Commando Consulting, November 2011

Why To Keep Investing In Your Consulting Firm Even When You Think You Can't Afford It

By Tom "Bald Dog" Varjan, Organisational Provocateur

Synopsis

Every now and then the shit hits the fan in every consultancy. In some cases, the result is just some "freckles", but in some cases it's a major "coverage" and a stink-up of biblical proportions.

And what do consulting firms do when they hit on hard times? In the best case, they scale down on their marketing. In the worst case, they stop marketing altogether and start hoping and praying that the hardship passes.

And what usually happens is that the general economic hardship passes, most businesses are on the mend, but our heroes, instead of resuming marketing, are still on their knees praying for better times.

A much better approach is to market your way out of the hard times. That is, invest in those things that most other consulting firms would never invest in during hard times.

In the 3rd Star Wars Ben Kenobi and Luke Skywalker walk into a rather dodgy bar to hitch a ride. They find Han Solo, a confident space mercenary, and sit down to him to negotiate the price and terms of a journey.

Han accepts the gig and presents his price and conditions.

Luke jumps up and loudly protests against Han's exorbitant fee. Finally Ben Kenobi calms him down.

What was the difference?

The wise, old Ben Kenobi understood the value of getting to their destination quickly and reliably.

The young, know-it-all, galactic greenhorn Luke knew only the going rate of a ride on a spaceship.

The same situation can happen when consultants are on the horn of a dilemma as to whether or not to make certain investments in their firms.

Look at most consulting firms' websites and what do you see? Seemingly amazing firms with mighty visions, breathtaking missions pontificating about achievements of epic proportions.

Then when you look at the real operation of many of those same firms, you often find that what you've just read on their websites is empty platitudes; well, a bucket of horseshit really

Where do these firms actually fall short? There are several areas, but probably one of the biggest problems is around investing in their own futures. Sad but true. The world has been becoming more and more short-term oriented. Both individuals and businesses are seeking instant gratification.

According to a survey[1], some 95% of business owners know what to do, but they fail to take action because of the risk it takes to act on their visions. They often rather suffer from inhaling the decaying stench of the status quo than stepping up to a higher level of excellence and performance where they could breathe pure air, simply because they are scared of falling from that higher level.

So, instead of looking at how to win and how to achieve amazing goals, attract great clients, passionate talents and exciting projects, they try to play it safe and not to lose... too much.

So, what holds consulting firms back from investing in themselves during tough times?

#1: Prostitute Thinking

"Unless we make money right away, we don't invest."

"Either a marketing campaign or a new Mercedes. I take the Mercedes, thank you very very much. Marketing and everything else can wait."

I have seen so many consulting firms where senior partners would take all the new money out of the firm to spend it on new homes, cars, boats and hookers (sadly, yes) because the firm's growth is not important enough. The same partners told their people that associates' compensation packages will be frozen for a few years because the firm is doing poorly. Hm.

This behaviour comes from a short-term mindset of instant gratification.

#2: Managerial Ego

"If some consultant points out the obvious, I lose face. Can there be a better system than the one I've created. No. No bloody way! I am the best around here."

So, cantankerous curmudgeon managers rather lose their firms' money, prestige, reputation and respect than swallowing their false pride and get the problem solved once and for all.

They don't care about what is right, but who is right. And they feel they must always be right regardless of the consequences.

#3: Fear

"What if the new ideas don't work for us?"

Look at it this way. You have been doing your best and created whatever you have. And whichever way you shake or stir chicken shit, you can't turn it into chicken salad.

And we all have some chicken shit in our businesses. The rest of the business may be the tastiest chicken salad, but one part can be the most rotten chicken shit stinking like a whorehouse at low tide.

The only way to step this up is by looking at your problems from a different perspective. It is scary, but you have no option. The status quo doesn't work anymore.

"We don't take any action until every T is crossed and every I is dotted. Every single step of the plan must be carefully scrutinised, analysed, timed and budgeted. Once we agree on those, we'll see what we can do."

And this is exactly what losers do. They try to budget and analyse themselves into excellence. However, it doesn't work without action, and yes, every time you take action, there is some risk involved. That is, you must have the courage to act on your vision and strategy.

#4: Lack Of Focus

Many firms are so busy fiddling around with non-core activities that often lose sight of what their own businesses are all about. According to the Outsourcing Institute, businesses are losing 38 cents on every dollar by engaging in "miscellaneous" non-core activities. This lack of focus erodes morale, and makes people question their managers' competency levels.

They try to climb hard and fast, but if management leans the ladder of progress against the wrong wall, at the end of the climb all the people will fall into the bottomless abyss of organisational doom.

#5: Perceived High Cost

It depends.

For firm leaders with cheap, shitty visions to build also-ran mediocre firms, even buying a used condom seems to be too expensive. I bet GM and BMW use different consultants, marketing strategies and ways of treating their people and customers.

They also happen to be at opposite ends of the perceived value continuum. It takes money to make money, and your return is a logical reflection of your investment. But the investment must come first. And the investment is the reflection of how much you believe in what you do.

Hint: Musicians bet on their talents every time they go to studio and pay the rather expensive studio time upfront. They have no guarantee that they can sell one single CD or that one single person goes to their live shows. But they have a strong belief both in their abilities and the audience pulling power of their music.

#6: Lack Of Belief

Yes, innovation is risky. But profit comes from risk. Well, I reckon that's why it's also so valuable. The funny thing is that some of the most risk-averse firms scream and shout the loudest from the mountaintops how innovative they are.

Just look at copywriters' websites. They all call themselves some kind of "Best of", "Number 1", "Top Notch" etc. copywriters.

The funny thing is that truly hyper-successful copywriters, like Gary Bencivenga, Bob Bly or Clayton Makepeace have never called themselves by any kind of superlatives. They are, well... "merely" the best.

The other funny thing is that when you present something innovative to these so-called innovative companies, their first question to you is...

"And where else have you implemented this perfectly, without one single glitch?"

And whatever you say, they will probe you for evidence until the sun goes down. Until and unless they perceive all Ts crossed and all Is dotted, they don't do anything.

Now, this is how innovative they are. I think businesses are like dogs. Some bark and some bite. The IT industry is full of businesses that bark, that is, executives from the pages of Fast Company, Wired or other magazines preach the unsuspecting crowd how innovative they are. And next Monday, they lay off a few thousand people in order to prop up their falling share prices and create the appearance of success... again.

And there are a very few companies that actually bite, that is, do something amazing. Interestingly, Apple executives have never spent much time barking how innovative they are. They just keep biting, that is, keep doing great innovative doodads. And the rest of the industry is bleeding harder with Apple's every bite.

#7: Lack Of Self-Esteem

I believe self-esteem consists of self-confidence to contribute great value and self-worth to charge and collect for that contributed value, as you can see it in the Contribution-Collection Matrix below.

True professionals contribute great value and demand high fees and prices for their contribution.

The other good quadrant is the "Newcomer" that can't contribute so much yet, so can't collect so much either. But with good guidance the newcomer moves into the "Professional" quadrant without even touching the "Martyr" and the "Scumbag" quadrants.

The "Martyr" quadrant is just unpleasant but not fatal to land in. Martyrs have high contribution but don't believe they deserve commensurate compensation for their contributions. And that can be corrected either through better pricing or some coaching to shape their beliefs.

The most treacherous ground is the "Scumbag" quadrant. It's about banjaxing the market and screwing clients out of their money in hot pursuit of the quick buck. And I believe these people should be hanged by their balls and starve to death. They can cause far too much aggravation for the good folks.

Also, there are people who inadvertently engage in some scumbaggish activities, so they should just be warned about their naughty actions. In the first round, their balls can be saved, but then they should be strung up too.

Sadly, far too many consulting firms operate the wrong way. They are bottom line managed. The firm fails to fulfil a great vision, but simply makes money to pay the bills and make payroll. But when in a consulting firm the role of care (in my view the number one role of a service business) is replaced with the pursuit of the quick buck, the firm becomes just another bunch of greedy, couldn't-care-less mercenaries.

#8: Lack Of Comprehending The Downward Spiral Of Poor Market Positioning

The lack of investing at the right time and in the right business functions always creates some undesirable consequences. I think one of the most serious consequences is that the firm starts dropping pretty fast on the market positioning ladder.

Can you imagine a farmer's buying a fancy new car for himself by selling his seed corn or his favourite mating bull?

Yes, all of a sudden he's got a car, but he's just killed his farm's performance capability by selling the goose that lays the golden egg.

In many firms, when there is no money to invest in one key area, there is no money to invest in other key areas either. Interestingly though, there is money to waste on unimportant but seemingly urgent issues.

For instance, there is no money to invest in marketing, but there is money to invest in completely redecorating the partners' offices and replace some company cars for good measure.

Then the partners call the marketing director on the, now brand new, carpet, and threaten him to drum up some new business or else. Of course, there is no money for any kind of marketing campaign because the firm's kitty is running seriously low.

#9: Underestimating the Loss Of Prestige

When your firm fails to invest in important business functions and lets its performance suffer, the market makes a perception-based decision: Bloody losers.

That conclusion may be right or wrong, but it's made nevertheless. And it's often underestimated or, even more often, completely ignored.

But the problem is that if the market perceives a firm to be a loser, then the end is not too far either. Let's just think of Arthur Andersen before and after the Enron scandal. Both before and after the scam, there was the same set of professionals.

But before the scam, it was a highly respected and sought-after group of professionals. And after the scam if was a disrespected bunch of hoodlums that would deserve to die a rather miserable kind of death.

Clients of consulting firms also know that many, especially large, consulting firms are notorious for their internal inefficiencies. They try to compensate for their own defects with inflated hourly fees, sending an army of junior people on clients at senior rates and conjuring up unnecessary tasks and deliverables.

Also, perceptions don't come alone. Just consider this: Most criminals are also perceived as drug addicts, heavy smokers and heavy drinkers.

Investors will also smell the rat and get worried. They understand that in some areas investing is an ongoing process, and know that reducing or seizing investments in those key areas will exponentially reduce their return. With that in mind, they will know they have less and less chance to ever recover their money, so they may demand it back right away and then run away very fast and very far. Hey, the dot com crash didn't happen such a long time ago?

Summary

Well, there are no guarantees in this life besides taxes and death.

I can vouch, as a tax payer, for the former and as a former gravedigger for the latter. But, cheer up, folks. The situation may be crappy but definitely not hopeless.

But unless you do something different from what you have been doing so far, you are guaranteed to achieve nothing different. You end up spinning your wheels throwing more sand into your own eyes.

However, I can't tell you what you can achieve when you start getting inspired by your vision, when you start believing in your strategy and when you have the balls to start acting upon your belief.

But we all know what happens if you fail to get inspired, to believe and to act in spite of all the fear and worry you may have. Nothing! Not a sausage. The question is whether or not you could be proud of that when some day your grandkids ask you about what you were doing during the great brain revolution.

Imagine a farmer after losing his crop to a hell of a storm. He can either invest his money and buy new seeds for the new crop for the new season or he can just slowly live off the money he has right now. If he buys seeds now, next year he has a chance to harvest and feed his family well. If he fails to invest in seeds, next year he will have neither money nor harvest, and he and his family are certain to starve to death.

And that can be a rather sticky end of life.

Yes, in tough times all competitors are likely to cut back, and that is why you should not. While your competitors are running for cover and crying for their mothers, you should bring out the heavy artillery of your marketing and dramatically reorganise the battlefield in your favour.

And you'd better do it fast because as soon as the market recovers, that is, "everyone can afford it", the compounded momentum of the market can toast your firm.

[1] I can't remember where exactly I've read it, but Alan Deutschman confirms this finding in his book, "Change or Die..."Continue where you've left off...

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