Commando Consulting: August 2008 - Can Passion And Enthusiasm Really Increase Profits For Consulting Firms?

by Tom "Bald Dog" Varjan, Organisational Provocateur

Summary: When it comes to improving performance in consulting firms, I've found two major camps of folks. Some say they just have to work harder and longer to chase more prospects. Some others say that first they have to become a drastically different firm, doing drastically different things and, in turn, attracting creating different results. While I don't deny the validity of hard work, I also know there is something else behind success not merely doing more of the same harder and longer. After all, even a grossly demotivated excavator operator can outperfrom the most motivated and enthusiastic guy with a single shovel. Well, even if it's a super-duper microprocessor-controlled super shovel. Nevertheless, before we change our toolsets, first we have to change our mindsets and skill sets. So, today, we talk a bit about the mindset. Audio Version (MP3): 53:01 .

Over the years of working with a broad range of consulting firms, I've noticed that most of them are obsessed with quantitative results but very often forget the qualitative ingredients that create those results.

I believe this problem is caused by the obsessions with tracking effect-based success indicators that show what has already happened but fails to consider what are likely to happen in the future.

Imagine a skydiver who is too busy counting how many summersaults he's done while freefalling but fails to look at his altimeter to check his altitude, and in this wild pursuit of maximum number of summersaults, he freefalls straight to the ground. This is pretty funny, considering that about two weeks ago I nearly turned into a human pancake as a result of a chute malfunction. But this is part of the package.

We've already discussed that in a consulting firm we have both effect-based (lagging) indicators and cause-based (leading) indicators.

Sadly, conventional wisdom tracks almost exclusively only lagging indicators, while leaving leading indicators unattended.

I believe this happens because dealing with lagging indicators is reactive and doesn't require any specific action. All it needs is commiseration...

"Oh, shit, we screwed it up again."

Well, yeas, as always.

So, what are some of the lagging indicators? For instance...

• Revenue


• Profit


• Variable costs

These numbers are assessed in retrospect. When partners like what they see, they rejoice. When they don't like the numbers, they get pissed off, and announce to non-partners that they (the non-partners) performed pathetically and management has no choice but to implement some serious layoffs and salary freezes.

And after this belt-tightening action, grabbing the freed-up money from layoffs, many partners go out and buy new luxury cars for themselves. After all, they have to keep up with the Joneses. At the same time the firm is freefalling to disaster. But the new cars will look impressive.

So, what are some of the leading indicators? For instance...

• Turnaround time


• Proposal acceptance ratio


• Number of new relationships


• Lateness from pre-scheduled events


• Bitching and bickering among associates

To these quantitative indicators, I would also add some qualitative indicators, but in most firms these are not even tracked or taken into consideration. Some of them are...

• People's mental, physical, emotional and spiritual state - Firm-wide average


• Feeling creative


• Feeling enthusiastic


• Feeling passionate about work


• Feeling stressed

And some indicators, associates should track for themselves because they predict how effectively they can perform in their works.

• Bodyweight fluctuation


• Amount of sleep


• Eating habits (what and when)

If you haven't read David Maister's Practise What Your Preach yet, then I encourage you to read it as soon as you can. His research in the correlation between passion, enthusiasm and other "soft" indicators and financial performance is truly eye-opening.

I've been just re-listening to my Suze Orman CDs, and she also talks about this mysterious connection between our inner state and our financial state. So, it's a lot more than sheer hard work.

Consulting is a very personal business, and the inner state of each of the associates creates a firm-wide inner state. And that firm-wide inner state can be either attracting or repelling to the marketplace. And yes, good marketing helps firms to generate enquiries, but when prospects come in contact with firms' "inner states", many of them, often the best of them, end up high-tailing to the competition.

And very often firms don't even know what causes this disaster.

They realise there is a problem, and now they're seeking some external fixes.

"We have to fire our advertising agency and hire a new one to develop a catchy slogan."

"We have to send the receptionist, who receives the incoming calls, to a sales training."

"We have to beef up our Yellow Pages ads."

What they totally miss is that the problem is 100% internal and not external or marketing related at all. But what is the alternative?

"We have to weed out politics in our firm right now."

"We have to start living by our values and follow our vision."

"We have to start caring about our clients beyond the money they pay us."

Now this is something serious, and I reckon this is why many firms rather fiddle around with external circumstances. It's a lot easier and since it doesn't question current practices, incompetent partners can save face and remain partners.

Consulting is probably the only form of business that is produced jointly by consultants and clients and "consumed" by clients, while consultants learn from each engagement and thus have more to use for upcoming gigs.

Imagine that a consultant has a bad day because his wife cuckolded him with the postman (options: milkman, encyclopaedia peddler, etc.), but later the same day he has a vital meeting with the engagement team. How productive is he likely to be? How sharp will his mind be at the meeting? With all this emotional burden on his shoulders, how effectively do you think he will communicate with the others?

The meeting is likely to be a disaster.

Can you see how tiny personal matters can make a mess of our service delivery abilities? Yet, how many silly things consultants do to create bad days for themselves? Here are some examples...

• Lacking of quality rest, including sleep


• Missing breakfast with family


• Dropping in to the local junk food joint for a crap burger and Coke for breakfast


• Arguing with colleagues at work


• Drinking buckets of coffee to stay alive


• Going through the day on adrenaline and caffine from hyperactivity to crash

So, by the time the meeting rolls around, our consultant is dead tired from lack of sleep and being overdosed on carbohydrates. His mind is racing to come up with an explanation to his wife why he missed breakfast... again. And he's searching for ways to justify his argument with his colleague, so he won't get into trouble. And he's desperately yearning for the next bucket of coffee, otherwise he may fall under the conference table at the client meeting.

Maybe this is the reason why, according to the Gallup Organisation, so many people are disengaged from their work. According to this study, 55% of people are disengaged from their work, that is, they don't concentrate on what they're doing. What's even worse is that 19% of people are actively disengaged in their work, that is, actively pursuing non-work-related activities while "working".

And at this point, many partners may blame associates for slacking off, but why are they slacking off?

My answer is because of the overall environment. In an environment of slacking off, blaming, pointing fingers, politicking etc. people quickly learn the reigning culture, and adjust themselves. But drop the same people into an environment of accountability, challenge, excellence, commitment, discipline, passion, enthusiasm and high expectations, and what you'll find is that they adjust to this environment.

A friend told me an interesting story about this. He noticed this phenomenon when he took the ferry from Britain to Ireland. On the British side, complying with the local tradition, people patiently queued up to the ferry. The on the Irish side, complying with another tradition, the same people frenetically kicked and elbowed each other in order to get off the ferry first.

What's changed them? Well, the environment.

Now, let's go back to the Gallup statistics. Can you see how much it can cost your firm to have its "state" out of whack? Imagine, only some 26% of your people are actively involved in and committed to the pursuit of your firm's vision?

This also tells us something about the famous 80/20 rule that some 20% of your folks produce 80% of the revenue. Quality guru, W. Edwards Deming also said many years ago that what used to be 80/20 in Pareto's time, it's about 95/5 in our knowledge-based economy. But let's be conservative and calculate with 80/20.

Vital minority: 20% of folks produce 80% of results => (80/ 20) 4% of results per 1% of people

Trivial many: 80% of folks produce 20% of results => (20/80) 0.25% of results per 1% of people

Results: The vital few outperform the trivial many by a factor of 16.

And one more important observation. This is not a factor of 16 of individual performance. In my experience, these folks are great team people, and the synergistic performance of all team members achieves this amazing result.

Look at many solo consultants who invoice in excess of $1 or even $2 million a year with the help of one single assistant. Yet, large consulting firms barely able to achieve $250,000 per employee performance.

Firms often use the revenue per partner indicator, but that's misleading because we don't know how many junior colleagues support each partner.

Personal Tolerations

We all know that issues in personal and family life have an impact on people's behaviour and performance at work. It happens because we put up with certain undesirable things, events and people in our personal lives. The founder of the coaching industry, the late Thomas Leonard called this "tolerations".

These tolerations have a pretty broad range. And based on these tolerations, he created a pretty neat self-assessment tool, called the Clean Sweep Assessment.

In this assessment, you can assess yourself on various personal issues, ranging from a dent on your car to squeezing the toothpaste from the middle of the tube, thus pissing off your spouse. These are small, seemingly inconsequential things, but they all add up and create burdens in our minds. And the more burdens we create, the less we can focus on our work. Also, every burden adds to our stress level.

So What Changes Can We Make?

We want to change factors that will change behaviour for the better. So, we have to increase passion, energy, enthusiasm and other similar ingredients. And for a moment let's remember, Maslow's hierarchy of needs...

Self actualisation: Working in the "flow", as per Dr. Mihaly Csikszentmihalyi's definition...

"Being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you're using your skills to the utmost."

Esteem needs: Respect to and from others, self-esteem, confidence, accomplishment

Belonging needs: Family, personal and professional community

Safety needs: Physical security, safety

Physiological needs: Food, drink, body functions, sleep, sex, etc.

So, management must create an environment of self-actualisation. And you have to create this right from the beginning, that is, in your career advertisement, when advertising for new people.

Change The Firm's Structure

Here is the big change. It's huge but pays off in the future. If possible, replace the partnership model with proper leadership model with one decision-maker on the top.

Maybe we can learn something from pirates. In a pirate ship crew there is almost full democracy. Goodies are shared equally, except the captain and the quartermaster who double-dip. Also, as far as decision-making goes, there is full democracy, except when in battle or chasing a ship. And these few details make the pirate ship crew one of the most effective human teams ever assembled.

Maybe there is a lesson here...

Change Payment Structures

A few years ago there was an article in CNN Money, entitled The Real CEO Pay Problem. It talks about how insanely corporate CEO's compensations have grown over the years. It seems that even CEOs whose companies are losing are awarding themselves with astronomical salaries, bonuses and stock options. The average CEOs compensation is 250 times larger than the average worker's pay package. It's even more interesting to consider that a typical CEO performs only 28 minutes of productive work per day. The rest is basically "strategic naval-gazing."

The irony is that these grossly underperforming CEOs are squeezing every inch of performance out of their - in many cases already overworked - employees.

In contrast, let's look at compensation in a predominantly motivated group of professionals, the military. A 4-star general's pay package is merely 6 times larger than that of the average soldier.

At the same time, I have a sneaking suspicion, that if army generals were performing at the same ridiculously low level as most CEOs do, by now Bin Laden or Castro would rule the world.

So, my idea here is to flatten the pay structure. It's hard to motivate people when they know that their hard work enriches the top dogs while leaving them with the table scraps.

Crank Up People's Accountabilities

Top professionals love being accountable for their work, and get demotivated when management fails to hold them accountable. Professionals don't want annual performance reviews. They want honest and instant feedback on their work, be it positive or negative. We can play with the words for negative feedback, like "areas of improvement" or "constructive criticism" but that is irrelevant. What is relevant is that managers have the obligations both to expect high performance, and communicate to their people their observations as to how they can improve their performance.

There is a world of difference between...

"The financial analysis must be absolutely and positively completed by tomorrow 10:00am."

...and...

"When you have a chance, take a look at this financial analysis stuff, and let me know what you think."

In general high performance and level of urgency go hand in hand. So, it's vital that you maintain a certain level of urgency in your firm. It's like stress. Too much stress, that is, distress is harmful. Too little stress fails to make people take action. The proper stress is called eustress.

Dr. Richard S. Lazarus, a professor in the Department of Psychology at the University of California did extensive research on this eustress-distress stuff.

For instance, high pressure, like...

"You have two days to finish this report or you're fired."

...creates distress.

But high challenge, like...

"Based on the prospect's sought improvement, our proposal is twice as expensive as the highest proposal this prospect has ever accepted. Let's tax our brains to figure out how to deliver this value using the least amount of our time and effort."

...creates eustress.

Unfortunately, in many firms all managers create is distress, thus crippling the creativity and the inspiration of the associates.

Change Recruitment Methods

Recruiting top-notch talents through the traditional resume/cover letter lunacy is not going to work. It's the recruitment equivalent of hiring independent professionals through bidding wars. The best and the brightest folks won't even respond. Also, hiring a headhunter agency is the same as hiring independent professionals through purchasing and procurement departments.

The best talents are not interested in job interviews, that is, discussions between interviewers (masters or superiors) and interviewees (slaves or subordinates). They want to be treated as peers, and are interested in having meaningful business conversations, and see if it's worth their time and effort investing their expertise in your firm.

Remember what Peter Drucker wrote many years ago...

"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."

Standard HR practices are good for the industrial age and industrial workers, but utterly useless for the knowledge age and for knowledge workers. So, we have to break from traditional HR practices, and treat these folks as peers.

Improve Supervision

Different people mean different things by supervision. Traditional supervision is what Stephen Covey calls "snoopervision", that is spying on people, checking each of their actions at work, checking when they come in and go home.

What I mean is a different kind of supervision. It's more like a feedback system. For instance, chief value officers are supervisors of some sort. But instead of supervising people, they supervise processes. In this case, they supervise the value delivery process, and make certain that clients receive the value they paid for and that consultants don't fall into the trap of delivering excess value that is not documented and paid for.

The other group of "supervisors" are the pricing folks who price engagements. In my work, I make sure that pricing folks know all the necessary details but if possible they don't know the name of the company in order to avoid emotional ties in case they know someone in the client's company. As we know, emotional ties can cause temptation for fee reduction, and we want to avoid that. Remember that value-pricing is all about getting paid for every shred of value you deliver to clients. It's only fair.

Manage The Maintenance Of The Soft Stuff

Imagine a twisty mountain road from where lots of cars fall off into the valley and hundreds of people die as a result? How do you manage the problem?

Do you manage the cause by setting up road signs and installing safety rails?

Or do you manage the effect by expanding the size of the cemetery at the bottom of the mountain and hire more gravediggers?

Most consulting firms are doing the latter. I've been hired many times to critique proposals. But the problem is not the proposal itself but the whole proposal process, staring with the very first meeting. The proposal is just one point in the engagement process. One huge problem is that many firms use proposals as sales tools.

But since we know that the soft stuff, like passion, energy and enthusiasm, create the bottom line, the idea is not to manage the bottom line itself (the effect), but the causes of that effect. We have to shift our gaze from the bottom line and focus on improving the soft ingredients.

In order to manage the soft stuff, practice managers must sweep up their own emotional backyards. They have to put their personal lives in order and only after that can they help, coach and mentor their people to clear up their lives. This in turn changes the inner state of their firms, so it can operate at a different energy level. And the different energy level will "attract" different opportunities.

And if you have a chance get a copy of David's book, Practise What You Preach and read it. I'm certain you'll find it eye-opening.

"Dynamic Duo" Mentor Programme... ...has 1 opening for July and 4 for August 2010. Click here to continue to read the fiendish details.

Recommended Reading

Don't Take Our Word For It, Take Theirs!

A complete guide to creating and using testimonials

By Michel Neray

It's so interesting that so many firms peg their success on using client testimonials, but upon reading those testimonials, we're not 100% convinced that these firms really know their stuff. Most testimonials are far too general, wishy-washy or just plain fluffy.

In this brand new e-book+audio package, marketing expert Michel Neray created an step-by-step process of requesting testimonials, editing testimonials for publishing, publishing testimonials and using testimonial with potential clients.

The big problem is that many consulting firms believe they have testimonials on their promo materials and websites, but what they have are really endorsements. They are not the same. Both are good but must be used differently. And an endorsement that is used as a testimonial can hurt the user firm.

You also discover...

• The difference between good and great testimonials


• The three ways of obtaining testimonials


• Five ways to enhance your credibility


• How to use your testimonials when people ask you, "What do you do?"

Now go and grab your copy of Don't Take Our Word For It, Take Theirs! by Michel Neray. Follow the "eLearn" link and you end up on the right page.