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NOTES FOR THE EPISODE:

Timeline:

00:12 —

Hello, I’m David Maister. In this weeks’ seminar, entitled, THE ONE-FIRM FIRM I will discuss the common approach to firm management and strategy that is used by some of the world’s most successful professional businesses.

01:37 —

What do investment bankers Goldman Sachs, management consultants McKinsey, accountants Arthur Andersen, compensation and benefits consultants Hewitt Associates, and lawyers Latham & Watkins have in common?

04:50 —

In large part, the institutional commitment at one-firm firms is generated not only through a loyalty to the firm but also by the development of a sense of “mission,” which is most frequently seen as client (or customer) service.

06:42 —

What management practices have created and sustained this culture? Not surprisingly, since people constitute the vast majority of the productive resources of the professional service firm, most of these management practices involve people management.

08:17 —

One-firm firms are notable for their investment in firmwide training, which serves both as a way to add to the substantive skills of juniors and as an important group socialization function.

10:08 —

A related practice of one-firm firms is the deliberate avoidance of growth by merger. In contrast to many other consulting firms, McKinsey’s overseas offices were all launched on a grow-your-own basis, initially staffed with US personnel, rather than on an acquisition basis.

13:31 —

Compensation systems (particularly for senior officers) are designed to encourage intra-firm cooperation. Whereas many other firms make heavy use of departmental or local-office profitability in setting compensation (i.e., take a measurement-oriented, profit-center approach), one-firm firms tend to set compensation (both for senior officers and juniors) through a judgmental process, assessing total contribution to the firm.

16:02 —

Communication at a one-firm firm is remarkably open and is clearly used as a bonding technique to hold the firm together. Frequent firmwide meetings are held, with an emphasis on cross-boundary (i.e. interoffice and interdepartmental) gatherings.

18:30 —

The one-firm approach is not the only way to run a professional business. However, it clearly is a very successful way to run a firm. The “team spirit” of the firms described here is broadly admired by their competitors and is not easily copied.