Influence factors for operational control and compensation in professional service firms

Abstract

Abstract Professional service firms have distinct operational challenges due to the type of work that is transacted by the employees of these firms, and due to the nature of the employees themselves. In this paper, we develop and present factors that influence professional service operations in firms and compensation structures for professional service providers. We establish professional service influence factors, which we posit will impact agency relationships in professional service firms. That is, we hypothesize that professional service influence factors (PSIFs) will moderate the effect of task programmability and outcome measurability in predicting the use of behavior‐ or outcome‐based compensation schemes (control strategy). Logistic regression is used on data provided by 192 professional service providers in order to examine the impact of the agency variables and moderating factors on control strategies. The results indicate that company‐ and profession‐based factors have moderating effects on task programmability when predicting control strategy. We discuss the implications of our findings.

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