Hi David – I find your observations really interesting…and very accurate! I myself am pretty new into the working world and did the it old-fashioned way – at the bottom. And really, I can’t see doing it any other way. I have had the opportunity to see how the company works and help out on such a diversity of projects. I don’t know what the future holds, but I am confident that the manner in which I entered the workforce will enable me to be far more successful in my career as the years progress.

Although I can not speak about professional services businesses, I think the trends that you mention above apply to other companies as well. The trends you mention, however, can be viewed differently. It is now the responsibility of the individual professional to manage their own careers and development. They have to chart their own path, neither waiting for their employers assistance or their permission to become the business person or professional they strive to be. The responsibility has shifted, without a doubt. As employees realize that they are responsible for things previously provided by career-long employers, they can chart their own path and request the mentoring that they need.

On a related note, could it be that the growth of the “life coach” industry is in direct corrolation to the trends you indicate above? It seems that people are finding their own mentors.

One more item could be added to David’s excellent list of reasons for the death of the apprenticeship model: the securitization of the firm.

Apprenticeship models were/are largely partnership models. The reward of achieving officer/partnership status is one thing in a privately held firm where the ownership vests in the senior owners. It is quite another in a firm governed by the financial demands of outside owners.

When it became commonplace to seek buyouts, to talk of multiples of revenue for the “owners” of the firm, things changed. It moved from a sense of stewardship toward the young people who were the firm’s future toward a corporate model where financial returns, usually of a short term nature, were dominant.

This wasn’t just some emotional shift, either. Anyone buying a professional services firm will want a return on their investment—say, 15% conservatively, given that buying a PSF is risky. Even at a multiple of 1.0, 15% ROI to the investor is considerably more than that in terms of impact on the bonus pool. It is not easy to find that kind of added value in new efficiencies or synergies with an acquiring firm.

The net effect on existing employees—particularly those within a few years of achieving officer or partner status—is demoralizing. The net effect on newer employees is pay pressure.

Perhaps David knows: what is the success rate of mergers and acquisitions in the various PSF businesses? I’m guessing—not high at all.

Great points, everyone.

Charlie, you are particularly astute in adding the securitization and “loss of stewardship mentality” arguments to the mix.

Measuring the success rate of M&A in professional service firms is hugely difficult, because it depends on whose success you are judging. As you point out, the current owners at point of “sale” (or going public) can make out like bandits, while leaving behind a firm that is no longer as energetic or motivated because of the loss of the future ownership incentive.

Exceptions can be found. Some would argue that Goldman Sachs has managed the transition, because it still makes enough money at the top to provide the incentive to stick with the apprenticeship.

You could also argue that some of the marketing communications conglomerates made money from their acquisitions because they substituted better current financial disciplines for the apprenticeship motivation.

However, the most common result of acquisition is the phenomenon you describe – loss of OOMPH! Some would say that’s what happened with AT Kearney’s acquisition by EDS and many technology consulting firm acquisitions.

But here’s my real point: I don’t want to be falsely nostalgic or romantic about “old models”.

Professional businesses were always tough to make it in. I just wonder if there are well-thought out “systems” for living in the post apprenticeship, post-stewardship world. Both Goldman and Accenture are public companies, and THEY seem to be doing soemthing right. So it must be possible.

I just think (a) it’s not commonly well done and (b) I’m not sure I understand the new model properly.

This is a great post, David. I am going to link back to it, because many of my readers need to see this in print.

I listen to HR go on ad naseum about employee retention. We need to keep the “good ones.” The high performers.

Who do we lose? The high performers. Why? You nailed it. (f) drives it home. It is so refreshing to see people out here in the blogosphere discussing the root of the problem instead of new and inventive ways to treat the symptoms.

David:

Not just because you were kind enough to refer to an earlier piece of mine I feel compelled to comment: This is one of yours “for the ages.” You have articulated what has been lurking in the back part of my brain in an inchoate, somewhat dreaded state of subconsciousness.

If you’re right—as I desperately fear you are—that the old apprenticeship model is well and truly broken, then we need courageous and long-term thinkers to help us invent a new paradigm. (The apprenticeship model was the antithesis of short-term thinking, and anything worthy of replacing it must be as well.)

The irony, if there is irony and not just tragedy, in the current situation is that it’s precisely the high performance/high achievement people who see through the fog-machine of performance (non-) reviews and rhetoric about “commitments to professional development” and who are the first to opt out of the exploitative, demoralizing system. After all, they have options.

Perhaps only when the cost of this supra-normal attrition among the “best and brightest” begins to really hurt will firms be motivated to look beyond the common wisdom for revolutionary new paradigms.

I wish you or I (or anyone!) could show the way, but the prospect is awfully dark right now.

My feeling on this is that demographics, as much as economics, is responsible. There were too many people baby boomer type people at the top of firms, and to continue to make junior people partners at the same rate required growth that just wasn’t there in the market place.

So the choices were to ruthlessly prune the babyboomers, or to betray the youngsters. Which would you do, if you were a babyboomer in charge of a firm?

Very interesting post, which makes me glad I’ve just jumped into corporate life from professional services.

David,

This reminds me of a conversation we had recently with our youngest associates in which we told them we hired them because we believed that each of them had partnership potential. They were shocked and amazed that these thoughts were even a part of our hiring process. They had been told during their educational career that they would have 7 or jobs in their lifetimes. They assumed that we had hired them with the belief that they were not long term employees.

The demographic point is a good one – altho presumably one that will resolve itself in the next 10 years as the boomers start to retire.

Another point is that professional services firms required lots of eager young grads to do the donkey work – and they were motivated by the lure of a well-paid partnership in the future. The back-office aspects of this donkey work are increasingly being outsourced to India, Eastern Europe, China, etc. Do they require the same number of apprentices as in the old days?

Accenture & Goldman Sachs get mentioned. Much of Accenture’s growth has been in outsourcing rather than “pure” consulting. Does outsourcing require an apprentice model to be successful?

David - pursuant to another blog posting about getting word of your work out, I just wanted to let you know that I passed a link to this posting along to a colleague who found it VERY relevant to some work she's currently doing....

Thanks for posting...