Strategy

Service sector: Serving the world

Canada's future depends on its service industries. But are we ready to compete globally?

Despite the rise of the oilpatch, Canada’s future increasingly depends on its service industries, especially higher-value engineering, legal and architecture firms. The professional, technical and scientific services sector contribution to GDP jumped 3.5% from April 2006 to April 2007, while adding 44,200 jobs in 12 months ending June 2007 — topping both the goods- and services-producing industries. And cities with more engineers and scientists have better job growth overall, reports a recent Statistics Canada study.

But there are some worrying signs that this sector is not quite ready to face the challenge of a global marketplace, according to Grant Thornton LLP’s Professional Services Insight 2007 report. Law firms are particularly vulnerable, partly because they heavily rely on grabbing new clients and increased hourly rates for growth — a growth that can only be fulfilled by finding andhiring increasingly scarce talent. “If you’re going to grow on an hourly rate billing method, you’re going to have go out and find more staff, and there is a war for talent out there,” says Doug Moore, a partner and professional services national leader at Grant Thornton in Vancouver.

Law firms would be better off looking at different types of payment methods such as value-based service billing instead of hourly rates, and contingency fees, prepaid billing and monthly retainers, says Moore. They should also find ways to grow globally with clients, probably by working out strategic alliances in other countries, especially since Canadian law firms are restricted in how much they can grow nationally.

Moore says some firms are adopting a team-based approach to billable hours, which gives mid-level professionals more experience. That doesn’t mean the partnership model has to be jettisoned. Indeed, only about half of younger employees believe that model is outdated (compared to two-thirds of those over 45), but partnerships must be flatter to provide more opportunities for mid-level staff. That might make for a long business card, but as Moore notes, cards do have two sides. andy holloway