Commando Consulting, April 2010

By Tom "Bald Dog" Varjan

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Do you know that giraffes can kick attacking lions' heads clean off with one single kick, basically decapitating, not to mention humiliating, "decrowning" and pissing off, the king of the animals?

Well, history has produced a number of headless kings, so one more or one fewer doesn't make a dickybird of a difference.

The reason why I mention this nipple-tinglingly exciting fact is because in today's competitive world, it doesn't take much for competitors to decapitate consulting firms. Maybe not literally, and some consultants end up with their heads intact, but rather by swooping in and taking away their best clients.

So, consulting firms have to be on guard over creating good reasons for their best clients to stay with them.

This article was triggered by a discussion I have had recently with a senior partner of a large law firm. They have reached a plateau in their growth, so decided to hire a consultant to help them to gain momentum again and go to the next level of success.

There was one snag. They ended up hiring a consultant who was a retail expert, and gradually started turning the law firm into a retail shop. Christmas sale, monthly specials and coupon books. It sounded pretty frightening.

This law firm wanted to grow as knowledge professionals but this consultant was about to turn them into a retail shop, something like the legal equivalent of WalMart...

"Legal services at the lowest prices."

Can you blame the consultant? I can't. He is a specialist at selling "things" to consumers in large volumes and with deep discounts, not selling customised legal services to corporations at premium fees.

Hey, Harrods in London and WalMart don't use the same consultants when they need help, although they both are in retail. They are located at the opposing ends of the quality scale.

And now this consultant was about to turn this poor law firm into a legal equivalent of Walmart. Holy sausage, man! The next thing is really flying pigs. Or flying lawyers. Hm.

So, now we know that selling high volume of services at a deep discount won't build a great consulting firm. It can only build a firm with chronic busy-ness, headache, heartache and stomach ulcers. That is why I am a fanatic proponent of building low-volume high-margin firms, where you serve a small number of carefully hand-picked clients (as per your Perfect Client Profile) who appreciate your support and are willing to pay premium fees for your expertise.

The interesting fact is that I often see one-person consulting firms to achieve this status, whereas larger firms - even the so-called successful ones - struggle to achieve it. Hey, I know several firms where it is expected to conjure up 2,000 plus billable hours per person per year.

Calculating with a 40-hour week for 52 weeks, that is 2080 total annual hours. So, you are allotted 180 non-billable hours to do practice development and also to cover vacations, illnesses and all sorts of unexpected bits and bobs.

Average North American consultants bill out 1,140 hours per year and that requires 55-65-hour workweeks. Creating 1,900 billable hours may require 80 plus hour workweeks. That is retarded. You may want to live a bit too, regardless of how much you love your work and business.

And when you look at the statistics (Business in Vancouver Book of Lists here in Vancouver), you find that the top consulting firms do this madness, however when you calculate their productivity (net profit per employee), we are often talking about less than $15,000 per year. The partners could make more profit by investing their money in the stock market or real estate and they could sleep in and have breakfast with their wives and kids every day.

So, let's see what you can do to create a distinctive consulting firm. And I mean distinctive to you, your clients and your people. It is not about winning awards or being written up in magazines. Think of the Pepsi commercial with Michael Jackson. It won all sorts of awards, but sales took a nosedive. The same happened with the award-winning Cadillac commercial some years back. Go figure. Arthur Andersen was a highly regarded and a highly "decorated" firm, but went down with Enron.

So, let's get rolling here, otherwise the sun goes down on us and we achieve precisely dick.

1. Unparalleled Skill Building Excellence

Since the consulting industry is changing pretty rapidly, it's very important that you seize all opportunities to build new skills, abandon obsolete ones and polish the ones that need polishing.

Just imagine a carpenter who has the best and most expensive tools in the universe but doesn't understand the principles of woodworking. Yes, he can build a great-looking chair out of veneer and chipboard, but it will collapse as soon as someone sits on it. It doesn't serve the purpose of a chair, but looks impressive.

Many consulting firms fall into this trap. They almost blindly hire people with MBAs and other fiendish diplomas without making certain those candidates actually have something "solid" behind the veneer of their credentials. I do agree with Henry Mintzberg that most people acquire their credentials in order to jump the queue, and get into a high position where accountability is almost non-existent and they can only fail upwards. After all, they have expensive tools.

One of the local universities here in Vancouver, The University of British Columbia, is one of the cheapest universities in North America, but even there you have to plunk down some $32,000 for an MBA. And that is only the veneer. Then you have to go to the trenches to collect some real scars to learn the principles.

It is vitally important that you constantly evaluate your skills. And don't get bogged down with core skills only. As a consultant you must have a breadth of skills. Look, some 63% (here in BC) of the unemployment lines are IT people of some sort, mainly programmers. Why? Because they plainly refuse to learn anything but new computer languages. The way I see it, they deserve to die of starvation.

Programming, regardless of how good people are, is only one skill. And it is damned hard to build a career on one single skill. Who the hell wants to employ them on a full-time basis? I read the other day on a discussion forum that some local techies want to form their own union to create steady employment for themselves, and to force companies to employ only union techies. Good luck. Who the cricket wants to employ someone whose only skill is making turntable cartridges, just because he's a union stooge? More and more people don't even know what a turntable cartridge is.

Besides your core skills, you have to learn social and emotional skills for better interaction with clients. The consulting world is a sequence of one-to-one interactions. So, what to learn? Here is a short list: Listening * spoken and written communication * practice development * coaching and counselling skill * reading people... and however much you may hate the word... brace yourself... selling skills.

But not the peddling skills. It's not about convincing people to buy your services. By selling skills I mean skills to facilitate buyers' decision-making processes and to let them decide what they want to do next.

This is a huge difference from traditional selling that is largely based on manipulation. You may not like the word but coming from engineering, I like reality.

And I dare to bet some vital parts of my anatomy that the more consultants resent the "S" word, the more trouble their firms are to land new clients.

Also, many people have deep-seated issues around receiving money for their expertise. Many consultants undercharge for their services because they don't believe they deserve more. Watch out for this. This is some serious emotional baggage we carry from our childhood, and it is hard to overcome by ourselves.

We almost always need some external, objective help. I grew up in hard-core communism, so you can imagine how strong this "I don't deserve it" stuff used to be for me. When you are brainwashed that your sole purpose in life is to serve the state, this money issue can cripple you pretty easily. But it is there for everyone, and it would be a mistake to deny it.

We are living in a non-compartmentalised world and every - even seemingly irrelevant skills - can have an impact on our work and life.

For instance, Apple encourages all employees to take art classes. I've just read about a law form in the UK that encourages all employees to take music lessons. In both cases the company pays for it all. Firm leaders know that this investment comes back to the companies' bottom lines several fold.

So, when you set out learning peripheral skills, don't shy away from seemingly irrelevant experiences.

Learning music can improve your creativity. Doing a few parachute jumps can take your decision-making skills to a higher level.

2. Unique Methodologies To Raise The Bar

Yes, we could talk about problem solving skills, but problem solvers are dime a dozen. The key is about raising the bar. Initially we may start out to restore the status quo, but if you stop there, then you offer nothing unique to the client.

Henry Ford was raising the bar when all his market asked for was faster horses. But Henry knew that the solution was not in doing more of the same but doing less but different.

He knew the secret was not in fitting horses with one extra leg or doubling the size of whips and the speed with which drivers whip their horses.

Not at all.

A great example of the "more of the same" trap happened in the Formula 1 world in 1976, called the Tyrrell P34, the Six Wheeler, one of the most remarkable and radical F1 racing cars ever to enter Formula 1 history.

One day, chief designer, Derek Gardner had a great idea in response to some new racing regulations. On his new model, Derek used 10-inch front wheels and tyres to increase air penetration and reduce "frontal area" drag. But to compensate for the loss of contact between the tyre and the road, and to improve grip, Derek fitted the car with an extra two front wheels, making them a grand total of four.

It was an odd-looking machine indeed, a sort of motorised centipede in the making.

So, what's happened to this masterpiece of human imagination?

Nothing. Not a sausage.

And in spite of winning the Swedish Grand Prix in the P34, driver Jody Scheckter declared the car as "a piece of junk".

You see, chief designer, Derek Gardner's response to changes in racing regulations was to add more of the same. In this case two more wheels.

And if this solution doesn't help, then keep adding some more wheels. Maybe a second steering wheel and maybe a few more fuel pumps for good measure.

But as we know from Walt Disney, when he was advised to create a sequel to the super successful "Three Little Piglets"...

"You can't topple pigs with more pigs".

I don't know what's happened to Derek Gardner, but luckily, Henry Ford knew significant improvements can come only from complete change not from more of the same. That is, barbeque your horse (may I recommend French red wine. French because, sadly, France is one of the very few countries where horse meat is a popular food item.) for dinner and replace it with an engine.

And here I also want to talk a bit about content knowledge.

I've recently read an ad. A local IT firm was looking for a business development manager. The minimum qualification was a master's degree in computer science and minimum seven years of experience.

Here is another retarded IT firm. They have IT knowledge oozing out of their ears and other fiendish orifices, but have serious client acquisition issues.

So, they want to hire one more computer expert, just like them, hoping that doing more of the same will solve their problem. People are really their own greatest enemies.

Managers mistakenly believe that by accumulating more computer knowledge in the company, they become more successful.

I emailed the president and mentioned to him that maybe it was not the amount of IT knowledge that had to be increased, but it was the firm's marketing knowledge that needed revision. He told me he had been in the IT industry since the seventies, and he had forgotten more than I would ever be able to learn, and knew exactly what to do without taking advice from others.

And, just like so many losers, he blamed the economy, the government, his employees, his suppliers and his clients. But he was the genius. Oh, well.

I wish this firm the best of luck, but I have a sneaking suspicion that managerial ego will sooner or later floor the company permanently.

There are not many brand new things under the sun, but every method can be modified, made more exciting, more effective and more lucrative.

Back to Henry Ford for a second.

People knew cart and wheels. And people used some kind of pulling mechanism to pull carts. The horse was a pulling mechanism. So was the engine.

Both the horse and the engine have the same cycles to move forward: 1) Suck: intake, 2) Squeeze: compression, 3) Bang: power and 4) Blow: exhaust.

The horse does it as a result of some hay and water, and the engine does it as a result of some petrol.

If you are an accountant and find a way of halving tax return preparation time, which demands less time from you but presents new value to clients in the form of shorter turnaround time, then you can legitimately charge more in spite of taking less time to do the work. By charging more, you have new money to invest both in taking better care of yourself and attending top-notch workshops or acquire new skills and buy new more effective tools.

Which financial advisor is more valuable for the client: Premium Paul, the top notch MDRT (Million Dollar Round Table) member who charges premium fees for his services, or Competitive Chris, the local financial advisor who charges competent(ly low) fees?

Paul's personal life is in order. His personal needs are met: He has time for recreation, vacations with his family and personal and professional development. He regularly exercises to keep his body in top condition. He eats good quality food, so he is always mentally alert and physically and emotionally relaxed. Paul also has the money and the desire to go and learn from the greatest financial masters, which then he translates into value for his client.

Chris's life is a disaster. He works like a dog from dawn to dusk. He barely sees his family because he is too busy seeing existing clients and prospecting for new ones. He is always tired and keeps himself alive on buckets of coffee. When he gets hungry, he picks up some junk food between two client meetings.

He doesn't have time for learning new skills because, he believes, he already knows it all and nobody can show him anything new.

"Only mediocre people are always at their best" ~ Somerset Maugham

And he doesn't have money for workshops and seminars anyway. He tries to stay in business by charging competitive(ly low) fees, but his clients are getting less and less value and keep deserting him. So, his life is a constant hunt for new clients.

Be honest with yourself. Which one would you choose as your financial advisor? Guess what? This syndrome plagues every single consultant who tries to get by on competitive(ly low) fees. If we want to raise the bar for our clients, then we must raise it for ourselves first. After all, we can offer something only if we have it.

Why do you think the medical profession has such a bad reputation? Because the lifespan of the average medical professional is some 15 years shorter than that of non-medical people. Some 60% of the nurses in hospitals are grossly overweight. Not to mention the large percentage of doctors who suffer from various addictions (drugs, booze, smoking, etc.)

Look at your methodologies and look at the impact they make on your clients' condition. Could you create the same client impact using less of your time and labour? Instead of writing that report, can you just dictate your notes into an MP3 file and then your client's secretary can transcribe it? Can you record each client interaction and then offer it to clients to download from your server? I tell you, it is much less work but more value. Why more value? Well, speed.

Can you cut down on face-to-face meetings and do more work on the phone, video conferencing or email? When face-to-face is unavoidable, can you ask clients to come to your office? Hint: Your dentist won't come to you. Neither will your lawyer or accountant, nor your car mechanic. You had better start demanding to be treated like a professional not like a journeyman (politically correct version: journeyperson).

Digression starts: What do you build in winter? A snowman or a snowperson? Digression ends.

And now let's take the next step. How can you create more impact with less work on your part and charge more for it? This is a bold question but you must understand that you are not paid for your labour, but for the value you bring to the table, and the whole idea is to create as much client value with as little effort and time as humanly possible. Well, value that is proportional to the fees you've got paid.

3. Innovative Talent Attraction Methods

You may be either a solo practitioner or a consultant who wants to build a sizeable firm. It is important to create a buzz around your firm so that right people queue up at your doorstep wanting to work with you.

Here is an interesting point. Don't expect people to work FOR you. People work FOR themselves but work WITH you AT your firm.

Consulting is one of the professions that is based on trust-based one-to-one relationships. Yes, all industries talk about creating and maintaining trust with their customers, but the professional service firm is the only business model that works with clients, selling care, protection and guidance.

I had already received the down payment and I was going to their offices for the first meeting with key people. Half of the offices were dark. It turned out the electricity company cut off supply because the firm failed to pay its bills. The same happened to the phones. It turned out people lifted every penny out of the business for personal use. In the end, I handed back their down payment and walked away. Something didn't feel right. About eight months later the company went bankrupt.

My gut feeling was that this was a company in deep shit and I decided not to become part of the problem. Yes, I know some shores are set aside for shipwrecks, and if the gig is interesting, I may be interested, but when the primary concern of the sinking ship's captain is how to save the silver from the kitchen and turn it into a fancy car or a larger house for himself, then I prefer to back off. Exactly this was happening at this firm. They were laying off their people on a daily basis, so partners could use their associates' now saved salaries and bonuses for their own personal purposes.

In order to create an attractive atmosphere within the firm, people must manage their emotions. It is not logic, statistics and the number of awards that make a firm irresistibly attractive.

4. Special Client Counselling Skills

This is very important. This will define a large chunk of the experience clients have with you. You must understand that a degree from Harvard alone is not enough to provide memorable experiences for clients.

The leaders of many companies that provide excellent service have never seen Harvard on the inside.

Actually I read it a few years ago that in spite of how useful a Harvard degree is, the experience of going through Harvard is rather miserable and pretty diabolical.

We must understand that "experience" is more of a gut feeling process than a head process. Your clients must have the experience in their guts, not only saying "she really knows competitive analysis".

And this is why we must improve in the area of counselling and giving advice the right way. The way I see it, "Hey man, you should do this" is not proper advice worth paying for. Besides, people are pretty allergic to this kind of "advice" and tend to ignore it. Clients must feel that we have their best interest at heart not only collecting billable hours. The interesting thing is that we can't disguise our intentions. When we are in for the dough and not for helping clients, they can read this intention on us, and they will run very fast and very far.

So, make sure you have all the appropriate soft skills, and if you have employees, require them to invest a certain amount of their professional development time to sharpen their social and emotional skills.

5. Massive And Valuable Knowledge Base

Your firm's "deliverable" is customised brainpower. If you operate as a real knowledge professional, then people should perceive your sellable value in what you have between your ears. Writing reports, memos and putting in more hours of manual labour can hardly be called client value. If it is, then you've just ill-educated your clients, and just watch what they will demand from you down the road.

There is one problem though. If you are an hourly service labourer type firm with an army of juniors, then your interest is in selling more billable hours at competitive(ly) low hourly rates, and make up for the loss in volume.

Just read a nasty example on billable hours here, entitled Ron Baker is Wrong 2

But is this a win-win? It is a win to you in the short-term, but is it a win for your clients? I doubt it. Sooner or later they discover they were taken for a ride and they not only desert their consultants but start spreading bad words about their firms. And we all know that can be a disaster.

Also create value in the form of templates and processes that is in forms that don't require your personal presence. This can be client website where they have access to now stuff at their convenience.

6. Different Approach To Different Projects

Clients are different. Therefore I have always been against the "our unique approach", which also translates into "our trademarked one-size-fits-all process". It reminds me of a family physician in my hometown in Hungary. He asked every patient to strip naked regardless of the symptoms the patient experienced.

That was his "trademarked" approach with every single patient. Once I went to see him with a shin splint, but the process was the same. He refused to examine my foot until I had stripped butt naked.

Far too many - especially large - firms have this level of rigidity. Just think of the Six Sigma craze and how the shit hit the fan for Toyota in spite of being "Six Sigmasized" to the hilt.

And there have been Reengineering, Management by Objectives and some other flavour of the month stuff, mainly created by fuzzy-brained college professors within the confines of their untouchable union jobs and government pensions, but most of whom have never seen real action in the real world.

Peter Drcuker put it in a rather interesting way...

"In business school classrooms they construct wonderful models of a non-world."

I don't think they know much about the daily "streetfight" and the occasional "bloodbath" that are happening in the real business world.

And the more you can customise your approaches, the more valuable they become and the more you can charge.

7. Perpetual Research And Development Excellence

This is a big problem in many consulting firms. Associates and partners get so bogged down with doing billable client work that they have no time left to develop new approaches and processes, not to mention time to mentor junior associates.

The fact is that people only want to engage in billable work because this is how they get evaluated at the end of the year. Yes, this can be vital for consulting labour camps that are in the vice grip of the terrible billable hour and charge hourly rates.

Managers sit down with associates and schedule in advance how many non-billable hours people are willing to invest in building the firm's future. But this is still dishing out hours of manual labour.

The whole idea is to get away from the consulting factory model and to become a real professional knowledge firm that sells expertise regardless of time and materials.

And talking about the future, we have just reached another roadblock. Most consulting firms are pretty short-term focused. Until this obstacle is overcome and people are willing to invest in non-billable activities, like research and development to build the future, nothing will change and they will keep offering the same regurgitated ho-hum methodologies for the rest of their lives.

Oh, one more point here. In a firm that practices value-based pricing, there is no difference between billable and non-billable work only work that either creates current or future value or not.

Back to Apple and the British law firm for a moment.

Those Apple employees while attending art classes are creating value. So are the law firm's associates.

Long-term value, but these firms' leaders have the spine, guts and balls to invest in the future.

And every farmer knows that whatever he plants and nurtures today can be harvested tomorrow or the day after tomorrow the latest. Farmers think in farming cycles from planting to harvesting.

On the four farms where I'm a joint venture partner, marketing guy and butcher, our organic and free-range pigs take about 17-20 months to reach the weight when I can send their souls to the heavenly pig nirvana and their petite little bodies to some dinner tables. And the costs are pretty high.

Especially because we marinate some of them for the last 4-6 months. We use either a glass of in red wine or a pint of Guinness a day.

By the way, the difference in taste is mind-blowing.

But when you sell the meat for $25-45US per lb, and the demand far outweighs supply, the costs are really investments.

Summary

So, what does it really take to build and run an outstanding consulting firm?

It's a cause and effect game.

On the cause side, it's a blend of subject matter expertise and various peripheral skills.

Most people would say it's outstanding subject matter expertise but I don't think that's enough.

It's the peripheral skills that make it possible for us to think in context. I may be the greatest financial analyst on the planet but unless I can think and apply my financial findings within the overall context of the business, all my numbers are useless.

This is why many training, HR and IT consulting firms are treated as commodities, thus are being price-shopped. They can't communicate their expertise in terms of their clients' overall vision and strategy, so clients can't perceive the real value of their services.

And on the effect side, let's look at financial performance.

So, what makes a consulting firm financially excellent?

Many people say it's the gross revenue.

Financially, I believe what makes a consulting firm outstanding is great productivity, that is, net profit per associate.

For internal use only, I also like looking at the number of hours it's taken to produce that profit.

If your firm produces $500,000 per associate in net profit by working the normal annual 2,000 hours, don't try to double that profit by pushing your people to work 3,000 hours per year.

By the way, knowledge workers work 24/7. It's called the Zeigernik effect, which states that people remember uncompleted or interrupted tasks better than completed tasks.

In the knowledge work world it means that people keep thinking about their projects 24/7 until they're completed.

This is why only morons pay hourly wages to knowledge workers.

Using the above example, use part of those 2,000 hours to figure out how to increase productivity. How can you involve your clients' staff more effectively to do the kind of work that takes a long time but don't add much value? For instance, transcribing audio recordings or typing up notes into reports.

One side of the coin is to help your people to optimise their individual productivity; the other side is to operate your people as a team, and the team's synergistic productivity can be 2-300% higher than the sum of individual productivities.

This is why it's vital to hire very carefully and then reward the whole team.

David Maister calls this the "One Firm Firm" as opposed to the "Many Individuals Firm".

Remember people don't perform significantly better when managed by carrot or stick, but they perform significantly better when they are parts of high-performing cultures and environments.

The seven points that we've discussed here can help you to create a better environment in your firm.

Take them one by one, and start making the necessary improvements.

In knowledge firms we can't solve problems by adding more people. The key is to optimise your people's performance and use the small headcount to make sure that demand for your services always far outweighs supply.

This way you can always charge premium fees and serve the top 3-5% of your target market.

Come and let's discuss this newsletter issue on my blog...

"Dynamic Duo" Mentor Programme... ...has 0 opening for January and 4 for February 2012. Click here to continue to read the fiendish details.

Recommended Reading

Reinvent Your Enterprise Through Better Knowledge Work

By Jack Bergstrand

We all know that running a knowledge firm is drastically different from running a factory or any other type of industrial, muscle-based business, but in practice many consulting firms ignore this difference.

And they often end up following practices that come from the industrial world. These practices are hourly fees for services and hourly pay for some of the associates.

In this book, author, consultant Jack Bergstrand is looking for ways of creating top performing cultures and environments for knowledge workers.

The author proposes a four-area infrastructure to create peak-performing knowledge work cultures.

They are...

Envision: Where is company heaqded and why?

Design: What to do and when?

Build: How to do what needs to be done?

Operate: Who takes responsibility for all this?

He also points out several areas of work in knowledge work organisations that undermine performance.

Some of them are overdose of unproductive meetings, competing and unresolved internal priorities, research materials prematurely shelved and never acted upon, unfinished initiatives, talked-about initiatives that never start, high attrition in the executive suit and knee-jerk type change of strategy.

And there is one great point I really love because I truly believe in it.

The professional knowledge firm is not a profit piling entity, but a profit distribution entity. That is, knowledge workers create profit by creating value for their clients. That profit flows through the firm, the firm takes enough money that's needed to run the firm, but the bulk of the money is distributed among the people who've created it.

In my interpretation, the professional knowledge firm offers a vehicle for knowledge workers to create value for clients and in return these knowledge workers have great careers and fulfilling lives.

The second part is vital because you can't work brain workers the same way as brawn workers.

Many brawn worker companies have adopted the "Hire 'em => tire 'em => fire 'em" system with their workers.

But the difference is that knowledge workers carry their wealth creating capabilities in their heads, so they are free to move around from firm to firm, or even to set up shop and compete with their former employers.

As Peter Drucker put once it...

"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."

It's not a long book, but because you will stop many times while reading and start thinking, it may take some time to read this book. I've read it three times in a row and have taken tonnes of notes.

I believe this book is vital for firm leaders who are interested in improving performance in their firms by creating cultures and environments that bring out the best in people.

The material in this book is also Jack's doctoral thesis, based on solid theory and years of experience from the trenches.

Place your order with Amazon.com for Reinvent Your Enterprise Through Better Knowledge Work. You'll be glad you did.

"Dynamic Duo" Mentor Programme... ...has 0 opening for January and 4 for February 2012. Click here to continue to read the fiendish details.