David Maister's Strategy Library

What's Our Deal?

david@davidmaister.com (David Maister) — Mon, 01 Jan 2007 12:00:00 -0500

At a recent conference, I heard a number of successful firm leaders describe how their firms had achieved significant growth and profitability. A common phrase used by each and every one of these firm leaders was “making sure that all the key people were ‘on the same page.’”

Clearly, it was important that something was agreed to and shared among the members of these firms. But what? What does “being on the same page” really mean? And how is it done?

A Hierarchy of Concepts

A common collection of integrating concepts might include choosing:

Purpose / Mission, then
Vision / Direction, then
Values / Principles, then

Culture / Rules of Behavior
An organization that begins with an agreed-upon purpose (or mission), would be able to communicate externally and internally WHY it is in existence.

This would allow the organization to communicate more easily a vision of its future, and hence its objectives and direction. (what it was trying to achieve.)

It could then, theoretically, derive a set of values or principles that the firm is going to operate by. (HOW it plans to operate in order to achieve the purpose, the vision and the objectives.)

The set of values and principles would then define the firm’s culture, the way things are done around here, and hence its rules of behavior. (This is more “HOW.”)

That’s just one approach. Notice that it leaves out the word “strategy” and makes no reference to specific objectives or targets.

Unfortunately, in practice, these various integrating concepts rarely achieve what is hoped for when they are developed, and many people have become (appropriately?) cynical about these concepts.

For example, many more firms have “mission statements” than actually have missions, and it is the rare organization where everyone believes that the officially declared statement of values is strictly adhered to.

Have all of these concepts lost their practical value? Should firms and their leaders still take the time to attempt to build consensus around things like purpose, mission, vision and values? If so, how can it be done in a way that actually has a practical, real-world impact? Where does one begin?

Tempting as it might be, it would be a mistake to abandon all uses of these terms. Some mixture of these things is almost certainly needed to:
create a sense of common, joint enterprise
define the organization,
set its boundaries,
give it a direction, and

mobilize the organization’s members.
If you were a real-world CEO or managing partner trying to lead your organization, where would you begin to grapple with these concepts?

Starting with Purpose

Among others, Nikos Mourkogiannis stresses the importance of beginning with “purpose” in his book Purpose: The Starting Point of Great Companies (Palgrave Macmillan, 2006.)

Howard Schultz, CEO of Starbucks, has been quoted as saying that “People want to be part of something larger than themselves. They want to be part of something they’re really proud of, that they’ll fight for, sacrifice for, trust.”

Where a clear, believable, palpable purpose exists for the organization, where its reason for existence and what it is trying to achieve is clear, a multitude of business virtues follow almost automatically. Among these are:
Decision-making can be made easier (at all levels) by being tested against whether or not they advance or inhibit the organization’s purpose. Things will happen more smoothly, more efficiently and with fewer false starts.
The organization can attract energetic, committed employees who believe in and share the purpose (and, what may be equally as beneficial, scare away people who don’t want to participate in that purpose)

Less heavy-handed oversight and management will be required to keep things on track, since everyone will be using the same principles to guide their interactions and decision-making.
Notice what the proponents of “purpose” are saying. The argument is that by (credibly) eliciting commitment to a “cause” other than maximizing shareholder value, shareholder value (and other measures of financial performance) will actually increase, not decrease, because people will contribute their extra efforts and dedication.

Purely financial purposes, the argument goes, will fail to elicit this extra energy. “Work hard to maximize the owners’ profitability” is not much of a rallying cry if you are not an owner, and may not even be that effective among (for example) the partners/owners themselves in a large partnership, if there are hundreds (or thousands) of them scattered over many distinct departments, numerous service lines, cities, countries and continents.

It’s also worth stressing that the practical test of whether having a declared purpose (or mission) helps your organization achieve greater things is not whether the marketplace believes what you claim to stand for, but whether or not the people inside the organization truly believe that all decisions are actually made (or should be made) on the basis of that purpose or mission.

Only if they believe the purpose or mission is real will you actually elicit the extra levels of energy, commitment, collaboration, dedication and long-term thinking that will produce the superior results.

This is, of course, a researchable, testable proposition. You could survey all of your people, right now, and ask them how well they think your organization is living up to its purpose, mission, vision or values. If they say it is, there’s a high probability that you are reaping the commercial benefits. If they say it is not, (or if you’re not sure you want ask or disclose the findings,) you have to question whether, in purely practical terms, you have learned how to make purpose, mission, vision or values work for you.

Achieving a functioning purpose is hard. It is not only a problem of management actually possessing an “ideology” and having the discipline to always act in accordance with it. It requires that the organization attracts (only) those who are prepared to help pursue the organization’s purpose, and not keep substituting their own agenda.

As I discussed in my previous article Are We In This Together? not all people are pre-disposed to enjoy mutually dependent activities designed to build for the future. Mr. Schultz of Starbucks may be right about most people being eager to seek out a cause, but not all people.

I’m not saying building a common purpose cannot happen, nor that it’s not immensely powerful where it does exist. I’m merely reporting that it’s incredibly scarce. There are relatively few organizations that are credible and convincing to their people that they won’t take advantage of other (“off-purpose”) opportunities to advance net shareholder value.

Note that this is not (primarily) a moral or aesthetic point, but a practical one. Contrary to what many leaders seem to believe, there’s no point declaring that your organization has purpose or mission if your people don’t think you will stick to it — unwaveringly.

As one of my clients said recently: “Inconsistency is very demoralizing.” Not to mention confusing — and unproductive. You cannot get your people to dedicate themselves to a cause you stick to only occasionally. As one managing partner said: “You can be certain that, as night follows day, that any ambiguity will be construed against you, particularly internally.”

And you cannot build an organization committed to a purpose, mission, vision or values if you hire (otherwise exceptional) people who are not susceptible to such appeals and do not share a dedication to achieving them.

Building Commitment

So, if you think that your organization does not (yet) have an energizing, motivating purpose, should you try to take your people through some kind of process to see if they are willing to sign up for one?

Maybe. But let’s be practical about what would be required. Whether you are talking about purpose, mission, vision, values, goals, objectives or almost ANY of the traditional concepts that people use, the only practical way to make it real is to do two (simultaneous) things:

(a) stop talking about the future destination, and start thinking about the rules you would have to live by in order to get there; and

(b) translate the generalities of the organization’s purpose, mission, values or principles into what it would mean for individuals and confirm that the organization’s members are, in fact, prepared to be held accountable and live by those individual rules.

I explored aspects of this in my article Strategy and the Fat Smoker. Saying that you “aim to get fit” doesn’t really indicate that you have chosen anything. It certainly doesn’t, by itself, persuade the listener that you are committed to that goal.

However, if you stop talking in the language of destinations (goals, targets, purposes, missions and aspirations,) but instead discuss whether you are prepared to accept (strictly-observed) operating rules such as “I will exercise for 30 minutes five times a week and eat no more than XX calories per day”, then it becomes both clear and convincing that you are committed to (and will, with high probability) achieve the goal.

We all know that, as a practical matter, it is insufficient to say “We will try to exercise for 30 minutes five times a week and eat no more than XX calories per day.” In both personal and business life, we know that the minute you allow ambiguity or uncertainty (i.e. loopholes and exceptions) into the statement, the less certain people will be about what you will actually do as a leader, what they are buying into and what they are required to do.

So, to see if your firm is willing to pursue a particular purpose, mission, vision or values, the discussion you must have would be: Are people willing to have all decisions, large and small, judged in accordance with that purpose? Are they willing to be personally and individually accountable for progress toward that purpose, mission, vision, value or principle?

Imagine, for example, a group of partners or firm leaders sitting around discussing their firm’s future. Imagine that someone proposes that the firm should commit itself to the purpose or mission of being “the leading firm” in its area.

What would be needed would be an in-depth discussion which explored such questions as: What might this mean in practical terms? Does this mean that everyone agrees that the firm should only do high-end work and turn away work if it does not command premium fees? If not, what is the rule going to be?

Does it mean, as an example, that the firm will only work for chief executives and no-one else in the client organization? Does it mean that the firm will only employ those who are truly superior and will ask the merely competent to leave? If it means none of these things, then what, if anything, would it mean to be a “leading firm?”

As a means of discussing people’s understanding and commitment to what is being proposed, notice that it often makes propositions a great deal more clear if they are phrased in the negative.

To say “we want to be the leading experts” is not the same thing as saying, for example, “We will not stay in a business that we cannot charge a premium for.” Usually, saying what you will NOT do communicates more than what you say you will do.

If you cannot articulate a set of binding rules that people will agree to be governed by, then you probably do not have a purpose, mission, vision or values.

As always, this is meant to be a pragmatic point, not a moral or aesthetic one. It used to be said that your culture was what people did when no-one was looking. That’s not a bad way of summarizing all this.

If the people in the organization share (and use) a common set of decision-rules throughout your organization whenever they are faced with choices, the likelihood that you have an integrated firm with a common purpose, mission, vision or values is high. If they don’t (or won’t) accept the same (clear, unambiguous) decision-rules, then you may have a successful firm, but it’s not clear that all parts of your firm will be “on the same page.”

In my 1997 book, True Professionalism, I wrote that the test of the existence of values in an organization was whether or not it had in place “consequences for non-compliance.” I believe that this is still a good test for the operational effectiveness of any of the concepts we are investigating here.

You don’t have a purpose or mission (or a set of values) when you declare them. You have such things when you put in place processes that respond to each and every instance when the organization (or individual) fails to adhere to the purpose, the mission, the values or the culture.

Strategy as Journey, Not Destination

What all this reveals is that “doing strategy” is not really about selecting objectives, targets or future states. (“We aim to be the best”) That’s too imprecise, and too easy to pay lip-service to.

It doesn’t matter whether you choose to start by discussing purpose, mission, values or culture (or anything else.) Whichever you begin with, it will turn out to be the rules you choose to live by that determine your future, not the targets you aim at.

You must start by asking yourselves – what are we going to be uncompromising about? This will tell the world (inside and outside the organization) who you are, what you are, and what are your vision, mission, purpose and values.

There are a number of other perspectives that shed light on this conclusion. Political science (and history) teaches us that you can determine the very nature of a society by agreeing upon its constitution: establishing the core, inviolable principles and regulations as to how decisions will be made.

By stating, concretely, the rules that would be followed in making decisions and, equally important, the rights and obligations of citizens in the community, the very identity and character (and its future potential) of the society can be determined.

So it is with business organizations. When “doing strategy,” it can be difficult, if not impossible, for firm leaders to say definitively what businesses the organization will get into, what services it will offer and in what parts of the globe it will offer its services.

In fact, making and declaring choices in these areas can be politically risky if they do not include, as priority targets, areas of the business that the organization is already in. No-one wants to be identified as being in an “off-priority” part of the business.

However, if firm leaders can propose, and build support for, the decision-making processes and rules (i.e. the constitution) that the firm will follow in all of its decisions, then something both meaningful and powerful can be created.

Another insight into this was provided by Cristian Mitreanu in a fascinating article called Is Strategy a Bad Word? He wrote:

“What explains the relative failure of most organizations to create effective strategy? Part of the problem …can be traced to their interpretation of the word strategy itself…

In war, objectives can often be clearly defined, and so strategy is thought of as a means to a specific end. ....By contrast, goal orientation becomes arguably inappropriate when success has to be indefinitely sustained.”

I call this “acting as if there is no final whistle.” It means running the organization not to attain particular targets in a particular time frame, but recognizing that, one way or another, the organization will continue into the indefinite future.

It’s rather like thinking of an organization as a biological entity or a species. It’s not in the choice of objectives that a species differentiates and sustains itself, but through its special ways of adapting and responding to shifts in its environment.

Consider also the well-known computer simulation that, by specifying, in advance, some basic parameters (including the rules of reproduction) and then allowing the game of begin, wonderful patterns emerge, and some species flourish while others die out.

The differences between these “species” are not differences in objectives, targets, purpose or mission. The differences which really determine the future are the rules they employ to make their decisions when faced with choices.

A final metaphor may be instructive. In game theory (a branch of mathematics about decision making) the term “strategy” doesn’t refer to any particular decision, or group of decisions. Rather, it is a way to go about making decisions. Defined that way, it’s a close correlation to the concepts of “values, ideology and principles” embedded in the organization’s decision-rules.

Where clear, unambiguous decision-making rules exist, there is the opportunity for a clear rallying cry for people either to buy into or to leave, and it makes delegation of decision-making upwards, downwards and sideways a lot easier. Everyone knows the REAL rules.

Participation

It is a well-established principle that people are more likely to live in accordance with rules that they have played a role in shaping (I wrote about this process of establishing ground rules for mutual accountability, mutual contribution and shared values in my co-authored book, First among Equals).

It is also well established that an organization’s “rules of engagement” have a tendency over time to be taken for granted. They can fall into neglect not through malice but by being taken for granted. The slow accretion of small decisions and actions, none of them actually seriously wrong, can nevertheless cause an organization to operate in ways contrary to its declared core beliefs, principles and the rules that enshrine them.

Accordingly, even if an organization thinks it has a clear, unequivocal agreement on purpose, mission, vision and values, it is nevertheless a good idea periodically to revisit the organization’s rules and trace through what rights and obligations they imply for individuals, top to bottom.

Even for established organizations that are confident that they are “on track”, there is tremendous power in giving people the opportunity to discuss whether they still wish to be governed by the rules that define the organization, and have the chance to affirm (or re-affirm) their “pledge of allegiance” to those rules.

At what level do you try and obtain buy-in to these “rules of engagement?”

It is a common tendency to draw up a set of a “values” or “principles” (or, as I would have it, decision-rules) and present them simultaneously to all of the key players at some annual meeting or specially-convened strategic planning meeting or retreat.

I believe this is a mistake. As noted above, an organization may be worse off, not better off, by pretending to advocate a set of standards it is not actually prepared to live by. And everyone in the organization will be looking “upwards” to see if “those guys” are truly serious before they commit themselves to the cause.

Accordingly, the best process for approaching all of this is to begin with a very small inner circle of top management leaders, who can look each other in the eye and ask: “Are these really the decision-rules we are prepared to stick with? If we advocate them, will our people believe that we will keep the faith to adhere to these strategies?”

Only when true commitment has confidently been obtained at that level will it be time to (slowly) roll it out to the next level, making the case as to why the organization should live by the decision-rules, and building the consensus and buy-in necessary.

Only when the top-level is truly committed will it be time to try and convince the junior staff in the organization that the firm is serious. And only then, when everyone internally has signed on, will it be time to let the outside world know what the organization is determined to do.

Decision-Making Rules

So what might some possible decision-making, constitution-forming rules be?

Drawing upon a variety of sources (including the best practices among super-successful firms that I identified in my 2001 book Practice What You Preach) here are some suggestions for firms to consider.
All decisions will be made on the principle that we put the clients’ interest first, the firm’s second and the individual’s last. We do not accept people who fail to operate in this way.
We will achieve levels of client satisfaction that result in client referrals becoming our main source of new business.
We will have no room for individualists – those who put their personal agenda ahead of the interests of their team.
Reward systems will be driven by a judgmental assessment of overall contribution to the success of the firm, not on short-term individual performance.
Everyone will be required, not just encouraged, to learn and develop new skills. The organization has an obligation to help each individual achieve this.
Each year, we will invest a significant amount of time in things that will pay off in the future.
Those in managerial roles will be selected, evaluated and remunerated primarily on the success of their group, rather than their individual performance.
Individually and collectively, we will operate with a “stewardship” mentality toward our junior people, accepting the obligation to coach, mentor and develop those who report to us.

We will not tolerate abuse of power or position, a lack of respect in dealing with other people at any level in the firm, politicking, individuals who cannot be relied upon to keep their word, or shirking or dumping of responsibility. Only those of the highest honor and integrity will be allowed to retain membership in the firm.
These are, of course, only possible decision-making rules. They are not necessarily the best (although a case can be made for their effectiveness in creating organizational success) and they are not the only choices a firm could make.

Indeed, my whole point is that different organizations will have different rules that they are prepared to live by, and that, in focusing on them as non-negotiable decision-making rules, firms will better achieve clarity and effectiveness in their operations.

Once the decision-making rules are in place, it should be easier to trace through the “rights and obligations” that members of the organization have: what they agree to sign up for when they join, what they agree to be held accountable for, and what they can reliably expect from the organization (and other individuals in the organization.)

My recommendation is not: Accept the rules offered here. Rather, it is: Figure out which rules you, your management and all your people are prepared to accept and never compromise. When you are done, you will know your purpose, your mission, your values and your strategy.

Are We In This Together? The Preconditions For Strategy

david@davidmaister.com (David Maister) — Mon, 01 Jan 2007 12:00:00 -0500

Managers build their plans and strategies on the assumption that people in their firm are ready and willing to be team players, acting collectively to create or achieve something in the future.

The truth, however, is that these attitudes cannot be assumed to exist. In fact, they may even be relatively scarce. In many firms — perhaps even most — these preconditions for strategy may not exist.

It is hard to identify and create buy-in for what “we” (i.e., the firm) should do if there is no strong sense of “we” — a mutual commitment and sense of group loyalty and cohesiveness. Similarly, it can be meaningless if the members of the firm are not committed to go on a journey together into the future.

This was brought home to me when I was facilitating a strategy discussion in an industry that has a long tradition of hiring, celebrating and rewarding stars — individualistic, solo operators. As we discussed the investments and initiatives necessary to pull off the strategy identified by management, one of the ‘players’ in the room asked: “Why would I want to do this. What’s in it for me?”

It must be immediately recognized that having this thought is normal. The industry I was working with is only unusual in the (refreshing?) willingness of people in this business to actually say things like this out loud.

In other industries and professions, they just think it all the time, without actually saying it!

As we worked through the issues, it became increasingly clear that there were major differences among the people in the room, the key players in the company, whose participation and collaboration would be essential to pull off ANY strategy.

The issue was not the specifics of the proposed strategy. What came through clearly was that no commitment to each other — or to their joint future — existed.

The differences among them were based on what seemed to be some inherent personality characteristics, or at least some strongly-held preferences, on two key dimensions — their desire to be engaged in a joint, mutually-dependent enterprise (collaboration) and the time frame they wanted to apply to their decision-making (future-orientation).

On the first dimension, there were people who actively wanted to be part of a team, with joint accountabilities, responsibilities, and rewards. They wanted to be part of something.

However, not everyone in the room fit this category. Many others freely admitted that they were most comfortable (and would seek out) situations where they could be independent — judged on their own individual merits and accomplishments, without being tied to the performance of others.

The second dimension we explored was time-frame. Some people had an appetite for high-investment, future-oriented strategies. They were willing to defer (if necessary) some immediate gratification in order to invest — to get the chance to reap higher rewards in the future. Others are reluctant to invest, even in their own future. They prefer to focus on “winning today,” letting tomorrow take care of itself.

Combining these two dimensions led to the identification of four kinds of preferences that individuals (and companies) have.

Type 1 is the solo operator who values independence, wants to make little investment in the future, but is willing to bet on his (or her) ability to catch fresh meat each and every day. I call this the Mountain Lion approach. “Pay me for what I do today (or this year.)”

Type 2 is the individual who prefers to act in coordination with others, but doesn’t like to invest (or defer gratification) too much. I call these people (collectively) the Wolf-Pack. “If we act together we can kill bigger animals, but it had better pay off soon or I’m joining another Pack!”
Types 1 and 2 may be unwilling to invest or “bet on the future” for a variety of reasons, including risk aversion.
Type 3 is the individual who wants to be independent, but is interested in building for the future by investing time and resources to get somewhere new. Such people remind me of Beavers building dams to provide a home for their (own) family.

Type 4 are individuals who want to be part of something bigger than they can accomplish alone, and have the patience, the ambition and the will to help the collective organization invest in that future.
I call this group “The Human Race” since one of the rare things about Homo Sapiens that differentiates it (at least in scale) from other species is its ability to act collectively to build and develop. (It’s called civilization.)

Note, however, that Type 4 could also be a description of an Ant Community or Beehive, where individuals slave for the benefit of the community, suppressing and subsuming their own identity within the whole. (This interpretation is most likely to be applied, naturally, by those who do not place themselves in this category.)

Capture Rewards for Short-Term Performance Build For the Future
Interdependent Team Players Wolf Pack Humans (or Ant Farm)
Independent Solos Mountain Lions Beavers

I don’t have a precise metric to measure the differing orientations described here, but I have found two proxy questions to be useful.

On the issue of independence versus team-play, I ask people whether, in general, they would prefer rewards in their organization to be based (compared to the current arrangements) a little more on individual performance or a little more on joint rewards for joint performance. I then ask whether, compared to the current arrangements, people would like their firm to invest more in its future, even if this meant they would have to accept less current income in the form of salaries and current bonuses.

These two (imprecise) questions tend to cause people to reflect on their true preferences. The underlying issue is not really about pay schemes, but phrasing the questions this way tends to crystallize the issues for many people.

In exploring these orientations, I frequently use secret voting machines which allow people to express their views while remaining anonymous.

I ask people in the group which of these four preferences best described their own, personal desired way of behaving. (At this point you may wish to pause and guess what percent of all your colleagues would place themselves, by preference, in each category.)

In this particular company where I first explored the model, all four groups were well represented, although only 10 to 20 percent put themselves in the “I want to be part of something bigger than me that is working to build for the future.”

Thirty to forty percent put themselves in the “solo-short-term” (Mountain Lion) category, with approximately twenty to thirty percent each of the “team-play short term” (Wolf Pack) and “solo builder” (Beaver) categories.

I don’t know if the fact that only 10 to 20 percent of key players wanting to be “team-play builders” strikes you as low, or matches your experience, but it leads to an interesting question: what do you think the chances are of melding people that describe themselves that way into an institution that has a differentiated reputation?

My own conclusion, then and now, is clear. An organization that had these proportions might succeed through individual, entrepreneurial activities, but it would be quite literally incapable of having a company strategy. For example, no common reputation or differentiation could be achieved in the competition either for clients or talent. Firm leaders that tried to develop and implement company strategies would be wasting their time.

In applying this model and conducting these votes numerous times in other firms, it has been revealing how much diversity is exposed among people who had previously thought of themselves of members of, and loyal to, their firm.

They may indeed, be loyal, but their desires and preferences differ so much on the key dimensions that, in many cases, no strategy can accommodate the diversity of preferences among the members of the group.

The mixture of preferences may place very severe limits on what an organization can achieve. While there may be some logic and merit in like-minded people banding together, (whether they be Mountain Lions, Wolves, Beavers or Humans) an organization made up of an unmanaged mix of such types is unlikely to function well.

If a majority of the key people really DON’T want to act collectively in building for the future, it is meaningless to develop plans as if they did.

In spite of this, very few people or organizations have frank and open discussions about this kind of thing. The preconditions for strategy are rarely surfaced and examined, possibly because the implications of discovering a disparity of preferences can be very scary and disruptive.

It is important to note that it is not required that a majority choose the “team-play building” preference.

A group of people who all identify themselves as preferring to operate as “independent short-term” players can succeed in many businesses. (See for example, the discussion of “Hunters and Farmers” in my 1993 book Managing the Professional Service Firm.) Many businesses can be, and are, constructed around “star players” rewarded for their short-term results.

Similarly, a Wolf Pack can achieve something that is called “strategy” and can align its recruiting, systems, rewards around a strategy of collaborative short-term actions, if that’s what everyone wants.

However, without a majority of key players committed to collaboration and investment in the future, it is unlikely that most of what is usually considered to be firm-level strategy can really be accomplished. Before discussing their plans, firms need to uncover whether their people really want to go on a journey — any journey — together.

Dealing With Diversity

If you were to conduct this poll in your organization (asking people either to place themselves in one of the four categories, or to estimate what percentage of their colleagues they would place in each group), what choices would you have if you found that you had a broad diversity of preferences?

I can think of the following (theoretical) options.

Option One: Try to Accommodate Differences

Is it possible to find different roles for people, so that individualists and short-term players can be accommodated by playing specific roles in the organization without compromising the commitment and determination of the majority?

This would clearly be very desirable if it were to prove practical. It would require the least disruption to the status quo.

Manufacturing corporations have different activities (such as sales, production, or finance) which may require different attributes, so the question arises as to whether other organizations, such as professional service firms, can also accommodate different orientations?

I believe that this may be possible, but not by allowing people of different orientations to play the same role in the organization. There may be differences between the desirable characteristics of those in sales and those in production, but I doubt that much variety can be acceptable within one of these groups.

If one sales person (or team) is taking a collaborative, building approach, is it acceptable for another to act in an independent, short-term fashion? If the answer is yes, it would be hard to see what is meant by saying the organization has a strategy!

The only way I’ve really seen “biodiversity” work in the real world is if different species are kept away from each other and do not compete for the same resources.

That means the wolf-pack is a completely separate department (preferably in a separate building) than the mountain lions who have their own “deal” (privileges, responsibilities, metrics). It is necessary to keep one group away from the others if they are to co-exist!

On my blog Passion, People & Principles, Brit Stickney wondered whether short-term individualists can be convinced to join the group effort. He asked:

How can we articulate to our colleagues that the team approach is in their individual best interest?
Even, or especially, if only, 10 to 20% of individuals want to be part of “something bigger” to build for the future, it is critical to be able to articulate to each team member why their role within the will help them individually. It may be possible to be persuasive that by relying on and working with others, they will be able to achieve their personal goals.

Personally, I’m not sure I share Brit’s hope in this area. Is it really possible to get short-term individualists to “do the right thing” for the company’s long-term bests interests either through persuasion, systems, or setting individual goals that further corporate goals?

I am increasingly skeptical that this traditional “managerial systems” approach can be made to work.

In my experience, the whole thing falls apart when we try to mush them all together and pretend that everyone is measured and rewarded on the same things, that everyone has the same performance standards and everyone plays the same role.

Ultimately, the hope that (too much) biodiversity can be accommodated may be impossible to achieve. I doubt that you can have a random, equal mixture of all types and make it work well.

Option Two: Work To Change People’s Orientation

The second choice for dealing with biodiversity is to try and affect people’s orientations. One way that MAY be possible to accomplish this is to craft a sufficiently compelling vision for the future, so that even those who do not start off with an initial preference for team play or investment are willing to “sign on.”

The potential success of this option will turn on one critical question. Are people’s orientations relatively fixed, based on underlying personalities and preferences? Or can they either change with time, or be made dependent upon specific circumstances?

The answer is important. If people’s orientation toward teamwork and time-horizon is context-specific (i.e., dependent upon the particular team and strategies being proposed), then there is hope that some process of building commitment to a strategy can successfully forge collective action even from those initially unwilling.

However, if there is a relatively sizable fixed component in people’s attitudes, then no strategic planning process can be successful. The choices will either be to abandon strategy, or to separate from those who do not wish to enter upon the journey together.

My own hypothesis is that the fixed component in many people’s personalities is relatively high. People really do differ as to how they want to live their lives. Solo operators rarely develop a preference for team play, and people who want immediate gratification rarely develop the patience to sacrifice even a portion of today for an uncertain future — especially if they have to make that investment in conjunction with (and be dependent on) others.

In this view, it is not the clarity or the glamor of the vision that affects people’s lack of buy-in to collective, future-oriented strategy, but their willingness to participate in strategy at all.

Another hypothesis that emerges from this is that it will be hard, if not impossible, to reconcile differences through pay schemes: it will be hard to change working behaviors based on deep personal preferences through the clever construction of incentive schemes.

If this is correct, people who do not match the basic orientation of the company should either be in or be out of your organization depending upon what it wants to accomplish. Companies, according to this point of view, must achieve a consistent philosophy by being careful about the kind of people they bring into their organization.

This alternative was phrased well by Brit Stickney:

First we must define what our “Super Bowl” is — what we wish to accomplish. Second, we should define what wins and losses are. And finally we should find the players that can help us (and want to) win games and reach the Super Bowl.

I think this way of framing the challenge is closer to the real problem that organizations face. But notice, Brit’s proposition suggests that organizations must “find the players that can help us (and want to) win games and reach the Super Bowl.” This suggests a degree of selectivity that many organizations fail to reach.

It is not easy, but it can be done. It is very encouraging, I have found, to discover how many people will, in fact, choose to accept a well-articulated philosophy, even if it is not the ideal one they might have chosen for themselves.

In spite of what I have argued above, the relatively “fixed” component of people’s collaborative and future-orientation is not COMPLETELY determinative.

If the firm is prepared to bring the issues of collaboration and future-orientation to the surface, and (through some open process) ask participants to commit themselves explicitly to a joint, building future, then significant degrees of buy-in can be obtained.

Options Three and Four: Split Up or Cover Up

The consensus-building approach does not always work. As Antoine Henry de Frahan asked on my blog:

How would you manage a situation when the firm has been in existence for a long time and is finding it impossible to define a coherent strategy because there is no consensus on the partnership model in the first place? I see two options: business as usual (which actually means inertia) or split. Is there any third way?

If people truly differ in their orientations and objectives, it may become necessary to ask those who are not prepared to commit collaboratively to the joint venture to separate from the organization.

This is the strategy advocated by Jim Collins in his book Good to Great, where he asserts that one of the primary keys to success is “getting the right people on and off the bus,” a conclusion that I share.

This sounds tough, brutal, scary and risky, and it is all of those things. Notice, the argument is NOT that doing this is unconditionally necessary. Rather, the argument is that it must be done if an organization is going to be capable of having a strategy — any strategy.

The fourth alternative is, by far, the most common: avoidance of the issue, papering over the differences, ignoring the problem, or (worse and most common), complaining all the time that everybody wants different things, and nothing gets done.

This does not necessarily lead to disaster (particularly since it is so common). However, it will almost certainly prevent the organization from making any strategic shifts.

It is commonly observed that the biggest problem with developing strategy is implementation. It may be the case that the problem is more profound — that the members of the organization have insufficient commitment to each other — or their mutual future — to pull off ANY strategy.

In a world in which many organizations have been put together with mergers, acquisitions and extensive use of lateral hires, the underlying problem may grow in importance, rather than diminish.

Accountability: Effective Managers Go First (published on ChangeThis.com)

david@davidmaister.com (David Maister) — Sun, 01 Jan 2006 12:00:00 -0500

The One-Firm Firm Revisited

david@davidmaister.com (David Maister & Jack Walker) — Sun, 01 Jan 2006 12:00:00 -0500

In 1985, one of us (David Maister) wrote an article for the Sloan Management Review called “The One-Firm Firm.” It identified a strategy common to leading firms across a broad array of professions — creating institutional loyalty and team focus.

The firms named in that article were McKinsey, Goldman Sachs, Arthur Andersen, Hewitt Associates, and Latham & Watkins, where Jack Walker became managing partner three years later.

If one is prepared to accept the argument that Accenture (formerly Andersen Consulting) is the legacy firm of Arthur Andersen, and not the defunct audit-based business, then that 1985 list of one-firm firms stacks up remarkably well as a predictor of subsequent success. These are still preeminent and immensely successful firms.

The marketplace for professional services has changed in ways that were unimaginable in 1985. Clients and client relationships have become dynamic at best and fickle at worst. Shortages and mobility of talent have affected every profession. As a result, the five named firms — and their main competitors — have adapted by making dramatic and often risky changes.

For example, of those five firms, Goldman, Accenture, and Hewitt have become publicly held companies — most have acquired other firms with varying degrees of success, and all have grown, become global, and (except perhaps in the case of McKinsey) have profoundly diversified their service offerings. Yet each has maintained or improved its competitive position as one of the most admired and profitable firms in its industry or profession.

In this article, we will address the issue of whether the one-firm firm principles identified in 1985 are still relevant to the continued, sustained success of these five firms. We will focus on what has been maintained, adapted, and abandoned in their management since 1985.

As we shall see, one-firm firm principles do indeed continue to drive success for these firms, even as their specific practices have been adapted and modified for changing market conditions.

What Is It?

The one-firm firm approach is not simply a loose term to describe a “culture.” It refers to a set of concrete management practices consciously chosen to maximize the trust and loyalty that members of the firm feel both to the institution and to each other.

In 1985, the elements of the one-firm firm approach were given as:

Highly selective recruitment;
A “grow your own” people strategy as opposed to heavy use of laterals, growing only as fast as people could be developed and assimilated;
Intensive use of training as a socialization process;
Rejection of a “star system” and related individualistic behavior;
Avoidance of mergers, in order to sustain the collaborative culture;
Selective choice of services and markets, so as to win through significant investments in focused areas rather than many small initiatives;
Active outplacement and alumni management, so that those who leave remain loyal to the firm;
Compensation based mostly on group performance, not individual performance;
High investments in research and development; and

Extensive intrafirm communication, with broad use of consensus-building approaches.
The one-firm firm approach is similar in many ways to the U. S. Marine Corps (in which Jack Walker served). Both are designed to achieve the highest levels of internal collaboration and mutual commitment in pursuing ambitious goals.

Loyalty in one-firm firms, and in the Marines, is based primarily on a strong culture and clear principles rather than on the personal relations or stature of individual members.

The key relationship is that of the individual member to the organization, in the form of a set of reciprocal, value-based expectations. This, in turn, informs and supports relationships among members — who often do not know each other personally.

Everyone knows the values they must live by and the code of behavior they must follow. Everyone is commonly and intensively trained in these values and protocols. Everyone also knows that if an individual is in trouble, the group will expend every effort to help him or her.

Marines have a special bond and a shared pride, built on shared values and a shared striving for excellence with integrity. Critical to the success of the organization is respect for both the past and the future. Every marine grasps the concept of stewardship — the organization, its reputation, and its very effectiveness have been inherited from previous generations and are held in trust for future generations.

The Warlord Model

A contrasting, and more common, approach to running a professional service firm is the “star-based” or “warlord” approach, which succeeds by emphasizing internal competition, individual entrepreneurialism, distinct profit centers, decentralized decision-making, and the strength that comes from stimulating many diverse initiatives driven by relatively autonomous operators.

In extreme warlord firms, the productive senior members operate as chieftains presiding over their own territories, coordinating occasionally but fundamentally without a commitment to the institution or each other.

Many prosperous firms are close to the warlord end of the spectrum. Such firms succeed by forgoing the energy that comes from institutional commitment and extremes of collaboration but achieve a powerful substitute through extreme levels of entrepreneurial energy exhibited by individual warlords.

Warlord firms succeed when management keeps the “big hitters” happy and productive. The past and the future are not high agenda items. Consequently, the performance of extreme warlord firms often swings through peaks and valleys over time. The environment at these firms tends to be politically charged, and a great deal of management energy is expended in modulating that charge.

Personal taste can play an important role in determining which path a firm takes. Some of the most effective professionals cannot abide by the one-firm firm model and thrive in the warlord model (and vice versa).

We hasten to note that the great majority of firms are neither pure one-firm firms nor pure warlord firms. What the one-firm firm and warlord models have in common is high levels of energy. Firms in the middle may pay a price if they fail to fully engage either method of eliciting energy (high levels of internal collaboration or high levels of entrepreneurial individualism).

Capturing the benefits of high institutional energy is not easy. The one-firm system (like that of the Marine Corps) depends upon a mutually reinforcing set of concrete policies and practices, and many firms may not be able to “get from here to there” in a short period of time. Indeed, part of our argument is that “true” one-firm firms were, are, and will likely remain statistical anomalies in each of their industries, albeit successful ones.

Twenty-One Years On

Looking at the range of their services and locations, the five one-firm firms are now almost unrecognizable compared to what they were in 1985. Goldman now emphasizes proprietary trading — a change from its predominantly advisory roots; Hewitt and Accenture have moved into business process outsourcing; and both McKinsey and Latham have expanded their service offerings and global coverage. As mentioned, Accenture, Hewitt, and Goldman have become public companies.

According to most press reports, McKinsey experimented with some significant changes as the impact of technology on consulting was felt. An early countercultural attempt to acquire and integrate an IT firm was generally considered to be a failure.

In the late 1990s, the technology bubble led the firm to expand at a faster pace, rapidly increasing the rate of hiring new juniors. It opened offices in many more locations around the world and reportedly cut back on training. As did other professional firms in that era, McKinsey stretched its compensation system to pay more to stars in order to keep them.

Then, when the bubble burst, the relative economics dropped and the firm had to let a lot of people go. A “capital call” on the partners was issued. According to most reports, the new managing partner who took over in 2003 has reoriented the firm on a more values-driven, one-firm firm approach.

Goldman Sachs has also been through significant policy and cultural changes, particularly during the late 1990s, leading up to the decision to go public. As with much of Wall Street, the traditional reliance on long-term relationships to build the firm has been significantly influenced by a move toward a “transactional” approach, pursuing fast-moving market opportunities.

Most observers would concede that Goldman is still, by far, the most collaborative, team-based banking firm. But this may now be a relative rather than an absolute description.

Latham has also stretched the boundaries of the one-firm firm approach. As we discuss below, it has relied, like most of the one-firm firms, on an increasing use of laterals. It has also introduced a greater individual component into its reward scheme. And it has acquired some sizable groups over the course of its expansion. (For example, it added a firm of more than 90 lawyers in France in 2001.)

Hewitt has also experienced dramatic changes. A few years ago it acquired a large firm which it had some difficulty integrating. It has gone public and has shifted from mainly an advisory firm to primarily a human resources business processing outsourcer.

Hewitt often acquires the client’s HR department in order to do this, which is contrary to the one-firm firm approach of stringent, selective recruiting from the bottom.

Accenture has also migrated to the profoundly different business of outsourcing, along with the concomitant less stringent hiring practices.

In spite of all these changes, something essential remains in most (if not all) of these firms. They are still, observably, institutions designed much more committed than most of their competitors to emphasizing teamwork and collaboration rather than individual entrepreneurialism.

This is most clearly revealed in their special human resource practices, designed to enforce high standards of both teamwork and dynamism.

The April 29, 2006 issue of The Economist magazine contains an article profiling Goldman Sachs, with rich details about its intensive and selective hiring process, tough promotion process, and enforcement of high standards even among the firm’s most senior people. The article says, “Often enough, someone important is asked to leave. This is one of Paulson’s most critical roles.” (Then CEO Hank Paulson is now US Treasury Secretary.)

Paulson is quoted as saying: “Goldman is a hard place to be hired, a hard place to be promoted and a hard place to stay.” One of The Economist’s writers observes that, “if you want an explanation of how Goldman endures, that, perhaps, is the best explanation of all.”

What these firms teach us is that the essence of the one-firm firm strategy (and what gives it its economic power) is not a superior ability to select markets and services, but a greater ability to achieve high standards through the consistent application and enforcement of espoused operating rules, philosophies, values and ideologies.

The Role of Leadership

A key component in a successful one-firm firm is the governance structure. Members of the firm must feel that they have approved the leaders and that the leaders are accountable to them. This is normally accomplished by having the members (or most of them) elect the head of the firm, who would then serve for a term, typically renewable by election.

In most cases, the leader is supported by a small, elected term-limited management committee made up representatively of practicing professionals. This accountability is usually balanced by a structure that insulates the leadership from the wrath of colleagues, following tough decisions that may involve short-term unpleasantness for long-term gain.

In one-firm firms, driven as they are by a commonly held ideology, once all viewpoints are aired and management makes its decision, the partners generally line up behind the decision. Partners or senior officers are willing to delegate managerial powers upward because they trust that those appointed to leadership will operate in accordance with the principles and values of the firm’s ideology. The existence of shared values underpins sustained management effectiveness.

To maintain this environment takes active management effort and (usually) careful thought in the appointment of group leaders. Running on autopilot is not an option.

In a previous article (Maister, Managing the Multidimensional Organization) Peter Friedes, the former CEO of Hewitt Associates, was quoted as saying: “I had 15 or so managers reporting to me. So I needed them to not be pulling the firm in different directions. One practice I had was to remind all those who reported to me that part of their role was to have my CEO perspective in managing their group. They were not to just be an advocate for their group or their people. They had to have a ‘whole entity’ view.”

The payoff from this consensus, values-based management practice can be huge. It permits the firm to excel at getting things done as a firm. In warlord firms, partners typically continue to undermine decisions they dislike, since they feel that they have not delegated the power to management to make those decisions.

This doesn’t mean that one-firm firm partners are shy about expressing themselves or opposing management as issues arise. They do, and indeed more safely and effectively than in warlord firms, where political risk and retribution are real issues.

Size and Growth

The good news, we believe, is that many (if not most) powerful professionals yearn to be part of a cohesive team (often in spite of their chest-thumping behavior). This yearning is something that can be leveraged.

However, it is very difficult to sustain the one-firm firm, consensus-based governance system as the firm grows beyond the point where all members know each other.

As clients and competitors change and as firms grow and expand, management must work harder to hold the firm together by, among other things, engendering a sense of reciprocal obligation both between the firm and individual members and among the members.

While twenty years ago a firm could engage in broad consultation and give people a real sense of participation, today’s mega-one-firm firms cannot feasibly do this without great effort and creativity.

Inevitably, the top person becomes more CEO-like. This has happened at each of the named firms. This inevitable transition from consensus-building to “consult then decide” can be successfully accomplished only where a strong philosophical base of shared values has been laid down over many years.

In a sense, the trust given to the firm-wide (often global) CEO is a residual habit left over from times when the individual could be known to all and could interact with all. Perhaps paradoxically, choosing a CEO (or managing partner) based on character, values, and principles becomes even more important if the CEO is to enjoy the same latitude to manage as in the past. And, of course, he or she must continue to deliver. Shared values go only so far.

The Role of Selective Recruiting

A core characteristic of the one-firm firm, in 1985 as well as 2006, is the careful hiring, training, and indoctrination of new talent. The one-firm firms described in Maister’s 1985 article relied almost exclusively on hiring “from the bottom.” They resisted lateral hiring as unnecessary and risky to the firm’s “fabric.” But, as mentioned, things have changed dramatically.

One key feature still common to most one-firm firms is that the core (if no longer exclusive) strategy is to “grow its own” young talent. Professionals hired directly from school invariably have the strongest emotional ties to each other and to the firm, and they are the ones who find it hardest to abandon ship. Focusing on young hires has the added virtue of creating a nimble, energetic army of people who are generally more willing to embrace the core teamwork culture and core values than are older lateral hires.

Many warlord firms have reduced or eliminated entry-level recruiting, purportedly because of the (short-term) cost of hiring and training such people. They prefer to hire laterally from other firms, to avoid the costs of investing in junior people.

We believe these firms are sending two uncongenial messages: the people we hire are fungible, and there is nothing special about us. As a result, they are not developing sufficient loyalty and glue to survive the coming down periods, much less to take them to the upper reaches of their respective industry or profession.

Alumni Management

One of the keys to the one-firm firm model has been the vigorous enforcement of high standards for progression within the firm. This means that a relatively small percentage of those hired are actually promoted through the ranks. For that reason, one-firm firms may not have different nominal turnover rates than other firms. However, one of the hallmarks of the model is that people who leave one-firm firms do so with great pride and loyalty, often becoming a source of business referrals for the firm.

Turnover among junior (and even senior) people has become a fact of life in all professions. In the 1980s, Latham learned that it made all the difference in the world whether people left feeling, on the one hand, neglected or badly treated or, on the other hand, as proud advocates of the firm.

Up to that point in time, Latham had ferociously concentrated on hiring, training, indoctrinating, and holding on to talent. In that environment, when a lawyer left the firm to do something else, it was regarded as a failure rather than an opportunity. The pejorative term “attrition” was applied to these sad events. As a result, the firm often treated the departing lawyer neglectfully or even badly, as if he or she was a defector. This is an example of a one-firm firm principle run wild.

In retrospect, the firm lost millions of dollars in potential business because it mismanaged relationships with those who left. As Latham matured as an organization, it changed its practices to honor people who leave the firm and to cultivate their friendship.

In the mid-1990s, Latham made a calculation about how much of then current business came directly or indirectly from alums. The figure was approaching 50 percent. And it was great business — name-brand clients, often premium rates, quicker bill collection, pleasant dealings, and so on. Moreover, the clients benefited because the alums had a special feel for the firm, including knowledge of strengths and weaknesses. In some cases, alternative risk/reward billing arrangements could be worked out because of the built-in trust factor.

At all of the one-firm firms, the loyalty of alumni is a key competitive weapon. A one-firm firm leader told us, “One of the managing partners of a competing firm once told me, ‘The thing that strikes fear in our hearts is when one of your alums ends up at one of our clients — the loyalty is beyond our understanding and usually means it’s just a matter of time before you guys have your nose under the tent.’”

The Role of Lateral Hiring

Prior to the 1980s, firms entered new markets cautiously by redeploying existing talent. But affairs and clients began to move quickly and markets have shifted much more rapidly in the years since then. Accordingly, most of the one-firm firms have expanded their use of lateral (experienced senior) hires. To wait for inside talent to develop was to risk missing the boat.

In addition, firms in every profession started to open offices in new geographic markets. Early attempts to staff new offices solely with partners from existing offices were unsuccessful. As a result, expanding firms began to cherry-pick talented experienced people from outside the firm.

Most firms moved cautiously, bringing in only individuals and small groups and avoiding large-scale mergers. The key has been to make sure that when new laterals join the firm, they know what they are buying into. The lateral must understand that he or she is joining a firm with an established ideology. “If you don’t like this ideology,” the clear message is sent, “don’t think of joining us.”

Surprisingly to many outsiders, one-firm firms have found that many laterals come to the firm to benefit from good management; that is, to be managed. They know about the firm’s reputation for effective management and team-based approaches, and they often come from poorly-run firms. Often — not always — they are the most fervent supporters of teamwork, management, and cohesive action in their new organization.

Lateral hiring, now a competitive necessity, remains a double-edged sword for a one-firm firm. On the one hand, careful lateral hiring provides rich work opportunities for the “home-growns.” Also, laterals can help the firm challenge its settled view of itself. Done well, laterals can bring a new air of dynamism and creativity to a firm.

On the other hand, lateral hiring is management-intensive. The bottom line is that a disciplined lateral program, anathema not very long ago, can strengthen a one-firm firm. A poorly managed program will tend to pull the firm apart.

The Role of Compensation Schemes

The one-firm firms have largely avoided the stampede toward individual-based (or profit-center-based) reward schemes. However, since 1985 most one-firm firms have gradually expanded the individual component of their reward scheme (in fact if not in rhetoric) and have increased the total compensation ratio between the highest-paid members and the lowest-paid members.

At Latham, until 1993 the long-term compensation element (known as units) was essentially lockstep, with seniority as the main driver. Under cover of the early 1990s recession, this system was changed. Management’s considered view was that the firm could not operate successfully in the emerging marketplace without providing more incentive for short- and long-term individual performance, particularly on the business development front.

Walker reports that this was the hardest decision he had to make during his tenure because of the obvious risk to the firm’s “fabric.” But because the change was sold and accepted as fundamentally respectful of the firm’s ideology and shared values — not as a scuttling of them — it turned out to be a successful move. Since that change, the percentage of Latham partners hustling and producing business of substance has dramatically grown.

Most one-firm firms run judgment-based compensation schemes (with a studied avoidance of formulas). As always, the key to successful functioning of the system is agreement on values and ideology. This is because a successful compensation system requires trust: the members must believe that the compensation decisions are made by colleagues who have the firm’s best interest as their only agenda.

Review: The Importance of Trust and Loyalty

There are many reasons why institutional trust and loyalty are important in a professional business, but three are worth stressing immediately.

First, clients of a one-firm firms have, as a practical matter, access to all the resources of the firm. Individual members, rewarded through the overall success of the enterprise, are more comfortable bringing in other parts of the firm to both win and serve clients with complex multidisciplinary or multi-jurisdictional matters.

Clients are generally better served than they would be by a firm of solos or silos. Clients respond positively when individual members support (and, especially, do not undermine) their colleagues. One-firm firms are good at relationships, internally and externally.

In firms that emphasize the use of credit and compensation systems to motivate (and placate) individual members, client service across disciplines and geography will often suffer. Sophisticated clients may cherry-pick great individual professionals or small practice teams from such firms but will rarely depend on them for complex work across boundaries. Warlord firms tend to excel at transactions, not relationships across boundaries.

Second, as we have seen, the stewardship approach that one-firm firms take toward their recruits (selectivity, training, high standards), when done well, can lead to great alumni loyalty. One-firm firms do not necessarily have lower levels of turnover, but former employees often leave as loyal advocates of the firm, based on the way they were treated when they were there. Employees of warlord firms do not always feel this way. This can have a significant impact on future revenues.

Third, trust and loyalty give a professional service firm a better chance of surviving market downturns. The test of a firm is not how it does in good times, but rather how it responds to roadblocks, stumbles, and problems, minor and major.

On such (inevitable) occasions, members of a loyalty-based firm will pull together, and they will take pride and pleasure in doing so.

In professional businesses with a free-agent climate, seemingly successful firms can disintegrate (and have disintegrated) almost overnight. At the first sign of weakness, the strongest members often feel that the sensible personal strategy is to build and cling to a client base and a personal reputation.

At the very time when leadership is most needed, it is difficult to get the best people to work for the good of the firm. As firms grow weaker, the key members clutch ever more tightly to their client work and the firm flounders. Those who can, run for the door. It is not easy to reverse this spiral.

In our view, many professional service firms are currently engaging in activities that undermine loyalty and create fault lines, including:
Growing for growth’s sake, by incoherently adding laterals and merging;
Expanding into unconnected practice areas and markets;
Hiring primarily semi-experienced lateral associates rather than hiring and training entry-level applicants;
Eliminating social and partner/officer meetings as a cost-cutting measure;
“Pulling up the ladder” to partner or owner status and establishing complex membership hierarchies, including nonequity levels, not to serve clients but rather to relieve inside pain; and

Obsessing about the short-term bottom line: treating financial success as the goal rather than as a byproduct of a well-run firm.
Joseph Heyison of Citigroup, in a private communication, offers an interesting explanation of why such actions are common. Consider, he suggests, looking at the issue from the perspective of a powerful rainmaker in a professional service firm.

The bottom-line question is whether a rainmaker is better off supporting a warlord model and developing a strong portable practice that can be moved to another firm if the current firm suddenly gets into trouble. Heyison’s special insight is that firms compete not only for clients and junior staff, but also for rainmakers, and much of what we can see in the evolution of firms can best be understood in terms of that competition.

He notes that, while many firms have gone under in downturns, few rainmakers have. This reasoning may indeed explain why some warlord firms (if staffed with truly skilled warlords) do well, at least in the short run.

The Stress of Boom Times on One-Firm Firms

Brian Sommers, a former Accenture partner, points out on his blog, in a posting called “The Lessons of Andersen,” that too much individual incentive can lead firms into trouble in boom times as well as bad times. He observes:

“Great firms don’t let their partners sell inappropriate work. They have a quality control process that prevents this. They utilize partners from different geographies, industries, etc., to do these quality control checks so that no one, in a position of career determination, can influence whether the work is sold and how it is structured.

“Great firms have a formalized approval process. Great firms protect their reputation as they realize that their brand is their number one asset. Great firms also pay all people in a relatively uniform way.

“Lone wolf selling and delivery, to get the biggest pile of money at the end of the year, drives way too many bad deals.”

Jonathan Knee, in a review of his experiences working in investment banking (The Accidental Investment Banker, Oxford, 2006), also points out that temptations can exist when a boom market allows firms to achieve rapid volume increases by relaxing their hiring or other quality standards. Management must be disciplined — must know how to say no — in prosperous times as well as in down times.

Our observation from watching one-firm firms over twenty years confirms that the one-firm firm principles are as fragile in prosperous times at they are in troubled times. In highly prosperous periods, productive partners grow impatient with management’s reluctance, for example, to hire willy-nilly in order to staff all of their new production, or to promote their favorite — and very busy — partner candidates.

Also, in busy times there is a temptation to let investments such as training take a back seat to getting the work out the door. Only adherence to the firm’s principles and values prevents opportunistic behavior that may have short-term benefits but long-term adverse consequences.

Rainmakers — always stressed but even more so in boom times — often have little patience with the one-firm firm business disciplines. They are characteristically insecure about whether it will rain tomorrow for them. This insecurity is why they are compelled to hustle for new business.

They are also likely to compare their compensation with those of the leading rainmakers in the warlord firms. When they feel that they are not at the very top of their peer group, they often find it hard to trust in the future. This is especially so with members who did not “grow up” with the firm. Loyalty and the long view require time to accrue.

It is during these times that managers of one-firm firms earn their money. It is tempting to relax the disciplines in boom times, but boom times always recede and the bad calls always bite.

Summary

As we have tried to report, the five named one-firm firms are both similar to and different from what they were in 1985. Changes have happened in these firms, but they have been managed within a (mostly) coherent ideological framework.

Some specific one-firm firm practices have changed with positive effect, and some experimental moves away from the one-firm firm system have proven to be mistakes.

While they may not seem as pure in their commitment to the ideals described in 1985, these firms are still distinguished by their deep commitment to a teamwork approach.

So it might be fair to say that Maister left out one important item when he listed the one-firm firm attributes in his 1985 article: flexibility, and the willingness to experiment and change within the firm’s value system.

One-firm firms are known for their attention to what warlord firms would pejoratively characterize as “soft values.”

If our experience since 1985 tells us anything, it is that this attention, balanced of course with high standards, can really pay off in terms of producing the kind of internal loyalties — and energy — necessary for long-term success.

Managing the Multidimensional Organization

david@davidmaister.com (David Maister and Patrick J. McKenna) — Sun, 01 Jan 2006 12:00:00 -0500

Professional businesses today are structurally complex organizations with many senior people overburdened by time-consuming and often conflicting roles.

Professional businesses often have some combination of

Business unit
Geographic markets or offices
Division or department
Product line/service offering
Industry group
Key account team
Committees (recruitment, training)

Task force or project team (service innovation, new offerings)
Each of these organizational groupings can, and does, intersect with duplicated missions, overlapping membership, and common resource pools to draw upon.

We frequently hear comments like this from members of management:

“It’s not at all clear what each of these groupings should be responsible for and how their activities should be coordinated and evaluated. If you are a key player in this organization, you can spend an inordinate amount of time in meetings. There has got to be a better way to organize for effective operations!”

There is a better way, but the way professional businesses organize and manage has not kept up with their increasing complexity. Eventually — we think sooner rather than later — this will significantly impede their continuing success.

Not only do modern companies have more “types” of organizational groupings than in the past, but these groups now have broader responsibilities than the simple “generate and serve clients” goals of the past. To survive and flourish, individual groups within today’s organizations must be accountable for client loyalty, knowledge transfer, development of their people (junior and senior), and many other “balanced scorecard” items.

To make it all worse, many of these groups are composed of people who, because of geographic dispersion, do not see each other regularly face-to-face. They have to operate as members of a “virtual” organization. Many would not even recognize some of the people in their own operating groups, with whom they have to interact regularly.

As Marcel Goldstein, of the global public relations firm Ogilvy, wrote to us:

“The modern-day professional business lacks much formal structure, at least when compared with manufacturers, government agencies, and other organizations. This is a great asset, as it allows the flexibility, creativity, and autonomy necessary to adapt to client needs. It can have a darker side though: inefficiency, confusion, and process breakdowns.

“In many professions, clients are demanding cross-practice cooperation. But do we have the right structures and personal skill sets to successfully manage the integration of specialty expertise?

“The highly matrixed professional business turns downright chaotic during times of great change: acquisitions/mergers; technology disruptions; and transitions to integrated, cross-functional service delivery.

“Many professional businesses engage in acquisitions of great fanfare, only to have their value left unrealized by political undermining. In my experience, traditional manufacturers with structured, hierarchical management execute acquisitions with far less confusion and resulting paralysis.

“We need structures that don’t squash flexibility and creativity but minimize inefficiency and confusion. We need help building the personal skill sets needed to manage ourselves and each other in these environments, especially during times of great change.”

We certainly would not profess to have answers to all these complex issues. However, we believe that there are five perspectives that must guide any review of a firm’s or company’s structure.

Imperative 1: Examine Structure, Process, and People

The solution for an individual firm must always address three perspectives in any organizational review:
1. structure (how we are formally organized);
2. processes (how different types of decisions are to be made and how conflicts and trade-offs are to be resolved);

and people (appointing the right individuals to play the complex roles that will make it all work).
No one dimension will solve the problem: all three must be examined. However, we suspect that the importance of these three elements in the solution may be first, people; then processes; then structure.

Imperative 2: Choose the Right Group Leaders

Many organizations believe, as we do, that selecting the right leaders (and having enough of them) is more important than structure or process.

Peter Kalis, managing partner of law firm Kirkpatrick & Lockhart, states the view forcefully:

“Structure and process — while as essential to a law firm as a skeleton and a nervous system are to a human — are prone to ossification and thus are fundamentally at war with the dynamism of the marketplace. People, on the other hand, are not. We try to elevate the empowerment of our people over the organizational niceties of structure and process except to the extent that those structural and process features work to empower our people.”

Choosing the right people for leadership positions was always important, but is even more critical in complex organizations. Consider just some of the (newly important?) skills that today’s group leader probably must have:
- The ability (and interest) to motivate and influence people they never see in person
- The ability to delegate and trust others to manage important relationships
- The ability to play a “linking-pin” role, simultaneously thinking about the overall good of the firm while taking care of the needs of the units they are responsible for

The ability to manage people who have core disciplines other than the one in which the leader was specifically trained
It has always been true that effective management required a complex mix of social, interpersonal, psychological, political, and emotional skills on top of the high intelligence and technical skills necessary to rise to the top. We believe that as organizations become more complex, possession (and development) of these so-called soft skills must play an ever-more-important role in influencing who is selected to perform managerial or leadership roles.

Unfortunately, such considerations do not always play a dominant role in selecting group leaders. It is a common syndrome that all initiatives (client team, industry, geographic, functional, etc.) are seen as important, so the same senior people always end up on all the committees, often based on considerations other than managerial aptitude or even orientation.

As a result, it is somewhat hit-and-miss as to whether the right people get selected for these roles, their mandate is clear, their performance as leaders gets discussed and evaluated, and whether they receive any assistance or guidance in learning how to perform their roles.

Not only does this hurt the organization by (possibly) leading to less effective team leadership, but it’s not clear that it is wise to consume the limited time of valuable people by asking them to manage and/or get involved in everything. This is simple economics — a valuable resource should always be focused on its highest and best use.

Imperative 3: Establish Mandates for Each Group

Even if you have an ideal structure, there will always be problems with coordinating cross-boundary resources and dealing with conflicting priorities. You cannot make all cross-boundary issues go away by simply redesigning the boundaries.

Beyond structure, companies must ensure that each group has a clear mission (or mandate) that is understood by those inside and outside the group.

In our experience, many firms launch new business units, various committees, or project teams with ambiguous charters and then leave it to powerful (or not-so-powerful) group leaders to determine through negotiations over time precisely how the groups will interact.

The case for doing this rests on the idea that internal competition is the inevitable result of shifting external market forces influencing each of the organization’s groups differently and that a flexible approach to the responsibilities and interactions of groups is an efficient way of responding to these external market forces.

However, we believe that failing to discuss and resolve the issues of group responsibilities (and how groups will interact and resolve conflicts and trade-offs) rarely results in optimal outcomes.

Under such an approach, power rather than principle determines group goals and how groups will interact, and this leads to lesser performance. Resolution of conflicting goals and clear, agreed-upon guidelines for decision making over trade-off situations must be determined in advance.

We also believe that organizations must stop treating all groups alike, which many unfortunately do, for administrative convenience. It is possible to use different types of groups for different things: lots of little teams for client-level relationships or one large central group for financial and administrative services.

A large, growing, and complex firm doesn’t have to be (in fact, can’t be) made up of units that have similar roles, look alike, have the same targets, and are managed in the same way. We discussed specific procedures for setting group goals and mandates in our book First Among Equals (Free Press, 2002).

In making all this work, it is almost better to stop thinking of permanent or semi-permanent “departments” and to begin to use the language of “teams.” There is a great deal of evidence that organizations work better when people feel that they are volunteers self-selected to small mission-oriented teams.

This is not just a matter of making people “feel good.” It has always been true that winning professional service firms succeed most by designing their organizations from the bottom up — through the voluntary enthusiasm of individuals. You’ll be better off with a messy set of teams filled with enthusiasts than you will with a logically correct set of groups filled with good citizens.

As Ben Johnson of law firm Alston & Bird remarked:

“One problem is that too many ‘leaders’ are afraid to create more energy than they can control. I tell people I’d rather have created more energy than I could control than not created any energy at all. Here’s to structural complexity! Here’s to dispersed leadership!”

On the other hand, it is also important that firms clarify the roles and responsibilities of group leaders and avoid the balkanization of the organization that can come from letting group leaders think that they are responsible only for their groups.

Peter Friedes, the former CEO of human-resources consulting firm Hewitt Associates, had this to say:

“I had 15 or so managers reporting to me. So I needed them to not be pulling the firm in different directions. One practice I had was to remind all those who reported to me that part of their role was to have my CEO perspective in managing their group. They were not to just be an advocate for their group or their people. They had to have a ‘whole entity’ view.”

Imperative 4: Clarify Agreements Within the Groups

Whether you are managing a division, a key client team, or a limited-scope task force, every group needs to have a very clear understanding of what “team membership” implies. As a matter of practicality (although not, alas, reality in some firms) there also needs to be a limit on the number of teams one person can join (and the number of roles one person can play).

For teams to work, there need to be clear, explicit guidelines (even rules of engagement) that team members have agreed to observe. Clarifying team members’ rights and obligations can go a long way toward becoming more efficient and effective. (Even as simple a rule as “You must do what you said you were going to do” would transform some organizations and save a lot of wasted meeting and planning time.)

The need for such agreements, while always wise, has become ever more critical in a virtual world. As Harry Truehart, chairman of law firm Nixon Peabody, observed, “Getting people and procedures that facilitate effective ‘management at a distance’ is the biggest challenge in making groups work.”

We believe that if far-flung groups made up of many autonomous individuals are to make cohesive decisions over time, then it is necessary that the group members agree in advance the principles on which they will base their decisions — the guidelines the group members agree to follow. Only with such an agreement in place can a decentralized organization make consistent decisions.

Part of the solution, may involve thinking of (and formalizing) different levels of team membership. For example, levels of “team membership” might include (i) full decision rights — possible called Team Leadership, or (ii) right to be consulted — called team membership or (iii) right to be kept informed — called team affiliation. (These are examples only.)

Imperative 5: Recognize Shifting Priorities in Structural Design

Structural changes alone will not resolve conflicting priorities and competing demands for resources, but structure does nevertheless matter. The evolution of professional-service firms over time suggests that some structural approaches do work better than others. Most successful global firms, in a broad array of professions, have tilted the importance of their different organizational “axes.”

For some time, there has been a general trend to make the target client industry the most important (and organizationally powerful) grouping. This has been driven by clients repeatedly telling their vendors and providers that they had better get to know and understand the client’s business.

Next in authority and emphasis comes the specifically targeted client (or key account) team. Well-orchestrated client teams are the only answer to making seamless service across geography and product/service offerings a reality. Don Lents of law firm Bryan, Cave notes, “It is my sense that there is a growing focus on client teams and the need for such teams to be front and center in the thinking of firms.”

Third, and with increasingly less power and responsibility inside most organizations, are the traditional product or service-line groups built around a focused technical specialty or discipline. Companies need to have highly focused and skilled technical people, but few are still primarily organized that way.

Finally (and this is a huge revolution from the past), the trend has been to make geography the least important and powerful dimension of the complex matrix.

In the past, the office head (or country head in mega firms) was the source of all resources and the arbiter of last resort. Today, in many organizations, a geographic head may preside over a location whose people all belong to groups headed and “controlled” by a powerful leader located elsewhere.

This is not meant to denigrate the role of the geographic leader. As Bob Dell of law firm Latham & Watkins points out:

“Having the right leader in an office can be extremely effective in facilitating the success of all the other groups therein. There seems to be something about physical presence combined with a leader who is perceived as less biased toward any group that can be very powerful in resolving competing demands.”

Moving Forward

We believe that there is a distinct process that firms need to go through to find their own customized solutions to managing a complex organization.

The steps are these:

First, assess the perception of “pain and difficulties” felt by the current organization, to determine people’s appetite for considering changes. This will usually require a process of interviewing key players across the firm. No change can be made unless there is a keenly felt sense of either pressure or opportunity.

Next, it will be necessary to collect and assess the evidence as to how well the organization and its components are currently performing and interacting. In a recent issue of The McKinsey Quarterly (2006, number 3), Cross, Martin, and Weiss described a detailed and powerful methodology for “mapping the value of … collaboration.”

Even if the approach is not this thorough, there will need to be an investigation of current organizational functioning, including not only an in-depth view of financials, analyzed according to numerous perspectives, but also an analysis of external evidence (including, perhaps, input from selected clients) and internal structural frustrations and performance inhibitors.

It will be necessary to examine whether reward systems are in line with organizational objectives and whether profit-center accounting systems are contributing to a balkanization of the organization.

At the other extreme, it would be worth examining whether the organization is currently being held together and energized by sharing in what is sometimes referred to as an “overarching purpose” or shared values. This is an approach to organization that is often fervently preached but rarely achieved.

Next, in any organizational review, would be the need to design and implement a process to generate commitment to re-examine organizational structures and processes and explore the major alternatives (including possibly re-constituting key groups). Any redesign, must, of course, ensure continuity of strategy formulation and implementation through the organization.

Finally, it will be necessary to examine, consider, and implement methods for the development of special managerial skills and competencies as well as new metrics that may give better indications of the organization’s functioning and response to external forces or internal pressures.

It may also be necessary to design a process to get the organization to recommit to a clarified sense of purpose, values, and “rules of membership”: — the principles and practices that people must follow to remain members in good standing of the organization.

Of course, to make any of this work, there is a need for key players to be willing to let other people decide some things even when they’re not there — a situation which does not exist in many companies and firms!

We do not mean this to be a throwaway line. To effect real change, organizations must not try to establish “theoretically correct” structures and processes but must have honest discussions among powerful players about the types and nature of the firm’s group processes that would, in fact, be honored.

We have seen too many firms go through the motions of putting in place what appear to be sensible organizations, when everyone knows that certain key players will not adhere to the policies that have been adopted.

We’re not idealists here — we recognize the realities of the need to accommodate personalities and special situations. But we also do not believe that progress is made by pretending or obtaining “false consent.” That is why organizational solutions must be custom-designed for each firm and need to be the result of a comprehensive review, not, as is so frequently the case, the net result of an accumulation of a series of incremental changes driven by short-run pressures.

Is Stewardship Dead?

david@davidmaister.com (David Maister) — Thu, 22 Mar 2007 12:00:00 -0500

Over the years, I have had a lot of people ask me for definitions of (a) what is a profession (b) what is a professional (c) what is a professional service and (d) what is a professional service firm?

On the last question, I have always argued that a professional service firm, as a special type of organization, is one where the current partners develop and pass on the firm to the next generation. (Itâ€™s also called the partnership model)

In the old days, when professional firms acted like they cared, many of them ran on the principle of stewardship or â€œlegacy.â€ The firm was run not only for the current generation, but with an eye to building an institution that would flourish and survive in future years. Partners, so the argument went, held the firm in trust for the next generation.

This was not just a cultural issue. Under the stewardship model, equity in the firm was transferred at book value â€“ in at book, out at book. Partners made their money from the income they earned while working at the firm, not by equity appreciation.

I got a call yesterday from a CPA firm partner who thinks that continuing to think this way today is all hogwash. Firms today arenâ€™t REALLY run to leave a legacy or build an institution for the next generation, and firm leaders should stop pretending that they are. Theyâ€™re fooling no-one, he says.

Todayâ€™s partners want not only to maximize their income, but also (when the time comes) they want to be bought out at fair market value when they leave the firm, not just depart with a token retirement pension.

In part, the commonality of the â€œstewardshipâ€ versus â€œif you want ownership you have to buy it from meâ€ model depends on which profession / industry youâ€™re talking about. PR firms, ad agencies and other marketing communications firms have ALWAYS been â€œowned.â€ Theyâ€™ve always been â€œbuilt to flipâ€ (ie sell to one of the big conglomerates like Omnicom or WPP.) From the beginning, their founders ran them to create a â€œcapital event.â€ They didnâ€™t usually give away equity for nothing to rising young people.

On the other hand, in the profession of law (in the US, UK and Australia, but not necessarily elsewhere) there is still a history of running a partnership model, not a corporate model. The message is still (so far) â€œearn your income while youâ€™re here, thereâ€™s no capital gains to be made from your ownership of the firm.â€ In part, thatâ€™s because in many countries there are barriers to who can own a law firm.

But what do you think is going to happen in the UK when the Clementi reforms are (finally) implemented and outsiders can buy the equity of a law firm? How long do you think it will take for the existing partners to rethink (even more than they have been doing) whether they want to admit new partners without forcing them to buy in at fair-market value? Why give away a part share of ownership in your law firm when you can sell it to Goldman Sachs?

In accounting firms, it depends on the size of the firm. Big global firms still pretend they are â€œpassing on the heritageâ€, while many small CPA firms owners are unapologetic in saying: if you want ownership in my firm, you have to buy it from me!

So, what do the rest of you see going on out there?

Is Stewardship (or the partnership model) dead, even among the firms that pretend to still have it?
Should we all just admit that the way firms are being run today is to maximize the wealth of the current shareholders?
If you ran a firm, would you run it on ownership or stewardship principles (be honest)
Is there a price to be paid if firms switch from one approach to another?

Do My Ideas Work?

david@davidmaister.com (David Maister) — Thu, 15 Mar 2007 12:00:00 -0500

Itâ€™s always gratifying to hear stories about people who did (or did not) use your advice, and to find out what happened. Hereâ€™s an interesting tale, received by email yesterday:

Dear David, It's extremely unlikely you will remember me, but I attended a management development workshop you ran in London in 1998. I had already read â€œManaging the Professional Service Firmâ€ and found the time spent with you very valuable. After one of the sessions you and I had coffee and you recommended I start my own market research company. Subsequently I returned to Australia, ran Taylor Nelson Sofres for a while, and then took the plunge.

We started Celsius Research in 2002. We carefully thought about our positioning (heavy-duty quantitative market research with a strong predictive component) and stuck to it. Things went great and I bought an Aston Martin.

In 2003 we recognised the opportunities presented by on-line data collection and, in line with your opening chapters, launched a separate company, Information Research Management, instead of attempting to use the Celsius skill set and culture to undertake the more operationally focussed tasks associated with fieldwork. Things went well and I travelled around the world with my family.

In 2004 Celsius undertook a segmentation study for Microsoft Xbox inAustralia andNew Zealand. Our advanced analysis produced a fresh view of this market, which Microsoft embraced. As a result of this success, Microsoft sent us a RFQ for the building and management of panels of gamers in 20 countries. The brief called for a large amount of sample build, with quite simple data collection, although on a grand scale. There was little need for Celsius Researchâ€™s skills, although they appreciated our knowledge here.

Anyway, my partners and I had a meeting where we concluded that, â€œMaister would say we shouldnâ€™t pitch on this work because it does not fit into the mission statement of either companyâ€. And, yes, you guessed it, we decided that you were probably wrong in this instance, and, after all, a $2.2 mill contract was very attractive. We pitched against the worldâ€™s biggest firms, and we won.

I can detail for you the rest of the story, but it ended in us losing $250k, our attention was taken away from our core competencies, no-one here enjoyed the work, and the only good thing to emerge out of this is that our reputation in Microsoftâ€™s eyes is good.

You were right!

Please feel free to use this case-study as you wish. Maybe someone else wonâ€™t make the same mistake; maybe they will listen to you! Next time you are in Oz, letâ€™s catch up for a beer. I owe you many. Regards, Martin. (Prof. Martin James, Managing Director, Celsius Research Pty Ltd.)

*****

For those of you who are not aware of the reference, the advice of mine that Martin is referring to was subsequently written up in my article Strategy Means Saying â€œNoâ€.

Does anyone else have examples of my advice gone right (or wrong?)

Strategy as Portfolio Management

david@davidmaister.com (David Maister) — Tue, 13 Mar 2007 12:00:00 -0500

A primary form of strategic competition among professional firms today is NOT the (direct) competition for clients, nor the (direct) competition for junior employees, but the competition for senior lateral hires who come in to the firm with a ready-made book of business, i.e. â€œwarlords with a following.â€

Building client relationships one at a time is a long slog, and takes persistence and patience. Itâ€™s hard to break in to new markets and locations solely by organic growth and patient investment: besides, market opportunities might move too fast to take that opportunity. How much easier to grow by bringing in people with pre-existing practices!

This approach is not unique to the professional sector â€“ it reflects what corporations have long tried to do: increase their corporate return on equity by buying their way in to profitable businesses (and dropping unprofitable ones.)

The success of this approach in the corporate sector has been mixed. The real success of this â€œportfolioâ€ approach to running (and defining) a firm is not a superior ability to acquire successful businesses, but a superior ability to help them grow once they have joined the â€œcorporateâ€ family. How many corporations have met this standard? How many professional firms, with their focus on attracting â€œalready successfulâ€ lateral partners, know how to do this?

My own observation is that firms are playing with fire with this approach. By building the firm on bringing in a high percentage of lateral hires, they compromise the identity, the group cohesiveness, the loyalty that defines a firm. When a firm is managed as if it were nothing more than a portfolio of practitioners, it is unstable. The VERY approach of bringing in lots of laterals works against the thing that would be needed to justify it - the ability to exploit firmwide relationships and connections to expand and build upon the newly acquired practice.

Yet firms cannot have it both ways: they cannot be a cohesive unit and compete primarily by bringing in outsiders who â€œgrew up elsewhere.â€

Or can they?

We Don't work for Jerks

david@davidmaister.com (David Maister) — Fri, 09 Mar 2007 12:00:00 -0500

As I reported inmy book PRACTICE WHAT YOU PREACH, one of the hallmarks of the most successful professional businesses is that they recognize that, for long-run success, you must not only delight your clients but also provide interesting, challenging work experiences for your people.

That seems simple enough, but too few firms understand (and implement) the logical consequence: that you must say â€œnoâ€ to clients who treat you or your people badly. Not only must you not employ jerks (as Bob Sutton keeps reminding in his new book), but you must also not accept them as clients.

Richard Ennis, the co-founder and Chairman of the Board of Ennis Knupp Associates (a 100-person consulting firm which provides advice to pension funds and other major investors on how to invest their assets) reports that the key to his organizationâ€™s success is that they have been very selective as to which clients they will take on. (They pursue only about 50 percent of the requests to propose that they receive.)

â€œLetâ€™s face itâ€ he says. â€œSome clients are nasty. And you canâ€™t expect to hold on to good people, at junior or senior levels, if you bring in work where they are not going to be treated properly.â€

Oh, if only more CEOs and managing partners understood that simple principle.

Does your boss?

When youâ€™re the boss, do you always live by that principle?

Lions, Wolves, Beavers and Humans

david@davidmaister.com (David Maister) — Tue, 20 Feb 2007 12:00:00 -0500

Back in August of last year, I posted a blog about Corporate Strategy and Personality Profiles. The basic argument was (and is) that many firms are incapable of firmwide strategy because the key players have not agreed either to (a) collaborate or (b) invest in their mutual future.

I have now expanded my thoughts into a full-length article (Are we In This Together? The Preconditions For Strategy), which has been posted on my website and can be read or downloaded now.

The article describes four kinds of people

Type 1 is the solo operator who values independence, wants to make little investment in the future, but is willing to bet on his (or her) ability to catch fresh meat each and every day. I call this the Mountain Lion approach. “Pay me for what I do today (or this year.)”
Type 2 is the individual who prefers to act in coordination with others, but doesn’t like to invest (or defer gratification) too much. I call these people (collectively) the Wolf-Pack. “If we act together we can kill bigger animals, but it had better pay off soon or I’m joining another Pack!”
Type 3 is the individual who wants to be independent, but is interested in building for the future by investing time and resources to get somewhere new. Such people remind me of Beavers building dams to provide a home for their (own) family.
Type 4 are individuals who want to be part of something bigger than they can accomplish alone, and have the patience, the ambition and the will to help the collective organization invest in that future. I call this group “The Human Race” since one of the rare things about Homo Sapiens that differentiates it (at least in scale) from other species is its ability to act collectively to build and develop. (It’s called civilization.)

I don’t have a precise metric to measure the differing orientations described here, but I have found two proxy questions to be useful.

On the issue of independence versus team-play, I ask people whether, in general, they would prefer rewards in their organization to be based (compared to the current arrangements) a little more on individual performance or a little more on joint rewards for joint performance. I then ask whether, compared to the current arrangements, people would like their firm to invest more in its future, even if this meant they would have to accept less current income in the form of salaries and current bonuses.

These two (imprecise) questions tend to cause people to reflect on their true preferences. The underlying issue is not really about pay schemes, but phrasing the questions this way tends to crystallize the issues for many people.

The article then explores the question: what can be achieved if you have a mixture of all types in your organization?

Strategy and the Fat Smoker

david@davidmaister.com (David Maister) — Wed, 02 Jan 2008 12:00:00 -0500

A strategy, like any other lifestyle altering decision, requires the discipline stick to the plan. Without this determination, most strategic planning is a complete waste of time. We will discuss the tools necessary to do what is obvious but not easy

The Fat Smoker

david@davidmaister.com (David Maister) — Mon, 16 Apr 2007 12:00:00 -0500

All companies know what they need to do to be successful. The trick is to have the determination and courage to not give into the temptation of short-term gains.

Survey Results

david@davidmaister.com (David Maister) — Mon, 09 Apr 2007 12:00:00 -0500

The goals of an organization are only attainable through the mobilization of the organization as a whole. How does your organization measure up?

Strategy is Standards

david@davidmaister.com (David Maister) — Mon, 02 Apr 2007 12:00:00 -0500

In order to succeed, a professional firm must have values, principles and standards. These should not exist as goals or aspirations, but as solid bottom lines that the professionals within the firm must live up to.

Profit Formula

david@davidmaister.com (David Maister) — Mon, 26 Mar 2007 12:00:00 -0500

In business many factors lead to ultimate financial and business success. The challenge is to identify which factors tend to drive other factors and hence, where you really should start to launch the sequence that leads to ultimate profitability.

	Capture Rewards for Short-Term Performance	Build For the Future
Interdependent Team Players	Wolf Pack	Humans (or Ant Farm)
Independent Solos	Mountain Lions	Beavers

David Maister's Strategy Library

What's Our Deal?

A Hierarchy of Concepts

Starting with Purpose

Building Commitment

Strategy as Journey, Not Destination

Participation

Decision-Making Rules

Are We In This Together? The Preconditions For Strategy

Dealing With Diversity

Option One: Try to Accommodate Differences

Option Two: Work To Change People’s Orientation

Options Three and Four: Split Up or Cover Up

Accountability: Effective Managers Go First (published on ChangeThis.com)

The One-Firm Firm Revisited

What Is It?

The Warlord Model

Twenty-One Years On

The Role of Leadership

Size and Growth

The Role of Selective Recruiting

Alumni Management

The Role of Lateral Hiring

The Role of Compensation Schemes

Review: The Importance of Trust and Loyalty

The Stress of Boom Times on One-Firm Firms

Summary

Managing the Multidimensional Organization

Imperative 1: Examine Structure, Process, and People

Imperative 2: Choose the Right Group Leaders

Imperative 3: Establish Mandates for Each Group

Imperative 4: Clarify Agreements Within the Groups

Imperative 5: Recognize Shifting Priorities in Structural Design

Moving Forward