Professions and financial incentives
Early social scientific accounts of occupations described characteristics or traits which defined them as professions (Macdonald, 1995). These included the existence of a code of professional conduct and a professional organization, as well as service for the public good (Millerson, 1964). More critical sociologists working within Marxian and Weberian traditions have for many years argued that professional groups put their own interests before those of the wider society (Saks, 1995).
However, such accounts tend to view interests in rather simple terms (Swedberg, 2005). For example, Alford’s (1975) conceptualization of the medical profession as a dominant structural interest in healthcare systems tends to assume that these ‘interests’ are determined according to the structure of social, economic and political institutions that exist at any given time. It also places a heavy emphasis on the importance of financial ‘interests’. This might imply that changing behaviour is best achieved by manipulating the financial incentives professionals face. In a range of settings, financial incentives are increasingly being used as part of an attempt to influence professional behaviour.
In this chapter we examine how the financial incentives faced by professionals in the fields of medicine and accountancy impact on their behaviour. These professions are very different. Medicine has traditionally been seen as a vocation and doctors are expected to exercise altruism when discharging their duties. In contrast, accountancy has been described as abandoning its social or public good orientation and replacing it with a narrow ‘keep the client happy’ commercial one (Hanlon, 1994). As we discuss below, however, both groups of professionals face financial incentives which attempt to influence their behaviour. We suggest that these are powerful influences in helping to reconfigure professional fields.
The changing context of professionalism
Professionalism has traditionally been seen as a means of organizing and controlling group members that contrasts with other hierarchical and bureaucratic forms of control (Macdonald, 1995). This means that professionals are self-regulating and enjoy a degree of autonomy which is not available to members of other occupational groups. Professional ethics are overseen by the professionals’ own institutions and associations, in the context of collegial, rather than hierarchical, relationships between practitioners. Linked to this, professionals are trusted to exercise judgement in the best interests of the client.
The context in which professionals work has, however, seen much change in recent years. We have witnessed a shift away from trusting professionals towards holding them to account against measurable criteria. Giddens views trust in professional experts as an essential component of modernity, yet ‘[w]idespread lay knowledge of the modern risk environment leads to the awareness of the limits of expertise’ (Giddens, 1990, p. 130; see also Chapter 9 by Brown and Calnan). In the context of a ‘risk society’, various commentators identify trust in professionals as declining. Beck (1992) asserts that an increasing public awareness of risk and uncertainty has been accompanied by a loss of faith in experts. Despite this trend, the medical profession has largely escaped the sort of critical public scrutiny experienced by other professions. For Beck, the ‘internal definition-making power of medical practice’ (Beck, 1992, p. 208, emphasis in the original) means that it can counter criticism from external sources by the creation of new social facts.
In addition to the shifting views of society, the organizational context in which professionals work is changing. The emphasis on collegiality amongst peers embodied by the traditional model of professionalism suggests equality amongst professional group members in terms of probity and competence. Yet, writing about the medical profession, Freidson (1985) identified a process of ‘stratification’ which involved an administrative elite guiding and evaluating the performance of professionals against standards developed by a knowledge elite (Freidson, 1985, p. 22). According to Freidson, this process enabled elites to exert control over members of the profession whilst helping maintain medicine’s position of pre-eminence. This ensured the continued dominance of the medical model and the profession’s ability to determine its own fate (Freidson, 1985).
The developments Freidson outlined were seen as enabling the profession to resist attempts at control from outside. More recently, however, the autonomy of professionals has come under increasing challenge from a range of sources such as clients and/or third-party payers, as well as managers within their organizations. Evetts (2005) identifies: ‘an ideal-type organizational professionalism’ which
is a discourse of control used increasingly by managers in work organizations. It incorporates rational-legal forms of authority and hierarchical structures of responsibility and decision-making. It involves the increased standardization of work procedures and practices and managerialist controls. It relies on externalized forms of regulation and accountability measures such as target-setting and performance review.
(Evetts, 2005, p. 9)
Such processes are likely to have a significant impact on professional behaviour. Grey (1994), writing in the context of the accountancy profession in the UK, suggests that the pursuit of career, which involves, amongst other things, conformity to organizational expectations and assessment via performance review, has implications for the way professionals behave. He describes how work, for some people, is important:
not just for those reasons of collegiate identification highlighted by the sociology of the professions … Instead, work is a part of the entrepreneurial project of the self … a process of the achievement of self through work which is offered within organisations as career and which is expressed by individuals through career.
(Grey, 1994, p. 482)
Career is both controlling and benevolent, since conformity to organizational expectations will help individuals achieve their potential. The process Grey describes resonates with writings from the sociology of professions, however, since notions of the appropriate self are formulated as part of socialization processes which inculcate norms and clarify expectations about appropriate forms of selfhood.
Grey does not use the phrase financial incentives, but they are implied, since the financial rewards that career progression brings are likely to be an important part of the process he describes. For the purposes of this chapter, we define an incentive as something that is intended to encourage people to do something. Increasingly, in recent years, there has been a tendency to treat incentives more explicitly. These attempts to influence professional behaviour reflect a general trend away from placing implicit trust in individuals and organizations to carry out their duties towards actively influencing their performance (Harrison and Smith, 2003). Whilst individuals may respond to financial incentives in the short run, they may be negative reinforcers in the long run, since they may conflict with intrinsic motivation – the individual’s desire to perform a task for its own sake. This is because they signal to the individual that they are not trusted to perform in the absence of inducements (Frey, 1997).
Much of the literature on financial incentives is informed by economics and cognitive psychology. However, these approaches tend to downplay or ignore the concept of a shared professional identity, with associated norms and behaviours. Moving to a more social (as opposed to atomistic individual) perspective provides some insights into the contextual issues which influence behaviour (McDonald, 2015). Furthermore, features of the wider system in which professionals work may have an impact as well. Reforms in the wider context (as opposed to immediate organizational factors) may threaten worker motivation and behaviour if they embody values that are antithetical to those on the receiving end.
Literature from the sociology of the professions draws our attention to the fact that professional groupings exhibit shared norms and behaviours. The introduction of measures to increase professional accountability and enforce formal standards, even if they are linked to financial rewards, may clash with the desire for professional autonomy (McDonald et al., 2010). In the following sections, we explore the impact of financial incentives in the context of medicine and accountancy.
Asking ‘what impact do incentives have on professionals?’ is likely to result in the answer ‘it depends on the context’. We choose two contexts – English primary medical care and accountants, and the empirical material reported on here is drawn from two large studies. The research examining medical professionals involved interviews with general practitioners working in England. The accountancy material is from a study into the ‘Big 4’ accounting firms and involved interviews with accountants in England and Canada.
Whilst primary medical care and accountancy are very different, the context is similar in some respects. Traditionally, accountants and English primary care doctors have worked in partnership arrangements. However, as we illustrate in what follows, this context is changing. Accountants and doctors face increasingly challenging and turbulent environments. This includes greater emphasis on competition and choice, clients who are becoming increasingly challenging and the professionalization of management (Brock et al., 1999). The neat distinction between traditional bureaucracy and professional modes of organizing no longer reflects the changing context in which professionals work. The incentive structures faced by professionals contribute to this process of change as we explain in what follows.
Medical professionals and financial incentives: the case of English primary care
As various commentators have noted, the autonomy of medical professionals has been increasingly challenged in recent decades (Kirkpatrick et al., 2005; McKinlay and Marceau, 2008). As part of this process, third-party payers in health systems internationally have placed emphasis on standardized treatment protocols that codify knowledge and reduce discretion. More recently, a proliferation of policy initiatives has sought to link financial rewards to performance (McDonald et al., 2010; McDonald, 2015).
In England, primary care doctors are general practitioners (GPs), who have traditionally been independent contractors to the National Health Service (NHS). The national GP contract is the result of a negotiated process involving representatives of both the GP profession and the state. However, in 1990, a new contract, which contained a handful of performance targets, was imposed on the profession despite its opposition. This opposition has been interpreted as a rejection of the ‘contract state’ and related market reforms pursued by the then Conservative Thatcher government (Lewis, 1998).
The election of a Labour Government in 1997 signalled the start of a new era in health policy. In 2000, the NHS Plan (Department of Health, 2000) outlined various policy objectives aimed at modernizing primary care. These included increased emphasis on performance-based rewards. The view that the existing general medical services (GMS) contract was outdated and inflexible was shared by the medical profession as well as the state in a context of poor morale in general practice, long hours and low pay relative to hospital doctors, difficulties in recruiting GPs and poor work–life balance (National Audit Office, 2008).
A new contract came into effect in April 2004. A prominent element of this, the Quality and Outcomes Framework (QOF), comprised 146 indicators of quality of care. Since then, a large percentage of practice income has been dependent on achieving these targets. The QOF includes the concept of exception reporting. This allows practices to exclude patients from performance calculations where, for example, patients do not attend for review, or where a medication cannot be prescribed due to a contraindication or side effect. The contract reforms also offered GPs the ability to opt out of the responsibility for providing care ‘out of hours’ (OOH) and resulted in significant increases in income for GP partnerships (Batty, 2003). These factors may explain why, unlike in 1990, most GPs in 2003 voted in favour of the new GMS contract in a national ballot. As part of the process of reform, substantial investment in primary care was planned (National Audit Office, 2008).
In line with its intention to increase competition amongst healthcare providers, the government introduced policies to promote patient choice and to allow money to follow patients to providers of their choice. Practice-based commissioning (PBC), was intended to be a key enabler of patient choice (Department of Health, 2004). Under PBC, practices or (more commonly) groups of practices were provided with an ‘indicative budget’ for commissioning secondary care (hospital) services. The intention was that GP commissioners would identify a variety of different providers for their patients and increase the choices on offer by directly providing or commissioning new services themselves. In addition, PBC was intended to control, and ultimately reduce, the overall rate of GP referrals to hospitals. As part of the process aimed at opening up the market in healthcare for NHS patients, the reforms gave GPs a new role as commissioners of care. In this role they could choose to commission care from private-sector providers of secondary care services, although this might compromise their commitment to ‘the NHS ethos’.
The reforms also allowed private-sector providers of primary care to enter the market and enabled existing GP partnerships to compete with these providers. The reforms also created a strong financial incentive to remain within budget. In the context of rising demand and costs, the implications were that GPs should reduce the volume of referrals to hospital and/or prescription medication.
In 2006, Primary Care Trusts (PCTs) in England, who commission primary care services from local general medical practices, were given new powers to negotiate contracts with commercial companies (APMS or Alternative Providers of Medical Services contracts) and employ GPs directly (PCT Medical Services contracts) (Heins et al., 2009). These reforms were also expected to help PCTs shift from being passive payers to active commissioners of primary care and to encourage more competition in primary care provision.
The medical case study is based on a large study undertaken between 2007 and 2010, which involved interviewing English primary care doctors to explore their experiences of financial incentives (McDonald et al., 2010). Quotes are from doctors, unless otherwise indicated.
Quality targets and changes in practice
Doctors interviewed for the study were very aware of the QOF targets against which their performance was measured and were generally supportive of the target regime. Practice team members were very conscious of targets and reported processes for monitoring performance levels on an ongoing basis, taking remedial action where necessary. In common with McDonald et al. (2007), we found evidence of new strata emerging within practices, with groups of staff ‘chasing’ other members of the practice team. Clinicians, for the most part, did not object to this scrutiny and monitoring. Often non-doctors, such as practice managers and nurses, were involved in this process of ‘chasing’ too. Over time, many clinicians adapted, with the result that they no longer needed ‘chasing’. One practice manager described approaching individuals on an ongoing basis, but this process was no longer necessary ‘because everybody knows what they’re doing’ (ID141 Practice Manager). Doctors were very aware of the surveillance process, feeling ‘quite managed and watched… don’t feel like you do have a completely free rein’. (ID216), as one doctor described it.
All of the doctors described positive benefits flowing from QOF, but often the suggestion was made that the potential benefits lay in improving standards in other, deficient, practices.
Where I was working before I was with this single-handed guy, when QOF first came in. His QOF scores were quite good, but it was just a load of rubbish because he was making them up. He was making up blood pressures.
(ID19)
Although, as the above quote implies, they also suggested that high scores in some deficient practices were the result of dubious activities. This willingness and enthusiasm for challenging poor performance in other practices is something to which we return below.
As part of the process of reorganizing care delivery in response to the reforms, there was an increasing trend towards devolving work to nurses who were practice employees. The partners received a large pay rise during the first three years of the QOF (National Audit Office, 2008). The influx of new money created incentives to limit the number of partners in the organisation since profits are shared between partners. This resulted in a trend towards recruiting salaried doctors. In some cases, these were additional staff, but in others, when partners left, they were replaced by salaried GPs. This created a hierarchy within the practice and led to resentment from some salaried GPs. They complained of being paid less and given more of the additional work, such as home visits, compared with partners.
Whilst some salaried GPs felt that they were treated as second class compared to partners, some partners also suggested that salaried doctors were not committed to their work. There was a suggestion that partners worked harder and gave additional effort in ways that salaried doctors would not.
In a context where partnerships were in limited supply, some salaried GPs felt they had no exit options, despite their frustrations. For others, working hard, despite feeling unfairly treated, was seen as a requirement to be offered a partnership in one’s existing practice. There were also frustrations expressed by salaried GPs about the QOF targets. Salaried employees had little influence or choice with regard to hitting targets, although some did report refusing to pursue targets where they disagreed with their content.
For some doctors, however, there was an acceptance that partnership status was something that should be earned rather than an automatic entitlement. This suggests that norms relating to expectations may be changing amongst newer entrants to the GP profession.
I don’t think you should assume that you should just have a partnership. That would be like joining a legal firm and expecting that you’re going to be a partner. In most businesses, you earn your partnership by delivering.
(ID231)
Cost containment and clinical freedom
Although PBC involved scrutiny of referrals, the process was not seen in emotive terms. Targets for reductions in referrals were agreed by elite PBC GPs, and proposals for reinvesting savings were dependent on approval from PBC elites, but, by and large, rank-and-file GPs did not express undue concern about the process. Participation in PBC was voluntary and even amongst GPs who were not PBC zealots, there was an acceptance that participation was beneficial since savings could be reinvested in other services. GPs described scrutinising referrals as a peer-review process carried out in a non-threatening manner ‘so we can bore down to great detail without us feeling huffy that we’re being criticised’ (ID297). Some who were initially ‘horrified by it’ described getting used to the process and ultimately viewing it as useful (ID101).
Accountability and performance monitoring
QOF performance data for each practice are available on the internet, although English GPs have not traditionally been involved in competing for patients. However, policies to expand the market for primary care by encouraging new entrants have been introduced to address perceived deficiencies in existing primary medical care provision (McDonald, 2009). Coupled with the moves by commissioners to actively monitor performance and commission services − as opposed to merely acting as paymasters − this appeared to have contributed to a willingness amongst English GPs for poor performance in other practices to be addressed. The fact that private providers might be found wanting when scrutinized on a common set of indicators may have been part of the appeal of this approach for some GPs.
New strata of ‘chasers’ included GPs and others who acted to monitor practice staff, including GP partners within their own practice. Additionally, in the context of PBC, what might be conceptualized as an administrative elite comprises members of PBC boards who volunteered to serve in this capacity. Since not all practices were represented at board level, new hierarchies were developing which involved scrutiny of practice activities by GPs from other practices. However, although not all English GPs were happy with new ways of working, most were relatively accepting of these changes and many welcomed them, despite the constraints on individual autonomy which accompanied them.
There are a number of reasons which might help explain this state of affairs. These include the voluntary nature of participation in the new working arrangements. Furthermore, the rank-and-file GPs who undertake elite roles are very different from Freidson’s elites, who ‘do not, and perhaps cannot do the daily work of the profession, and therefore may not be able to understand, let alone sympathize with, the problems of daily work’ (1983, p. 289).
Standardization and regulation from outside and from within
The relatively positive reactions to the reforms are perhaps understandable, given that guidelines and evidence-based practice have been part of the landscape of British general practice for many years (Checkland, 2004). This is reflected in the comments of study GPs that QOF was consistent with existing practice. Amongst ‘chased’ GPs, there was little complaint about being on the receiving end of prompts and reminders from other members of the practice team. In some cases, reservations were expressed about particular targets and guidelines but, for the most part, not about the principle of ‘peer’ review and targets. Most rank-and-file GPs were content to respond when chased and let ‘elite’ members do the work of organizing the process, and they welcomed the development of new services made possible from PBC savings.
Furthermore, there was support amongst elites and rank-and-file GPs for a more proactive approach to tackling poor performance, leading in extreme cases to decommissioning services from existing providers. The provision of evidence-based targets and guidelines appears to be viewed by many GPs as assisting them in delivering a quality service, with little evidence that it is perceived as constraining their autonomy.
The GPs appeared to have few reservations about greater standardization. Rather than leading to deepening divisions, actions to address poor performance were welcomed by many rank-and-file GPs. A refusal to judge others has traditionally been a key element of the medical identity (Bosk, 1979), yet the GPs in our study highlighted poor performance in neighbouring practices, suggesting that stricter sanctions should be applied. In a context where individual GPs and practices are being compared against each other, where practice activities contribute to consortium performance and market reforms are enabling primary care commissioning and provision to be contracted out to private limited companies, one interpretation is that rank-and-file GPs and elites have a common interest in ensuring that their fellow GPs and practices are behaving in a way that does not undermine the standing of the profession. These changes do not necessarily threaten the ability of the profession to socialize members into an attitude of loyalty towards colleagues. However, in a context where performance measurement is viewed by GPs as legitimate, this loyalty is unlikely to be unconditional.
Restratification and the empirical findings
In an environment where medicine is increasingly governed, rank-and-file English GPs saw the actions of elites as legitimate and, for the most part, did not appear to regard them as unduly interfering with their ability to exercise ‘autonomy’. The standards by which English medical professionals are judged relate to resource use (PBC) and adherence to guidelines (QOF and PBC), which are generally relatively uncontroversial. Scrutiny involves assessment of compliance against clear standards rather than an investigation into the ethics of individual practice assessed against a vague notion of what constitutes professional conduct. The creation of clear and largely uncontentious standards depersonalizes the process of scrutiny. The questions asked by elites do not concern detailed examination of the particular ethics and actions of individual practitioners, but are merely a judgement of whether a particular standard was achieved.
At the same time, the fact that scrutiny is conducted by fellow professionals as opposed to NHS managers may also account for the acceptability of these processes to English GPs (Sheaff et al., 2004). Confining review by colleagues to specific areas of clinical practice means that new forms of collegial practice enable professionals to continue to exercise considerable autonomy in other areas. At the same time, the voluntary nature of arrangements can be interpreted as allowing GPs to reconcile their need for autonomy and their ‘choice’ to respond to prompts and ‘chasing’ from elites.
Despite this, PBC was beginning to change the context of medical work, with groups of doctors taking responsibility for fixed budgets, requiring them to modify their practice. This may be interpreted as a mechanism by which the state (via medical elites) is shifting responsibility on to medical professionals and reducing their ability to exercise discretion.
In the English context, medical professionals might be interpreted as responding to state policies aimed at ‘enforced self-regulation’ (Dent, 2005). Hood and colleagues describe this as involving ‘the deployment of heavier regulatory tackle against the incompetent or recalcitrant, while lightening the regulatory yoke over good performers’ (2000, p. 296).
The findings suggest that English GPs have adapted to state pressures by developing new forms of self-regulation. Waring identified a process of ‘adaptive regulation’, suggesting that this might be viewed as part of an ongoing process enabling the medical profession to ‘respond, even resist, and “move with the times” whilst maintaining or not excessively fracturing the enduring norms of professionalism’ (Waring, 2007, p. 175). There are parallels in the data with other studies which describe doctors as reordering their ways of working in a way which combines self-surveillance and self-control with a defence of professional norms of self-regulation (Dent, 2005).
Just as English medical partnerships have undergone institutional change leading to/driven by the introduction of financial incentives and accountability structures, so too have UK and Canadian accounting partnerships in the last 20 years undergone something of a commercial revolution which has changed the way in which accounting professionals conceive of and execute their work. The case study referred to below was undertaken between 2010 and 2014 in the two countries, involving 36 interviews with partners in accounting firms.
Modern accountants are much more concerned to translate their knowledge and skills into social and (particularly) economic rewards (Larson, 1977) than their counterparts in the past. The focus of this section is specifically on the ‘Big 4’ accounting partnerships. We focus on these organizations specifically for a number of reasons. Firstly, their sheer size makes them worthy of analysis in their own right. Their market share dwarfs that of their counterparts. For example, 99 out of 100 audits of FTSE 100 companies are undertaken by Big 4 firms (FRC, 2013). Secondly, the Big 4 have become so influential in shaping both national and international accounting regulation in recent years (Suddaby et al., 2007) that they effectively set the professional agenda (in their own form) for others to follow. As such, that which is observable in Big 4 firms might be thought of as portentous of future trends in the profession more generally.
Although accounting has always been interested in money, the profession’s relationship to profit seeking has historically been tempered by a wider compact with society (Spence and Carter, 2014). Whilst it is perhaps too crude to suggest that accountants have historically been honoured servants of the public interest (Freidson, 1994), one could at least reasonably conclude that their own status and economic position has followed as a by-product of rendering a service conceived of by the state as socially necessary. In some ways, accounting has operated as something of a semi-autonomous field (Bourdieu, 1996). What will be argued below is that this autonomy in recent years has been heavily circumscribed as the accounting field (read profession) has been rapidly colonized by market logics, which bring with them a whole concomitant raft of financial incentives.
For the Big 4, as with other professional services firms, their globalization has led to a much greater focus on revenue generation, new areas of business and profitability. As a result of this increasing colonization by the economic field, the types of behaviour exhibited by partners has changed quite dramatically in recent years. One phenomenon that encapsulates this change is the slow death of the ‘technical partner’. Technical partners can be described as accountants who embody a very high level of technical expertise. This might manifest itself in significant hands-on experience in audits, up-to-date knowledge of the latest accounting standards or the ability to conceptualize and execute an especially complicated tax vehicle for clients. Such partners still exist, but they are, we were told, a ‘dying breed’ (Canada Audit Partner).
Rather, contemporary partners in Big 4 firms spend the vast majority of their time on ‘business development’. What this essentially entails is proactively selling and cross-selling services to clients, managing relationships with clients and representing the firm in the business community. As one partner put it, within Big 4 firms today you need to have ‘hunters, killers and skinners’ (UK Retired Managing Partner) which denotes a process of finding work, winning work and delivering work. Partners are much more concerned with ‘hunting’ and ‘killing’, while ‘skinning’ is left to the technical people who, these days, are unlikely to be partners and more likely to be directors or senior managers.
This is a far cry from the scenario in (then) Big 6 firms 20 years ago, when partners were much more focused on actually delivering work and far less concerned about aggressively winning work:
Back in [previous firm – circa 25 years ago] they would sit around for someone to knock on the door and say ‘would you be kind enough to do my accounts?’ ‘We’ll have a look at it, consider it and get back to you’. Now you do anything that you can to get that business.
(UK Managing Partner)
This managing partner described how his firm was a ‘gentleman’s club’ when he first joined in the 1980s, where the partners did very little actual work and where the barriers to ascension were defined much more in terms of who your father was and what school you went to. That technical expertise was associated with feet up on the desk or golf on a Friday afternoon says something about the power dynamics within firms at the time. Since then, partners now argued that things have become more ‘meritocratic’ (UK Corporate Finance Partner). Meritocracy in this sense essentially means that Big 4 partners are expected to perform and meet financial targets whereas, in the past, accounting was done, to some extent, for accounting’s sake.
Essentially, during the 1990s, with neoliberalism in full swing, the accounting field lost its last vestiges of autonomy and started to become colonized full force by the laws of the market. In other words, financial incentives became the primary criteria by which partner and firm performance were measured. The emergence of financial incentives is evident from the story of a clear-out in the UK office of a Big 4 firm from the mid 1990s. This clear-out was described evocatively by the following interviewee as the ‘year of the knives’:
At one point, here three of us made partner the same day, that was 49, 50 and 51 partners just for the Scottish practice. Only £26 million in income, so it was not very profitable. Then, we took that partner number down to about 26 in a 12–13 month period. So it was a quite brutal … The younger partners coming through were saying ‘wait a minute, I could be earning more money somewhere else, so why don’t we go and sort it!’ So we did and we became very profitable up here.
(UK Corporate Finance Partner)
When asked why this sudden change came about and where the new focus on performance came from, interviewees gave general responses referring to the changing economic climate, denoting those changes as natural or inevitable. Research looking at changing partner requirements in the legal field tells a similar story of increased commercialism and financial incentives creeping into law firms almost as an inevitable consequence of globalization (Galanter and Henderson, 2008).
This new emphasis on financial accountability to one’s fellow partners had significant implications, not only for who made partner, but for other salaried positions as well. In the early 1990s, career structures in the then Big 6 saw managers move to senior manager. The next grade above senior manager was partner. Further, there was an explicit ‘up or out’ policy whereby, after a certain amount of time as senior manager, one needed to either make the step up to partner or find a job elsewhere. Employee turnover was therefore high but the number of partners within a firm was also relatively high compared to the present situation.
Around the mid 1990s, at the same time as the commercial revolution within these firms was in full swing, a new category was introduced in between senior manager and partner. This was variously called director, principal, or associate partner, depending on the firm in question and the geographical context. This new category offered existing non-performing partners the opportunity of a safe haven to which they might retreat. One Canadian audit partner explained how, in the mid 1990s, there were lots of people who were ‘being carried’ by other partners who ‘were performing’ and, rather than ask them to leave, they could be demoted to a position that was more prestigious than senior manager and which still had a ‘market-facing title’. The current managing partner of the office which instigated the ‘year of the knives’ described how things had changed over the course of the last 20 years:
If you look at the structure, in 1992 we would have 52 partners in Scotland turning over a third of what we turn over now. We have now got probably 17/18 partners. How did we do that? Because a lot of the guys that would have been partner are now directors.
(UK Managing Partner)
Essentially, the introduction of these new salaried positions had two effects within accounting partnerships. First, they offered a career option for people who had spent perhaps ten years previously working within the firm, preventing talent loss for the organization and reducing notoriously high attrition rates. Second, they increased ‘leverage’ – the ratio of staff to equity partners. This latter phenomenon had the effect of greatly increasing profit-per-partner figures. Again, the same phenomenon has been observed in law firms over the period (Galanter and Henderson, 2008).
Directors essentially fulfil the function that the technical partners of the past would. In other words, they are the skinners of the firms rather than the hunters or the killers. These specialists, we were told by more than one partner, were ‘second-class citizens’ (Canada Retired Managing Partner), ‘boffins’ (UK Audit Partner) or ‘geeks’ (UK Tax Partner).
We have described in this section the death of the technical partners and his (invariably ‘his’ rather than ‘her’) replacement by a more commercially oriented partner whose main interests revolve around responding to financial incentives. This is not to say that financial incentives have replaced an archetypal commitment to the provision of robust accounting services. Rather, it is to point out that the delivery of those services is undertaken by subordinates rather than the leaders of Big 4 firms.
Functionalist interpretations of this change in work delegation might suggest that this is merely a result of the growth of firms and the need to develop a cadre of leaders who spend more time on oversight rather than delivery. However, a whole host of concomitant changes have been engendered by the birth of the new commercial partner. Essentially, the language of public interest and professional ethics has been replaced by the more solipsistic and financially focused terminology of ‘risk management’. Technical experts are there within firms not so much to ensure the successful delivery of a professional service as to ensure that the entrepreneurial partners’ backs are covered as they gravitate around their local business communities trying to increase profit-per-partner figures.
In other words, the meaning of professionalism has changed within these firms or, rather, there are now multiple meanings of professionalism depending on what pay grade one observes. This multiplicity notwithstanding, it is clear from the present research that a more commercial, entrepreneurial conception of professionalism dominates the traditional, archetypal conception. Financial incentives have been very successful in reconfiguring the professional field in this respect.
As we have outlined, there has been a tendency in recent years for professionals to be subject to more explicit financial incentive regimes than was previously the case. This means that rather than trusting autonomous professionals to ‘do the right thing’, greater emphasis is placed on linking actions to rewards. The complex contexts in which professionals work are often characterized by multiple and competing goals. This can create tensions for professionals who may be incentivized to prioritize certain goals over others. Choosing to pursue financial incentives might be seen as at odds with professional behaviour (e.g. choosing cheap treatments when these are not in the interest of the patient). However, it might also be seen as indicative of a new form of professionalism which reflects the aims of the broader organization in which professionals are working.
The cases illustrate the importance of the organizational dimension in the process of governing professionals and changing notions of professionalism. The findings we describe, with an emphasis on targets and performance monitoring and related financial incentives, resonate with the concept of organizational professionalism (Evetts, 2004). Linked to this, our findings also highlight the social nature of responses to incentives. Norms are changing within organizations. New ways of working in response to revised incentive structures are becoming embedded in organizational routines and practices in a way which gives them some legitimacy amongst professionals.
As illustrated in our case studies, a growing emphasis on financial incentives has contributed to changes in the two professions we describe. In many respects, the context of accountants working in the private sector is very different from that of doctors. However, an environment in which partners scrutinize the behaviour and performance of salaried accountants has some similarities with medical practice. The potential to achieve promotion and partnership status, combined with internal surveillance mechanisms, acts as an incentive to prioritize certain behaviours over others. In both cases, incentives have contributed to the creation of new strata, with career progression taking on a new dimension in the context of diminishing access to partnership status.
For salaried GPs, there is some evidence of acceptance that partnership status is becoming seen as something to be worked for over time rather than an entitlement. This appears to involve developing an appropriate form of selfhood (Grey, 1994) which is in accordance with organizational norms and expectations. At the same time, salaried GPs are seen as second-class doctors by some members of their profession.
There are some similarities with the creation of new salaried positions (directors) in the big accounting firms (second-class citizens, as one interviewee described them). Yet, whereas directors are unlikely to achieve partnership status, salaried doctors often aspire to this. Indeed, it is this ambition which incentivizes certain activities, even though it may also reduce morale to some extent.
As outlined earlier, responses to incentives depend on the context. Reactions of doctors in Turkey (Yuzden and Yildirim, 2014), France (Saint Lary et al., 2013) and California (McDonald and Roland, 2009), for example, to financial incentive reforms differed from those in England. It is too early to say at this stage whether changes initiated in those countries will ultimately lead to similar trends to those observed in England. It is certainly true that financial incentives can lead professionals to engage in illegal activity (Cunningham and Harris, 2006; NHSBA, 2014), and such extreme cases hit the headlines in the popular press. There is a danger in focusing on these dramatic incidents since, as we have shown, there are other effects of incentives which are more widespread and are likely to have enduring impacts on notions of professionalism and professional governance.
References
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