, especially those concerning highly complex problems. 

One of the students raised the question of whether, as service-based industries have better information and tools at their disposal, we should expect their management to become more professional in the way they make decisions, much as has been the case with engineering as it matured as a discipline over the decades.

It was a very intriguing question that has stayed in my mind since.  What does it mean for a company and its management to be more professional?  How is professionalism related to the scientific and technology underpinnings of the company, as well as to its use of information, analysis and modeling tools?

 
According to the Wikipedia entry for professional:  “A professional is a member of a vocation - an occupation to which a person is specially drawn or for which they are suited, trained or qualified - founded upon specialized educational training.” 

The Wikipedia entry lists a set of criteria associated with being a professional, which include: academic qualifications; expertise, specialized knowledge and skills in one’s field of practice; high quality work; a high standard of professional ethics and work practices, including often putting the interests of the client ahead of one’s own; and being motivated to do a job well to attain a high level of professionalism.

I don’t think there is much argument with these definitions and criteria.  But underlying them is the expectation that to be considered a true professional there is an accepted body of knowledge, expertise and skills that a person needs to, as well as a sense of responsibility to clients, communities and society in general.  This has been the case in a number of relatively mature professions like engineering.   

Science and technology have clearly had a huge impact on engineering disciplines in the last hundred years.  As a result, there are certain expectations that we now have for what it means to be an engineering professional, e.g., a civil, mechanical or electrical engineer.  According to the IEEE:  “The title, Engineer, and its derivatives should be reserved for those individuals whose education and experience qualify them to practice in a manner that protects public safety.”

We have similar expectations for engineering enterprises, such as a construction company that builds bridges, an automobile company that builds cars, or an energy company that builds nuclear power plants.  They are supposed to use the best possible science, technology and talent to build bridges, cars and nuclear power plants that are both profitable and safe.  They are expected to balance the interests of the company with those of their customers and society.

Well functioning societies have developed a number of checks and balances to ensure that companies do not abuse the public interest in their quest for wealth and profits.  Government regulatory agencies have the responsibility to ensure that companies and markets are operating in accordance with such public interests.  Examples of such agencies in the US are the National Highway Traffic Safety Administration (NHTSA), the Federal Aviation Administration (FAA) and the Securities and Exchange Commission.

Even when there is a fair degree of agreement among company executives, government regulators, academics and other experts about the science and engineering underlying an industry, major disputes will arise from time to time surrounding complex issues.  The recent safety incidents and recalls concerning Toyota’s cars are but the latest example of such a thorny complex issue.

If managing can be tough in relatively mature industries with sound science and engineering underpinnings, then what about managing in an industry lacking such solid underpinnings, as has been the case with the more service-oriented industries?  Our ongoing financial crisis is a case in point.

A few individuals here and there can claim that they saw the financial crisis coming.  But overall, the crisis seems to have surprised just about everyone else, including banking executives, financial regulators, economists - including quite a few with Nobel Prizes to their credit - government officials, and academics.  It is fair to say that as a group, our country’s top financial minds, the so-called best and brightest, did not truly understand what was going on until the crisis was upon us.

Looking back, many of our financial experts may have actually contributed to the crisis by coming up with theories that leant credence to financial activities that made no sense.  In retrospect, how could so many otherwise smart people have believed that it was OK to lend money to borrowers regardless of their credit history, employment status, income level or ability to make a down payment, because housing prices would just keep going up?  Or that, in any event, lenders could protect themselves from the risks that homeowners would default on their mortgages by distributing the risks using innovative securitization and financial instruments like derivatives?   The professionalism behind these decisions was seriously flawed.

There are many reasons why companies and industries make bad decisions, including greed, erroneous assumptions, misaligned interests, competitive pressures and perhaps mediocre management.  But, equally valid is that our knowledge, expertise and skills may not have kept up with a fast changing world.  What worked in the past may no longer apply.  We need a better understanding of the new technology and market environments in which these industries are now operating.  

Achieving such a better understanding, as well as a consensus on the underlying science and technology, is what we mean by the professionalization of an industry.  I think that over the past century, we have seen major progress in the scale and public safety of engineering-based industries, including construction, transportation and energy, as we have achieved such a better understanding.

Hopefully, as we make progress in applying STEM disciplines to service-based industries – e.g., finance, health care and the public sector in general – the overall professionalism of these industries will similarly increase.  If it does, that will lead to better decisions both for the companies involved and for society as a whole.

Comments

[Graham Johnson]

I understand the statement of the problem but I am surprised you limit the need for "better understanding" to just "New technology and market environments". Surely process and organisational context are just as important?

[Bud Byrd]

I have given considerable thought to products and services both as a former employee of our common corporate ancestry and as a private individual who at one time was a practitioner operating as a consultant in the services marketplace.

The question offered up in your Imperial College event, re: “…whether, as service-based industries have better information and tools at their disposal, we should expect their management to become more professional in the way they make decisions?” is very intriguing indeed. Unfortunately, I was not present for the conversation to gain context or more detail, nevertheless, I’ll state my opinion.

In areas wherein professional implies a level of absolutes that must be firmly adhered to;
e.g., the laws of physics, gravity; weights, measures; etc., require professional licensing to maintain the precise standards demanded of nature and society. Such areas as:

Bridge building, airframe design, submarine design, building architecture, etc., are among the many areas requiring strict adherence to absolutes, consequently, the requirement to certify the competence and performance of practitioners.

In electronics, laws (Ohm’s law among others) some of which may be considered physical laws require a level of knowledge that in many cases is as important to society as the physical laws, e.g., properly designed and manufactured electronics that keep the 747 airborne. Whether the engineers and by extension engineering managers performing design, testing design and other roles need be licensed or alternatively vouched for by a credible group (e.g., IEEE) may be debated …certified knowledge v. licensed professional being the criteria but most would come down on the side of professional (licensed) workers and professional supervisors in these roles.

Medicine and other life and death disciplines should have the same level of professionalism in the form of licensing, sanctioning, disciplining bodies, etc. applied as stated hereunder.

If, on the other hand, the area of services is more mundane than life threatening, e.g., the designation of professional is nothing more than a requirement that an academic degree, organizational affiliation or other qualifier be assigned that causes one services manager be deemed professional while another equally skilled not be, then the term professional is misapplied. Professional becomes a bureaucratic, exclusionary term with no redeemable value to society.

One area wherein professional is being bandied about and where many are calling for more professional management requirements is the area of finance. While greater professionalism as defined in knowledge of products and services is important, more important management requirements in this area are honesty and integrity with a pinch of humility. To help managers to display higher levels of honesty and integrity, it seems appropriate that regulations need be enacted / enforced that allow the business performing the service to prosper and/or to suffer, reap the same consequences as its many customers. Services firms (including respective management teams) should be held accountable and not be allowed to pass on all the risk inherent to their respective services / products without holding on their own books a large measure of any consequences of failure.

I love your posts …wish I had the opportunity to attend some (all) of your events. Please keep up the great work.