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TeAM YYePG Digitally signed by TeAM YYePG DN: cn=TeAM YYePG, c=US, o=TeAM YYePG, ou=TeAM YYePG, email=yyepg@msn.com Reason: I attest to the accuracy and integrity of this document Date: 2005.05.26 19:34:23 +08'00' THE PROFESSIONAL SERVICES FIRM BIBLE T H E PROFESSIONAL SERVICES FIRM BIBLE JOHN BASCHAB JON PIOT John Wiley & Sons, Inc Copyright © 2005 by John Baschab and Jon Piot All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada Designations used by companies to distinguish their products are often claimed as trademarks In all instances where John Wiley & Sons, Inc is aware of a claim, the product names appear in initial capital or all capital letters Readers, however, should contact the appropriate companies for more complete information regarding trademarks and registration No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or other wise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 6468600, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008 Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Baschab, John, 1968– The professional services firm bible / John Baschab, Jon Piot p cm Includes bibliographical references and index ISBN 0-471-66048-5 (cloth /cd-rom) Service industries—Management Professions—Marketing I Piot, Jon, 1966 – II Title HD9980.5.B368 2005 658—dc22 2004011607 Printed in the United States of America 10 Contents Preface ix Acknowledgments xiii About the Authors xv SECTION I Managing and Governing the Professional Services Firm Managing the Professional Services Firm John Baschab, Jon Piot, and Robert H Schwartz Professional Services Firm Benchmarking Gina Gutzeit 16 Partnership and Governance Structures John J Reddish 53 SECTION II The Front Office: Driving Sales and Growth Sales Management Jana Carpenter Marketing and Business Development Bryan J Wick 121 Service Line and Intellectual Property Creation Thomas Marbach 143 Proposal and Reference Management Tim Bourgeois 158 Strategic Partnering T Gregory Bender 180 77 v vi Contents SECTION III The Organization: Attracting and Retaining the Best Professionals 10 11 Organization Structure Frank Ribeiro Career Tracks, Compensation, and Professional Development John Baschab and Jon Piot Professional Staff Recruiting and Retention Brant C Martin 197 217 237 SECTION IV Services Delivery: Taking Care of Business 12 Service Delivery D Michael McDowell 265 13 Resource Management Joe Santana 284 14 Risk Management and Quality Assurance John Baschab and Jon Piot 316 SECTION V The Back Office: Efficient Firm Operations 15 Finance, Accounting, and Human Resources Jeffery B Nemy 16 Purchasing, Procurement, Vendor, and Asset Management John Baschab and Jon Piot 337 383 17 Information Technology John Baschab, Craig E Courter, and Jon Piot 431 18 Real Estate and Facilities K Todd Phillips 466 Contents vii 19 Legal Counsel Scott M McElhaney and Michael W Malakoff 495 20 Office Management John Baschab and Jon Piot 517 Appendix: About the CD-ROM 531 Index 535 About the CD-ROM This appendix provides you with information about the CD that accompanies this book For the latest updates, please refer to the ReadMe file located on the CD System Requirements • A computer with a processor running at 120 Mhz or faster • At least 32 MB of total RAM installed on your computer; for best performance, we recommend at least 64 MB • A computer capable of running Microsoft Office • A CD-ROM drive NOTE: Microsoft Office Suites is capable of reading Microsoft Office files However, users should be aware that a slight amount of formatting might be lost when using a program other than Microsoft Office Using the CD with Windows To install the items from the CD to your hard drive, follow these steps: Insert the CD into your computer ’s CD-ROM drive The CD-ROM interface will appear The interface provides a simple point-and-click way to explore the contents of the CD If the opening screen of the CD-ROM does not appear automatically, follow these steps to access the CD: Click the Start button on the left end of the taskbar and then choose Run from the menu that pops up In the dialog box that appears, type d:\setup.exe (If your CD-ROM drive is not drive d, fill in the appropriate letter in place of d.) This brings up the CD Interface described in the preceding set of steps 531 532 About the CD-ROM What’s on the CD The following sections provide a summary of the software and other materials you’ll find on the CD Content As part of this comprehensive guide to professional services firm management, we have built an electronic library of relevant planning and operational documents The documents, checklists, tools and spreadsheets will be helpful to the professional services firm in executing the approaches and methodologies covered in this book We hope they are as useful to you as they have been for us The templates, links and files provided are intended as a guide to provide a head start and to help drive critical thinking on the subjects As with any tool, they must be refined for usage within any organization, and the specific circumstances being addressed The files are included on the accompanying CD-ROM, and are organized by chapter Any material from the book, including forms, slides, and lesson plans if available, are in the folder named “Content.” Applications The following applications are on the CD: Adobe Reader Adobe Reader is a freeware application for viewing files in the Adobe Portable Document format Word Viewer Microsoft Word Viewer is a freeware viewer that allows you to view, but not edit, most Microsoft Word files Certain features of Microsoft Word documents may not display as expected from within Word Viewer Excel Viewer Excel Viewer is a freeware viewer that allows you to view, but not edit, most Microsoft Excel spreadsheets Certain features of Microsoft Excel documents may not work as expected from within Excel Viewer PowerPoint Viewer Microsoft PowerPoint Viewer is a freeware viewer that allows you to view, but not edit, Microsoft PowerPoint files Certain features of Microsoft PowerPoint presentations may not work as expected from within PowerPoint Viewer About the CD-ROM 533 OpenOffice.org OpenOffice.org is a free multi-platform office productivity suite It is similar to Microsoft Office or Lotus SmartSuite, but OpenOffice.org is absolutely free It includes word processing, spreadsheet, presentation, and drawing applications that enable you to create professional documents, newsletters, reports, and presentations It supports most file formats of other office software You should be able to edit and view any files created with other office solutions Shareware programs are fully functional, trial versions of copyrighted programs If you like particular programs, register with their authors for a nominal fee and receive licenses, enhanced versions, and technical support Freeware programs are copyrighted games, applications, and utilities that are free for personal use Unlike shareware, these programs not require a fee or provide technical support GNU software is governed by its own license, which is included inside the folder of the GNU product See the GNU license for more details Trial, demo, or evaluation versions are usually limited either by time or functionality (such as being unable to save projects) Some trial versions are very sensitive to system date changes If you alter your computer ’s date, the programs will “time out” and no longer be functional User Assistance If you have trouble with the CD-ROM, please call the Wiley Product Technical Support phone number at (800) 762-2974 Outside the United States, call (317) 572-3994 You can also contact Wiley Product Technical Support at http://www.wiley.com /techsupport John Wiley & Sons will provide technical support only for installation and other general quality control items For technical support on the applications themselves, consult the program’s vendor or author To place additional orders or to request information about other Wiley products, please call (800) 225-5945 Index A Abbott, Ida O., 258 Aberdeen Group, 284 Abiatti, Antony, 162, 177 Accounting, 352–368 fundamentals of, 352–356 project cost, 376 –377 systems, 356 –357 Acquisitions, 381–382 Activity measures, 21–22 Advertising, 137 Allocation, firm resource (Exhibit 5.1), 127 of resources, 178 of time, 27–29 Appraisals, career, 228–230 Arthur Andersen, 277 Assessing your firm, steps to, 10–15 Asset management, 385– 427 Attrition models, 231–232 Averbook, Jason, 289, 303, 308, 309 B Backlog, 301–302 Bailey, Robert S., 234 Balance sheet, managing, 357–363 Benchmarking, 16 –52 activity measures, 21–22 applications and limits of, 47–50 best practices and, 22–23 cost-based measures, 21 expenses, 27–38 finance department, 38– 41 human resources, 45– 47 information technology, 41– 45 outcome measures, 21 performance measures, 21–22 pitfalls of, 48 primer on, 21–26 professional services firms, 26 – 47 quality-based measures, 21 revenue, 27–38 starting, 25–26 targets of, 23–24 time-based measures, 21 time management, 27–29 timing for, 24–25 value of, 18–19 Benchmarks, determining, 22 Benefits: obligations, 67 selection of, 225–228 535 536 Index Best practices, key focus of benchmarking, 22–23 Billable resources, managing, 297–304 Bill rates, developing, 30–31 Boilerplate documents, development, 171 Boot camp, sales training and, 95–99 Booz Allen, 200, 203 Branch office model, 71 Budgeting, 369–375 Budgeting process, 211 Business, development, 121–142 driving, 137 Business portfolio chart (Exhibit 13.9), 303 C Call centers, competing with larger organizations, 188–189 Capability, 286 Career progression, 212–213 Career track, 219–225 appraisals and, 228–230 elements of, 221–223 nonpartners, 224–225 review, 225 update, 225 Casalan, Sarah, 164 Certifications, vendor, 396 Change, improvement and, 267–268 Change order, 177 Client risks, 324 Clients, managing, 134–137 Coaching, 234–235 Collection strategies, 280–281 Collins, Jim, 272 Commission schedules, 88–89 Compensation, 66 –71, 240, 225–228 administration, 347–350 contract negotiations for, 377–380 disclosure, 227 events, timing, 227 negotiating, 254–255 Compliance-based opportunity, 146 Conclusions, reaching, 320 Conservatism, definition of, 353 Consistency, 353 Contract negotiations, 377–380 Contracts, review of (Exhibit 16.4), 399 Cordial, Dale, 273 Core competencies, 434 Cost-based measures, 21 Cost estimates, 375–376 Costs: controllable, 31–34 definition of, 352 professional, 34–37 Crisis management, 330–331 Customers, identifying, 110–111 D Decision-making processes, 320 DeCourcey, Marc, 165 Delivery risks, 323–324 Differentiating, the firm, 123–124 Digital globalization, 185 Disclosure, 353 Downtime, 297–298 Index 537 Dudley, George W., 96 Due diligence, vendors, 421– 423 Fungibility, 239–240 Furniture, office, 491– 494 E G Efficiency, administrative, 380–381 Enterprise resource planning (ERP), 308 Enterprise service automation (ESA), 308 Equity, 62– 66 Executive committees, 72–73 Executives, role of, 19–21 Expectations, managing, 134–137 Expense recognition, 355, 363–364 Expenses, 27–38 of lawyers, 38 External risks, 324–325, 329 Gallwey, W Timothy, 312 Generally accepted accounting principles (GAAP), 352–354 Gioia, Joyce, 311 Goldratt, Eliyahu M., 269 Goodson, Shannon L., 96 Governance, 201–203 Governance structures, 53–74 Grossing up, definition of, 480 Gunn, Ronald A., 294, 303, 304 F Finance, 368–382 capital structure and, 368–369 Finance department, benchmarking, 38– 41 Financial planning, 369–375 Financial statement, review of, 365–368 Firm, assessing, 10–15 Firm, defining, 123–124 Firm size, billable hours (Exhibit 2.3), 29 Forecasting, human resource, 347–350 Framing, 320 H Herman, Roger, 311 Hlavaty, Gregg, 487 Hoff berg, Kevin, 114 Home office model, 71 Human resources, 338–351 benchmarking, 45– 47 benefits administration, 347 bonus programs, 348–349 communication, 344 compensation administration, 347–350 forecasting, 347–350 layoffs/reduction in force, 343–345 legal counsel and, 340–341 partner model, 125–129 performance evaluation, 342–343 538 Index Human resources (Continued) records management, 345–347 recruiting, 341–342 role of, 339–340 timesheets, 350 tracking time off, 350–351 using, 125–129 vacation, 350–351 Internal risks, 321–323 Interviewing, 250–252 Interviewing, for sales team, 92–93 J Job description, sales, 90–92 Jonassen, Jim, 162 I Ideal client, defining, 124–124 Identifying potential employees, 248–250 Indemnification, 379–380 Information technology, 431– 465 architecture of, 435– 436 budgeting for, 454– 459 drivers of cost (Exhibit 2.15), 43– 44 managing, 433– 465 operations, 445– 446 organization of, 436 – 442 out-of-budget requests, 459– 460 projects, 449– 454 resources (Exhibit 17.4), 441 sample inventory (Exhibit 17.2), 438 scope of operations (Exhibit 17.6), 446 – 448 standards, 442– 445 steering committee, 460– 462 strategies, 433– 435 Intellectual property, 143–157 development, 153–155 protecting, 155–156 understanding, 153–156 Intelligence, gathering, 320 K Kautz, Judith, 181 Kotler, Philip, 145 Krueger, Mark, 50 L Labor, value of, 355 Lateral hires, 249–250 Lawsuits, causes of (Exhibit 16.3), 396 Layoffs, 343–345 Lea, Wendy, 107, 109 Leadership models, 71–72 Leandri, Susan, 18 Leasing commercial space, 467– 481 Legal counsel, 495–516 managing, 511–515 selecting, 507–511 when needed, 496 –507 Leiter, Michael, 293, 311 Leverage, and billable hours, 16 –17 Index Leverage, partner (Exhibit 2.16), 46 Levinson, Rob, 139 Liability, 241–242, 379–380 Limited liability companies, 58 Litigation, 331 Litvak, Jeff, 80, 82 M Maister, David H., 220 Management, strategic internal, 268–276 Management skills: developing, 309–313 improving engagement, 311–313 Managing feedback matrix, 235 Market-based opportunity, 147 Marketing, 211 competency, 129–131 development, 121–142 expertise, 129–131 Marketing personnel, 137 Marketing and sales, integrating, 83–84 Master services agreement (MSA), 176 Matching principle, 352–353, 354–355 Materiality, definition of, 353 Measurement and evaluation, 278–279 Measuring sales costs, 113–114 Meetings, sales, 104–106 Mentorship programs, 257–259 Mergers, 381–382 539 Mining, as a source of sales, 112–113 Morris, Tom, 117 N National Association of Purchasing Management Code of Ethics (Exhibit 16.9), 428 Neiner, Kathryn, 93 New service development, 211 Notice period, 380 O Objectivity, defining, 353 Office design, 487– 490 Office finish-out, 490– 491 Office management, 517–529 culture, 525 defining, 519 document management, 522 facilities management, 524 hiring a manager, 526 –528 mail room, 522 other services, 522–523 reproduction department, 521 resources, 528–529 support services, 519–521 travel management, 522 Opportunity: compliance-based, 146 market-based, 147 Organizational models: examples, 213–215 functional, 207–208 540 Index Organizational models (Continued) geographic, 208–209 hybrid practice, 208 options, 204–209 practice, 206 –207 Organization structure, 200–201 Osborne, Edi, 269, 274, 278 Osetek, Alan, 163, 177 Outcome measures, 21 Ownership, 201–203 P Partner model, 125–129 Partnerships, 56 –58 Partnership structures, 53–74 limited liability companies, 58 partnerships, 56 –58 sole proprietorship, 56 subchapter C corporation, 60– 62 subchapter S corporation, 59– 60 Performance evaluation, 342–343 Performance measures, 21–22 Performance plans, creating, 230–231 Performance ranking, 304–305 Perquisites, 228 Personality issues, 240–241 Personnel rations (Exhibit 2.17), 47 Pipeline management chart (Exhibit 13.7), 301 Pitch, developing, 138–139 Porter, Michelle, 48 Practice management teams, 73 Pricing, 211 Pricing strategy, 279–280 Procurement management, 385– 427 Professional development, 228–236 Professional development, appraisals, 228–230 Professionals: misfit, 246 –247 rainmaker, 244 types of, 243–247 worker bee, 245–246 Professional services: collection strategies, 280–281 definition of, –7 history of, 4–5 measurement, 278–279 number of firms, pricing strategies, 279–280 quality control, 281–282 strategic delivery, 276 –282 unique issues of, 9–15 Professional services firms: overview, 199–200 selecting a structure (Exhibit 3.1), 63– 64 structuring, 53–74, 192–216 Professional specialists, 244–245 Profit, calculating, 16 Profitability, 16 –52 Progression, career, 212–213 Project cost accounting, 376 –377 Project manager, alignment chart (Exhibit 13.3), 289 Projects, 265–283 executing, 265–283 improvement, 267–268 managing, 265–283 planning, 265–283 Index Proposal development, managing, 174–175 Proposal management, using lawyers, 171 Proposal(s), 158–179 closing, 174 defined, 160 follow up, 174 keys to success, 177–179 negotiating, 172–173 pricing, 172–173 related documents, 175–177 role of, 160–165 selling, 161–165 written, 165–166 Public relations firms: the pitch, 138–139 postpresentation, 141 prepresentation, 139–140 presentation, 140–142 using, 138 Purchasing: automated and online, 399– 400 ethics and, 427– 428 Purchasing management, 399– 400 Q Qualifications, 167–171 Quality, commitment, 19–20 Quality assurance, 329–333 Quality assurance, defined, 318 Quality-based measures, 21 Quality control, 281–282 Quality of life issues, 259–260 541 R Real estate management, 466 – 494 budgeting, 469– 470 building classification, 469 finishing out an office, 490– 491 gross leases, 479– 480 leasing agents, 472– 473 leasing space, 467– 472 listing potential properties, 473– 481 negotiating leases, 482– 486 net leases, 480 office design, 487– 490 office furniture, 491– 494 parking facilities, 476 – 477 property walk-through, 481– 482 rental rates, 477– 479 security, 477 subleasing, 470– 471 Recompetes, vendor, 402– 404 Records management, 345–347 Recruiting, 237–262 compensation, 240 debriefing, 260 liability, 241–242 personality issues, 240–241 phases of, 247–256 sales team, 90–93 Reductions in employment, 343–345 Reference authorization, 170–171 Reference management, 158–179 References, 157–171 checking, 252–253 managing, 168 Relationships, using for business, 131–134 542 Index Request document, example (Exhibit 7.3), 169 Request for information (RFI), 176 Request for proposal (RFP), 160–161, 176 Request for proposal (RFP), vendors, 414– 420 Requirement profile, identifying, 285–287 Requirements, focus on, 287–289 Resource administration, 305–309 Resource allocation, 127, 178 Resource management, 284–315 Resource pool, assessing, 289–292 Resource pool ranking chart (Exhibit 13.10), 305–309 Resources, managing billable, 297–304 Resource utilization: optimal level, 292–297 optimizing, 293–297 overutilization, 293 underutilization, 292 Retention, 242–243 debriefing, 260 phases of, 256 –259 Revenue drivers, 29–31 Revenue realization, definition of, 352 Revenue recognition, 363–364 Review and feedback, periodic, 256 –257 Risk management, 316 –333 categories of risk, 322–325 decision making and, 319–322 defined, 318 improving, 326 –329 methodology, 325–326 responsibility for, 331–332 Risks: categories, 322–325 client, 321, 324 delivery, 321, 323–324 external, 322, 324, 329 internal, 321–323 Robert Morris Associates, 66 Roberts, Harry, 329 Russo, J Edward, 319, 320 S Sales: establishing territories, 83–86 marketing and, 83–84 measuring, 113–114 resources, 118–119 support systems, 114–117 team size, 86 –87 tracking, 99–104 Sales call evaluation, 96 Sales cycle (Exhibit 4.7), 107 Sales management, 77–120 acquiring new business though, 81 revenue generation and, 80 Sales meetings, 104–106 Sales process, professional services (Exhibit 7.2), 166 Sales professional, alignment chart (Exhibit 13.4), 291 Sales team: building, 89–107 compensation of, 89 managing, 89–107 organization of, 81–83 Index recruiting, 90–93 training, 93–106 Salomon, John, 111, 112 Satisfaction programs, 257 Schoemaker, Paul J H., 319, 320 Scope creep, 380 Screening, 250 Screening criteria, 248 Selling process, 161–165 Selling services, 107–113 Sergesketter, Bernard, 329 Service creation, 149–152 Service creation, roles to support, 152–153 Service firms: challenge, 145 creative process (Exhibit 6.1), 144 response, 145–147 Service offering, 147–153 benefits, 147–148 creation, 147 setting expectations, 149 terms, 148 Skill, 286 –287 Software solutions, 309 Sole proprietorship, 56 Standard operating procedures (SOPs), information technology and, 445 Statement of work, (SOW), 176 Strategic internal investment: capital, 271–273 clients/customers/consumers, 273–274 employees, 271–273 founders, 270–271 investors, 270–271 management structure, 275–276 management team and, 269–270 543 objectives (Exhibit 12.3), 276 owners, 270–271 vendors/suppliers, 274–275 volunteers, 271–273 Strategic partnering, 180–193 driving, 182–183 geographic types, 184 globalization, 185–187 guidelines, 189–192 mind-set, 183–184 partner selection, 189 supply side, 184–185 Strategy: definition of, 433 technology, 434– 435 Strong, Patrick, 87 Subchapter C corporation, 60– 62 Subchapter S corporation, 59– 60 Succession, 65 Support staff, role of, 209, 200 Systems, 356 –357 T Talent themes (Exhibit 13.1), 286 Targeting sales opportunities, 110–111 Target market, defining, 124–125 Territories, establishing, 84–86 Thaler, Richard, 327 Time, benchmarking, 24–25 Time-based measures, 21 Time management, 27–29 Timesheets, 350 Tracking, sales, 99–104 Training, sales team, 93–106 Training programs, 232–234 544 Index V Value objectives (Exhibit 12.1), 268 Venditto, Rose, 98 Vendor management, 385–399 assignment rights, 394 certifications, 396, 429 contracts, 392–396 dispute resolution, 395 ethics and, 427– 428 evaluation, 409– 410 insurance, 394 liability, 395 managing performance, 397–399 partners, 385–386 payment terms, 395 recompetes, 402– 404 relationships, 385–388 resources, 428– 429 role, 388–389 taking control of, 390–392 training, 395, 429 working with other customers, 400– 402 Vendor manager, assigning a, 389–390 categories of (Exhibit 16.1), 386 due diligence, 421– 423 evaluation team for, 409– 410 geographic presence, 413 negotiating with, 424– 427 new, 392 references, 422 request for proposal, 414– 420 scope, 409 screening, 410– 414 selection, 406 – 427 size, 413 troubled, 404– 405 Voice-over protocol (VOP), 185–187 W Work backlog management chart (Exhibit 13.8), 302 Z Zachman framework, 436 For more information about the CD-ROM, see the About the CD-Rom section on pages 531–533 CUSTOMER NOTE: IF THIS BOOK IS ACCOMPANIED BY SOFTWARE, PLEASE READ THE FOLLOWING BEFORE OPENING THE PACKAGE This software contains files to help you utilize the models described in the accompanying book By opening the package, you are agreeing to be bound by the following agreement: This software product is protected by copyright and all rights are reserved by the author, John Wiley & Sons, Inc., or their licensors You are licensed to use this software on a single computer Copying the software to another medium or format for use on a single computer does not violate the U.S Copyright Law Copying the software for any other purpose is a violation of the U.S Copyright Law This software product is sold as is without warranty of any kind, either express or implied, including but not limited to the implied warranty of merchantability and fitness for a particular purpose Neither Wiley nor its dealers or distributors assumes any liability for any alleged or actual damages arising from the use of or the inability to use this software (Some states not allow the exclusion of implied warranties, so the exclusion may not apply to you.) ... RationalEmotive Behavior Therapy (REBT) in New York City, under the direct supervision of Dr Albert Ellis, the founder of REBT Leslie is one of the West Coast’s leading experts in REBT, a form of brief cognitive-behavioral... the United States Virgin Islands Additionally, Bryan has significant experience representing debtors and creditors in bankruptcy proceedings About the Authors xxiii Bryan graduated from the

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