Thoughts on ways to improve the management of professional services firms + broader thoughts on management, economics and public policy
Tuesday, October 31, 2006
This shift in gender balance is taking place at a time of demographic change in developed countries, an aging of the population. I looked at the Australian impact of this in Demography, Universities and the Trades in Australia, a post on my personal blog. One of my key conclusions was that numbers in the traditional university entry level cohorts were essentially stuck in a narrow band.
This comes through when we look at student numbers. In a later story I discussed the report released by Bob Birrell and Virginia Rapson. This suggested that there had been no real increase in the number of Australians attending university in the decade since 1996, with all the apparent increase in numbers coming from an increase in overseas full fee paying students. Education services is now one of Australia's largest export industries.
With stagnant numbers expected to continue in the entry level age cohorts for the next decade, and in the absence of significant change in post school education participation rates, by 2016 Australia will have had two decades of zero increase in actual numbers attending university.
Over the last decade the Australian economy has grown rapidly by world standards. We have accommodated this growth largely through improved productivity aided by skilled migration. Part of the productivity growth has been real (working better), but another part has simply come from working harder as measured by increased working hours.
After a decade of fast growth, skilled labour shortages have emerged across the Australian economy from skilled trades through para professionals and professionals. In some cases, engineering and dentistry are examples, these have reached crisis point requiring urgent corrective action.
There is a further factor. Skilled people are increasingly mobile in a world marked by global skills shortages and increasing competition for particular skills. Something over 800,000 Australians now live abroad. In the words of a Senate Committee (here) that examined the expatriate issue, "Australian expatriates increasingly tend to be young, highly skilled and highly educated", that is just the group the professions need.
Australia clearly has a problem. If we now track forward, you have to ask how we are going to sustain growth in the face of stagnant student numbers combined with growing global competition for good people. Worse, over the next decade an increasing number of baby boomers will retire, so we have to find replacement people as well as people required to carry out new activities.
I have painted a fairly stark macro picture. If my analysis is in any way correct, then individual firms are going to be struggling to get and hold the people they need. They will also be facing another challenge as well in that attitudes within the professional work force towards work have changed, a process that continues.
I know a fair number of Australian senior professionals. I find it disturbing that so many of them are to greater or lesser extent unhappy with their professional life. They are, quite simply, tired of the constant pressure. In the words of one person I know well, "It's just not fun any more."
When you look at younger age groups, you find an increasing proportion that are no longer prepared to pay the price associated with traditional career success. They, and especially the women, want a different life style.
I am writing from an Australian perspective. However, I do not think that this is a uniquely Australian problem. The demographic patterns that I have talked about are wide spread, while my monitoring of global discussions suggests that the attitudinal issues I am talking about are also wide spread.
This brings me to something that puzzles me. If my analysis is correct, the people challenge is going to be the single most important strategic issue all firms will need to address over the next decade. Why, then, is there so little apparent interest in it? The discussion is there, you only have to look at David Maister or Bruce MacEwen to name just two to see it, but it does not seem to be getting the traction it deserves.
Is it because individual firms think that they can deal with it themselves? Are people just too busy to focus? Have I simply missed the discussion?
I don't know, and I find it very frustrating. There are so many things that firms could and in my mind should be doing now to set themselves up to manage the issue, things that would improve performance anyway. How do we get the story across?
Monday, October 30, 2006
To my mind, this is one of the most absurd comments that I have heard. Goodwill is the core asset of most professional services businesses. To say that it has no value is like saying that the practice/business has no value beyond a limited range of tangible assets.
In an earlier post - Professional services : mergers, acquisitions and goodwill - I looked briefly at the goodwill question, suggesting in part that action by partnerships to abolish goodwill opened the way for corporatisation by creating a gap between the partner share as valued by the partnership and the external market value.
This is not rocket science. The key question in buying a business is the level and sustainability of profits. Here it does not matter if the business assets are tangible or intangible. Abolition of goodwill allows an aggregator to get a practice at lower price by offering partners a return for an asset carried in the books at zero value.
We saw this in medicine. Corporatisation and aggregation began with the higher value added areas such as pathology, but then spread into general practice. Doctors, especially the older ones, rushed to sell their practices. The big question was whether or not the profit margins were large enough to support the process. So far the answer appears to be a qualified yes.
Law is far more profitable than medicine. Not only are top partner incomes higher, but so also is profit as a percentage of revenue. To this point law has been protected by regulatory barriers. These barriers are starting to go. As they do, the aggegators will move in.
Friday, October 27, 2006
David Anderson of View Italy (one of my favourite soul blogs: just look at his latest story on cheese) has launched a new blog called Small Business USA focused on his professional work as a private equity adviser. The blog is still new, only seven posts, but includes a range of material relevant to those interested in professional services. For example, his post on Is it a Business or a Job raises very similar issues to those that I have been trying to get across in my comments on the self employed professional vs the business builder.
Noric Dilanchian continues to add superb content to his site. I really enjoyed his post on a recipe to make a high net worth chef. Perhaps Alaric 1 would indeed have demanded a different ransom to leave Rome unsacked!
Noric spoke during the week as a Sydney lawyers' seminar on precedent automation. He and I have been working together over many years on knowledge management issues through our joint involvement with the Ndarala Group. Knowledge management is not easy because it starts not with technology but with management analysis. At some stage (I say some stage because the quantity of things I want to write about seems to just keep on expanding) I will take some case studies here.
Those who read this blog will know that improving people management in professional services is one of my obsessions (here for a summary of previous posts). Bruce MacEwen's Adam Smith blog had an interesting story on Allen & Overy's attempts to improve associate retention. The story begins:
Associate retention/attrition may have always been a chronic problem for the (legal) industry, but is it only me or is the situation actually deteriorating? Annual attrition rates of 25% at AmLaw 50 and UK 50 firms are now widely reported, and as I previously noted one downtown NYC firm lost 7 of its first-year class of 25 associates between September, when they arrived, and the following April over just 7 months.
This is a real problem that affects firm profitability across many professional services areas. Take the cost including time of graduate recruitment. Add to it the training costs including time for first year training. Then divide it by the number retained at the end of the second year to get an average cost per head. The results may frighten you. Keeping staff is not rocket science. Why, then, are so many firms bad at it?
I have to be careful about commenting on Chris Marston's Inside the Firm of the Future simply because I do not want to make it seem as the though the whole thing is just a two way conversation between the two of us. I think that Chris is suffering from the problem than many of us suffer from, the challenge of getting readers to respond.
Personal Reflections, my personal blog, now gets a steady stream of comments if from a very small group. I value this enormously. Each respondee is of great value, even that very small number ofanonymouss nasty responses. But it all takes time. So Chris, keep plugging away, you obviously have readers, and I will keep commenting if sometimes biting my tongue!
Because I regard each of my favoured blogs as a personal friend, I do regular searches looking at people who have linked to them in some way. Here Chris's blog led me to Jay Shepherd's Gruntled Employees blog. Jay, I like you comments on work-life balance.
This morning I chaired a meeting of Plan4Life, a small JV that I am chairing on behalf of a client. Our first multi-disciplinary training offering on estate planning being developed in conjunction with the University of Technology, Sydney, should launch in March next year.
I will brief on this later. For the moment, I simply note that this JV encapsulates another of the messages that I am trying to get across on this blog, the need for new approaches that will break down the silos separating the professions so that we can move towards a truly multi-disciplinary approach.
Enough for the moment.
Wednesday, October 25, 2006
Last Friday (October 20) I discussed Designing a Good Performance Appraisal System. The post makes clear my own view that a lot of performance appraisal systems are not very good and may indeed have negative effects.
Is this a fair view? What has been your own experience with such systems? What do you think the major problems are? Have you seen systems that do in fact work well?
Tuesday, October 24, 2006
Previous posts are:
- In only my second post (4 July) I looked briefly at the difference between self-employed professionals and business builders. The first group, the majority by number, focus on return from cash flow. The second focus on building a business looking for a return from the combination of cash flow and business sale. This leads to significant behavioural differences.
- In the following post (also 4 July) Selling your practice: the self employed professional case I suggested that even self-employed professionals should take sale possibilities into account.
- On 8 July I looked at the need for role clarification within partnerships in order to improve management and governance. This included the separation of returns on capital from payments for work. Once this was done, I suggested, the definition of roles and the remuneration to be attached to those roles could then be dealt with using conventional job analysis and remuneration principles.
- On 11 July I introduced the topic of mergers, acquisitions and the abolition of goodwill. I began by looking at the resistances and practical difficulties that would need to be overcome if returns from equity and capital were to be separated. I then suggested that separation of returns from equity and capital was linked to another issue, the increasing trend towards mergers and acquisitions within professional services, a trend associated with changes including demographic change placing pressures on both smaller and mid size practices to get bigger or get out. I then looked at the implications flowing from moves by some firms to abolish goodwill, suggesting that this created its own problems.
- On 14 July I looked at the question of consolidation among accounting firms and especially the way that the WHK Group was using tuck-in acquisitions.
- Then on 31 August in corporatisation in the Australian legal sector I foreshadowed a major series of posts looking at the Australian corporatisation experience across sectors. However, I then explained in on 6 September in corporatisation in the Australian professions - reasons for delay that I had met some practical problems including just how much to explain about the Australian system and that I had therefore put the matter on hold until I worked out the best way of handling it.
- 23 October 2006. People Management in Professional Services - Consolidated list of Posts as at 23 October 06
- 12 October 2006. Blogs and Blogging - Stocktake of Posts as at 12 October 06
- 24 September 2006. Professional Mudmaps - Cultural Differences Across the Professions: Stocktake of Posts as at 24 September 06
Monday, October 23, 2006
- 24 July 2006. Introductory post on topic.
- 25 July 2006. Professionals vs managers looks at the differences in training and approach between professionals and managers.
- 26 July 2006. Developing management skills begins our discussion on ways of improving management skills among professionals.
- 27 July 2006. A training primer 1 starts our discussion on overall training issues. A key conclusion was that training could offer significant economic pay-backs if, but only if,the training process focused on and integrated total learning within the firm, including informal learning.
- July 28 2006. A training primer 2 extends the discussion, looking at different categories of training needs, competency based approaches and organisational vs individual needs.
- 3 August 2006. A training primer 3 completes our immediate discussion of overall training issues covering the need for realism, immediate action steps and the integration of appraisal systems and performance measurement.
- 9 August 2006. Getting the horse to the training water responds to a comment about ways of getting people to do training.
- 18 August 2006. Maister on Training looks at the reasons why David Maister will not provide training to certain firms.
- 28 August 2006. Recruitment moves the people management discussion from training to recruitment, the first step in the people chain.
- 31 August 2006. Induction provides an induction check list to help you better integrate new people into the firm.
- 11 September 2006. People Management in Professional Services - Effective Delegation look at ways of improving delegation in professional services firms.
- 11 October 2006. Communications Skills and the Professional discusses communications skills among professionals.
- 14 October 2006. Changing Gender Balances in the Professions - a question for you asks to what extent changing gender balances are affecting firm management.
- 20 October 2006. Designing a Good Performance Appraisal System discusses why so many staff appraisal systems fail and looks at the features of a good system.
- 12 October 2006. Blogs and Blogging - Stocktake of Posts as at 12 October 06
- 24 September 2006. Professional Mudmaps - Cultural Differences Across the Professions: Stocktake of Posts as at 24 September 06
7 September 2006. People Management in Professional Services - Previous Posts as at 7 September 06 (now replaced and will be deleted from the next list of previous stocktakes)
Friday, October 20, 2006
I think that the most common failures can be summarised this way:
- Complexity: Too many systems are just too complicated, try to measure too many things.
- Centrally imposed and firm focused: This one may sound a bit funny in that performance appraisal systems are almost by definition centrally mandated and intended to improve overall firm performance. It's where we go from there that's important. Good appraisal systems assist individuals to improve personal performance. Otherwise the whole thing becomes just another hurdle that people have to jump through.
- Linking perfomance appraisal and remuneration. Again, this one may sound a bit funny in that performance is obviously one (but only one) factor in considering remuneration. The problem is that as soon as you establish any form of formal link between performance appraisal sytems and remuneration review, pay immediately comes to dominate.
- Fear and loathing: Structured appraisal can be a personally frightening process. Many staff fear and even loath the appraisal process. A bad appraisal system itself become an impediment to performance improvement.
- Does not involve pay
- Focuses on performance improvement
- Is regular, consistently applied, but kept as simple as possible.
- Is built into normal management processes and involves a two way appraisal using the previous appraisal as a base
- Takes varying staff needs into account
- Is action oriented
- Has the firm values built into it.
Wednesday, October 18, 2006
When I first joined the Australian Public Service as a new graduate we all used to complain about the way work was allocated. The Director kept the most interesting work and passed the rest onto the class 9. The class 9 selected what he wanted to do and passed the rest onto the class 7. The class 7 then selected, leaving us with the worst stuff. A bit of a parody, but still not far from the truth.
Since then working as a manager and consultant, I have found complaints about delegation to be very common. So I wondered about your views and experiences.
Is delegation in professional services as bad as sometimes presented? What problems have you experienced yourself in the way work is allocated or indeed in trying to allocate work?
Tuesday, October 17, 2006
There has recently been a fair bit of recent discussion about problems and issues associated with blogging as a publishing activity.
I publish and mainly write four blogs, each serving a different purpose. In doing so, I try to be accurate. However, recently I made some mistakes of fact and interpretation in a story. They were pointed out to me and I have corrected them.
No harm was done int his case. However, it provided an excellent illustration of the need for care. I thought therefore that I should provide a statement of principles governing my approach to all my blogs. Each blogger has their own approach. This is mine.
All my blogs are intended to stimulate interest in and discussion on particular topics. They provide an opportunity for me to place ideas, thoughts, information and research on the public record. I spend a fair bit of time thinking about individual stories and want my readers to value the visit experience. I also believe that blogs are a way of encouraging civilised conversation. To this end:
- All my blogs contain a mix of fact, analysis, recollection and opinion.
- I try to check my facts. However, I will make mistakes. Where I do so, I will make corrections to the story and, if necessary, acknowledge the mistake.
- There will also be mistakes in my analysis. Again, I am happy to recognise and discuss such errors.
- While I try to be objective, I recognise that my own values and opinions colour my writing. I will try to write in such a way that the reader can properly indentify my views and biases and hence make their own judgments. This holds especially when I am arguing a case.
- When writing as an analyst, I try to deconstruct the elements in a discussion so that I can properly present issues and approaches. I will try to do so independent of personalities.
- Since I want to encourage civilised conversation, I will try to treat my visitors with courtesy even where I disagree with them. I reserve the right to delete comments where those comments are nasty or may create legal problems, but I will never delete a comment just because I disagree with it.
- As part of civilised conversation, I will try to recognise other's ideas, to contribute to relevant discussion on other people's blogs and to answer promptly emails arising from my blogs.
Monday, October 16, 2006
In an earlier post I spoke of the question posed on the US Learning Circuits blog, should all learning professionals be blogging. The approach adopted - an open question with people responding on their own blogs - generated a large response. Now Dave Lee is trying to encourage a follow up discussion.
Looking at the low response I think that that people are now blogged out so to speak, that the revised question is perhaps too narrowly defined. However, it does give me an opportunity to talk about some of the things I have been mulling over.
Recently I have been trying to get some of my fellow professionals to consider not just blogging, but other new technology approaches to supporting their work. I am not talking about "big" technology here, rather simple approaches that people can use with minimum support. I must say that I have not had great success.
I understand all the reasons for this, but it still frustrates me. I am not in any personal sense a technology leader. I have been working with new technology for many years and remain a technology lagger. So I take something up when I find it useful. But having done so I then become a strong supporter. Hence my frustration.
Given all this, I thought that I might share with you some of the ways that I do use things such as blogging, as well as the things that I have learned.
Use of Blogs to Keep in Touch
I work mainly from home. This is partially a function of the work I do, but also reflects a decision taken several years ago that I wanted the opportunity to enjoy my daughters as they were growing up. I have gained enormously. But the decision also imposed very real costs, one of which has been a degree of isolation. Earlier this year I began to wonder if my knowledge was still up to date, was I falling behind. I now know that this is not the case.
At the time I started really focusing on blogging I had not fully realized the fundamental change that had already taken place in the blogosphere, the fact that a remarkable number of professionals around the world were using blogs for discussion, as a marketing tool, as a way of promoting their ideas. Further, because they posted so frequently, in many cases 3-5 times per week, there was a currency to their comments making it easy to see trends. In addition, the comment facility on blogs allowed for a degree of response and interaction, making knowledge transfer easier while also building contacts.
Perhaps the most important feature of blogging at this level is the way it acts as a huge information screening device. Most bloggers look round their world for things of interest to them and then include links in their posts.
I presently monitor some fifteen key blogs on a daily basis, quickly scanning to look for things of interest. Given average post patterns, this means that I scan up to 12 posts per day, reading some in more detail. The 12 posts will probably contain up to 30 links, of which I will click through on 3-4 and again scan. 30-40 minutes per day keeps me in touch in a way that is simply not possible with either conventional web searches or the print media.
Note that I do not use feeds. I get over 100 emails a day as it is. I prefer to control my own search and review process.
Overall, perhaps it is not surprising that blogs have taken over as a key information resource for so many professionals. Certainly I no longer feel either stale or isolated. I know that my professional competency still stands up on a global basis, and that's not a bad thing to know.
Blogs as a Tool for Dialogue
I find blogs a useful tool for dialogue, establishing new linkages. Let me take two examples to illustrate.
The linkages established through Learning Circuits means that I now have access to experts who know far more about aspects of learning and development than I do. If I have a problem, I can ask. Why is this important? Well, I think that new approaches to learning and development are critical to improved performance in professional services. So I can take the knowledge of others who perhaps know little about professional services but a lot about learning and development and try to make it relevant to the management of a professional services firm.
Then, too, I have been monitoring the efforts of Chris Marston, CEO of Exemplar, to establish a blog focused on the development of Exemplar as a new type of law firm. I first came across Chris through the blogs of Bruce MacEwen and David Maister. I monitored Chris's blog for a few months to get a feel and have just started to comment.
Again, why is this important? Well, I am interested in Chris's experiences as a CEO because it may tell me things that I can use on this blog and in my advice to clients. I think, too, that I may have something that I can contribute to him.
Use of Simple Technologyto support Service Delivery
One of my constant messages on this blog is the need for the professions to learn from each other. Linking this to the core message in this story.
Teachers are one of our most important and least recognised professional groups.
In 2002, Neil Whitfield had to take over an Advanced English class at Sydney Boy's High, one of NSW's selective secondary schools. He got outstanding exam results. One technique that Neil used was a simple web site giving his students access 24/7 to key information. I asked my daughters about this. They thought that it was a marvelous idea.
In 2002 I was running a Front Line Management training course for R&D staff at Aristocrat, the world's largest manufacturer of gaming machines. A web site giving my group 24/7 access would have been a wonderful idea. I did not even think of it.
So my point is that every professional and professional services firm needs to think about how best to use the technology now available.
Saturday, October 14, 2006
In 2004, 54.3 per cent of all Australian university students were female. The female proportion among new students entering university in 2004 was also 54.3 per cent.
I have tried to find aggregate data on the female/male balance in different fields of study but without success at this point. However, based on previous research I did covering certain institutions and fields, my qualitative impressions are:
- In some fields including optometry, dentistry and vet science, the female proportion is now over 80 per cent.
- In other professional fields including medicine, law and accounting, the female proportion is well over 50 per cent and climbing.
- In still other fields such as primary teaching (female) and engineering (male), the traditional gender bias is still there.
Because changing gender balances have implications for individual professions and professional practices (women have to balance child birth and careers), I wondered what the position was in other countries, what practical impact this was having in management terms?
Thursday, October 12, 2006
- 16 August 2006. Accountancy Blogs lists five blogs relevant to this sector
- 27 August 2006. Dilanchian Launches Blog reports on the launch of a blog by this Sydney law firm
- 14 September 2006. Interlude - Things of Interest reports on things noticed in the on-line world
- 25 September 2006. Blawg Review #76 reports on the Carnival of Law Blogs hosted on David Maister's blog.
- 28 September 2006. Blog Nominations Called For invites nomination of business blogs run by smaller Australian professional services firms or individual professionals for consideration for inclusion as one of the featured blogs on the US small business blog of the day site
- 29 September 2006. Interesting Posts - September 06 reviews a range of blogs and posts
- 2 October 2006. Dennis Howlett & Blogs points to an interesting comment by Dennis on on the use of collaborative tools
- 3 October 2006. Should All Learning Professionals be Blogging - Practical Issues links to a major exercise run by the US Learning Circuits looking at the relationships between learning professionals and blogging.
Previous Stocktake Posts
Wednesday, October 11, 2006
Chris is CEO of Exemplar Law Partners, a US law firm trying to develop new approaches to the practice and management of law including complete adoption of fixed pricing in place of the hourly billing model. Chris uses the blog to promote Exemplar, while also encouraging discussion on professional and management issues relevant to law.
Chris wanted to encourage discussion and I have posted a comment. This has to go through moderation before it appears, so I won't comment on my comment until it appears. In the meantime, it got me musing on two linked questions:
- Are professionals bad communicators?
- If so, why?
Several years ago when I was CEO of a specialist medical college part of my role was to take complaint calls from the public about our Fellows. I had to be very careful in doing this. I could not say anything that might be construed as interference, I did not wish to worsen situations, I had to be very careful in case my words came back to haunt me later in any inquiry or court case. So my standard approach involved:
- listening very carefully
- encouraging the person to talk for as long as they wanted while not taking sides
- use of gentle and cautious questions to draw out the facts at the person saw them, to find out if they had raised their concerns with the Fellow in question
- regular summarising to ensure that I had properly captured the position as seen by the complainant
- then if necessary at the end giving factual advice on the options open to the person.
In a quite remarkable number of cases I found that the core problem had nothing to do with medical treatment but was simply a communications problem between a busy doctor on one side and a concerned, sometimes frightened, patient on the other, a problem that had festered into a major issue in the patient's mind. In nearly all such cases, talking to me actually defused the problem.
Based on this as well as my experiences as a professional adviser, I would conclude that professionals are in fact bad communicators. Whether they are worse than other groups is a more open question, although I suspect that they are.
If professionals are bad communicators, why so and what can be done about it?
We all think that just because we can talk or write that we can communicate. In fact, I think that personal communications is a skill and, like any skill, must be learned and practiced. Such training may not make the person a good communicator, all sorts of things come into the picture here, but will certainly make them a better communicator than would otherwise have been the case.
I also think that communications skills should be built into vocational education programs for at least all professions requiring individual interaction between the professional and the client or patient.
Tuesday, October 10, 2006
Book Review: "Good to Great"
This review covers a very useful management text, Jim Collins' "Good to Great. Why some companies make the leap..and others don't" (Random House Business Books). The book is useful because it provides a helpful correction to some current management fashions. We would encourage everybody to read it, but in the meantime a summary follows.The review is broken into two parts:
- It starts by outlining Collin's methodology.
- Then summarise his conclusions
Collins and his team attempted to define what distinguishes a great company from a good one using an empirical approach. Key elements:
- They used US public companies because data was readily available.
- They culled through the records looking for companies that displayed the following basic pattern: fifteen year cumulative stock returns at or below the general stock market; punctuated by a transition point; then cumulative returns at least three times the market over the next fifteen years. Fifteen years was picked because it transcended lucky breaks and was longer than the average tenure of most CEOs. Three times market was picked because it exceeded the performance of the most widely recognised great companies.
- Eleven companies were identified using this criteria. Two control samples were then picked.
- In sample one, they picked direct comparison companies, one for each good to great company. The comparison company were in the same industry with the same opportunities and similar resources at the time of the transition, but had themselves failed to make the jump. Thus Abbott (good to great) was paired with Upjohn, Wells Fargo with Bank of America and so on.
- In sample two they selected six companies that had made the transition from good to great but had then failed to sustain it.
- They then examined the complete set of companies to try to identify those features that distinguished the good to great companies from the sample companies using published records and reports, previous published analysis and comment on the companies plus interviews.
In all, a reasonably rigorous approach with the methodology explained with sufficient clarity to allow others to attempt to refute/challenge.
The study's results came as a surprise to the team.
To begin with, many of the commonly held views about factors contributing to success simply did not stack up. Two immediate examples:
- There was no difference in planning techniques between good to great and the sample companies. This does not mean that planning is not important, simply that planning on its own is not sufficient.
- There was no link between remuneration and performance. The only discernable difference between the good to great and the rest was that the good to great companies in fact paid their senior executives slightly less!
At the end of the day, the team identified seven common distinguishing features between good to great and the rest. In summary they were:
Leadership: Every good to great company displayed what the team called level 5 leadership, a paradoxical mix of personal humility and professional will. More plough horse than show horse, they are ambitious for the company rather than themselves, look after people, downplay their roles and provide recognition for others, take responsibility for failure, build succession and are driven by the need to get sustained results. Ten of eleven CEOs were internal promotions.
In contrast, two thirds of the comparison companies had leaders with huge personal egos that contributed to their companies' mediocrity or even demise. Thereﾠwas a clear negative correlation between larger than life celebrity CEO's recruited from outside and company performance.
First Who then What: When the study began, the team expected to find a clear correlation in the move from good to great between take-off and the creation of a new direction, a new vision and strategy and the alignment of people behind the direction. They found the opposite. The good to great companies first worried about getting the right people, getting rid of the wrong people, and only then worried about where to go.
In doing so, they adopted a rigorous but not ruthless approach. For example, the sample companies used lay-offs as a tool five times more frequently. Six of the eleven good to great had never laid off.
Interestingly, there was no real difference in average churn among senior executives in good to great as compared to the rest, but there was a difference in pattern. At senior level, executives in good to great either left quickly because they did not fit or stayed for a long time. So the good to great companies did not churn more, they churned better. The study also found that whether somebody is the "right person" has more to do with character traits and innate capabilities than with specific knowledge, background or skills. Competency as such is the enemy of greatness.
Confront the Brutal Facts: A dominant theme from the research was that breakthrough results came from a series of good decisions diligently executed. The good to great companies made many more good decisions than the comparison companies. Some key features here:
- Good to great companies constantly focused on identifying and resolving immediate problems. They did not lose site of their vision for greatness - Collins uses the term unwavering faith - but continually refined the path to getting there.
- Good to great companies had an open questioning culture. They engaged in dialogue and debate, not coercion, they conducted autopsies without blame, they sought to improve.
- An unexpected conclusion was that spending time and energy to motivate people was a waste of time. If you have the right people, they will motivate themselves. The real challenge is not to de-motivate them.
The Hedgehog concept: In the classic story, the fox is all over the place developing brilliant strategies and plans to catch the hedgehog. The hedgehog just goes on about its business. The good to great companies were all hedgehogs. They created simplicity out of complexity.
In doing this, they operated in the overlap of three circles. They were passionate about what they did. They aimed to be best in the world. They completely understood what drove their economic engine.
The good to great companies did not develop their hedgehog concept over night. It took four years on average to evolve. Often the comparison companies simply did not stick at something for long enough to have any chance off doing the same thing. This is where stability in senior leadership also comes in, with much higher CEO turnover in comparison companies.
Another feature was that all the good to great companies experimented.
Importantly, the study found that you do not need to be in a great industry (most good to great companies were not) to produce truly superior returns.
A culture of discipline: The good to great companies were dominated by people with self discipline who were very focused on the hedgehog core. They displayed a duality: people were required to adhere to a consistent system, but then within this had great freedom and responsibility. Companies were not tyrannical. Unexpected results:
- The more a company has the discipline to stay within its three circles, the more the opportunity for growth.
- "Once in lifetime" opportunities are irrelevant. A great company will have many such opportunities.
- The purpose of budgeting in good to great companies is not to decide how much each activity to get, but to decide which areas should be fully funded and which should not be funded at all. Stop doing lists are more important than to do lists!
Technology accelerators: Good to great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation, Technology was there to support. Paradoxically, they were pioneers in the application of carefully selected technology.
The study concluded that technology by itself is never a root cause of either greatness or decline.
The Flywheel and the doom loop: In the good to great group there was no single defining action, no grand program, no one killer innovation, no single lucky break, no miracle moment. rather the process resembled relentlessly pushing a giant heavy fly wheel in one direction, turn on turn, building momentum to a point of breakthrough and beyond.
Those who launch revolutions, dramatic change programs and wrenching restructurings (a feature of many comparison companies) will almost certainly fail to make the leap from good to great.
Collins' book is interesting because the conclusions effectively debunk many current management nostrums. It therefore forces all management professionals whether in management or advisory roles to question their advice and approaches
Thursday, October 05, 2006
I suggested that full multidisciplinary work occurred when professions combined in some way to create an integrated outcome informed by the knowledge and insights drawn from the different professions.
In this post, I want to extend this analysis, looking at the practical and professional issues that can arise, illustrating with examples.
Individual Knowledge Domains
Because each profession has its own knowledge domain and individual professional approach they approach the same issue in different ways. Take employment as an example.
The lawyer is likely to think of it in contract terms, the legal relationship between employer and employee. Appointment letters drafted by lawyers read like legal documents.
The HR professional is likely to think of it in terms of the internal people related people processes within the organisation. Appointment letters drafted by HR professionals can read like an internal process document.
Managers think in terms of their immediate requirements. Appointment letters drafted by managers focus on the job, are likely to be much shorter and may ignore both legal and HR issues.
Nothing very profound here I know, just plenty of room for confusion. Very similar issues arise in other areas such as service contracts or service level agreements where a legal wrapping is placed around a business or management need that may of itself involve cross-overs between professions.
At the simplest level this discussion links back to my earlier post on the need for a discipline of practice and the following post comparing the diagnostic approaches adopted in law and medicine. Good diagnostic approaches and skills can minimise the scope for inter-professional confusion within a conventional working frame.
But assume that the professional or practice wants to go further than this, consciously or unconsciously moving into the territory occupied by another profession. Again using the employment case, a law firm may offer advice extending beyond legal questions narrowly defined into management and HR. However, now a new set of issues arises.
Moves into a new domain involve risks. These include:
- Regulatory. Regulatory structures vary between professions. In Australia at least we have had parallel and conflicting trends between de-regulation on one side intended to increase competition and customer choice, re-regulation on the other to increase customer protection. This makes for a messy scene.
- Insurance. Moves into new areas can affect professional indemnity coverage and costs.
- Knowledge. The knowledge required to operate in the new domain has to be acquired.
- Cultural. In previous posts (post summary here) I have spoken of the cultural differences between the professions. These pose real risks for moves across professional boundaries in part because they are in fact largely unseen.
So far five main models have emerged to manage such risks, each with its own weaknesses:
- Sticking to the Knitting. Firms choose to stay within existing fields, thus avoiding the risks entirely.
- Channel approaches. Firms with different services but common customer groups combine in some way, each using the others as channels to try to cross-sell services while maintaining service and customer separation. My experience has been that this type of approach usually does not provide sufficient returns to warrant the costs unless very carefully structured.
- Alliances. In this approach common among consulting practices, a single firm maintains the lead but brings in others to provide supplementary specialist resources. These approaches are effective in meeting particular needs, far less effective in growing new activities.
- “Multidisciplinary” firms: The firm recruits specialists to bring knowledge in house. I have put the word multidisciplinary in inverted comers because most simply replicate external silos internally.
- New practices including JVs. A new venture is formed to focus and integrate activities in new areas. This approach can be effective but requires careful planning.
New Process and Knowledge Approaches
From my experience, truly effective multidisciplinary working requires three things:
- Clear management structures and processes.
- Creation of a new integrated knowledge domain covering areas of professional overlap.
- Establishment of the required professional culture.
This post has become quite long enough. I will extend the discussion in future posts
Tuesday, October 03, 2006
Email from Tony Karrer to say that he and Dave Lee and have started something new over at the Learning Circuits Blog. As mentioned before, this blog has been sponsored by the American Society for Training and Development to provide a public forum for e-learning issues.
Each month they propose to to post “The Big Question”, hoping that they we will get posts on the topic from bloggers in the community, from readers and from the larger ASTD community. The first one question selected is Should All Learning Professionals Be Blogging?
I stand in awe of Dave and Tony's energy. I see that Dave has already put up a post on his own blog cogently arguing the reasons why it is just silly to expect all learning professional to embrace blogging with enthusiasm. Tony has already responded with a counter post on his blog. Accepting that all learning professionals will not blog, he sets out the case why the individual learning professional should consider blogging.
This is not the first time this type of question has come up on Learning Circuits. Back in March 2006 Jay Cross inspired an interesting discussion on blogs as a knowledge management tool that covered some of the same issues. This included comments from Jane who had been using her blog as a tool in her work on UK higher and further education. In turn, this inspired me to prepare a case study looking at the potential use of blogs as a management tool in the world of the Australian specialist medical colleges.
My conclusion was positive. However, I also pointed to problems including especially that of limited time. Mind you, I was personally sufficiently inspired to actually launch my own blogs as a device to further test and extend my thinking. So in that sense Learning Circuits has a lot to answer for!
Later I drew from this as well as later material to prepare a post on my personal blog - UNE Strategic Planning - impact of new technology - looking at the application of technology in the context of the University of New England's strategic planning process.
In that post I suggested that the University and especially its staff had been slow to adopt and fully utilise the possibilities associated with the new on-line technology. I also suggested that staff training might help.
In a response, the University's Bronwyn Clarke responded:
"Jim, I'm not sure it's so much a 'training' problem as a cultural and strategic one. UNE has such a strong and proud tradition in distance education that, IMO, we've been a little slow in adopting new strategies. Because we did things so well in a pre-internet era, much of our thinking about teaching and elearning is still in the mode of providing quality text-based resources in hard copy for individual study."
This triggered a further post from me - UNE Strategic Planning - Impact of New Technology 2 - looking again in part at the technology issue. In that post I quoted a distinguished UNE staff member who wrote one Saturday morning:
"I agree with you about the usefulness of blogs. I wish I had time to get one up and maintain it - mostly, maintain it. I'm at UNE today, marking assignments since early hours -I started around dawn at home & then transferred 'up top' where a colleague and I are coordinating a seminar for postgraduate scholars - a task involving running around to make sure everyone's happy - publishers, editors, academics from interstate, etcetera... and then, quiet time in my cell block with undergraduates' assignments. Sigh. The old story"
Again, the practical problem of time. I know that blogs could be an extremely useful device for Michael, but I do sympathise.
So where do I come down in all this? I clearly remain a strong supporter of blogs for both business and individual professional purposes. But the proportion who actually blog is likely to remain small.
Monday, October 02, 2006
I am putting it up as a post before I forget it because I know that there are some people who read this blog who are outside the normal professional services loop.
David Maister put up a post on metrics for internal service providers. In response, Dennis Howlett made an interesting comment on the use of blogs as a collaborative tool. As some of you will know, this is one of my areas of interest. I mention Dennis's post (you will find it by clicking on the above link) because it provides another example.
Anyway, back to lunch.
Standard Team Approaches
Teaming approaches involving professionals and managers from different areas are a common organisational tool. They are also common within professional services where the assignment in question involves multiple capabilities. Standard project management disciplines can be used to manage such teams and the associated projects.
Take a major bid as an example. A project team is formed under the leadership of the project manager drawing together the required skills. The project manager and relevant subject specialists analyse the requirement. Tasks are allocated. The outputs from these go into the bid response. If the bid is successful, the project team moves into the delivery phase.
Even at this simple level cross-disciplinary problems can arise. The marketing team wants the job since that is how their performance is measured. Let's get the bid in, we can worry about the details later. The technical team also wants the job since this gives them work, but have to come up with a workable solution taking technical risk into account. The commercial team is worried about budget and costs, the legal side worries about any-flow on legal risks. So there is plenty of scope for differences of opinion and even confusion.
Again these problems can generally be resolved so long as tasks and processes are clearly defined.
Project Management - Application across the Professions
Project management management approaches are common across many professions, although the language used may vary.
Several years ago I chaired a session on the application of project management approaches within the multimedia industry. This was an area of convergence between different sectors, so we put together a panel of speakers from different sectors - software services, event management, independent film production to name a few. Each spoke on the project management approaches adopted in their own area. All, and the audience as well, were surprised at the similarities once differences in language were stripped away.
While project management approaches are widespread, their application is much less common in professions such as law, accounting or medicine where much professional work is still individual. Matter management is not the same as project management. I think that those professions would benefit from a greater understanding of project management as a discipline.
Project Management and Multidisciplinary Working
Project management approaches allow multidisciplinary teams to work together across professions on specific projects. However, this is generally not multidisciplinary working in the full sense. The team may involved different professions, but each profession contributes within a frame set by their own professional expertise. Putting this another way, the project can be thought of as series of professional modules linked through the project structure.
To my mind, full multidisciplinary work occurs when professions combine in some way to create an integrated outcome informed by the knowledge and insights drawn from the different professions. Let me try to illustrate by example.
Take a business succession problem.
Traditionally, the owner seeks advice from different professional sources, his accountant on the tax aspects, lawyer on the legal issues including estate planning, financial planner on personal wealth management issues, maybe his business adviser on business issues. The team may come together to discuss, but the advice is still separate.
On the surface at least, the owner is likely to get a much better result if the various professionals involved could combine their advice in some way. In my next post I will look at the practical and professional issues this raises.