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Practice Development Services for Management Consulting Firms - Tom 'Bald Dog' Varjan
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Ten Deadly Firm Management (Mal)Practices.

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Ten Real causes of Low Morale in Professional Firms

by Tom "Bald Dog" Varjan, Organisational Provocateur

This month we continue our journey to discover what messes up morale in professional service firms. Last month we discussed the symptoms, and this month we go into some real causes. The problem is that most practice leaders get bogged down with the symptoms and never hack their ways through the jungle of symptoms to find the real causes. Why don't they do it? Because it is time-consuming and it may even be necessary to bring in some external help. And sadly, many professional firms operate on a super-high ego level, so bringing in external help is out of the question.

Apart from subject matter expertise (law, accounting, etc.) the long-term success of every professional 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 you are running a craft but not a business. There is a world of difference between practising law and running a law firm.

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 being 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 professional service firms, where the firm's success is based on one-to-one trust-based relationships with clients, people have to put out all they have. And again, I'm not talking about only subject matter expertise. Even the best IT specialist needs sales skills to interview a potential buyer for the details of the potential project.

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 practitioners in firms who would come 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 quit they told me that there was only a one-way communication system in place. The partners and the practice leaders in the suites did the barking of the orders, and the "grunts" serving the clients did the "sir, yes sir" game.

A professional service 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 but also upwards 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 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 pathetically poor at supporting them to produce the demanded results. The fact is that most practice leaders and partners have their own clients, and coaching their own people is not even secondary issue for them.

But this is retarded. Look at the military. The general planning the battle in the war room is not expected to go out and dig trenches and fire bullets. His job is to co-ordinate the soldiers who dig the trenches and fire bullets. Why? Because if the generals get 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 help to keep the boat in the right direction.

In a professional practice leaders shouldn't even have their own clients. Their job is to bring out the best in their practitioners. Their job is to keep the firm on the right course. Their job is to coach and mentor practitioners to improve their skills and fine-tune their characters.

The nub: If you are a partner or practice group leader, hand over your clients to your practitioners and focus on achieving the most through your people.

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

We all now that the world around us, including our businesses, can only grow if we grow personally. Yet, when firms get busy, then skill building is cut to the bare minimum. 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. Several accountants started arguing with the instructor about tax deductions. Soon it turned out that they'd been feeding their clients with obsolete advice due to lack of learning. 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. When money is tight, first cut back on skill building and client acquisition.

So, what is the lesson here: Offer your people an environment of constant learning both personally and professionally. Support them in engaging 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 really in nature nothing is irrelevant. Everything is interrelated.

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.

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 that 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 annual evaluation thingidoos, but speeding in the wrong direction for a full year before being told that you're are going the wrong way is a disaster. 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.

For instance explaining to them 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 we work FOR them. Often, the "I work WITH 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.

It may also be important to consider that, for instance, surgeons don't use patient satisfaction. They use vital signs monitors for objective feedback. So, how do you get your operational "vital signs"?

6. No Firm-Wide Skill Development Programme

Look at many firms and what you find is that when the money is tight, they cut back on the two most lucrative investment opportunities: Skill development and marketing. And here is an interesting observation.

A few years ago I worked with a large realtors office in Vancouver. The owner of the office called me in because she suspected the staff was seriously underperforming, and she wanted me to help to put together an education programme for each realtor. She thought it was the lack of skills. As you may guess, the realtors were up in arms against any learning. They were 100% convinced that they had nothing new to learn especially from a guy like me, who wasn't even a licensed realtor. They were out of date on mortgage rates and some other fiendish real estate-specific things. When I asked a bit deeper, they told me that the firm didn't offer a penny for skill building and they just didn't want to spend their own money on learning. It was the typical communist mentality, "I do it if you pay for it, but don't expect me to invest in myself."

Now help to understand because I may be totally wrong here. We have a business model, called the professional service firm, whose only sellable item is intellectual property inside their peoples' heads. The firm's future depends on refining this intellectual property. So, what is the logic in stopping all skill development and clicking into cruising mode? Tom Peters said many years ago in the Circle of Innovations that if the folks in the competitors' firms are getting better faster than the folks in your firm, then you're doomed. And that must be a miserable situation to be in.

7. Constantly Moving The Goalposts

This is where people can get really confused. It usually comes from the fact that the firm's leaders don't know where the firm is headed. People come to the office every day, they do the tactical work, but strategically the firm is lost beyond hope.

Imagine soldiers going to a major war and all they know is that their job is to win the war but major interim goals change every day. Today Joe is the enemy, so march west. Then all of the sudden, never mind Joe, Fred is the new enemy so turn around and march east to defeat Fred.

Your firm must have an overall direction that is properly communicated to each and every person within the firm must understand that.

8. Not Understanding The Expected Results

This is about micro managing. Performing a professional service cannot be framed into a 9-to-5 job. It's not manual labour where you are expected to shovel manure from 9AM to 5PM. Providing a professional service is a creative process and creativity cannot be performed on command. This is why I have chosen a blended life as opposed to a balanced life. I often listen to client interviews while cooking or write promotional copy sitting on the plane in a noisy corner while waiting for my turn to jump.

The big problem here is that many firms try to manage both outcomes and activities, leading to retarded comments like, "I like the outstanding billing hours you produce, Joe, but I want to see you in the office more or I have to remove your bonuses and pursue disciplinary action against you." Within two weeks Joe was servicing his clients from the firm's main competitor's office. The new employer loved to accept Joe when he walked in with an army of loyal (loyal to Joe, that is) clients. Joe's old firm had to make some serious cutbacks because the firm couldn't the firm just couldn't replace the lost clients quickly enough.

A few years ago I was working with Express Computer Center in White Rock, British Columbia. We had a contract at a flat fee, but at the end of the gig the president withheld a part of my fee because I took a trip to the Rockies during the Christmas break. He just couldn't comprehend that he wasn't paying me for dispensed time units but for what I can help him to achieve with good marketing. And after 13 years in business the firm is still using pavement pounding and dialling for dollars prospecting grunt work to get new business.

There are some important consideration when assessing service professionals' 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? While industrial companies can operate on a "Leader and his/her minions" basis (although the best don't), this can be a real killer for professional firms.

6. Do we keep innovating and renewing ourselves?

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.

9.. 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 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 created that amount? How many hours did it take to produce that amount? A $10 million a year firm with ten people, working 35-40 hours per week, is pretty impressive. A $10 million a year firm with 25 people, working 60-80 hours per week, is a disaster.

So, the key is to establish relative indicators, like 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.

10 people putting in a total of 22,000 hours per year...

$5 million annual net profit...

...giving you $5 million / 22,000 = $227.27 profit per person per hour.

2. Net Profit Per Person

10 people

$5 million annual net profit...

...giving you $500,000 annual profit per person. The problem here is that we don't know how many hours it took to produce it.

3. Net Profit Per Client

$5 million annual net profit...

...from 20 clients...

...giving you $250,000 profit per client.

In this case you may also want to track how many hours you pump into each project.

So, since your overheads are given, focus on the money that you actually keep.

And remember, it's not the money you make but what you actually keep that counts. And one more thing: Before you make an investment, like travelling to meet a half-arse committed prospect at the far end of town, consider the potential return first.

The nub: So, what real indicators can you set up to check your progress?

10. Management Is Not Focused On People

This is where modern management expert (gag me with a spoon), 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 professional firm where people just go to the office to justify their next paycheques.

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 clients work, then the personal aspect is much more important.

While I believe that it is important to have great systems in any business, but really and truly it is 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. Professional firms are the same.

When it comes to systems I agree with Michael Gerber's E-Myth, but what he says about people I tend to disagree. The essence is that if you have good systems, you can hire the chepest, lowest-skilled people to operate the systems. Well, try to explain this to a patient waiting for brain surgery or a suspect waiting for a murder trial. Unlike industrial organisations that employ workers, the professional service firm is the only model that employs talent. And there is a hell of a difference between worker and talent. All in all, in professional services you need more than systems alone.

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

The nub: At Egon Zehnder International every new associate is on the path to make partner. Anyone who ever goes to work at the firm knows that a great and exciting career is waiting for her. Read again: Not just hard work, high pressure, high demand, long working hours, denied vacations, but an exciting career. It does includes 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?

Bonus

1. 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 also qualified to slaughter free-range, organically grown animals for top-notch deli meat. And I have some joint venture farms where we process animals for the US deli market.

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 Goon Show (Check here for a personal greeting from Bluebottle) himself.

Of course I want to get these flies out of the way, so they can't wreak havoc with the 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 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. 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 to catch flies is...

2. Creating a "honey pot". This is a jar halfway filled with sugared water. We all now 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 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.

My friend and colleague, Billie Sinclair, who provides fatloss and lifestyle coaching for businesswomen, tells her clients, who are too busy chasing prospects, about hunting vs. fishing. "Hunting is a chasing process. Hunted animals run for their lives." So do people chased by hungry peddlers. "Fishing is an attraction process. You put out a specific bait and a specific fish (only your ideal client) will come."

No I don't suggest that you drown your prospect in sugared water, but the principle of attracting is the same. And if a butcher can figure this out, then you can do it too. So, what kind of honey pot can you create?

So, what can you do today to raise your firm above and beyond the typical human-hostile organisation, as described here here. The language may sound harsh but the reality is there. Far too many professional 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.


Copyright 1997-2012 Tom "Bald Dog" Varjan. All rights reserved. You are free to use this article in whole or in part. One favour though: Can I ask you to you include complete attribution, including a live website link. Also, would you mind letting me know where you plan to publish the article?

The attribution: This article was written by Organisational Provocateur, Tom "Bald Dog" Varjan of Dynamic Innovations Squad, a firm specialising in helping consulting firms to sell their expertise at the highest margins. Get Tom's free Practice Management Black Paper when you sign up for his monthly newsletter, Commando Consulting: Lessons And Practices From The Ultimate Professional Service Firm, The Military. Visit Tom's website at http://www.di-squad.com/black-paper.html.


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