Commando Consulting: May 2008 - 15 Pillars Of Agile Practice Management - Part 1 Of 3

Or...

Practice Development Strategies From The Ultimate Professional Service Firm: The Military Commando

by Tom "Bald Dog" Varjan, Organisational Provocateur

Summary: In this issue I'm starting a series of concepts I've gathered over the years on what makes a great consulting firm. And for this I use concepts from agile project management and operating principles and practices of military commandos that are some of the most flexible and highest performing teams on the planet. No, no one is perfect, but the overall success rate of Special Forces units around the world makes them a pretty good role model to build top-performing consulting units. Audio Version (MP3): 44 minutes

While attending the wedding of Princess Diana and Prince Charles in London on 29 July 1981, a coup de ta, led by Cuban-backed communist rebels, threw over Gambian president, Alhaji Sir Dawda Jawara's government. Among the hostages were the president's family.

While in London, President Jawara requested help from the British government.

Prime Minister Margaret Thatcher accepted Jawara's request, and in early August 1981 the British Army sent a team to Gambia. That is a team of three men from the SAS B squadron. Within days the three men overthrew the whole Gambian army, rescued the hostages and helped to restore Jawara's government to power.

So, how come that a team of three people, who were seriously outnumbered by the enemy, managed to neutralise a whole, pretty well-armed army? How come that three people managed to kick a new government in the arse and defeat the rebel army?

How come? How come? It comes from operating as a team. The three SAS men were not merely three individuals. They were one team.

You see the operating dynamic of a commando is drastically different from that of a regular army. Regular armies, just like traditional industrial organisations, like retail, manufacturing and product-selling companies, contain highly separated silos of specialists.

In contrast, Special Forces units contain cross-trained generalists with diverse core expertise and pretty diverse peripheral expertise.

For instance, everyone knows first aid, but one member is a medical doctor. Everyone knows how to use grenades, but one member is an explosive wizard. Everyone knows how to use computers, but one member is an computer guru with significant hacking expertise.

Nevertheless, everyone can shoot, throw knives, do CQC (close quarter combat), first aid and CPR, scuba dive, skydive, etc.

The key is that it's a team of deep generalists, or as many years ago - I believe - R. Buckminster Fuller coined it, versatilists.

A typical definition of a versatilist is a person who can apply a depth of skills to a progressively widening scope of situations and experiences, with equal ease and confidence.

But versatilists are not normal generalists.

A generalist is what we also call a handyman. A versatilist is, for instance, an architect, who also understands and has good working knowledge of building, plumbing, electrical work and security systems. So, when she designs a house, she can think ahead and collaborate with the other trades people to get everything right.

She understands the building in the context of a home as opposed to a pile of concrete, wood and glass. A common problem general builders have of architects is that most architects have never used a hammer and can't think from the perspective of construction. They know the drawing board but have no idea of what's going on in construction sites.

Other example. Specialists build cars on assembly lines. Each person performs one single task for the rest of his life. In the Formula 1 world, small teams of versatilists hand-build the cars.

By the way, this is why home-made sausages, made by skilled butchers, a.k.a versatilists, taste better than mass-produces sausages made by specialists, a.k.a. unskilled workers trained in one single task.

And now we've arrived at the concept of agility, and before we go into the details of agile practice management, an idea I've been polishing for a while, we have to discuss the general umbrella term of agility.

Agile Practice Management

Definition: "Agility is the ability to balance flexibility and stability" ~ Jim Highsmith, 2002.

Agile practice management is a concept I've adapted from agile project management, topped up with operating principles of the military commando, probably the most effective man-made peak-performing team environment.

Agility is the seamless integration of technology, processes, systems and people. It is based on five major concepts...

A: Anticipating Change

G: Generating Confidence

I: Initiating Action

L: Liberating Thinking

E: Evaluating Results

Some people erroneously believe that agility is the same a lack of structure, and the lack of structure and stability lead to chaos. Also, too much structure generates rigidity.

Using military language, agility is when you're prepared for peace but ready for war. In the world of business, you're prepared for peace, that is, you're running your business without any hiccoughs. But you're ready for war, that is, you're prepared for unexpected events, like losing a key person, a server crash, losing key clients, etc.

We just have to find the balance between agility and stability. We have to define the minimum stability we still can live with and the minimum agility we absolutely must have, no matter what.

Compare the regular army to the commando. The regular army is heavily structured and rigid. In a commando the structure is dropped to the bare minimum in order to maximise agility.

For instance the first Gulf war took two years of planning to pull off. For commando warfare see the Gambian example under "Entrepreneurial Leadership". Three men defeated a whole army.

Many years ago, former Visa International CEO, Dee Hock (1999) coined the word "chaordic" to describe both the world around us and his approach to managing a large global enterprise - balanced between chaos and order.

In Systemantics: How Systems Work and Especially How They Fail, author John Gall writes about the rising trend of turning everything into rigid systems. He calls it "systemism".

Many managers believe that everything can be turned into systems, so people don't have to be paid for the work. As Gall points out that "the fundamental problem doesn't lie in any particular system but rather in systems as such." These systems become organisational ends rather than practical means to ends.

Now, some people may say that systems help to compensate for lack of skill? That's what process proponents have been preaching for years: Install comprehensive processes and then use minimum wage people. And this has been the trend in Canada for many years.

And what is the result?

Canada has been a permanent number last in the G8 economic group. Now Spain is demanding entry into the G8 group to replace the chronically underperforming Canada.

And self-appointed management guru, Frederick Winslow Taylor confirmed this systems concept in his rubbish called "The Principles of Scientific Management" (1911)...

"In the past the man has been first; in the future the system must be first."

He single-handedly eliminated pride and joy from doing great work and turned it into sequences of mechanistic low-skilled motions. But...

Do you want to go to a hospital where the cardiology department uses all the best equipment on the planet and lowest paid surgeons in the land? Try to avoid that place.

In the age of the knowledge worker talent rules.

And in the age of talent and the knowledge worker, professional knowledge firms must lead the by example and create talent-nurturing cultures.

I believe the points I'm listing here help to achieve a culture that is both flexible to respond to short-term changes and stable to achieve long-term stability and prosperity.

So, let's see what we need for agile practice management...

1. One-Person Leadership As Opposed To Multiple Equal Partners

It's time to eliminate the constant and never-ending power-struggle created by the multi-partner model. In today's fast economy where companies must be agile and make decisions pretty quickly, the multi-partner model serves only two purposes: 1) organisational sloth and 2) desperate clinging to the status quo.

The problem with multi-partner models is that the issue is not about making the firm more successful but protecting the partners' turfs and accumulated personal wealth. And this also means that the services the firm provides are not about improving the clients' condition, but about playing safe and pile the money for the partners often at the expense of the rest of the firm and its clients.

Let's look at many areas of life and we'll find that in the leadership position of any group there is ONE leader. An airliner has one captain. So does a ship. The White House has only one president. So does the Kremlin. In the Gulf war good ol' Norm was at the helm. It's not a committee of equal captains, presidents and generals.

And one day someone came up with the brilliant idea of leadership by committee and called it managing partners. And what is the condition of becoming a partner? In short, the ability to drum up enough business.

Interesting theory. In the world of farming, every farmer, with more than two brain cells, knows not to appoint even the best behaving pig to be the swineherd.

It's a totally different skill set. Besides, it would look silly to appoint each and every pig for good behaviour.

It's only consulting firms that have accepted this "leadership by committee" approach. No doubt, it has advantages. But if a position is owned by many, then it's owned by none. This is one of the reasons why communism has gone tits-up almost all over the world. Everything is owned by the state, that is, the managing partners. Consequently, no one is accountable for anything. Many consulting firms are the same. Many people are in charge, but none of them is responsible for the firm's success.

In state-owned systems, politicians, the so-called owners, do their best to fatten their bank accounts before they get replaced. They know the time is limited, so they steal as much as they can.

Maybe this is the reasons why all four of The Big Four accounting firms have been sued recently for abusing non-partner employees. More specifically, demanding overtime from them, but refusing to pay them for doing it.

When you look at the numbers below, you can see why. The starting annual salary of an MBA from a leading business school is around %120-150,000. The total cost of employment is about 165% of the person's gross compensation. So now we're at $200,000 and beyond.

Yet, the revenue per person figure barely covers salaries.

PricewaterhouseCoopers $25.2bn revenue with 146,700 people ($171,779 per person)

Deloitte Touche Tohmatsu $23.1bn revenue with 150,000 people ($154,000 per person)

Ernst & Young $21.1bn revenue with 130,000 people ($162,307 per person)

KPMG $19.8bn revenue with 123,000 people ($161,788 per person)

It's just normal that partners, just like communist dictators, do their level best to channel as much money into their own pockets, even at the expense of ripping off their own non-partner people, as humanly possible. It reminds me of those notorious communist Saturdays I was forced to work in Hungary, sacrificing my weekends fully unpaid. And when we performed well, the boss got his fat bonus.

In that sense many consulting firms are like communist dictatorships. Partners grab a disproportionally high portion of the total revenue, while the non-partners get fed with fairy stories why they don't get more money, in spite of the fact that the firm has made more dough than last year.

Every firm that is serious about growing a wealthy organisation, as opposed to wealthy individuals, must choose the one-person leadership model.

The difference is that in wealthy firms, when wealth is distributed fairly, people are wealthy. But just because some people, e.g. partners, are wealthy, the firm may still be poor as a church mouse. Just like in communism. The party leaders are filthy rich but the country as a whole is dirt poor. Just look at so many non-profit organisations that are dirt-poor as organisations, yet the officers of the organisations have company cars and all sorts of perks. They seem to get handsomely rewarded for keeping their organisations penniless.

2. Culture Of Results As Opposed To Culture Of Busy-Ness

Look at most consulting firms, especially the large ones, and what you find is that they are obsessed with busy-ness. People are running around like headless chickens, and everyone is happy because people are busy.

One of the reasons for this pervert busy-ness is that they get paid for being busy. That is, most of these large firms charge time-based fees. I've recently read a story about a junior consultant at a large firm asking a senior consultant about a project...

"Hey, Frank, would you help me out? What is this project all about? I have no idea?"

"Son, this projects is about billing this client $124,000 every month as long as we can get away with it. The rest is irrelevant."

There is a world of difference between achieving certain outcomes and merely being busy between 9am and 5pm.

The problem is that most consulting cultures promote busy-ness because relaxed-looking associates, regardless of their performance, get criticised for being lazy and abusing their positions. This is like accusing Tiger Woods of wasting Nike's sponsorship money while he's asleep or not on the golf course.

There are two extremes here...

Some managers tolerate any kind of negative behaviour from high-performing people, and say they rather pay the price of demoralising the rest of the firm but want enjoy the benefits of these people's performance.

Some other managers don't care about people's performance, but if that performance is achieved by violating organisational values, they'd get rid of those people.

Again some other managers only care about that people are busy and work lots of hours. And as long as people work long hours, their real performance becomes irrelevant.

So, to get rid of the sense of busy-ness, consulting firms have to get rid of their timesheets, and stop tracking time. After all, it's not the time itself that matters, but what your people actually stuff into their time.

So, instead of tracking time, we have to focus on learning and practising good project management. And throughout project management, we want to manage the value of the service we deliver.

So, here are some considerations when assessing engagements...

Scope of objectives: What does the client want to accomplish through this initiative? What is the new desired condition?

Scope of value: How will the client be better off as a result of achieving the objectives of this initiative? What is the gap, expressed in dollars, between the status quo and the expected improved condition?

Scope of price: What is the client willing to invest to acquire the value established in the previous point?

Scope of services: What service(s) are to be delivered, that offers value to the client commensurate with the investment? How to deliver this service in the most effective manner using the least amount of time, money and effort?

In value-based consulting firms, clients' perceived value in the solutions drives price, not the firm's costs of performing certain activities. Price actually drives costs, so it makes sense to know value and price before we spend even a sausage on rendering services.

3. Value-Pricing As Opposed To Hourly Pricing

Value-pricing establishes what clients are willing to invest to achieve their desired objectives (solving a problem or seizing an opportunity), and consulting firms develop cost-effective solutions based on clients' budgets. In this scenario clients get what they pay for. In cost-based pricing firms establish the cost of their services, mark them up, present it as the fee and hope and pray that clients accept them. Most often they don't and they start haggling.

When a firm practices value-pricing, as opposed to hourly rates, it sends a loud message about its positioning in the industry's pecking order.

And as VesaSage colleague, Ed Kless is fond of saying, "If you suck at what you do, you'd better keep charging hourly rates."

For many folks value-pricing presents an issue because many people consider it as price-gouging.

It most probably comes from the old Marxist value paradigm, which Marx documented in his Communist Manifesto...

"A commodity has a value, because it is a crystallisation of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labour necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labour, worked up, realised, fixed in them. The correlative quantities of commodities which can be produced in the same time of labour are equal. Or the value of one commodity is to the value of another commodity as the quantity of labour fixed in the one is to the quantity of labour fixed in the other."

Considering Marx's theory, a fist-sized gold nugget is worth the same as a fist-sized iron ore because they both took the same amount of labour to mine. But try to tell this to a jeweller when you want to pay for a couple of gold rings with a horseshoe. Hm.

Contrary to conventional wisdom, the cost of selling your services has nothing to do with the cost of rendering your services. From the buyer's standpoint the seller's cost of delivering value is irrelevant. You can't demand higher fees because you do accounting by hand on paper without computers.

Here is a comparison...

Hourly Pricing: Service => Cost of an hour => Cost of rendering service => Mark up cost for profit -> Present hourly price for consideration => Buyer accepts or rejects your price

The traditional hourly pricing model asks:

"What is my cost of delivering my services?"

"What is the going rate for this kind of work?"

Value Pricing: Client => Perceived value stipulated by the buyer => Price, the buyer's investment in the expected improvement => Delivering the pre-agreed service using as little time and effort as possible.

Notice how value pricing reverses the order of the decision-making process in offering your solutions.

The value-pricing model asks:

"How will the buyer be better off by solving this problem or seizing this opportunity?"

"What is value of the difference?"

And note that these questions can be quantified either by a percentage of improvement or a direct dollar value.

4. Inspired Talents As Opposed To Micromanaged Wage-Slaves

Consulting is knowledge work at every level, thus cannot be equated to the passage of time. Intellectual capital, thus client value, is not dispensed linearly. It's non-linear and not subject to traditional measuring methods of manual workers. The measurement of manual labour requires only a measuring stick, like dispensed time; knowledge work requires judgement, knowledge and discernment. In the professional knowledge firm everyone is a knowledge worker, thus cannot be paid as a manual worker.

In their book, A Simpler Way, authors Margaret J. Wheatley and Myron Kellner-Rogers write...

"Playful and creative enterprises are messy and redundant. Human thinking is accomplished by processes that are messy and redundant. When computer scientists first tried to mimic the lavish parallelism found in human thinking and all of nature, they had to link together more than 64,000 computers working on the same problem at the same time. Parallel systems are dedicated to finding what works, not by careful stepwise analysis in the hands of a few experts, but by large numbers of a population messing about in the task of solution-creation. They come up with better solutions, but they are based on a different kind of logic: trying thousands of things simultaneously to find what works."

The other important point is that parallel systems are riddled with errors because errors lead to the next level of thinking which in turn lead to the ideal solution. Also, in parallel systems the errors are not related. In serial systems errors are caused by each other, and one small error can lead to a disaster as it happened to the American long-distance telephone service in 1990. It took only three lines of code (of the two million lines) to bring the system to its knees.

Micromanaged wage-slaves (most manual workers) are usually closely supervised (a.k.a. snoopervised) to perform precisely described tasks according to very specific sequences. Obviously knowledge workers can't work that way. There is a huge difference between manual workers and knowledge workers. In the words of the late Peter Drcuker...

"Knowledge workers are volunteers who own the means of their performance, and whether or not they remain with any one company is totally volitional. Just like most investors, they will go where they can earn a fair economic return-measured in wages, fringe benefits, and other pecuniary rewards-as well as where they are well treated and respected, the psychological return. In the knowledge society, the most probable assumption for organisations - and certainly the assumption on which they have to conduct their affairs - is that they need knowledge workers far more than knowledge workers need them."

And here are a few differences between knowledge workers and manual workers.

So, as you can see the difference is pretty drastic. One common complaint against large consulting firms is that they are basically manufacturing plants churning out pre-packaged solutions delivered by junior employees.

5. Tracking Cause-Based- As Opposed To Effect-Based Indicators

Imagine there is a windy road high on the mountain, and every now and then cars fly off the bend and land in the valley, killing everyone. You want to reduce the number of fatalities and try to develop some kind of indicators to track your success.

You can either create leading (cause-based) indicators to predict what probably will happen. Like the speed of the car nearing to the bend. Or you can use trailing (effect-based) indicators to report what's happened. Like the number of people who have died during the last month.

The problem is that most consulting firms use lagging indicators and waste precious time and money on analysing what has already happened and cannot be changed. They are so immersed in dissecting the past that more often than not they run out of time and steam to create a better future.

We're living in a cause and effect world. Everything that happens in a business is an effect of a deeper cause. The typical indicators consulting firms track are merely effects, often caused by totally irrelevant factors. Just look at annual revenue. It's an effect caused by ingredients like energy, enthusiasm, passion, dedication to duty, accountability, commitment, discipline and several other soft factors.

In this picture accountability, commitment and discipline are leading indicators for they can lead you to a reasonable prediction what's going to happen.

In the absence of predictive indicators, we can't take preventive action to avoid the causes that lead to undesirable effects.

Revenue and profit are lagging indicators. They are mere effects. By the time they show up in our lives, it's too late for prevention. At that time we can only take reactive action to mitigate the impact of the effect.

For instance, if I want to lose weight, I track the number of my workout sessions and eating regimen (leading indicator), not my bodyweight (lagging indicator). By the time I see the impact on the scales, I can only work on some reactive action. That is, I have to undo the damage, well weight gain, I could have avoided by monitoring my workout activities.

Also, reactive action is always much more expensive than preventive action.

But reactive action is tempting because it gives us instant gratification, and on the surface it's cheap, easy, traditional, comfortable and convenient. For instance, I can save money by changing oil in my car only at every 20,000 km, instead of the recommended 5,000, and save the price of three oil changes.

Great!

But by the time I reach 20,000 km, the engine has burnt out and it costs me $10,000 to replace it.

Sadly, most people don't think so far ahead.

And we'll continue with the next five pillars in June, including...

6. Offering a fair guarantee as opposed to dumping 100% of the risk on the client

7. Performing a doctor-type diagnosis as opposed to canned dog-and-pony show sales presentations

8. Living by a code of honour as opposed to bible-thick policies and procedures manuals

9. Managing through before- and after action reviews as opposed to constant micromanaging

10. Offering instant feedback as opposed to annual performance reviews

... so stay tuned.

"Dynamic Duo" Mentor Programme... ...has 2 opening for November and 4 for December 2008. Click here to continue to the fiendish details.

Recommended Reading

The 80/20 Individual: The Nine Essentials of 80/20 Success at Work

by Richard Koch

We've all heard about the famous/notorious 80/20 principle that 20% of the efforts create 80% of the results. And this is all most people know about the 80/20 concept. This book is a brilliant road map to outline how to make the 80/20 principle work for you.

First the book describes the broad application if 80/20, and then goes into details and explains how to use it in certain areas of life and business. If you're a business owner, you learn how to boost your business by focusing on 80/20.

If you're an employee, you can focus on increasing the value of your contribution to your company and request extra compensation for the extra value that you've created. Richard uses examples from highly successful people how they've been using the 80/20 principle to be the best they can be.

Place your order with Amazon.com for The 80/20 Individual. You'll be glad you did.

Value Pricing Assault Course... ...has 4 openings for November and 2 for December 2008. Click here to continue to the fiendish details.