Andy Lang
01-01-2003, 09:11 PM
Fast Company
Are All Consultants Corrupt?
That's one possible conclusion in the wake of the Enron scandal. According to David Maister, who's been studying professional-services firms for more than 20 years, it's time to clear the air.
by Alan M. Webber
photographs by Allan Penn
from FC issue 58, page 130
(C) May 2002
Enron's monumental bankruptcy, Global Crossing's questionable accounting practices, and Wall Street's complicity - if there is a common thread in the scandals of the day, it is the central role played by the nation's elite professional-services firms. McKinsey & Co., the bluest of blue-chip consulting firms, gave Enron its strategy -- and even its former CEO. Jeffrey Skilling's model for Enron was to pattern it after a professional-services firm, to elevate the company above the lesser status of an energy company to the more rarified air of a knowledge-based, asset-light company. Andersen, among the most respected accounting firms, vouched for Enron's books. Enron was chock-full of MBAs and refugees from accounting and consulting firms. A few column inches away from Enron is Global Crossing and its founder and chairman, Gary Winnick, who is an alumnus of Drexel Burnham Lambert. The fingerprints of Wall Street's elite firms appear on some of the questionable transactions that are now under congressional scrutiny. And the world of professional-services firms -- a world to which most high-flying MBAs readily aspire -- is suddenly under intense review.
In that world, David Maister is the recognized expert. For more than 20 years, he has been studying professional-services firms. He has written about them, spoken to them, and consulted for them. A native of Great Britain, Maister holds degrees from the University of Birmingham, the London School of Economics, and the Harvard Business School. He taught at HBS for seven years before striking out on his own. His books ( all published by the Free Press ) include Managing the Professional Services Firm ( 1993 ), The Trusted Advisor ( 2000 ), Practice What You Preach: What Managers Must Do to Create a High-Achievement Culture ( 2001 ), and, most recently, First Among Equals ( 2002 ).
Fast Company sat down with Maister in his home in Boston to gain insight into the state of professional-services firms, their role in the current scandals, and the right way to be a professional.
What's your take on the business scandals that we're seeing today?
The car wreck that we're reading about in the newspapers was inevitable. It was going to happen, because professional-services firms don't practice what they preach. They're filled with smart people who understand what they should do to win. Those people talk about having a strategy with a longer-term view, but the operational reality is vastly different. They want the money right now. In practice, cash is everything.
That's how most professional-services firms operate. But are there fabulous accountants, lawyers, consultants, and investment bankers who do it right? Absolutely. What's missing are whole firms that are built on discipline and strategy. With one or two exceptions, cash is everything for a firm. It's also important to mention that the current scandals are not that special. They're special in size, but not in nature.
Is the problem with professional services due to a lapse in ethics?
The real problem is that people do what they're told. They're simply in compliance mode. What's even more interesting is that there's so much going on that's stupid. People are making the wrong calls on stuff that doesn't even come close to ethics. But that's just common practice. It's what happens inside firms, because that's how people have been raised in business. Before they even get to an ethical issue, they've been taught that if there's cash to be made, then make it. So it's not as if they were wonderful to begin with and then suddenly there was an ethical challenge and they lost their way. The message has always been that nothing trades off against cash.
Too many professional-services firms have never met a dollar they didn't like. The question that they need to ask themselves is, Do we believe in our own strategy and our own standards, even when we're tempted by cash? Good business is about having the guts to stick to a strategy. You can count on the fingers of a single maimed hand the number of professional-services firms that have the courage to stick to their strategy.
So what's wrong with the professional-services firms of today?
The problem is that they've been taught to act like businesses. But they've learned all the worst lessons of business and missed all the best ones. Tom Peters used to tell the story of McDonald's founder Ray Kroc. Someone asked Kroc what his secret of success was, and he answered, You have to be able to see the beauty in a hamburger bun. You might laugh at first, but when you think about it, that's got to be right.
What most professional-services firms don't understand is that to make the most money, you actually have to believe in the product or service that you offer and care for the customers or clients whom you serve. That isn't a religious argument; it's a business lesson. You can't dominate an industry unless you care passionately about what you do and the people you do it for.
Why don't these firms change?
Why don't they change? Let me give you an analogy from my own life. I am a fat smoker. I don't need another speech to tell me that I should stop smoking and lose weight. Clear lungs, a longer life, a better sex life -- I accept that it's a fabulous strategy. But please, no more speeches. Now, people in professional services have heard all the speeches before too: Give great customer service, be a team player, manage your people. It's not that they don't believe the strategy.
The problem is, whether it's me giving up smoking or them starting to give great customer service, any kind of improvement requires short-term sacrifice and short-term pain in the name of a better long-term future. There are very few businesses that are truly interested in maximizing their future income stream.
Professional-services firms need to have an ideology. They need to know what they stand for. They need to have nonnegotiable, minimum standards. They need to be able to say, We will not accept work that goes against our standards, because that's not who we are. The problem in professional services is that because the environment is so bountiful, you can get everything wrong and still have a nice income.
I'm not picking on any one profession. They're all equally bad. They treat people poorly. They don't train well. They have no quality assurance. They don't collaborate with one another. They don't show any interest in their clients. You would think that this would kill them. But they're only competing against each other. So as long as nobody wakes up, they can all make money doing this shit. Why are there so many bad professional-services firms out there? For the same reason that there are so many fat smokers.
But don't most firms know that they're not measuring up?
Here's a little quiz that I've been giving professional-services audiences for the past seven years. First I give them three categories to classify how they feel about their work. Category one is, "I love this stuff! I just love doing it." Category two is, "I can tolerate it, but that's why they call it work. I do my job, but I have no emotional investment in it." Category three is, "How the hell did I end up doing this junk?"
The results are always the same in all professions around the world. You get about 20% who say, "I love this work"; 60% to 70% who say, "I can tolerate it"; and 10% to 20% who say that what they do is junk.
Then I give them a second question. I say, "You've told me about your work. Now tell me how you feel about your clients." Again, I give them three categories to classify how they feel. Category one is, "I really like these people. I enjoy serving them." Category two is, "I can tolerate them. I'm responsible and I give good service, but there is no real difference between today's client and tomorrow's client." Category three is, "These people are idiots who work in a boring industry."
The results for the second question are pretty much the same as for the first. About 20% love their customers, 60% to 70% can tolerate them, and 10% to 20% can't stand them.
What the numbers say is that most professionals like their jobs one day a week or less, and the rest of the time, they just tolerate what they do. Then I ask them, "Do you think your clients can tell?" To which everybody says, "Yes!" Well, what are the business implications of that? For most professional-services firms, the answer lies in their mission statement: We won't screw up, but we're nothing special.
I tell them, If that were me, I'd slit my wrists! That's true for one very simple reason: I don't want my tombstone to read, "He did tolerable stuff for tolerable people because they paid him." I'm not that much of a whore. Do I do it occasionally? Sure. I'm no more noble than anyone else. But that's not the issue. The issue is, Is that your life? Why would you want to spend your life doing stuff that you can just tolerate, working for people you don't like? Especially when you realize that you can make more money doing work that engages your passions. The only sensible business rule is, Life is too short to work for idiots. So if you're working with people who are shady or crooked, get out!
Alan M. Webber ( awebber@fastcompany.com ) is a Fast Company founding editor. Visit David Maister on the Web ( www.davidmaister.com ).
Are All Consultants Corrupt?
That's one possible conclusion in the wake of the Enron scandal. According to David Maister, who's been studying professional-services firms for more than 20 years, it's time to clear the air.
by Alan M. Webber
photographs by Allan Penn
from FC issue 58, page 130
(C) May 2002
Enron's monumental bankruptcy, Global Crossing's questionable accounting practices, and Wall Street's complicity - if there is a common thread in the scandals of the day, it is the central role played by the nation's elite professional-services firms. McKinsey & Co., the bluest of blue-chip consulting firms, gave Enron its strategy -- and even its former CEO. Jeffrey Skilling's model for Enron was to pattern it after a professional-services firm, to elevate the company above the lesser status of an energy company to the more rarified air of a knowledge-based, asset-light company. Andersen, among the most respected accounting firms, vouched for Enron's books. Enron was chock-full of MBAs and refugees from accounting and consulting firms. A few column inches away from Enron is Global Crossing and its founder and chairman, Gary Winnick, who is an alumnus of Drexel Burnham Lambert. The fingerprints of Wall Street's elite firms appear on some of the questionable transactions that are now under congressional scrutiny. And the world of professional-services firms -- a world to which most high-flying MBAs readily aspire -- is suddenly under intense review.
In that world, David Maister is the recognized expert. For more than 20 years, he has been studying professional-services firms. He has written about them, spoken to them, and consulted for them. A native of Great Britain, Maister holds degrees from the University of Birmingham, the London School of Economics, and the Harvard Business School. He taught at HBS for seven years before striking out on his own. His books ( all published by the Free Press ) include Managing the Professional Services Firm ( 1993 ), The Trusted Advisor ( 2000 ), Practice What You Preach: What Managers Must Do to Create a High-Achievement Culture ( 2001 ), and, most recently, First Among Equals ( 2002 ).
Fast Company sat down with Maister in his home in Boston to gain insight into the state of professional-services firms, their role in the current scandals, and the right way to be a professional.
What's your take on the business scandals that we're seeing today?
The car wreck that we're reading about in the newspapers was inevitable. It was going to happen, because professional-services firms don't practice what they preach. They're filled with smart people who understand what they should do to win. Those people talk about having a strategy with a longer-term view, but the operational reality is vastly different. They want the money right now. In practice, cash is everything.
That's how most professional-services firms operate. But are there fabulous accountants, lawyers, consultants, and investment bankers who do it right? Absolutely. What's missing are whole firms that are built on discipline and strategy. With one or two exceptions, cash is everything for a firm. It's also important to mention that the current scandals are not that special. They're special in size, but not in nature.
Is the problem with professional services due to a lapse in ethics?
The real problem is that people do what they're told. They're simply in compliance mode. What's even more interesting is that there's so much going on that's stupid. People are making the wrong calls on stuff that doesn't even come close to ethics. But that's just common practice. It's what happens inside firms, because that's how people have been raised in business. Before they even get to an ethical issue, they've been taught that if there's cash to be made, then make it. So it's not as if they were wonderful to begin with and then suddenly there was an ethical challenge and they lost their way. The message has always been that nothing trades off against cash.
Too many professional-services firms have never met a dollar they didn't like. The question that they need to ask themselves is, Do we believe in our own strategy and our own standards, even when we're tempted by cash? Good business is about having the guts to stick to a strategy. You can count on the fingers of a single maimed hand the number of professional-services firms that have the courage to stick to their strategy.
So what's wrong with the professional-services firms of today?
The problem is that they've been taught to act like businesses. But they've learned all the worst lessons of business and missed all the best ones. Tom Peters used to tell the story of McDonald's founder Ray Kroc. Someone asked Kroc what his secret of success was, and he answered, You have to be able to see the beauty in a hamburger bun. You might laugh at first, but when you think about it, that's got to be right.
What most professional-services firms don't understand is that to make the most money, you actually have to believe in the product or service that you offer and care for the customers or clients whom you serve. That isn't a religious argument; it's a business lesson. You can't dominate an industry unless you care passionately about what you do and the people you do it for.
Why don't these firms change?
Why don't they change? Let me give you an analogy from my own life. I am a fat smoker. I don't need another speech to tell me that I should stop smoking and lose weight. Clear lungs, a longer life, a better sex life -- I accept that it's a fabulous strategy. But please, no more speeches. Now, people in professional services have heard all the speeches before too: Give great customer service, be a team player, manage your people. It's not that they don't believe the strategy.
The problem is, whether it's me giving up smoking or them starting to give great customer service, any kind of improvement requires short-term sacrifice and short-term pain in the name of a better long-term future. There are very few businesses that are truly interested in maximizing their future income stream.
Professional-services firms need to have an ideology. They need to know what they stand for. They need to have nonnegotiable, minimum standards. They need to be able to say, We will not accept work that goes against our standards, because that's not who we are. The problem in professional services is that because the environment is so bountiful, you can get everything wrong and still have a nice income.
I'm not picking on any one profession. They're all equally bad. They treat people poorly. They don't train well. They have no quality assurance. They don't collaborate with one another. They don't show any interest in their clients. You would think that this would kill them. But they're only competing against each other. So as long as nobody wakes up, they can all make money doing this shit. Why are there so many bad professional-services firms out there? For the same reason that there are so many fat smokers.
But don't most firms know that they're not measuring up?
Here's a little quiz that I've been giving professional-services audiences for the past seven years. First I give them three categories to classify how they feel about their work. Category one is, "I love this stuff! I just love doing it." Category two is, "I can tolerate it, but that's why they call it work. I do my job, but I have no emotional investment in it." Category three is, "How the hell did I end up doing this junk?"
The results are always the same in all professions around the world. You get about 20% who say, "I love this work"; 60% to 70% who say, "I can tolerate it"; and 10% to 20% who say that what they do is junk.
Then I give them a second question. I say, "You've told me about your work. Now tell me how you feel about your clients." Again, I give them three categories to classify how they feel. Category one is, "I really like these people. I enjoy serving them." Category two is, "I can tolerate them. I'm responsible and I give good service, but there is no real difference between today's client and tomorrow's client." Category three is, "These people are idiots who work in a boring industry."
The results for the second question are pretty much the same as for the first. About 20% love their customers, 60% to 70% can tolerate them, and 10% to 20% can't stand them.
What the numbers say is that most professionals like their jobs one day a week or less, and the rest of the time, they just tolerate what they do. Then I ask them, "Do you think your clients can tell?" To which everybody says, "Yes!" Well, what are the business implications of that? For most professional-services firms, the answer lies in their mission statement: We won't screw up, but we're nothing special.
I tell them, If that were me, I'd slit my wrists! That's true for one very simple reason: I don't want my tombstone to read, "He did tolerable stuff for tolerable people because they paid him." I'm not that much of a whore. Do I do it occasionally? Sure. I'm no more noble than anyone else. But that's not the issue. The issue is, Is that your life? Why would you want to spend your life doing stuff that you can just tolerate, working for people you don't like? Especially when you realize that you can make more money doing work that engages your passions. The only sensible business rule is, Life is too short to work for idiots. So if you're working with people who are shady or crooked, get out!
Alan M. Webber ( awebber@fastcompany.com ) is a Fast Company founding editor. Visit David Maister on the Web ( www.davidmaister.com ).