Commando Consulting, July 2011

Seven Consulting Firm Leadership Pains In The Arse... And How To Reduce Or Eliminate The Pain

Podcast: MP3 Version

Since 1923, The 24 Hours Of Le Mans has been one of the most prestigious endurance car races in the word. Jointly with the Monaco Grand Prix and Indy 500, they are also called the "Triple Crown of Motorsport". Originally, the race was invented to test cars' endurance and reliability under extreme circumstances. And it's an extreme race in terms of both the fierceness of competition and the torture the cars have to go through. By the end of the race, drivers cover as many as 5,000 kilometres.

At one point, The Le Mans races started seeing a new type of start. Cars would line up on one side of the road and the drivers on the other side. At the wave of the start flag, drivers would run to their cars, jump in, start their engines and off they go.

However, this type of rather spectacular start was soon abandoned because, in order to get to the front of the pack, drivers didn't bother to fasten their safety harnesses.

So, they started the race, crashed every now and then, and, in turn, kicked the bucket every now and then. And that was a rather miserable way of ending an otherwise rather nice day.

And the reason why I mention this interesting point is that, in the shuffling madness, so many consulting firms rush headlong to the market to generate revenue, but they fail to think through how they manage their operations.

And as the saying goes, if you catch the tiger by the tail, then you'd better figure out your next move pretty quickly. And the same goes for managing consulting firms.

And since they've never figured out how to manage their firms, the proverbial tiger comes back and bites them in the arse.

And then this tiger goes home and tells all his friends and relations about the fresh juicy tushies available for biting. And the process repeats for the poor miserable firm.

Or maybe not...

While growing any business can be a major challenge, and while many aspects of growth in industrial companies can be delegated to watertight systems and almost minimum-wage workers, growth in a consulting firm is a totally different ballgame. And while I truly believe in systems and processes, to truly grow a consulting firm requires kick-arse talent as well. Not merely workers, but actual talents.

But just how to handle the delicate balance of what to systemise and what to humanise?

Using Pareto's 80-20 rule, systemise some 80% your firm's mundane and recurring tasks. This gives your people the creative freedom to humanise the other 20%.

As Roy Williams, The Wizard Of Ads writes in one of his Monday Morning Memo...

"A company without freedoms is a sweatshop. A company without policies, procedures, methods and systems is a country club for unproductive employees."

Just look at client acquisition.

It can be broken down to three phases.

In the Interest phase buyers research their predicaments, collect pertinent information and check several sellers' materials, including website. They read white papers, case studies, watch webinars and listen to podcasts. But they ignore brochures, and other typical sales materials. Also, at this stage they have no interest whatsoever in meeting sellers in person. In this stage, they are aligning their purchasing criteria within their organisations.

In personal relationships, this phase is dating. Searchers shop around, research, go through and check out several dating partners. There is mild interest but the commitment level is still pretty low.

The difference is that you can be interested in several things or people, but you can be committed to only one thing or person.

In the Conditional Commitment phase buyers make conditional commitments to engage specific consulting firms if those firms can fulfil buyers' buying criteria and they can have mutually beneficial bases for working together.

In personal relationships, this phase is engagement. Searchers settle with their single choices and engage them. The relationship, well, in most cases, becomes monogamous, but the exit hatch is still open in case searchers choose to flee.

In the Purchase phase buyers make final commitments to work with consulting firms and money exchanges hands... well, piggy banks.

In personal relationships, this phase is the marriage. Searchers and their partners exchange "I do"s, which is really the equivalent of money exchange in commercial situations.

So, midway through 2011, let's discuss some challenges managers and partners of consulting firms are facing and wrestling with when trying to bring out the best in their people to grow their practices.

Many consulting firm managers mistakenly believe that by hiring ten more associates or acquiring ten more clients the firm is to grow proportionally. It's like doubling the number of horses in a cart and hoping that eight horses can pull the cart twice as fast as four.

Well, yes. In terms of overheads and total number of working hours the firm is really growing. But when we examine profit per person, profit per hour or profit per client, you may see a drastically different picture.

Consulting firms produce something no one can touch or smell. Their "products" are concepts, ideas, strategies and perspectives being perceived to have significant level of ambiguity and risk. That makes both the promotion and the delivery of consulting services drastically different from the promotional and delivery methods of industrial organisations.

Unlike the offerings of industrial companies, consulting services are "being consumed" while "being produced". What that means is that there is no such thing as a prototype. Every time you "fire", that is, you deliver the service, you fire real "ammo" at real people. That's an awkward comparison. I don't encourage you to kill your clients though.

So, let's look into seven issues that can cause major headache for consulting firm leaders and partners.

1. Maintaining One-To-One Trust Between Clients And Consultants

The consulting firm is the only business model where - ideally - services are performed by the same people who've landed the business. I know large accounting behemoths have salespeople (a.k.a. rainmakers) and back office worker bees to deliver services, but that's not really unique consulting but mass-production of a commoditised services. Maybe that's why they have to overstaff their projects, so they can earn a living while still charging acceptable hourly rates.

Actually this is the bullshit behind the "rainmaker" concept. Essentially the chief peddler (yes, the rainmaker) with just enough grey on his temples, pretending to be your partner, sells the engagement then disappears to the next victim. Then an army of school kids (all right, let's call then junior MBAs) descend on the client at competitive hourly rates, and then stretch the project, so the firm still can make a killing by selling a boatload of - often useless - billable hours.

This is not a good way of building trust. And this is the exact reason why you can't sell consulting services the same way tangible things are sold. What that means is that, since most sales trainers teach how to sell commodities, you have to be very selective about where you send your people to learn about selling.

No doubt, selling is a significant part of the consulting equation, but how you sell makes all the difference.

2. Knowing The Real Competition

This may sound simple, but there is a bit more to it.

Statistically, every year, more people get killed by pigs than by sharks.

The same applies to businesses too. Business owners worry about sharks, a.k.a. competitors, but it's the pigs, a.k.a. apathetic, disengaged and uncommitted employees that do them in, and eventually kill the company.

Just like pigs who would rather lie in the mud and oink, these employees are on the payroll to pay their bills but don't really care about the firm or its clients.

In many consulting firms pigs are the mid-level managers who are more concerned with advancing their own individual agendas than contributing to the firm's ore clients' successes.

Pigs can also be consulting firm leaders whose only thoughts are for the quick buck at the expense of everything and everyone else.

It's vital to create a healthy, pig-free firm that has deep-seated core values, clear vision and a powerful sense purpose.

For industrial companies the competition is other industrial companies in the same industry. That is, the competition is external. For consulting firms the main competition is their own people. The competition is largely internal. Your clients can choose between firms, and so can your talents. And the quality of your clientele is just a reflection of the quality of your people.

Just look at restaurants, for instance. You'll never see affluent people to organise their birthday parties at Wendy's or Pizza Hut, staffed by minimum wage school kids. No. They expect a certain standard because they understand standard.

In these restaurants meals are prepared by cooks and served by servers.

They want to go to restaurants where the meals are prepared by chefs and guests are looked after by maître d's and sommeliers.

The word "affluent" may not come across the right way in our context, but think of them as the cream of the crop of your target market.

Buyers who seek high-value and high-quality work and are interested in forming deep trust-based relationships with their consultants.

And the fact is that consulting firms, while putting huge emphasis on solving client's problems, fail to put enough emphasis on providing memorable client experiences. They treat their work as transactional. They mistakenly believe that providing a certain number of hours (the work itself) and a certain poundage of deliverables are the same as kick-arse service.

And the other side of the same coin is retaining top-tier talents. If some great people are not in your corner to advance your firm's success, then they work in someone else's corner. There is nothing in between. This is a basic warfare equation: Here is the battlefield. You are either on my side or on the enemy's side. It's this simple.

3. Realising That "Who You Are" Is Your Brand

And this "who you are" stuff goes well beyond your marketing. You have to express your real self in every aspect of your firm, knowing full well that some people will hate your guts for it. Former UN General Secretary, Dag Hammarskjold, put it this way...

"It is more noble to give yourself to one individual than labour diligently for the salvation of the masses".

The only way of creating consistency in your firm is by living your true values and not to compromise on them. And this consistency becomes a major building block of your brand.

In 1990 Cadillac won the prestigious Malcolm Baldrige National Quality Award. Does that mean Cadillac was aiming at producing quality in any shape or form?

Not at all.

Cadillac was aiming at winning an award, and using it in subsequent advertising campaigns to fend off foreign, mainly Japanese, competition. The whole quality initiative was terminated right after winning the award. To a certain extent it worked, but now the market knows about the advertising hype that drives the American car industry, and most people opt for the higher quality, more reliable, economical and cost-effective Japanese models, and tend to ignore artificially evangelised scrap metal producers like General Motors.

As Stephen Covey says in his book, Principle Centered Leadership, that there is a difference between "being" (real, authentic and professional) and "seeming" (pretentious, falsely business-like). Staying with the car industry for a moment, the Japanese car industry is. The American car industry seems and pretends to be.

Running a consulting firm is more about who you are than what you do. The "what" is always defined by the "who". When you send a duck to eagle school, he can pretend for a while to be an eagle, but then some problems start emerging.

It starts in flying class. And even if the duck manages to go through the flying class without raising some serious eyebrows, the shit will seriously hit the fan in hunting class when the assignment is killing, eviscerating and eating big, fat, juicy a rat.

So, in order to be consistent under all circumstances, just be the real you and don't try to pretend. If you're a jeans bloke, then be a jeans dude day in day out, and don't try to pretend something else by putting on a pinstripe suit. I know I could create huge incongruence by dressing so far up. That's just not me. I do my best work when I'm dressed the way that is in synch with who I am. Some people like it, some don't and that's fine.

The other day I was writing a biographical sketch for a client. He looked at the draft copy, which I based on his behaviour during our relationship, and he was scared. He is a laissez faire jeans bloke, but in his business communication he is desperate to come across as a corporate "pinstripe". He's desperate to look business-like. Then I pointed out to him that in spite of his effort of looking business-like, he takes, on average, one full week to return a phone call or respond to an email. So, he actually IS an unprofessional guy who wants to LOOK business-like.

And he confuses his market.

Yet, at that moment, Jason preferred to look business-like over being professional.

We can look business-like until we're blue in the face and broke, but if we can't be professional enough to promptly respond to calls and emails, then our businesses are mere pretence without substance. We're just third-rate punks in fancy suits, and sooner or later we'll get found out."

After networking events, I always send emails to people I talked to. Nothing complex because I'm pretty socially inept, well, introvert, and I don't want to run the risk of making a pig's ear of my good intention. Just a few kind words of encouragement and a casual invitation to join my newsletter readership.

Usually fewer than 5% of people ever respond to those emails, and they usually are the owners of already pretty successful businesses.

They are like one of the guys in the lumberjack story. He's so busy cutting down trees that he doesn't have time to sharpen his axe, so the other lumberjack far outperforms him, although he's taken several breaks during his shift.

A short while ago a potential joint venture partner was losing my emails in his "junk box" because, after one month of "comparing notes on email" communication, he didn't bother to put my name into his address book, and several of my emails ended up in his spam box, which he deletes without ever checking. And this was an IT guy, selling Internet solutions. The phrase "Doctor, heal thyself" comes to mind.

4. Constant Systematic Lead Generation

Now this is an interesting topic. Interesting because for some consulting firm partners believe they can get away without "wasting money" on it.

So, what happens is that proactively generating qualified prospects is pushed to the backburner, while the rainmakers go out to pound the pavement and chase opportunities".

As the old British proverb says...

"You gain on the swings but lose on the roundabouts."

Hm. It reminds me of the time when I was learning to drive in the UK after driving in Hungary, on the other side of the road, for a good few years. Luckily the Brits didn't mess with the pedals.

Yes, you can save some pocket change by skimping on lead generation or skipping it altogether, but what is the price?

The difference is the same as preventive and remedial medical care. When people are falling off a cliff to almost certain death, you can either build a fence on the top of the cliff or build a hospital and a graveyard at the bottom. Yes, you have to spend some money before the first person falls off, but you don't have to spend a fortune later on the hospital and the skull garden. Also, you don't jeopardise the attraction factor of the cliff, so revenue from tourism doesn't suffer.

According to McGraw Hill, the cost of one one-hour local in-person sales meeting costs the selling firm some $370. An out-of town meeting costs over $1,000. This is the price you too might be paying for playing the chasing game and spending too much time on prospects who are not yet ready to buy, but drag your people around and milk them for information.

If you are willing to make a fair investment at the beginning, you start the momentum and your ongoing investment keeps going down while your return keeps increasing.

And at one point, your investment level bottoms out and stays there, unless you seriously screw something up, but your return keeps growing.

Sadly many firm returns can't grow because leaders lift the money out of the business and spend it on personal purchases, like new cars, boats, mistresses or exotic vacations.

So, unless you invest at the beginning, you will drastically increase the cost of landing new clients. The later you start the investment, the more it will cost you to convert prospects into paying clients.

Yes, I know many professionals say "Advertising doesn't work", "Our market doesn't respond to direct mail" or "Newsletters don't work in our industry". It's the same as saying, "My car is different. It doesn't need engine oil. It's a special dry system."

"Don't blame the target for missing it. Shoot better."

He was dead right. The problem is not with lead generation per se, but how it is used. Professional firms just have to find the best way of using certain methods to generate leads.

5. Integrating Sales Into Operations

This is another huge difference. Unlike in industrial organisations, in consulting firms there is no dedicated sales force. Selling must be a seamlessly integrated part of the whole operation of the firm, and every single consultant of the firm must be able to conduct conversations with prospective clients to establish whether or not there is a mutually beneficial fit to work together. No firm must be in the mercy of some rainmakers who can come and go as they please, leaving the firm high and dry.

Besides, without a built-in sales ability, because it can't stand on its own feet, a consulting firm has no innate value whatsoever. Not a sausage.

And this is another huge reason why there must be a proactive, 24/7 lead generation mechanism in place. I use the word "mechanism", because a large part of lead generation can be automated, so by the time prospects contact the firm, they are pretty close to making buying decisions.

And when I say selling must be incorporated into the service delivery process, I don't mean that you manipulate prospects and spend service delivery time pitching. This is a basic flaw with so-called free consultation. It's not consultation at all. It's an extended sales pitch and hard-core manipulation.

All I mean is that when in the middle of a strategy formulation session the managing partner sighs that "Oh I wish we stopped losing our best people after only a few months", then you can ask her, "Tell me about it".

You don't interrupt your delivery process per se, but still ask about the problem and establish whether or not the client wants to solve that specific problem. Remember, your job is to improve the client's condition. And if you know you have the expertise to address the problem the client tells you about, then you have a legitimate reason to discuss it as a future project.

And this is why you need more than good subject matter experts. You do need them, but you also need them with the additional "enquiring into" ability. That is, they must be able to recognise "distress signals" from clients and respond to them appropriately.

And what does "appropriately" mean?

Nothing much just asking clients, whether or not you can help with that issue.

That simple!

6. Maintaining Client Acquisition Momentum

Many consulting firms rely far too heavily on haphazard word-of-mouth referrals. This approach highly depends on the industry. If you're a financial advisor, you can create quite a bit of word-of-mouth, because it's an ongoing service. After all, your clients have like-minded friends and associates who also need responsible financial advice and planning on a continuous basis.

But what do you do if you're a divorce lawyer. You can't pester your clients to introduce you to their friends who are headed to the divorce court. If you're a funeral director, this word-of-mouth stuff becomes even more complicated. I saw this problem when I was a gravedigger a good few years ago.

Unlike industrial companies, most consulting firms suffer from the dreaded feast and famine cycle. Typical accounting firms are dead busy around the tax season and try to put food on the table for the rest of the year. They could eliminate feast and famine altogether by having a good client acquisition system in place, but many firms regard that as a waste of money.

They say a bird in the hand is better than one in the bush. No doubt. But if the bird in the hand is a skinny sparrow and the one in the bush in a nice juicy goose or ostrich, then, it may be worth letting the sparrow go and looking behind those fiendish bushes and check out those big birds.

Consulting firms must realise that it takes some time between first contact and signed contract. They can't just land new clients on the first contact, and receive 5-6 figure fees in one meeting. After all, you're selling a unique service not discounted commodities. Your services are not bought on impulse. It takes your prospects quite a bit of time to become paying clients.

This is why it is important that you have a client acquisition machine quietly humming in the background, while your people are doing their daily client work. And every single person in the firm must participate in cranking that client acquisition machinery. Everyone must be able to dedicate time and effort to landing new business.

Can you imagine a soldier who refuses to perform peacetime activities, like shining his boots or the daily morning run because his reason of joining the army was shooting enemy soldiers? That's retarded. There are certain peacetime activities to be performed to keep the army ready and prepared for shooting.

In consulting firms too there are peacetime and wartime activities. "Peacetime activities" are performed in preparation for client work. And the proverbial "wartime activities" are the actual client work.

Well, with some clients, it's really war.

Also, client acquisition must be a firm-wide effort. I find it ludicrous when new associates join firms, more often than not they are given the Yellow Pages with the instruction, "Letter M through P are yours. Start dialling." In this scenario associates are flying by the seats of their pants doing all sorts of haphazard activities to bring in business while some greedy senior partners raid the marketing budget to buy some expensive toys for themselves.

So, make certain you have a comprehensive and firm-wide client acquisition system in place and that everyone is on board to using it.

7. Sustaining Firm-Wide Passion And Enthusiasm

Now we know that passion and enthusiasm are two of the biggest profitability drivers in consulting firms. Yet, what we see in most firms is just a robot-like performance of activities. What causes this? Well, partly it is plain garden-variety burnout. I have worked with several firms where the norm was 1,900 plus personal billable hours per year.

Let's calculate a bit here.

There are 220 working days a year. With eight hours per day this gives us 1,760 total hours.

1,900 billable hours require 237 fully chargeable days. Or you work 220 days but work longer than eight hours. Now you're working harder than a prisoner in a Gulag death camp in Siberia.

And on the top of this, you still have to accommodate time for non-billable work like administration, skill building and client acquisition. At the end of the day, typical consultants work about 70 hours a week. So, how can you have even a shred of passion and enthusiasm if you work like a dog day in day out just to make your quota of billable hours?

Again the military comes to mind. The battle is over and is won, but Joe didn't shoot anyone. Not one single enemy soldier. The commander walks up to Joe and tells him...

"Joe, either you go back and shoot someone right now or don't get dinner tonight and have your allowances suspended for two weeks. Remember you must make your quota of corpses if you want to get paid."

The fact is that a consulting firm should act as a tight-knit team, but realistically most firms are loose groups of individuals who happen to be working under one roof and share toilets, but the community ends right there. They don't have time to work for the firm because they are so busy working for themselves.

Can you blame them? I can't? Is such a firm worth working for? Not really. Not many firms are.

This is a cut-throat environment, like car dealerships, where salespeople deceive each other, their managers and customers in order to fatten their personal commissions. They care as much about the firm's welfare as the firm cares about their personal welfare: Zero, nada, zilch, not a sausage.

Passion and enthusiasm must be part of the culture of the firm and new associates must be able to pick it up upon entering the firm. And a firm can only have passion and enthusiasm if it has a higher purpose, than simply making money.

The firm must provide an environment of both professional and personal growth for its people. If, as a firm leader or managing partner, you can find out what's really important for your people on a personal basis, then they will start truly caring about what's important to you and your firm.

And in the meantime remember the words of Clarence Francis, business executive and renowned food expert...

"You can buy a man's time, you can buy a man's physical presence at a certain place, you can even buy a measured number of skilled muscular motions per hour or day. But you cannot buy enthusiasm, you cannot buy initiative, you cannot buy loyalty; you cannot buy the devotion of hearts, minds, and souls. You have to earn these things."

Just think of the ultimate passionate renegade, Richard Branson. I don't think he's the best airline pilot, musician or telephone designer, yet his company is a major player in air travel, music and mobile phone technology.

And while you can't institutionalise passion and enthusiasm, you can always lead by example. And remember that like attracts like. If your firm is a gloom room, then it will attract doom and gloom people. And at the last count, it's bloody hard to sell doom and gloom on the marketplace.

On Summary

I start from the back with this passion stuff because that can take quite a bit of time. It requires no money but it requires behavioural change, and that's the real hard part. Many firms can't even pull it off. They are so mired in this "smartly business-like" image that being authentic is out of the question.

The next one is lead generation. You can't put the future of your firm in the hands of your clients in the form of word-of-mouth. There must be something proactive too. Can your people speak or write? Lead generation is not necessarily cold calling or knocking on doors and begging for appointments. That's invasion-based.

Good business development is invitation based. You put out good content, and self-qualified buyers will come to you when they're ready to buy.

It may seem we've got stuck on client acquisition, but this is probably the biggest headache firm leaders have nowadays. After all, client acquisition is a deciding factor in whether a firm lives or dies.

There must have been a good reason for Peter Drcuker to state...

"Because its purpose is to create a customer, the business has two - and only two - functions... Marketing (you get paid for creating a customer) and innovation (you get paid for creating a new dimension of performance). Marketing and innovation produce results, all the rest are costs."

So, what produces results, and what are the costs in your firm?

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

"Dynamic Duo" Mentor Programme... ...has 0 openings for May and 2 for June 2012. Click here to continue to read the fiendish details.