David Maister - Professional Business, Professional Life
David’s ResourcesAbout David
NEW! Browse my materials by topic of interest:StrategyManagingClient RelationsCareersGeneral

Passion, People and Principles

Does the Network Work?

post # 133 — July 14, 2006 — a Strategy post

Here’s an old question that’s newly relevant. In a network of operators, how do you tell if the network is working?

The network could be the different offices or departments of a single firm. In these days, when whole departments move between one professional firm and another, this is a highly relevant question. Groups that are shopping around have to decide which networks or ‘firms’ to join.

Or the question could apply to today’s “virtual” firms, where professional providers act in informal cooperation with each other over the internet without being legally bound.

Or it could be something in the middle: declared alliances without overlapping ownership.

In any of these cases, there follows the question: How do you tell whether the network is really adding value to its members (especially in comparison to belonging to other networks?

If you were looking for some possible metrics, here’s a few you might consider.

First of all, some metrics which attempt to judge the outcomes or results:

  1. Amount of referred work (as a percent of all revenues)
  2. Joint work (how many client projects involve teams simultaneously from more than one group or unit)
  3. Percent of clients served by more than one group / unit
  4. Percentage of joint proposals won
  5. Take top X clients and ask what percentage of the markets they operate in does the network do work for them (penetration percentage)
  6. Average rate (fee level) on joint work (network is adding value if joint work produces higher-than-average fee levels. If it produces less than average fee-levels, then more joint work by itself does not prove that network adds value)
  7. Average rate (fee level) on referred work (network is adding value if referred work produces higher-than-average fee levels. If it produces less than average fee-levels, then more referred work by itself does not prove that network adds value)
  8. Exchange of methodologies. (How many “tools” developed in one place are being used elsewhere?)

In addition to these measures of outcomes, you could also attempt to measure network effectiveness through metrics which judge “effort”

  1. Exchange of peopele among different groups
  2. Amount of joint proposals
  3. Amount of shared market research
  4. Amount of assistance on domestic proposals
  5. Amount of joint training
  6. How often is network expertise tapped into?

As I indicated at the beginning of this blogpost, this is an important topic even for single firms. Measures like these might allow the firm to judge its “cohesion” – the degree to which it is truly acting like one organization, rtahre than a bunch of separate operators trading under the same brand name.

Anyone got some additional and, especially, BETTER ideas?


Leo J Bottary said:

Between 1995 and 2000, I owned my own firm and was a member of The Worldcom Public Relations Group – The largest of the PR networks. In addition to the metrics you outlined above, I believe there are several other advantages as well. Professional development – the value of what you can learn from principals and colleagues of other PR firms. Brand Enhancement – The fact that a local shop can bring geographic reach and a broader base of expertise to the table can make your firm competitive for a piece of new business when it may otherwise not be. A broader perspective – relationships and ongoing communications among firms tend to offer local shops a more global view of the profession. Finally, there’s great travel – in my years at Worldcom, we met in Rome, Buenos Aires, Tokyo, Lisbon, Boston, LA, Denver, etc. This may be the best benefit of all.

posted on July 14, 2006

David (Maister) said:

Thanks for the comment, Leo. Seriously (ie apart fom the travel) which of the things discussed did you REALLY look at to see if the Worldcom network was working for you? Are they the same things you would look at to judge whether a “single-ownership” network like Hill and Knowlton is working?

Among the possibilities, what are the KEY metrics in your mind?

And does anyone else want to join in on this one?

I think it’s a key strategic question. Since firms in all industries and professions are eagerly building global networks, surely we should develop some broad concensus on how managers and leaders should judge the success of what they are creating?

posted on July 14, 2006

David Koopmans said:

We operate a virtual network in marketing with designers, digital marketers and marketing consultants and the truth is that the only measure we use currently is the amount of work we do together. So thank you for the ideas on metrics.

However we do one other thing that does make a real difference in becoming a team; we plan together. First of all it is something that we probably wouldn’t do as much on our own but it also means that we generally have a commitment to the same goals and directions. No travel beyond the Australian borders though…

posted on July 14, 2006

David (Maister) said:

David, could you please help the rest of us a little bit more? What does it mean when you say that your virtual team “plans together?”

Could you walk us through the benefits you get from choosing “the same goals and directions?”

I’m think I can guess the genaral answers, but there’s a lot of us out here who could benefit from some specifics from your experience.

posted on July 14, 2006

Leo Bottary said:

Two things regarding ROI on networks. I looked at direct and indirect new business wins – direct from other partners and indirect based on the capability I could claim from being part of the network which helped me win business on my own. (I did believe in the value it brought to our brand.) Regarding the Hill & Knowlton comparison, I think it works in a similar fashion to Worldcom PR Group, but just a bit better because of the weight of the H&K brand and the more frequent collaboration among our offices. We have more opportunities to work together and build trust in one another. When clients hire H&K, they actually get the whole firm, not just the office in their city.

posted on July 14, 2006

David (Maister) said:

The ability to win and serve better business confers more of a competitive advantage than the ability to win more business, but I don’t think many firms have in place the metrics to judge the “caliber of business” they bring in. I think most firms and networks lapse into using volume as the measure.

Also, if I were H&K (or one of its competitors) I’d want to have a way of measuring whether or not we really WERE “delivering the whole firm” rather than acting like a collection of independent offices or practice groups.

A lot of people assert they deliver the firm, and it would be nice to be able to track it whether we truly are delivering on the promise (or just claiming it.)

posted on July 14, 2006

Leo Bottary said:

I consider a client that wants or needs more skill sets and greater geographic reach to be a more desirable client – at least in most cases. The challenges are typically greater and the potential income much higher. Being part of a network as a local firm can put you in the game to win this kind of business. I experienced it firsthand is a member of Worldcom PR. During my best year with the newtork, I calculated a 13 to 1 ROI based on income directly attributable to the network versus my total network investment (dues, and yes even travel expenses). Regarding H&K collaboration, we track it, quantify it, and offer financial incentives internally as a way to offset the tendency of a single office to want to “keep revenue” as a means to boost its own P&L. Once again, I can vouch for the fact that it’s more than just promise or preference of certain individuals within the firm; it’s a cultural core value that’s institutional in its scope and practice.

posted on July 15, 2006

David Koopmans said:

David, in response to your request for a little more detail on how our virtual team plans together and how we benefit from the same goals, this is how it works.

When we first started out working together we simply focused on the jobs at hand; most contact was via email and telephone because it is convenient. Over time we realised that we were really not much more than a bunch of people working on the same projects instead of a team; a team is more than the sum of its parts.

We really were not as we didn’t add any value to each others business beyond delivering a project together.

We also realised that none of us spent enough time working on the business rather than in the business.

So we had some discussions and agreed on the following; we would do regular business planning together, particularly focused on sales and marketing to generate our growth. The sessions have been focused on refining our target market, developing a shared unique value proposition and on how we present this value proposition.

The “business” minds assisted the “creative” minds with their thinking and vice versa. As any team should. We also ensure that we have face-to-face meetings at least on a fortnightly basis to force the time to just see each other as people, not email addresses.

It is not terribly sophisticated but that may just be the secret. There is no doubt that we are now more than just the sum of our parts.

posted on July 15, 2006