Passion, People and Principles
post # 229 — November 2, 2006 — a General post
Many old friends and many new participants in the past month — just what a blog host wants, so thank you all for responding and participating.
Ladies and Gentlemen, may I introduce you please to your fellow interactors:
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Lora Adrianse, Jason Alba, Stephanie West Allen, Tyler Allison, Ron Baker, Jim Belshaw, Kent Blumberg, Sue Boggs, Eric Bostrom, Leo Bottary, Rob Brown, Jean-Claude Brunner, James Bullock, Nigel Burke, Tim Burrows, Allan Carton, Niall Cook, Ctd, Andrew Davis, Debbie, Ahmet Dogramaci, Stephen Downes, Lance Dunkin, Scott Dunn, Heidi Ehlers, Carolyn Elefant, Adam J. Fein, David Foster, Jordan Furlong, Barbara Garabedian, Alexei Ghertescu, Michelle Golden, Phil Gott, Charles H. Green, Dan Griffiths, David Harmon, Ted Harro, Ken Hedberg, Heidi, Joseph Heyison, Tom Hoff, Chris Horne, Dennis Howlett, David Jacobson, Jaylpea, Tim King, David Kirk, Alexander Kjerulf, Edward J Kless, David Koopmans, Peter Kua, Norma Laming, Stuart Liroff, Karen Love, Suzanne Lowe, Brett M, MG, Macz, James Mason, Matt Mason, Alex McCafferty, Pat McGee, Francine McKenna, Ann Michael, Mike, Warren Miller, Stephanie Fox Muller, Nancy, Miika Niemelä, Nneka, Erek Ostrowski, Bill Peper, Florin Petean, Erich Peters, Lars Plougmann, Prem Rao, Ric, Rightwingprof, Jeff Risley, Nick Saban, Mark Schenk, Frank Schophuizen, Tim Scout, Steve Shu, Tom Siebert, Linas Simonis, Carl A. Singer, Sonnie, Dustin Staiger, Stephen Thomson, Richard Thornton, Tom “Bald Dog” Varjan, Bo Warburton, Michael Webb, Ellen Weber, Michael Webster, Ian Welsh, Ed Wesemann, Fred Wiersma, Mott Williamson, David Zatz
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Accounting for a Detoured Economist
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Bob Sutton : Work Matters
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Y’all come back agin y’hear?
post # 228 — November 1, 2006 — a Managing, Strategy post
In 1985, I wrote an article for the Sloan Management Review called “The One-Firm Firm,” which turned out to be one of their best-selling reprints.
It identified a strategy common to leading firms across a broad array of professions – creating instituitonal loyalty and team focus.
The firms named in that article were McKinsey, Goldman Sachs, Arthur Andersen, Hewitt Associates, and Latham & Watkins — still today pre-eminent and fabulously successful firms. (Assuming you accept Accenture as the legacy successor to Arthur Andersen, that is.)
Today, I have added to my website a new article “The One-Firm Firm Revisited” coauthored with Jack Walker, former managing partner of Latham & Watkins. (“The One-Firm Firm Revisited” can also be downloaded in pdf form.)
We examine what has happened to these one-firm firms in the past 21 years — what they have preserved, what they have abandoned and what they have modified.
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 thanon 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.
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. The rainmakers of the firm are the warlords, and their followers, the mercenaries, are doing it for the money.
Which would you bet on to win? In which environment would you want to work?
post # 227 — October 31, 2006 — a Managing post
An accounting student writes in to ask:
I interned with an accounting firm that paid everyone (except for partners) by the hour. Under this system employees made a lot of money during tax season. People seemed to work much longer hours than at another firm I had worked in which paid straight salaries. It really did not seem they had so much more to do, but time-and-half wages were a huge opportunity cost of going home. “Time-in-seat†seemed to be a motivation which could only lead to a lack of efficiency.
I don’t blame the firm on this one—a lack of efficiency seems to be a fundamental problem with billable hour work in general because more hours translate to more pay. I can’t blame the employees either—why not use this incentive structure to their advantage? The partners encouraged people to work as much as they wanted.
At school, we studied a manufacturing company (Lincoln Electric) which pays its workers a piece rate. Lincoln requires a quality standard for each piece (no pay if the standard isn’t met and the employee has to fix things up on his/her own time). Teamwork is factored into a score that determines bonuses at the end of the year (and importantly, employees are held to the teamwork and other requirements). With year-end bonuses having the potential of 100% of the whole year’s wages, the employees take these rules seriously.
Obviously, you can’t really pay piece rate for a tax return (and I’m not even sure you would want to). Paying by the hour must inevitably put dollars ahead of excellence (at least slightly. Paying a salary currently seems like a best bet.
How should employees be compensated?
The Lincoln Electric case study is very famous in business schools, but I’m not aware of any professional firm that uses piece-rate wages for its employees. Does anyone else out there know of an example?
As a lot of people have discussed, paying people by the hour builds in lots of discincentives and poor behavior. Nevertheless, many firms do this, even if it is only in the aggregate form of paying bonuses annually for those juniors with the most billable hours.
I think this is a terrible system because junior employees don’t really get to control their own workload. It’s a partner who decides whether or not give a piece of work to junior person A or B. So getting more billable hours may just be a matter of being chosen more often. (Although you could argue that such a system serves as a quality screen — only the good juniors will be sought out by the partners who allocate work, so they will end up busier.)
There have been some firms that create a “free market†for work allocation — to get assigned to a job, juniors can offer to work for a discount off their salary, and partners can pay a premium over normal salary rated. That way, partners only sought out either the :best†for their jobs†or the cheapest internal resources for the basic work. I know firms (elite firms) where this lasted a long time.
In spite of its creativity, I’m against such models. All quantitative incentive schemes backfire (we’re dealing with smart people here!) Ultimately, I think you have to do what Alfie Kohn said “Pay people well (a salary) and work like mad to get them to forget about the money.†If you want them to work to higher quality, more collaboratively, with higher productivity, then you must MANAGE them to accomplish this. You can’t just design a scorecard and then say “go!â€
One thing in the Linoln Electric system is worth contemplating. A significant annual bonus for everyone based on company results and teamwork makes a LOT of sense to me.
Anyone else got different views?
post # 226 — October 30, 2006 — a Managing post
My sister Frances (who passed away earlier this year and is sorely missed) was a management consultant for a long while. She used to tell this story:
Before going into consultancy I was a teacher. In a school in a relatively tough area, the stress was phenomenal. I had nowhere to go with my stress and was just told not to complain. I got more and more depressed and eventually left teaching. When I went into consultancy I noticed that managers who “listened” had more effective staff. People, like sponges, can absorb only so much stress. Find a way to squeeze your stress sponge, and also allow other people to share their concerns and problems. It helps to get rid of some of the pressure, thus enabling you (or them) to cope with more.
Regular readers of this blog know that one of my central themes is that we must learn about how people function wherever we can, and then apply those lessons in each of the contexts in which we operate.
We have stress in our personal lives. Conflicting demands for what has to be done — NOW! —and we try to accommodate our loved ones. But, as at work, pressure can build. Between husband and wife, parents and children and other family members, any way you can find to give the other person the opportunity to say what’s on their mind helps to overcome pressures, misunderstandings.
My sister’s lesson is that it helps most if you can solve the source of the stress, it helps a little if you say “sorry†— but it’s still worth giving people a chance to vent if you can’t change things. Talking about it helps under almost all circumstances, and enables people to carry on even if the source of stress cannot be immediately removed.
I’m curious — in your workplace, what opportunities are there for people to let off steam, vent and vocalize their frustrations, or, as Frances would say, “squeeze the stress sponge.†What have you seen that works? What creative approaches have you seen?
post # 225 — October 27, 2006 — a Client Relations post
In recent years, my UK publisher has been re-issuing my books with covers that have a consistent look, turning individual volumes into a “set.”
It’s an old trick, and it works. I know that in my hobby of collecting music, I am a sucker for completeness (all known recordings on the XX label) or multivolume presentation. If there are available “The hits of 1995, volumes 1,2 and 3″ and I want something on volume 2, there’s a vey high chance I’m going to buy volumess 1 and 3, just to make my collection complete. Book publishers use this phenomenon with their look and the (sometimes) artificial creation of series.
I get suckered in in extra ways. Record companies keep discovering “bonus tracks” (sometimes only studio demos of tracks already on the album) and then re-issuing the whole album at a premium price, justified by the inclusion of the one extra track. Who’s the mug who re-buys the whole thing, even though he has the original album already, just to get that one extra track? Me, of course.
I was always this obsessive. I think it common among little boys to collect stamps and coins, and I did both, but I was a bookish, nerdy kid, and I started applying the same “gotta have the set” thinking to my reading. In my teens, I read everything (and I mean everything) written by James Thurber, Dorothy Parker, Henrik Ibsen, Oscar Wilde, George Bernard Shaw and Ayn Rand. (Yes, I’ve got wierd tastes.) I wouldn’t start with an author unless I was prepared to ‘complete the set.’ (Is this the same as being brand loyal? Not quite, but it might be related.)
So, here’s the point of this blog post: is the impulse to collect “sets” – the urge for completeness – a general phenomenon? If so, can it be applied beyond retail things to professional businesses? If you were a consultng firm, a law firm, an engineering firm, an ad agency, an accounting firm, etc., how would you take advantage of people’s propensity to want to complete “sets” or have things presented as “sets”?
post # 224 — October 26, 2006 — a Careers, Managing post
Bob Sutton, for those of you who don’t know him, is a Stanford professor who has written some superb business books (including the co-authored Hard Facts, Dangerous Half-Truths And Total Nonsense.)
He has a new (200-page) book coming out in February called “The No Asshole Rule: Building a Civilized Workplace and Surviving One that Isn’tâ€.
Many of you may be aware of his themes, because Bob has a terrific blog and has been talking about the topics of his new book in a number of posts.
As you would expect from Bob, it’s a terrific book — a true ‘must read.’
The theme is clear from the title, but the chapter that really got me was “How to Stop Your ‘Inner Jerk’ From Getting Out.†In other words, how to stop being an asshole yourself.
Bob notes that we all act as assholes sometimes. “Most of us, even the most ‘naturally†kind and mentally healthy, can turn caustic and cruel under the wrong conditions,†he writes. He also points out that “once you unleash disdain, anger and contempt or someone unleashes it on you, it spreads like wildfire. …If you join a group filled with jerks, odds are you will catch their disease.â€
Bob covers a lot of territory in his book. What assholes do, and why you know so many. Why every workplace needs the “no asshole†rule. How to keep the rule alive. Tips for surviving nasty people and workplaces. And, to be fair, the virtues of assholes.
Without a doubt, this book will make you think. I’m just sorry you’ll have to wait until February to get it.
In the interim, let me try to start a dialogue based on Bob’s ideas.
I don’t think I’ve ever been the type of asshole who transgresses Bob’s two tests ( first, making other people feel humiliated, de-energized and belittled and second, aiming venom at people who are less powerful than me.)
But there are other ways of being the primary asshole in the room without going that far.
Not in Bob’s sense of the truly nasty person, but nevertheless saying or doing inappropriate things. Bob’s book says that past performance is a good predictor of future performance and one of the good ways to avoid being an asshole in the future is to figure out when and why you have been one in the past.
So, under what circumstances have you found (past tense, of corse) that you yourself ended up being the asshole?
Here’s the beginnings of my list:
I have been the asshole when:
- I got overexcited and overenthused on a topic (I lose my sense of proportion , just keep trying to make my point and don’t let people finish their sentences)
- I got tired
- Three things went wrong in a row. Two I can handle, but make it three and I lose it.
- I was asked to do more than one thing at a time. I’m not a multitasker, and I get shirty when people interrupt my concentration.
- I got criticized too directly (I reacted badly)
- I felt like I’m not being treated with respect
- I was trying too hard to ‘show off.’
Anyone else wanna play this game?
Under what circumstances do you become the asshole?
post # 223 — October 25, 2006 — a Strategy post
There’s been a lot of discussion about leading PR firm Edelman’s involvement in something that transgressed many people’s sense of ethics — creating a blog consistently favorable to Wal-Mart without disclosing Wal-Mart’s (or Edelman’s) involvement.
For example, noted industry observer Paul Holmes, comments on this (and other similar situations):
There’s no doubt in my mind that Wal-Mart is as sincere about its commitment to use every dirty trick in the book to win its public relations battle as Edelman is about its commitment to set high ethical standards…. So what happens when a PR firm with high standards works for a company with a win-at-any price philosophy? The answer is not as obvious as it sounds—there are PR firms who do great work for morally dubious clients—but often the tone is set by the person paying the bills, and we get Hill & Knowlton’s work for the tobacco industry in the 60s and the Kuwaiti government in the 80s, Ketchum’s more recent troubles involving its work for the Bush administration, and countless other examples.
As I read about all this, I reflected on the number of other occasions that I’ve seen my clients (advertising agencies, investment banks, law firms, consultants, accountants and all the others) clearly working for people they neither respect nor trust, doing deals they didn’t believe in. In all professions, it seems, most providers are guns for hire. (Actually there’s a ruder word.)
I have discussed this a thousand times with professional providers, but very, very few think they are “allowed†by their firms to walk away from a paying customer because they didn’t like what he or she was doing.
I like to make a sort of game of it:
Would your firm walk away if you didn’t like the client?
What if he or she was trying to do something you didn’t believe in?
What if he or she was doing something unethical?
Socially irresponsible?
Illegal?
The answers are close to uniform: most individuals inside most firms feel an overwhelming pressure to ignore all these considerations but the last – and many will play games with “I didn’t know what was going on” on that one too.
Notice that what people are telling me is how their FIRMS are run. Most tell me they would make different choices if they were solo like me.
And you know what? I believe them! I can impose my own standards of whom I want to work for. It is (and always has been) the reality of my solo work life that I only work for clients I like personally and whose cause I can wholeheartedly serve. It was like that from the beginning.
Yet, the very minute I joined an organization, I know I would sacrifice that ability to apply selective criteria of taste, meaning, ethics and (maybe even) legality. I would have to apply someone else’s selection criteria, not my own. And the bar would almost certainly be set pretty low.
I’ve been told over and over again that business organizations cannot afford to be selective. Public or private, they feel they are under immense pressure to grow, and cannot turn away business. But notice, I’m in business, too. It’s not being in business that drives you to the compromises, it’s being in an organization!
The fascinating thing is that I know LOTS of CEOs and managing partners. as individuals they are usually people of taste, honor, integrity and all the rest of it. But they believe in their bones that they are not allowed to apply the same criteria in their organizational roles that they would if they were working only for themselves. They feel as trapped and as compromised as the most idealistic junior does.
I think part of what is going on is this. It’s all about trust. If I knew that all my colleagues, bosses, partners, owners, etc., shared a common set of standards, then I would have the courage to make selective decisions based on those standards. However, if I think they do not share my values, ideologies, principles and preferences, then I will not take the risk and expose myself to criticism by turning away cash under any circumstances. And the organization’s decision-making gets driven to the lowest common denominator. We’ll shoot at anything that moves, serve anyone with anything, as long as they pay.
Does anyone want to explain all this to me? Are organizations (professional firms) incapable of being selective? Does everyone inside a firm have to end up as just a gun for hire? If not, how does an organization avoid it?
During a recent speaking tour in Europe, I made a presentation one evening in Denmark to the alumni of a major consulting firm.
Among my messages was the fact that, as consultants, many of us give advice on things we were not trained in, and do not actually have ‘proof’ that what we advise is correct. We know less than people think we know. I used my (now) familiar metaphor that most business problems are like losing weight: things the client already knows that he or she should do, but just isn’t doing. As consultants, we don’t have any magic pills — we just help clients exercise more and eat less.
That doesn’t mean we’re faking it, or that we are useless. Just that we mustn’t get carried away with believing our own publicity. We like to think we have answers, but we often don’t. In fact we usually don’t. We have opinions. Sometimes, we have ways of thinking which help other people’s ways of thinking.
When we help, we help not with our knowledge, but with our ability to guide the client’s own reasoning. What counts is not our knowledge, but our interactive, human skills in helping clients — as individuals and as organizations. Sometimes it’s gentle, sometimes you need to be challenging. But it’s all about helping the clients make decisions and act
On my return to the US, I received the following e-mail (presented here in a slightly edited form):
I think my unusual consultant story confirms many of your findings. I believe I have one of the most awkward backgrounds as a consultant, but still I can very much relate to your experiences. I have spent the first 10 years of my weird and fun career on operational level in transportation, followed by 6 years in different management positions. I had an adventure in between as franchisee for 7-Eleven, then more than 3 years in consulting. I faked myself into the consulting business. I don’t have a master’s degree and I don’t read many books on management consulting. Actually, I am open and honest about who and what I am. My knowledge is not really very impressive — it is wide but not deep. But I believe I have many healthy principles, I act with passion and I share with everybody – and that’s basically it. To my own big surprise, I have from the first day in consulting generated revenue above average and only ever received good customer feedback.
I have often asked and struggled myself with the tough question: what am I good at? Not much really, but I have a general view, that life is simple and business is simple. I don’t see myself outstanding in specific disciplines, but, as a consultant, I make things happen at the right time and ensure that things are well communicated. In consulting, the right decisions and the way to consensus is often written in neon.
The magic pill surely is integrity – but for those who didn’t have it in the cradle, the pill is probably too big to swallow. Like many clients (and consultants) I had an illusion at the beginning of my consulting path about the big answer book and higher truth – but now I know, that it is only an illusion. I think you framed that very well.
Best regards,
Henrik Nielsen,
Senior Consultant, Denmark
Thanks, Henrik!
Reactions, anybody?
post # 221 — October 22, 2006 — a Managing, Strategy post
I was doing some tidying up of my (computer) files over the weekend and came across this.
It’s the slide I prepared over 20 years ago to give speeches about what was happening in professional businesses.
Isn’t it astounding how much is still the same?
MAJOR STRUCTURAL TRENDS IN THE PROFESSIONS
Client Marketplace
- Short service/product life cycles – constant need to innovate
- More client demand for specific industry expertise
- More “packaged” service products
- Global marketplace
- Fee pressure on “mature” services
- Merger activity-client base
- Continued demand for high specialization
- Increasing client demand for counseling work (more “front room” / “advisory”)
- Fuzzing of boundaries between professions
- More complex client organizations
- Client use of microcomputer technology
- Merger activity-professional firms
- Client skepticism about value of services
People marketplace
- Rising competition for junior staff
- Competition for staff from other professions/industries (change in perceived “glamour”)
- More hiring of senior (lateral hire) staff
- Computer technology changing work tasks (and hence leverage ratios and organizational structure)
- Rising proportion of women in profession
- Cultural shift in work-ethic among juniors
- Greater diversity of skill backgrounds in staff
- Greater mobility of skilled staff
- Increasing ability of paraprofessionals to perform junior professional tasks
Some consequences
- Rising diversification of services inside firms need to manage different businesses differently
- Internal coordination of specialists required
- More investment in technology, r&d, mktg.
- Rising fixed costs in the practice
- Rising internal training needs
- More internal formal structuring
- Greater need for market intelligence on client needs
- Effect of changing environment on senior professionals
- Effects of rising firm size on culture, communications
By presenting all this, I don’t mean to pretend that I was especially prescient. My whole point is that anyone at that time would have readily agreed that these were the major trends.
But who would have predicted that we’d still be talking about many (most?) of them 20 years later.
Here’s the question for all of you out there:
What does it MEAN that the list of trends 20 years ago is still so current?
Does it mean that we’ve learned or solved nothing?
Does it mean that there really are no new business issues?
Does it mean I stopped paying attention 20 years ago?
In the normal course of life, we do a thousand little things that annoy other people, and they do a million that annoy us. Occasionally, all this irritation boils over into an intemperate ‘spat.†We complain, we say something harsh, or we say something valid in a harsh way.
It can happen with a client, a boss, a subordinate, a peer, a romantic partner, a friend or a family member.
Of course, you acknowledge that you were guilty, too, but you feel that your sins are less because:
(a) you were RIGHT
(b) you had a good reason for what YOU did
(c) the other person was unfair
(d) they started it
(e) you’re going to be the one who has the final word, come hell or high water
Now what?
The temptation is always to dwell on the hurtful things the other person said, or the ways they let you down. The temptation is to burn your bridges, or engage in extensive discussions to prove you were in the right.
Bad idea. The thing that set the other person off may not have been the thing they’re complaining about. Often, it’s not. Frequently, resentments accumulate and the final topic that causes the explosion is, more often than not, only the excuse for the bad temper, not the real cause.
One of the hardest things in the world is to stand aside from all this, and ask “Do I want to end the relationship right now, or try to restore it over time?†It’s hard to ask ‘What’s in my best interests here?’ It’s hard, but necessary, to put aside — at least temporarily- the issue of who was right and who was wrong.
One of the most elusive — and valuable — talents, is the ability to mend broken fences. Some people are terrific at it, others don’t have the personality for it. But my rule is that I don’t believe in half-relationships. We’re either in this fully together or I don’t want to play.
That doesn’t mean that I don’t realize that sometimes the relationship is on probation. When trying to mend fences, note that you will need to discuss whatever set you both off, but not right when it happened. The more you try to “explain†your side, the more self-justifying (and annoying) you will become. Remember the goal is to heal, not to have the argument yet one more time.
Just move on together. Weeks, months or years from now you can discuss who did what to whom, but until time has performed its magic, you’ll get nowhere trying to heal hurt feelings with logic. Just acknowledge that the underlying mutual respect is there — the commitment to make it work — and get back to work.
Relationships are more important than blame.
What are YOUR tips for getting through these terrible times?
