Commando Consulting, November 2010

Ten Causes of Low Morale in Consulting Firms

By Tom "Bald Dog" Varjan, Organisational Provocateur

Podcast version: MP3 Version

Have you heard that in the years of yore people believed that certain colours could help to fight the evil spirits that had the nasty tendency of lurking over nurseries?

And since blue was the colour of "heavenly spirits", parents started dressing their boys in blue.

And what about girls?

First they were dressed in black, and then from the Middle Ages, they were dressed in pink.

And what happened to boys who got dressed in pink for some inexplicable reason?

That created a bit of a self-esteem problem which led to morale issues.

We can observe similar morale nosedives in many consulting firms, triggered by various events.

It seems the whole firm is dressed in pink.

So, in this article we try to get to the bottom of the low morale issue in consulting firms.

Apart from subject matter expertise, the long-term success of every consulting firm revolves around making the most of their people's capabilities through better leadership, teamwork and communication.

Some may say, these are soft skills, but without them firms can't fully benefit from what their people have to offer.

People can have great subject matter expertise, but without leadership, teamwork and communication, people quickly lose the soft ingredients that lead to low morale.

And what are those soft ingredients?

Well, they are energy, ambition, enthusiasm and inspiration. And by inspiration I mean internal drive not external motivation (usually carrot and stick).

So, let's see 10 factors that can enliven or kill our morale.

1. Misemployed People

According to a survey (I can't remember who it was done by) some 82% of the working population are misemployed. What that means is that they go to work and spend the day performing activities and looking impressively busy, but are light years away from tapping into their full capacity.

This problem can be a touch more easily camouflaged in industrial firms, but in consulting firms, where the firm's success is based on one-to-one trust-based relationships with clients and other associates, people have to put out all they have.

And again, I'm not talking about only subject matter expertise. Even the best strategy specialist needs sales skills to interview potential buyers.

I've been using the Gallup's talent assessment programme, called Strengthfinder, and I've found it very helpful to assess people for their innate talents, so they can be placed within the firm according to their talents.

It's a brilliant account of how introverts and extroverts differ, and you can employ them in the best positions.

For instance, introverts are better listeners (Clients' #1 problem with consulting firms is not listening), they think before action, enjoy working in small groups, have few but deep interests and have more attention to details.

Extroverts like empty chit-chat, talk fast and loud, enjoy working in larger groups and have many shallow interests.

This is important when you're matching your clients with your people.

I encourage my clients to assign two associates to every client. The primary contact is a match to the client, and the backup is complementary. This way the two consultants complement each other and work well.

One consideration though is staying away from extreme introverts or extroverts. And extreme introvert can plan forever without action, while an extreme extrovert does no planning at all.

Try to avoid both situations.

2. Communication Problems

In many firms people don't dare to speak their minds because they know they would be punished for doing so. British writer, St. John Ervine once said...

"To hear nothing but what is pleasing is to make a pillow of the mind."

Sadly, many firm partners and practice leaders are actually sleeping on this kind of pillow. They only hear the good news.

It reminds me of communism where people didn't bother to tell their party leaders about the bad news in fear of having the messenger killed.

I have talked to far too many associates who would go to work in the morning, and then spending the evening sending out resumes for new jobs. I know an IT firm where all the Open Source experts quit at the same time.

The problem was that the firm was positioned as an Open Source specialist and the mass exodus almost killed the firm. When I talked to two of the guys who'd quit, they told me there was only a one-way communication system in place.

The partners and the practice leaders in the suits did the barking of the orders, and the "grunts" serving the clients did the "sir, yes sir" game.

A consulting firm is a tight community. If you can't freely speak there, then there is a serious problem.

Communication should flow not only downwards from partners to associates but also upwards from associates towards the partners. You have to establish communication channels for every possible situation.

Often even short delays can be dangerous, so instead of getting hung up with the style of the communication, focus on its speed and substance. A handwritten note right now is more valuable than a nicely printed memo the day after tomorrow.

3. Colleagues And Partners Are Not Accessible For Help

Practise what you preach. Where is the problem here? I think we only have the right to preach what we practise. Partners and practice group leaders are good at demanding results from their people but are hopelessly useless at supporting them to produce the demanded results. The fact is that most practice leaders and partners have their own clients, and coaching junior associates is not even a secondary issue for them. That is, teamwork is an illusion, and they don't even try to pretend to play the team game.

But this is retarded. Practice leaders shouldn't focus on client work. Instead they should work with those associates that they mentor, and help them with their client work.

Just look at the military.

The general planning the battle in the war room is not expected to go out to the battlefield to dig trenches and fire bullets.

His job is to co-ordinate the soldiers who dig trenches and fire bullets. Why? Because if the generals got too busy digging trenches, then who would be planning the battle?

Imagine a rowing team. Everyone rows like hell but there is no one at the helm to keep the boat in the right direction.

Practice leaders should spend most of their time mentoring associates and bring out the best in them. That's much more profitable than their putting in more hours serving their clients.

Now retired professional service firm expert and one of my mentors and role models, David Maister has a great summary on this issue, entitled How Managers Should Spend Their Time It's the middle video in the second row from the top.

If you are a partner or practice group leader, your clients are really your associates, and you have to coach them to bring out the best in them. Focus on achieving the most through your people.

4. Overall Lack Of Personal And Professional Growth In The Firm

Consulting firms can only grow to the extent their people grow both personally and professionally. Yet, when firms get busy, then skill building is either cut to the bare minimum and is eliminated.

People are stagnating because they are so busy doling out - often obsolete - advice. A few years ago I attended a tax course on how to optimise tax deductions. It was led by a tax attorney who was a chief advisor both to the Canadian and the US tax authorities. It's fair to say he knew his stuff.

Several accountants started arguing with the instructor about tax deductions. Soon it turned out those accountants had been feeding their clients with obsolete advice due to lack of ongoing professional development.

They do the minimum skill building to qualify for professional development credits from their associations, but otherwise are dead busy doing client work. That's why growth is not taking place in many firms.

When money is tight, they first cut back on skill building and marketing.

But naturally people want to learn. And if this learning is compromised, sooner or later people leave the firm.

So, what is the lesson here: Offer your people an environment of constant learning both personally and professionally. Support them in engaging even in seemingly irrelevant activities.

If a conservative, risk-allergic associate wants to try skydiving, rest assured that will have an impact on her risk-taking and decision-making abilities. It may be a seemingly irrelevant activity, but as in Gabriele Veneziano's theory of quantum physics...

"Everything is connected with everything else. You just have to find out how."

5. No Feedback From Inside And Outside The Firm

Most firms use some kind of regular feedback system but the problem is that these feedback systems are far from being instant.

They are the annual reviews. So, if an associate makes a mistake in January, his action won't be reviewed and corrected until December. How retarded is that? Well, very retarded.

Now imagine this. You're sitting in a taxi and driving down the motorway at 100 miles an hour. All of the sudden you notice the driver keeps his eyes closed and opens them every two minutes for 10 seconds, then closes them again. How do you feel? How confident are you that you get to your destination in one piece?

I know there are the annual evaluation thingidoos, but speeding in the wrong direction for a full year before being told something is off-kilter.

Many years ago I stopped using feedback sheets with clients. I expect them to tell me right away when they feel something is not going according to plan. Often they need a bit of training here. Most people are still living under the former periodic evaluation illusion.

For instance, explaining to clients that just because something is off track, it doesn't necessarily mean that I am an idiot and don't know what I'm doing.

Many clients believe that consultants work FOR them. Often, the "I work WITH you but not FOR you" concept is totally new for clients. I often use personal training as an example, indicating to prospects or clients that what they put in is what they get out.

So, make sure you set up an instant feedback channel both inside the firm with colleagues and outside the firm with clients, so you can make instant corrections when something happens. And as we know, there is no straight line in the universe. Whatever we do, we are off course almost all the time, but we instantly correct our error. Just try to keep your car on a steady 100 miles an hour and don't look at your speedometer for about five minutes. I bet that after five minutes you will be driving either faster or slower than 100, but not spot on 100 miles an hour. Not to mention the direction.

It may also be important to consider that, as I observed during my years in biomedical engineering, that surgeons don't use patient satisfaction. They use vital signs monitors for objective feedback. So, how do you get your operational "vital signs"?

6. Constantly Moving The Goalposts

This is where people can get really confused. It usually comes from the fact that firm's leaders don't know where the firm is headed. They are so busy doing the day-to-day running of the firm that long term vision goes down the toilet.

Just as Spanish philosopher, essayist, poet and novelist, George Santayana has put it so well...

"Fanatics are who lose sight of their goals and redouble their efforts."

Partners and practice leaders go to their offices every day and get busy doing tactical busy-work. They get hopelessly busy, while strategically the firm is often lost beyond hope.

Imagine soldiers going to a major war and all they know is that their job is to win the war. That's great but the interim goals change every day.

Today Joe is the enemy, so march west to defeat Joe's army. Then all of a sudden, change direction and march east to defeat Fred's army.

Your firm must have an overall direction that is properly communicated to each and every person within the firm, and your people must understand it, so they can do the daily work in alignment with the big picture.

7. Not Understanding The Expected Results

This is about micro managing. Performing consulting services cannot be framed into a linear 9-to-5 job. It's not manual labour where you are expected to shovel manure from 9:00am to 5:00pm.

Providing consulting services is a creative process, and creativity cannot be performed on command. This is why I have chosen to have blended business and life, as opposed to balance one against the other. I often listen to client interviews while cooking or write promotional copy sitting on the plane in a noisy corner en route to the drop zone and ready to jump.

The big problem here is that many firms try to manage both outcomes and activities, leading to retarded comments like...

"Joe, I like the outstanding service you provide, and the client is extremely satisfied with your work, but I want to see you in the office more or I have to remove your bonuses and pursue disciplinary action against you. Our working hours are 9:00am to 5:00pm, we want you to adhere to it."

Within four weeks Joe was servicing most of his personal clients from the competitor's payroll. The new employer loved to accept Joe when he walked in with a small army of loyal (loyal to Joe, not his current employer) clients.

Joe's previous firm lost $170,000 worth of monthly retainer business, and some serious projects that were about to start. The firm had to make significant cutbacks because the firm couldn't replace the lost clients quickly enough.

There are some important considerations when assessing consultants' performance.

1. Do we clearly articulate our objectives?


2. Do we make our people fully accountable for their actions? (Not for the results, since no one can control results)


3. Do we keep learning?


4. Do we focus on quality?


5. Do we treat our people like partners?


6. Do we keep innovating and renewing ourselves?

While industrial companies can operate on a "Leaders and their minions" basis (although the best don't), this can be a real killer for consulting firms.

You have to clearly communicate the strategy and let your people figure out how to do it. Trust them a bit and they will do miracles.

8. Unnecessarily High Overhead

I love this. The problem here is that many firms use performance indicators that are used in industrial organisations. In doing so they lose sight of their overhead costs. They make good money on gross billing, but don't track what is left after the expenses are paid.

It's common to use gross billing, and let's see why it is useless.

Let's say you want to buy a car and the salesman says...

1. This car can run for two solid hours. Yes. Great! With how much progress?


2. This car can cover as many as 200 miles. Yes. Great! In how many hours (or days?)

These are great features but are useless. These numbers are relative to nothing. It's much more meaningful if he says the car can do 100 miles an hour. Now that means something.

What does gross billing mean?

How many people have created that amount? How many hours has it taken to produce that amount?

Gross annual revenue of $10 million with ten people, working 40 hours per week, is pretty impressive.

Gross annual revenue of $10 million with 25 people, working 80 hours per week, is a disaster.

In the first case we have 10 people putting in, using 50 weeks thus 2,000 hours per person, 20,000 hours. 10 million / 20,000 = $500 per hour per person revenue.

In the second case we have 25 people putting in, using 50 weeks thus 4,000 hours per person, 100,000 hours. 10 million / 100,000 = $100 per hour per person revenue.

Yet, in the conventional sense, the 25-person firm is more successful.

And we haven't even deducted the cost of doing business yet.

The key is to establish relative indicators, like, in the car's case, miles an hour.

So, what sort of indicators can you use?

Here are some of my favourites...

1. Net Profit Per Hour: Take the total firm-wide net profits and divide it by the number of total hours ALL the people of the whole firm worked.

Although, I don't like tracking time. Let people work at their pace as long as they keep to project deadlines.

2. Net Profit Per Person: Take the total firm-wide net profits and divide it by the number of people on your payroll. Many firms track profit per partner but that's misleading because it's not only partners that cost money to employ.

3. Net Profit Per Client: Take the total firm-wide net profits and divide it by the number of clients on your roster. This is very rough, so make sure you track the profitability of individual clients too.

4. Hours Per Project: Track how many hours your people pump into projects. Over time, keep working on reducing labour intensity, while increasing perceived value.

Dump as much donkey work on your clients' staff as possible. Be the hired brain not the hired extra pair of hands.

I like recording interactions and then give clients the MP3 and request the transcript. Or, whatever we scribble on the white board is then transcribed and drawn out electronically by clients' admin staff and I get copies of everything.

The only miscellaneous work I provide as part of the project is editing and proofreading when I do copywriting. I do that because I have my reliable editors and proofreaders who know my style and the way I write.

So, they correct style and grammar where necessary without changing the tone of the document.

And remember, it's not the money that you make but what you actually keep that counts

9. Management Is Not Focused On People

This is where the self-styled father of modern management, Frederick Winslow Taylor comes alive and says...

"In the past people came first. In the future systems come first and people will conform to them."

And all of the sudden he killed professional pride in many people by turning the most exciting and fulfilling careers into mundane meaningless jobs. And you can see this conformism both at McDonald's and many consulting firms where people just go to the office to justify their next paycheques, but don't really give a shit about the work they do. They are almost as apathetic and unproductive as most union labourers.

Even if you manage a group of assembly line workers, you have to pay attention to the persons behind the workers. When you manage people who earn money through one-to-one face-to-face client work, then the personal aspect is much more important.

While I believe that it's important to have great systems in any business, but really and truly it's your people who will make the difference.

Just look at Formula One racing. The cars and their features are almost identical. Whether a car comes in first or last is up to the driver. Consulting firms are the same.

When it comes to systems I agree with Michael Gerber's E-Myth, but I disagree with his statement that if you have good systems, you can hire the cheapest, lowest-skilled people to operate the systems. Well, try to explain this to a patient waiting for brain surgery or a convict waiting for his lawyer at a murder trial.

I have strong doubts that Michael Gerber's McDonald's approach works for consulting firms.

I'm all for systems, and I gained deep appreciation for Michael's concepts when I was studying at his E-Myth Mastery Academy in 2000.

But people are the only factor in a business that can't be copied. Systems are easy to copy. So, the emphasis is obvious.

The best situation is when you have great people and effective systems. And the systems are playing into the hands of the people. That is, the systems serve the people not the other way around, as we can see it in so many firms.

Unlike industrial organisations that employ workers, consulting firms employ talents. And there is a hell of a difference between a worker and a talent. All in all, in consulting services you need more than systems alone.

People are the only differentiating factor consulting firms can have. Everything else comes from the same few suppliers and they are available to each of your competitors.

At Egon Zehnder International every new associate is on the path to make partner. People know that a great and exciting career is waiting for them. Read again: Not just hard work, high pressure, high demand, long working hours, misappropriated bonuses, denied vacations and stress of biblical proportions, as in many firms, but exciting careers. It does include hard work, but also some more. So, how do you make sure that you can attract top-tier talents and what can you offer them besides competitive compensation?

10. Management In Hot Pursuit of Money

It is just impossible to make more money by chasing it. I think it is from Emerson, but I'm not sure that...

"Success is not to be pursued. It must be attracted by the person you become."

You must acquire certain character traits to attract business success. So, here is a little example to demonstrate the difference between pursuit and attraction.

From a former life I am butcher, and I have some joint ventures with organic family farms where I work as a marketing guy and butcher.

It's probably easy to imagine that where there is blood and raw meat, there are flies.

You know, the big horse flies and bluebottles. And here I don't mean secret agent Bluebottle (Leader of the East Finchley Junior Secret Agents Club, Mastermind behind the second East Finchley World Cup and owner of many other fiendish achievements including rose-coloured knees) from the British comedy, The Goon Show.

Of course I want to get these flies out of the way, so they can't wreak havoc with on meat. At this point we have two distinct options:

1. Chasing the flies with a rolled-up newspaper and flattening them one-by-one. Just like firms' rainmakers chase prospects one-by-one with their idiotic sales pitches. It's doable but it takes too much time and energy, and the number of flies I can flatten is very very limited. Similarly, you can only reach a certain number of prospects by chasing after them.

You may also want to consider that some 97% of prospects are not ready to buy. That's why it is so expensive to go and meet prospects randomly in person. However, management often believes that this brings in instant money. But when the button is more expensive than the coat, regardless of how fashionable it is, it is still a waste of time and money.

Yes, when you land the deal, you can get busy, but will you make any profit on that busy-ness? This is the question to consider.

The other option of catching flies is...

2. Creating a "honey pot". This is a jar halfway filled with sugared water. We all know that flies love sweet stuff. Then I spread honey on the inner side of the lid and screw it on the jar. Then, with the knife sharpening steel, I punch a small hole on the lid. The hole is just big enough so the biggest flies can squeeze through and get to their oh-so-much-longed-for sugar. Then I put out the jar in the working area, and get on with my work.

The interesting thing is that all the flies disappear. They all go to the jar. They are not interested in the "competition" (blood, meat or even the people) any more. They are only interested my unique offer, the sweet water in the jar. And of course after tasting my offer, they can't get away, and they all die in the jar.

What is the lesson here? We created the "honey pot" and the prospects (flies in this case) came to us without our chasing them.

No I don't suggest that you drown your prospects in sweet water, but the principle of attracting clients is the same.

On Summary

So, what can you do today to raise your firm above and beyond the typical human-hostile organisation? Far too many consulting firms' missions revolve around how to screw clients and associates in order to fatten the partners' bank accounts. Cynical? Maybe. True in many firms? You bet.

But the other point we have to consider here is that over the years, thanks to the Internet, buyers have become better informed, and try to keep their consultants under closer scrutiny than ever before.

Clients require more specific guarantees than before and they are willing to invoke those guarantees if they feel their consulting firms don't pull their weight only bill them.

And this is one more reason why hourly billing has to die. Clients want to know from the beginning what to expect.

So, look at your firm and see which points apply to it and what you can do right away to rectify problems.

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

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