Motivating Consultants at the Floundering Boutique
My strategy was to focus on the alienated transportation consulting group to turn them into a poster child for the entire consulting business
This series of articles teaches how consultants can apply best practices from the top management consulting firms to any consulting business.
In part 1 of this series we dived into how I was head-hunted to turnaround a boutique consulting firm.
Part 2 provided an overview of the consulting business I inherited.
Part 3 dived into the challenges of turning around a consulting business while dealing with a hostile management team.
Part 4, this article, focuses on a surgical approach to rebuild skills and motivation within the consulting firm.
For confidentiality reasons, we have modified some of the details in these articles.
Why some consultants don’t want to change?
Why don’t people want to change?
Why don’t consultants who are generally above average in intelligence and can see value in certain changes accept those changes?
Consultants do not want to change if they think the incentives to change do not outweigh the costs, and risks, of changing.
One of the great dangers of looking into the elite consulting firms, from outside, is to make the assumption that everything is done for a very rational reason.
Even junior McKinsey, BCG and Bain consultants fall for this trap. Generally, if you ask a McKinsey associate why McKinsey does x, they will outline this seemingly logical reason. That is how you know someone is junior. They assume rational logic wins the day every time.
Now, if you asked the McKinsey management committee member who championed x why it was done, he will likely say it was an experiment. They just did not know if it would work, but were willing to try it.
Not everything works with rational arguments.
That is also how you know someone left BCG or McKinsey as a junior consultant. They never admit there is guesswork involved.
Sometimes, people just do not like you and no matter how rational you may be, they will ignore you. You can have the most compelling case why a consulting partner should spend less time traveling, but if he hates his wife and wants to spend as little as possible time with her, trust me, your rational logic will not win the day.
Boutique consulting firms struggle to retain and develop consultants
So, why does this matter to a boutique consulting firm? Well, boutique consulting firms really struggle to retain and rapidly develop consultants. It is one of their major weaknesses and this is a problem at most boutique consulting firms: mind you we were one of the larger ones.
So how does this problem manifest itself?
Our boutique consulting firm had 2 employee layers. The first layer consisted of the very senior and much older consulting partners who have been with the firm for up to 20 years in some cases. Below them was this big gap in age and then the second layer which consisted of junior consultants (managers and associates).
The average gap between senior consulting partners and junior consultants was between 10 and 20 years.
The main problem with boutique consulting firms is that they do quite poorly at releasing partners into the corporate wild. Boutique consulting firms have weaker brand recognition compared to elite consulting firms. So a consulting partner at a boutique consulting firm usually has less opportunities to leave his firm for a major industry role. Due to this lack of opportunities they usually stay and occupy their partner slot.
They stay for years thereby limiting promotion opportunities for junior consultants unless the firm is growing rapidly to create new promotion opportunities alongside the existing partners.
They become all mouldy and sometimes die in that very same chair.
This creates downward pressure on the junior consultants. Since no slots open at the top, it becomes progressively tougher to promote deserving managers and associates. So over time you see these talented consultants not getting promotions and not moving up as fast as they could and want.
The younger consultants sit in the same position for years and due to incremental salary increases of 2% to 5% a year, a 7-year associate can end up earning roughly the same as a principal.
This quickly corrodes enthusiasm at all levels of the consulting firm. The junior consultants see no real meritocracy to move up and the existing partners do not want the junior consultants to have client access, since that may lead to the senior consulting partner becoming redundant.
Tension is the natural outcome.
This is one reason why boutique consulting firms that never grow are destined to fail. Growth creates opportunities and a boutique with an employee count of 4 partners and 20 junior consultants for 10 years is basically going to see churn among ambitious managers and associates. This will result in only the less ambitious, and probably weaker, junior consultants remaining while bright stars leave.
Growth is the means to the end to train talented junior consultants
Growth is critical to keep talented consultants and develop them. And the up or out policy helps to ensure you keep the best.
In addition to a desire to see career progression, the best want to learn. To learn they need progressively tougher responsibility and this means the consulting firm must grow to provide this.
Therefore, in a clever consulting firm growth is not the objective. Growth is the means to the end to train talented junior consultants.
It is a pleasant evil to build a capable team of highly trained consultants.
Tackling the promotion issues first
Keeping this treadmill of promotions running was essential to renew the consulting business.
I could have tackled many, many problems at the boutique consulting firm like branding, salaries, recruitment and so on, but I choose to tackle the promotion issues first since without good people we were dead in the water anyway.
I tackled the promotion treadmill first because the most important thing you can do to encourage change in a company was to raise morale. I needed to show that what I was doing was working before I tackled all the other problems.
Finding a way to move the treadmill was going to be hard since the senior consulting partners were not going anywhere. They were effectively a blockage on the treadmill and you could not reasonably expect the junior consultants to fight for promotions since they would be fired or penalized. That would be career suicide on their part.
I also could not step in to run selected consulting groups within the consulting practice and force the change since that would move me away from my role of running the entire boutique consulting firm.
Institutionalizing the career treadmill
I had to institutionalize the career treadmill so that it ran without my constant attention or hands-on presence. That is key. Good change implementation is automated change management.
I did the following.
The boutique consulting firm was arranged by sectors. Each of the sectors was headed up by a group of senior consulting partners and they were adamant their approach of not grooming and releasing talent worked best. They were not going to change.
In fact, some junior consultants had only worked for one director or partner for up to 6 years! How do you learn by doing the very same study for the very same consulting partner for the very same sector for up to 6 years?
I could have told the directors to change and they could not really stop me.
Yet, the problem is that I needed them to actually execute the change. So telling anyone to change anything only works if they are able and willing (or forced) to execute it and I could not watch them like a hawk every day to see it through.
This is why forcing decisions usually does not work. The decision is just the start. Seeing it through is more important.
People either need to voluntarily implement changes or the management processes set in place must give them no other choice. I was going to pursue both strategies, but rely more heavily on the latter.
I also could not simply dismiss all the problematic consulting partners. At this stage we had 2 headhunting firms helping us find new consulting partners but given our weak brand, operating locations and lower salaries, my colleagues at the elite firms were not exactly falling over themselves to make the move.
That said, I did convince 3 exceptional consulting partners to join me and they made a massive difference. Though, that is for another post.
Tapping a rag-tag group of 30 outcast consultants to foster change
This is what I did in the short-term.
I noticed we had one sector covered by this rag-tag group of outcasts. This group of 30 consultants worked in a sector no one really cared about, transportation and bulk goods. They did not even sit in the same buildings as the core consulting team and were generally treated pretty badly.
Their salaries were lower. Their standards were okay but not great. They were treated like the Roma in Europe today by the rest of the consulting team.
Yet, they had two things I needed. They had a license to operate unfettered in a key sector, since the arrogant directors from the core consulting team did not think much of that sector and would not interfere, and the senior consulting partner running the group was just happy I was noticing him.
In fact, before I came along his group was rarely invited to anything. They were true outcasts. They did not even share the same email address as the New York and Moscow team. No one knew what the team did.
In essence I had a “vehicle” to execute the changes I wanted to make. Mind you, looking at the transportation sector was not my first choice. I would much rather have worked in the sectors where I had experience like resources and energy, but those senior consulting partners were not prepared to change.
So, I had to start from scratch.
This is the key insight. A very senior strategy partner does not want to learn a new sector in his mid-life, but he has the ability to do so. And this is what separates the training from the elite firms from other consulting firms. We have the fundamental skills to enter any new sector.
It takes time to learn, but we eventually get it, and after one or two studies, we are really experts on the issues.
The first difficult step was getting the transportation partners to believe we could do important work that mattered. These consultants did a lot of route planning work. If the City of London wanted to build a new subway line, these guys would do the congestion studies. They did a lot of it.
The group had stacks and stacks of these reports going back over 20 years. I visited their library and it was massive.
Dealing with the transportation consulting group’s hesitancy to get on board
Convincing the transportation consultants and executives was not easy.
Really, it was very hard. Over a 4-months period I would drive past my office and go to the rinky-dink offices for the transportation consulting group, an ugly industrial wasteland far from any good cafes or restaurants. I have since learned that a Starbucks’ branch defines civilization’s borders. I had to take my own lunch on most days.
At the offices, I would arrange meetings with different consulting partners and we would discuss major problems facing their existing clients.
Their hesitancy to change was driven by several things.
First, they did not know me that well or even understand my motivations. Why would the new managing partner pick the often-ignored team for so much attention? I had to convince them I was prepared to see this through.
Second, they had no idea what I was talking about. At the Firm, we take for granted that every person speaks our language of management consulting.
Go ahead and try explaining operations and corporate strategy to someone who has not done the work? It is very difficult to do so. Mainly because most people think they are already doing it.
Third, they did not actually believe they could do the work. And even if they could, they only had 30 consultants to spare and they were all busy fixing subway problems around the world. Who would do the work?
Fourth, if I tried many different things and it failed, I could easily leave. I would land well somewhere else. They would be left behind to deal with the fallout and they were wary of my willingness to see things through.
I had close to 50 meetings with the various transportation executives both from the consulting team and parent company. Fridays were pretty much dedicated to these long 4 hours discussions over tea or coffee. Sometimes it was lunch and I ended up eating a lot of pasta. So much penne pasta with peas and sausage.
On the days I was not meeting the senior transportation team, I would speak to the transportation consultants and I would discuss previous studies I had done and basically try to get them excited.
Transportation consultants as a poster child for the consulting business
After many meetings they realized they could not get rid of me. They decided to help me. I basically wore them down versus dazzling them with my amazing intellect. I set up camp and refused to go anywhere.
The key is always to get people to want to help you. Growth changes never work if it is shoved down anyone’s throat. Only operational changes like cost cutting can be forced onto people.
You may ask why I did not simply change the sales incentivization metric to force the consulting partners to sell the right type of work. There are two problems with that approach.
First, if we use this approach we will end up rewarding sales and that is not the culture we wanted. In that model you end up hiring and promoting directors who will sell anything just to get a bonus. That model ignores the clients’ needs. We wanted to reward people excited about impressive work. Sales were going to be a by-product of this.
Second, the transportation consultants were not yet equipped to deliver the right type of work.
Eventually, we agreed to set aside Fridays for an intense training program for the 30 or so consultants. So each Friday, transportation consultants would come in at 7am and complete all their administration work.
From 8am to 5pm I would lead a training session explaining to them how BCG and McKinsey would do an operations or strategy consulting study. Now, imagine training veteran engineers how to do management consulting? That is what we were doing.
Nothing could be taken for granted. We spent 2 full days just getting transportation consultants to understand how to structure a problem from the objective function all the way to the analyses, and at each point someone would point out it was not a clean approach. They wanted perfection.
They could not understand how a messy approach like this could yield a better answer than their approach. Engineers work with precision and this was not precision.
They took a long time to understand how this approach was more valuable.
Through this training, we were able to assemble a core team of 6 consultants who were both excited and equipped to do this kind of work. Many of the other consultants either did not get it or thought it was too much of a risk to try this experimental approach.
That was fine since I could only really handle 6 consultants on a hands-on basis.
We then picked a major client of the parent company who was facing serious problems on a critical issue. We commissioned internal research that burnt up a lot of time, prepared a massive report and took it to the client.
I could discuss this study we did in more detail later if Firmsconsulting readers find it interesting.
We basically outlined the problems they would face under different scenarios and what they should consider doing.
I did not do all the presenting. I encouraged the associates and managers to present key parts. I also spent a lot of time with the senior consulting partners of the transportation practice finding more difficult and bigger roles for them. As a result they moved their careers forward freeing up space for the junior consultants.
This was a crucial step since I had to move them away from being the roadblock on the career treadmill.
In essence, I made them focus on spending more time meeting clients, understanding their issues and working with me to create this massive internal think-tank. By doing that, since the senior directors were no longer managing engagements as they previously did, we essentially created this role for partners who would deliver studies and I convinced them to experiment by promoting three of the managers to this role.
Those managers would focus on delivering the studies with the client while the senior partners would work with the client and myself to think about the client’s issues.
That study we did led to us gaining the trust to help that client develop their business planning for the next 3 years. It was not easy to get and it was the result of numerous discussions. It was painful: the travelling, presenting and discussions. Even the delivery was hard. But that is for another article.
This post is about building excitement. Let’s see what happened.
Fundamental error of many ex-BCG/McKinsey partners
Notice I did not simply try to go out there and secure some “strategy” work to change the business. That is a short-term and damaging step. I needed to first get the team of consultants to support me and get them equipped with right skills so that they could deliver the work once we had it.
Many ex-McKinsey and ex-BCG partners focus on sales and relationships once they join boutique consulting firms. They assume anything else is beneath them. My view, which I believe is correct, is to build the foundation of the boutique consulting firm so that consultants have the skills to deliver the work and eventually build strong client relationships.
There is no point in convincing a client to work with you if you cannot deliver. This implies having cash in the bank to pay for this retraining phase. This is something else boutique consulting firms rarely do. Training is always an afterthought and underinvestment.
Moreover, almost all McKinsey and BCG ex-partners forget that they were successful partially because they worked in a firm with incredible resources. My job was to both get the firm to do new work but also institutionalize many things we take for granted in the elite consulting firms.
We had to build parts of the platform that makes firms like McKinsey and BCG so good. We had to think long-term and not just focus on selling a $3 million study.
In these situations where sales is the focus the senior consulting partner who sold the work often ends up getting a big bonus but typically leaves in frustration within 12 months when the firm cannot deliver the work, and said senior partner who sold the work needs to step in to deliver, thereby moving him away from managing the firm.
That is what happens.
And I mean many, many, many little things needed to be institutionalized and taught. For example, the partner should not hand the bill to the client. There many key reasons for this but the boutique consulting firm had to be taught this.
This implies we had to teach the back-office teams how to work with C-suite clients, since they would now do that. You cannot have a junior accounting clerk call the COO’s office to fax over a bill! We had to teach them how to print proper letterheads, how to speak, who should call from our side and how to courier the invoices.
We also had to teach them that billing mistakes and billing underestimates was a cost we had to bear since the client hired us with a price in mind and we are responsible for that mistake. We must stand by our word – written or spoken. Image counts so much in management consulting.
We had to teach them, and this was very tough. Thankfully, the CFO was willing to trust me on this.
So now you can see how change cascades across the consulting business. By starting to build a core team and philosophy I was sure we would not fail when it came to delivery. And that is why most partners from McKinsey etc. struggle when they join boutique consulting firms. They completely underestimate the challenge of building the delivery mechanism McKinsey has.
The analytics deployed on a McKinsey study is like watching Swan Lake. There is a lot on which the performance rests and if you get the performance on the night correct, but everything else behind the scenes is not institutionalized, you still fail, because the process cannot scale.
Many ex-partners forget that they were largely successful due to the resources of the elite firm like McKinsey and their results are not so great without those resources. We had to avoid that curse.
So with the new client relationship and new roles for the senior partners in transportation, we could essentially promote more junior consultants. By getting the senior partners to do more critical work, their resumes were bolstered and they eventually moved on to better roles. So the career treadmill starts working slowly.
Now you can hire people as well, and hire them carefully based on the challenges ahead. In other words, someone perfect for McKinsey as an associate needs additional skills when they join a firm where McKinsey’s delivery system is basically non-existent.
As the transportation team did well, the consultants started introducing transportation executives from the corporate parent to the consulting team’s clients. Other consultants started talking about the work done by the transportation team and excitement started to build. Eventually we reached a point where other directors were pulling us in to help them change versus me forcing it on them.
Moreover, turning around such a moribund and disastrous consulting group sends a clear message that this was no fluke.
The transportation executives from the corporate parent would sit in a board meeting and explain to the energy executives about this interesting new work and opportunities in transportation.
The energy corporate parent executives would then come to me and ask if we could do something similar in energy and resources. And basically this is how we drove the changes at the boutique consulting firm.
Sending consultants from my core team to strengthen other parts of the business
We essentially cut off funding for anything that was not aligned to the new priorities of the consulting practice. We, thereafter, built the institutional abilities for new types of work within a small unit and allowed that unit to thrive. Once we had a thriving unit who understood the values we wanted, we would then dispatch them to other offices and practices to implement the changes.
And this is a very important lesson, one of the biggest. Once you build that core team of consultants you must be willing to export them to other parts of the business and have the ability to replace them. If we could not send consultants from the newly developed core transportation team to other parts of the business we could never have so quickly seeded the changes we eventually implemented.
A huge credit must go to the transportation senior partner who was basically cannibalizing his team for the greater good.
In most boutique consulting firms, senior partners hoard consultants once they have invested time in training them. That is a recipe for disaster.
Only once we had one of our well-trained consultants exported to another region or office would we open deeper investments for that office and they would start the cycle all over again. At first we had just one office doing this, within 12 months we had 2 offices operating this way and within 24 months we had 4 offices doing this.
This is how you begin to change a boutique consulting firm
The key was getting morale up by moving the career treadmill.
As you can see we never took on the resistant consulting partners directly. We blocked their budgets and then focused on their champions on the corporate parent board whose support allowed the partners to be resistant. Once we removed that support from the champions, the resistant partners had no choice but to change because they were left with no other choice.
If they did not change, they would not have an investment budget and would be left out of the growth. Moreover, and this is key, with growth and the success of transportation consulting group, some of the best consultants working for the resistant directors were asking for a transfer to the transportation team.
That was last signal that they had to change. Once their people started to leave, they really had no leverage left to negotiate. The resistant directors were like the former Soviet Union: once powerful but now weak where everyone is clamoring to go over the wall. The key to changing anything is to manipulate the incentive structure.
And this is how you begin to change a boutique consulting firm. Not just with fancy sales, but also with skills building which is painfully hard and by changing the incentive structure.
To be continued …
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