The Change Challenge: Why Some Leaders Leave -- and Others Transform Their Firms

There are long-standing barriers in the way of changing professional services to meet new market realities. Some are choosing to leave. What can be done if you stay?

This blog is the fifth in a series of five discussing the challenge for professional services pricing when disrupted by AI technologies.

John Martinez (not his real name), a 36-year-old Managing Director at his mid-sized consulting firm, had seen enough. After a leadership meeting showcasing AI implementations - from transfer pricing analyses completed in days instead of weeks to new risk assessment tools promising dramatic efficiency gains - he made a decision that stunned his colleagues: He left to join a private equity firm focused on rolling up professional services companies.

"The culture was too entrenched," he told me. "Despite growing evidence that AI would fundamentally change our business, most of the leadership team saw it as just another efficiency tool. They couldn't - or wouldn't - see that our entire approach to creating and capturing value needed to change."

Martinez's departure might seem like a cautionary tale about the future of professional services. But there's something most executives miss when they see this transformation coming - something that explains why some leaders choose to leave while others stay to drive profound change.

The CFO's Discovery

Mark Thompson (not his real name) was having what he called a "moment of professional vertigo." As CFO of his 1,500-person consulting firm, he'd just finished reviewing five years of pricing data, and something wasn't adding up.

"Everyone owned pricing," he told me from his Chicago office. "Which meant, of course, that no one actually owned it."

This realization came during a broader review of his firm's response to AI's impact on their business model. For years, a vague line item called "price transformation" had appeared on the annual investment plan, only to be bumped each time by seemingly more urgent priorities. "Wait 'til next year" had become a running joke in budget meetings - echoing a phrase all too familiar to Chicago sports fans who've spent decades hearing the same about their beloved Cubs and Bears.

But now the data painted a stark picture. The firm's entrepreneurial culture had always celebrated revenue growth above all else. Under the banner of "price to win," every dollar of revenue was considered a good dollar, regardless of profitability. The result was a deeply ingrained pattern:

• Senior engagement leaders were independently negotiating rates with clients

• Practice leaders were setting their own pricing strategies, each convinced their market was "unique"

• Service line heads were creating new AI-enabled offerings without coordinated pricing

• Regional offices were making local "market adjustments" based on their interpretation of competition

"Trying to implement governance and controls in that environment?" Thompson shook his head. "It was like being the hall monitor during a prison break."

The metaphor wasn't far off. Every attempt at establishing basic pricing discipline was met with fierce resistance, justified by decades of "that's not how we work," followed inevitably by "you don't understand my practice," "you don't know my clients," and "I'm still hitting my numbers." The very notion of coordinated pricing felt like an attack on partner independence.

Then came the moment that made him question everything he thought he knew about professional services. "We've all been taught there are four fundamental drivers of profit," he explained. "Volume, Cost, Mix, and Price. These are the universal levers that determine success." Looking at his organizational structure, he mapped out who owned each of these fundamental drivers:

• Volume: National Managing Director (Sales)

• Cost: Chief Operating Officer

• Mix: Chief Strategy Officer

• Price: ...

"I stared at that empty space for ten minutes," he said. "Three of our four profit

drivers had leaders sitting next to the CEO in weekly executive reviews. But pricing? A lever just as fundamental to our economics as cost management? It was an everybody/nobody problem - everywhere and nowhere all at once."

The Inevitable Reckoning

"I realized this wasn't just about creating a new executive role," Thompson told me. "Our entire financial infrastructure - from compensation structures to investment funding to client billing systems - was built around the billable hour. The real challenge wasn't recognizing what needed to change - it was figuring out how to rebuild our economic engine while keeping the plane in the air."

His proposal to the board laid out the inevitable scope of change needed:

• New pricing governance model with clear executive ownership

• Revamped compensation tied to value creation

• Modernized financial systems to handle outcome-based pricing

• Restructured investment funding for AI-enabled services

• Redesigned client engagement models

"It was the hardest thing I've ever done professionally," Thompson admitted. "As CFO, I was basically telling our board that our fundamental business model needed to change. But something unexpected happened."

Thompson's proposal found a champion in the CEO, who had consistently reinvested his profits back into the firm rather than maximizing short-term compensation. "He immediately understood the stakes," Thompson recalled. "When he saw how AI could erode our economic foundation, he saw years of reinvestment at risk."

The other Managing Directors, many of whom had similarly reinvested in the firm's growth, quickly aligned around the need for change. "AI created a sense of urgency that finally united everyone," Thompson noted. "The same leaders who had delayed pricing initiatives for years were now pushing to accelerate transformation. They had too much invested to watch it erode."

Thompson's transformation journey is still in its early stages, but the initial results have provided crucial momentum:

• Price variability decreased by 40% in pilot practices

• Price compression arrested, with rates finally stabilizing quarter-over-quarter after months of AI-driven decline

• Client satisfaction scores increased, particularly in areas where value-based pricing was tested

• Partner engagement strengthened as clearer pricing guidance replaced the burden of "complete autonomy"

"What surprised us most," Thompson explained, "was how many partners were actually craving more structure. As AI eliminated billable hours, they had been watching their pricing power steadily erode with no clear way to stop it. What we had labeled as 'entrepreneurial freedom' was often experienced as isolation - forcing each partner to figure out pricing in a vacuum. Once we established clear guardrails and expectations, backed by investments in real-time deal coaching support, partners found both the confidence to hold the line on pricing and a new sense of belonging. They weren't looking for more latitude; they wanted practical support in making pricing decisions."

From Vision to Action

"The early results bought us time and credibility," he continued. "But we're under no illusions - the harder changes are still ahead. We're rewiring decades of muscle memory around how we price, sell, and deliver services."

The transformation roadmap spans several years, tackling increasingly complex challenges:

• Modernizing financial systems to handle new pricing models

• Restructuring compensation to reward value creation

• Building new skills across the partnership

• Developing governance that balances control with entrepreneurship

"It's a delicate balance," Thompson admitted. "We need to show enough quick wins to maintain momentum, but we can't let those early successes distract us from the deeper changes required."

The Questions That Remain

The stories of Martinez and Thompson reveal something crucial about change in professional services: The choice isn't simply between leaving and staying. It's about how to drive meaningful transformation in the face of deeply embedded cultural and structural barriers.

Their experiences raise critical questions that demand deeper exploration:

• How do you build pricing power in organizations designed to resist it?

• What specific governance models actually work in professional services?

• Where should firms start their transformation journey?

In our upcoming series, we'll examine these challenges in detail:

"From Warning to Action" explores practical first steps for firms ready to move beyond analysis to implementation.

"The Power Vacuum" reveals how some firms are building pricing authority without triggering organizational antibodies.

"The Value Imperative" provides tactical approaches to capture value while broader transformation efforts take hold.

As Thompson reflected in our final conversation: "The hardest part isn't seeing what needs to change. It's figuring out how to change it without breaking what already works."

That challenge - how to transform while maintaining daily operations - will be at the heart of our continuing exploration.

Disclaimer: The stories and insights shared in this blog are based on my personal experiences and conversations throughout my career. While some content reflects recent events, they are drawn from a broad range of interactions with professionals across professional services, including friends and colleagues from various organizations, and do not specifically refer to or represent any single employer, past or present. Identities have been anonymized, and quotes may be paraphrased or combined for clarity and storytelling purposes. This blog is a personal endeavor and does not reflect the views or proprietary information of any employer.