The Consultant's Role

Early in my career, the management team of a large professional firm asked my opinion about how they were conducting their affairs. I responded with a very honest, direct and candid answer -- "Here are the things you are messing up, and this is what you should have been doing!" To my surprise, I was fired for being a disruptive influence. This was hard to understand, since I knew (and I knew that they knew) that I was correct in my diagnosis and prescriptions.

Eventually, I learned the obvious lesson. It is not enough for a consultant to be right: An advisor's job is to be helpful. I had to "earn" the right to be critical. Critiquing one's clients is, by definition, a part of every consultant's job, since suggestions on how to improve things always imply that all is not being done well at the moment. We must not only be smart, we must be diplomatic, sensitive and gentle -- and behave in such a way that we are trusted!

Many consultants approach the task of giving advice as if it were an objective, rational exercise based on their technical knowledge and expertise. However, consulting is almost never an exclusively logical process. Rather, it is almost always an emotional "duet" played between the consultant and the client. If you can't learn to recognise, deal with and respond to client emotions (and client politics), you will never be an effective consultant.

To see how the success of your career depends on these things, consider your own purchases of professional services. Whether you are hiring someone to look after your legal affairs, your taxes, your child or your car, the act of retaining a professional requires you to put your affairs in someone else's hands. You are forced into an act of faith, and you can only hope that the person you choose will deal with you appropriately. When the final decision on whom to hire comes, you must ultimately decide to trust someone with your "baby," which is never a comfortable thing to do.

Here are some other common emotions you and your clients might feel when selecting and working with an outside advisor:

1. I'm feeling insecure. I'm not sure I know how to tell which of the finalists is the genius and which is just good. I've exhausted my abilities to make technical distinctions.
2. I'm feeling threatened. This is my area of responsibility, and even though intellectually I know I need outside expertise, emotionally it's not comfortable to put my affairs in the hands of others.
3. I'm taking a personal risk. By putting my affairs in the hands of someone else, I risk losing control.
4. I'm impatient. I didn't call in someone at the first sign of symptoms (or opportunity). I've been thinking about this for a while.
5. I'm worried. By the very fact that they are suggesting improvements or changes, these people going to be implying that I haven't been doing it right up till now. Are these people going to be on my side?
6. I'm exposed. Whoever I hire, I'm going to have to reveal some proprietary secrets, not all of which are flattering.
7. I'm feeling ignorant, and don't like the feeling. I don't know if I've got a simple problem or a complex one. I'm not sure I can trust them to be honest about that: it's in their interest to convince me that it's complex.
8. I'm sceptical. I've been burned before by these kinds of people. You get a lot of promises. How do I know whose promise I should buy?
9. I'm concerned that they either can't or won't take the time to understand what makes my situation special. They'll try to sell me what they've got rather than what I need.
10. I'm suspicious. Will they be those typical consultants who are hard to get hold of, who are patronising, who leave you out of the loop, who befuddle you with jargon, who don't explain what they're doing or why, who ..., who ..., who ...? In short, will these people deal with me in the way I want to be dealt with?

What all this shows is that when retaining and working with a consultant, what you (and your clients) want is someone who understands your interests, and will not put their interests ahead of yours while working for you. You want someone you can trust to do the right thing. You want someone who will care.

Have you ever had a trusted advisor? Someone you turned to in order to help you solve your problems? What made them so helpful to you? Here is a listing of traits that great trusted advisors have in common. They

1. Seem to understand us, effortlessly, and like us
2. Are consistent: we can depend on them
3. Always help us see things from fresh perspectives
4. Don't try to force things on us
5. Help us think things through (but make sure that it's our decision)
6. Don't substitute their judgment for ours
7. Don't panic or get over-emotional; they stay calm
8. Help us think and separate our logic from our emotions
9. Criticise and correct us gently and lovingly
10. Don't pull their punches: we can rely on them to tell us the truth
11. Are in it for the long haul (the relationship is more important than the current issue)
12. Give us reasoning (to help us think), not just their conclusions
13. Give us options, increase our understanding of those options, give us their recommendation and let us choose
14. Challenge our assumptions and help us uncover the false assumptions we've been working under
15. Make us feel comfortable and casual personally (but take the issues seriously)
16. Act like a person, not someone in a role
17. Are reliably on our side, and always seem to have our interests at heart
18. Remember everything we ever said (without notes)
19. Are always honourable: they don't gossip about others, so we can trust their values
20. Help us put our issues in context, often through the use of metaphors, stories and anecdotes (few problems are completely unique)
21. Have a sense of humour to diffuse (our) tension in tough situations
22. Are smart (sometimes in ways we're not)

What is significant about this list is that it is only in small part about intellectual skills. Equally critical are the items we are rarely taught: social skills, interpersonal skills and, above all, emotional skills. All are critical to being a successful consultant.

Focus on the other Person

There is an old saying from Dale Carnegie (How to Win Friends and Influence People): "You'll have more fun and success when you stop trying to get what you want and start helping other people get what they want."

For some this sounds like an idealistic spiritual or religious principle. Others may think of it as communism: a cry to place others before yourself. However, a moment's reflection will reveal that the aphorism is the very definition of what a capitalist exchange economy is about. To get what you want from someone, you must first focus on giving them what they want!

This is harder than it looks. In the midst of a conversation with a client, we are likely to find ourselves thinking things like "How will I solve this problem?" "How will I get the client to buy this idea?" "What am I going to say when the client finishes talking?" "How can I appear expert?" We're not thinking about them. We're thinking about our reactions to them. We're thinking about ourselves.

If we strip down all these distractions to their core, we are likely to find fear: fear of embarrassment, of failure, of appearing ignorant or incompetent, or fear of loss of reputation or security. Ironically, the professions attract people who are prone to these fears.

More often than not, we consultants are high achievers who have consistently overcome our fears through constant application of skill and hard work in the pursuit of technical mastery. And, up to a point, these things are rewarded. In the early levels of consulting life, we are often asked to focus on little else.

Then comes that crucial career transition from technician to full professional, from content expert to advisor. As technicians, our task is to provide information, analyses, research, content and even recommendations. All of these are basically tasks performed out of the clients' presence. In contrast, our task as advisors is an "in-person" and "in-contact" challenge to help the client see things anew or to make a decision. This requires a complete change of skills and mindset.

It can be unsettling to find that the client is primarily interested in having his or her problem understood, in all its emotional and political complexity, as a pre-condition to having the problem diagnosed and solved. Some of us never make it over this hurdle. The key to prior career success (technical excellence) can actually become an impediment at this level.

The types of people who typically succeed in consultant service firms are driven, rational and meritocratic, with a high need to achieve. It is the natural thing for such people to stay focused on their own individual performance (something that is reinforced by many firm cultures) and to look for confirmation that what they are doing is all right. This is not a situation conducive to building skills in developing trust. It is in some sense a wonder that so many do so well.

Another prime obstacle to focusing successfully on the other person is the apparently common belief that mastery of technical content is sufficient to serve clients well. It is ironic that a business in which the serving of clients depends so heavily on interpersonal psychology should be peopled with those who believe in the exclusive power of technical mastery.

The professions are havens of rationality for those less comfortable with a more direct, emotional approach to life. Good social skills and an excellent mind, in the professions, can generally compensate for a very large degree of emotional avoidance. Combined with an ethos that worships the mind, it is not surprising that some advisors feel that working on consulting skills such as intimacy is risky and uncomfortable.

An Example

I once had to hire a lawyer to probate a relative's will. The first few lawyers I spoke with tried to win my business by telling me when their firm was founded (really!), how many offices they had and how much they would charge. None of this inspired much confidence. In fact, the more they talked about themselves and their firms, the less interested they appeared to be in me and my problems.

Finally I encountered a lawyer who, in the initial phone call, asked how much I knew about probating a will. My reply was "Nothing!" The lawyer then offered to fax to me a comprehensive outline of the steps involved, what I needed to rush to do and what I should forget about for a while because it was not urgent. The fax also provided the phone numbers of all the governmental bodies I needed to notify, even though this had nothing to do with the legal work (or the lawyer's fees).

All of this (immensely helpful) information was provided freely (and for free) before the lawyer had been retained. Naturally, he got the business. He had built confidence by demonstrating that he knew what information was most relevant to me, even though some of it had nothing to do with the practice of estate law. He had earned trust by being generous with his knowledge and by proving that he was willing to earn the potential client's business. He wasn't focused on himself: he was focused on me, and it was irresistible!

Professional or Prostitute?

Whenever a consultant is trying to sell something, there is only one question on the client's mind: "Why are you trying to sell me something?" There are two possible conclusions the client could come to. First, he or she might believe that the consultant is trying to sell something just to get more revenue. Or the client might believe that the consultant is trying to sell something because he or she is interested in the client, truly cares and is sincerely trying to help.

Under what conditions is the sale made? It should be clear that new business will be won only to the extent that the client believes that the consultant is interested, cares and is trying to help. The noble path wins. One could argue that the consultant's task is to make the client think that the consultant cares, meaning that consultants must learn how to fake sincerity. (Indeed, many sales training courses are filled with such tips and tactics.) However, faking sincerity is a prostitute's tactic, not a professional's. It may work occasionally, but not as often as real sincerity.

Is this moral counsel or business advice? Either way, the conclusion is the same. You will get hired, rehired, obtain referrals and have lessened fee sensitivity to the extent that you care passionately, both about your work and your clients. Believe passionately in what you do, and never knowingly compromise your standards and values. Act like a true professional, aiming for true excellence, and the money will follow. Act like a prostitute, with an attitude of "I'll do it for the money, but don't expect me to care," and you'll lose the premium that excellence earns. True professionalism wins!

How Much Do You Care?

Very few consultants become known by their clients as "great" purely as a result of their intellectual or technical abilities. The opposite of the word "professional" is not "unprofessional" -- the opposite of professional is "technician." Professionalism is predominantly an attitude, not a set of competencies. A real professional is a technician who cares. (You may recall the old slogan, "People don't care how much you know until they know how much you care.")

One of my favourite discussion questions is to ask people, "Why do you do what you do?" Too many consultants don't do what they do because they want to help their clients: they're in it only for the money or the personal prestige. Such consultants may become good -- and even earn good incomes -- but they will never be considered great. The reason is simple: the clients can tell! (If you're not sure you believe this, draw on your own experiences as a buyer. Can you tell if your doctor really cares, showing an interest in you as an individual? Does it matter to you? Can you tell if your accountant is just sticking to the technical tasks or is thinking ahead on your behalf? Does it matter? Does it affect your buying behaviour?)

Being a professional is neither about making money nor about your professional fulfillment. Both of these are consequences of an unqualified dedication to excellence in serving clients and their needs.

Perhaps it is time for our schools and our consultant firms to stop teaching students that they are the best and the brightest, the special elite in the noblest profession of all (whatever that profession happens to be). Maybe schools and firms should find ways to teach more about what it is to serve a client, and about how to work with people (not just business problems). When I talk with business school alumni about their careers and what they would do differently, the most common reply is "I wish I had paid more attention to the courses about dealing with people."

Consulting success requires more than talent. Among other things, it requires drive, initiative, commitment, involvement and, above all, enthusiasm. Yet these things are often missing from consultants' lives. Consider the following quiz.

Think back on all the work you have done in the past year or so, and divide it into one of three categories. The first category is "God, I love this! This is why I do what I do!" The second category is "It's O.K., I can tolerate it -- it's what I do for a living." The last category is "I hate this part -- I wish I could get rid of this junk!" Before reading on, estimate your answers to this question.

Figured it out? Then let me report the results of putting this question to top consultants in prestige firms around the world. The typical answers I am given are 20 to 25 percent for "God, I love this!"; 60 to 70 percent for "I can tolerate it"; and 5 to 20 percent for "I hate this part." In other words, the typical consultant in a top firm is (I am told) positively enjoying his or her work about one day a week.

Now, a second question: Think about all the clients you have served in the past year and, again, divide them into one of three categories. Category one is "I like these people and their industry fascinates me." (Yes, I know, I'm combining two things.) Category two is "I can tolerate these people and their business is O.K. -- neither fascinating nor boring." Category three is "I'm professional enough that I would never say this to them, and I'll still do my best for them, but the truth is these are not my kind of people and I have no interest in their industry."

Ready to compare results? Typical answers from top consultants around the world are 30 to 35 percent for "I like these people," 50 to 60 percent for "I can tolerate them," and 15 to 20 percent for "I really don't care for them." (I must stress that these are not my opinions about professional life, but what individuals in top-drawer firms tell me about their work lives.)

These estimates provide the single biggest reason to re-introduce some energy into your professional life and into the process of client development. Why spend the majority of your professional life working on tolerable stuff for acceptable clients when, with some effort in (for example) client relations, marketing and selling, you can spend your days working on exciting things for interesting people? Do you really want to have your tombstone say "He (or she) spent his life doing tolerable stuff for people he could tolerate, because they paid him?"

A consultant should build the skills involved in practice development (generating business) for one main reason: the better you are at getting hired, the better your chances of working on fun stuff for people you can care about and the less you will be forced to take on work and clients you don't truly enjoy. You won't be forced to take on clients simply because you need the money.

As my probate lawyer, described above, illustrated, getting hired has no magic to it. If you really are interested in a client, and can clearly demonstrate both your ability and willingness to help them, you can earn their trust. The biggest trouble for many consultants is that they haven't taken the time to figure out who they do like. You don't have to like every client -- indeed, that's the whole point, you can't. You need to figure it out. Now!

When one reviews who is successful (and happy) among consultants, it quickly emerges that it has nothing to do with IQ, where they went to school, or what training they received. Those who succeed are those who can sustain the magic and excitement they felt when they were first setting out to build a career and were willing to work to make it happen. All it takes to find the fun is a little energy, excitement, ambition, drive, enthusiasm -- and passion! However, so scarce are these characteristics today they have turned out to be the dominant competitive advantage for both individual consultants and firms.

The good news is that professionalism and marketing are not in conflict with each other at all: They are the same thing. Both are defined by a dedication to being of service and helping people.

Building Business Relationships

In our ordinary lives, when we want to build a strong relationship we try to be understanding, thoughtful, considerate, sensitive to feelings and supportive. All of these adjectives apply equally well to what is needed to build a strong business relationship.

To earn a relationship, you must go first. The client must visibly perceive that you are willing to be the first to make an investment in the relationship in order to earn and deserve it. You want to get hired by someone someday? Find a way to be helpful to them now. Even if it's only a small gesture, give something.

Small gestures can count as much as big ones, as long as they don't become too rote. Take the issue of proving or demonstrating that you care about the relationship and value it. On a random day, of no particular significance, call your client and say, "I've been thinking about you, and ran across some information that made me start thinking, and I have an idea for you. I don't think it involves us, I just wanted to contribute the idea to you."

What are you demonstrating by this action? That you care; that you're thinking about the client in the client's terms, not yours; that you are a source of ideas (some good, some not so good); and that you are someone they will want to stay in touch with. Not a bad set of outcomes for such a simple action.

To make anyone believe something about you, you must demonstrate, not assert. For example, your questions can reveal that you have done your homework: "I know by the research we've done on your firm that you merged with [another company] nine years ago to become third largest in the world. What I would like to learn more about is how you cope with the integration challenges of employees from so many cultures and backgrounds."

Such questions give evidence that you are thorough, that you respect the client's time enough to be prepared and that you are ready to get right to the issues.

At the core of building a relationship with someone is convincing them that you are dealing with them as a human being, not as a member of a group or class or subset. Accordingly, as you listen to a client talk, the question on your mind should be "What makes this person different from any other client I've served? What does that mean for what I should say and how I should behave?"

Unfortunately, this is hard work. The natural tendency of most of us is to do the exact opposite: we listen for the things we recognise and have met before, so that we can draw upon past experience to use the words, approaches and tools that we already know well. It's the way most of us work, but it doesn't always serve us well.

Before you can help someone, you need to understand what's on their mind. You must create situations where they will tell you more about their issues, concerns and needs.

What Role Are You Playing?

Also essential to being an effective consultant is having a good understanding of your role. This is illustrated by a friend of ours, who once said, "Sometimes I feel like I'm explaining things to a child. My client can't seem to grasp even the basic logic of what I'm trying to convey. I feel like saying 'Shut up; just accept what I'm telling you! I'm the expert here!' "

What makes this friend's comments so understandable is that, in many advisory relationships, the client may be untrained in the consultant's specialty, while the consultant may have seen the client's problem (or variants of it) many times before. There is for that reason an almost constant threat of coming across to the client as patronising, pompous and arrogant.

It is understandable why advisors can feel this way, and it is equally clear why clients resent it. After all, when I'm the client, I'm the one in charge. If I don't understand what you are saying, then maybe the problem is you, not me. Maybe you don't know how to convey what you know and understand to a lay-person. Of course I don't know your field; that's why I hired you! Explain it to me in language I can understand. Help me get it! Your job is not just to assert conclusions, but to help me understand why your recommended course of action makes sense. Give me reasons, not just instructions!

Excellence in advice-giving requires not only the right attitude but also a careful attention to language. There are always a number of ways of expressing the same thought, each of which differs in how it is received by the listener. Saying "You've got to do X," even when correct, is very likely to evoke emotional resistance. No one likes to be told that they must do anything (even when they do).

It is usually better to say something like "Let's go through the options together. These are the ones I see. Can you think of anything else that we should consider? Now let's go through the pros and cons of each course of action. Based on those pros and cons, action X seems the most likely to work, doesn't it? Or can you think of a better solution?"

If the client doesn't want to do X, the conversation is still alive. If you've said, "You've got to do X" and the client says "No, I don't," you've nowhere to go. Your effectiveness as an advisor has just been lost, and you have placed yourself and the client on opposite sides. The odds are that what will follow will be an argument, not a discussion.

In many ways consulting skills are similar to those of great teaching. A teacher's task is to help a student get from point A (what they know, understand and believe now) to point B (an advanced state of deeper understanding and knowledge). It is poor teaching for the professor to stand at the front of the class and say, "B is the right answer!" (As the old joke says, a lecture is the fastest means known for getting ideas from the notes of the teacher into the notes of the student without passing through the minds of either.)

A teacher needs two skills to be really effective. First, the teacher must have a good understanding of point A: Where is the student (or client) starting from? What does he or she understand now? What do they believe and why do they believe it? For what messages are they ready? What are they doing now and why are they doing it that way?

The second required skill is to develop a step-by-step reasoning process that takes the student/client on a journey of discovery. The goal here is to influence the student/client's understanding so that, eventually, the student/client says, "You know, on reflection, I think B is a better answer," to which the teacher/advisor can respond, "OK, that's what we'll do!"

Among other things, effective advice-giving requires an ability to suppress one's own ego and emotional needs. It is immensely tempting once a client describes an issue to jump in, even before the client has finished talking, and say, "Oh, I know the answer to that one, that's easy!" There is no surer way to give offence than to be too over-eager to show off one's expertise!

Do You Have the Courage?

The single biggest barrier to success in consulting is courage. Many consultants (and consulting firms) lack the guts to stick with the plans and goals they have set for themselves.

I first learned this lesson some time ago, when I set for myself the goal of trying to become a strategic advisor to international professional firms. Shortly thereafter a firm asked me to accept a project conducting sales and marketing training courses for their people.

The assignment was very attractive: a large volume of familiar, comfortable, enjoyable work that would provide a significant portion of my revenue target for the year. However, it was obvious that spending most of my year doing sales skills training would do nothing to help me achieve my strategic goal. Rather than becoming a strategic advisor, I would, by the end of that year, be a sales trainer.

Taking the expedient path would not have been immoral, but it would have meant that I would not have obtained the benefits of my declared strategy. Obviously, resisting the expedient path is hard. You have to really bet on yourself and believe your own vision. You have to have the courage of your own convictions. Believing in the benefits of your goals is one thing; living by the diets that are necessary to achieve those goals is another.

So which did I want? Easy cash (and it was a lot) or an ambitious strategy that would require hard work to create? Did I want a comfortable, well-paid year or one where I had to accept the burden of generating an equivalent number of days of "real" work that would move me toward my strategic goal as well as generate income? I decided to stick with my strategy and pass on the "easy money" opportunity. I arranged for a friend to look after my client, and worked hard (and successfully) to bring in the kind of work that was "on strategy."

All strategies at some time or another involve a trade-off between short-term cash (doing what's expedient) and executing the strategy (living the vision of excellence you have set for yourself). If you're going to pursue a strategy, you must be willing to make hard choices and act as if you truly believe in your own strategy. In short, having a strategy takes courage.

Business life is filled with daily temptations, short-term expediencies and wonderful excuses why we can't afford to execute our strategy today. Accordingly, that new article never gets written, work is delegated only when it must be (not when it can be), the junior staff remains only "adequately" supervised and the marketing principle is, "We never met a dollar of revenue we didn't like!"

The importance of courage is not meant to be an inspirational point, but simple logic. In business and professional life, you reap the benefits of what you actually do, not what you hope to get around to doing some day if it is convenient and you're not too busy. If you want to be known as excellent at something, then you have to be reliably, consistently excellent at that thing.

If you don't feel passionate about it, if you can't care, don't become a consultant!

The Anatomy of a Consulting Firm

The structure and management of consulting firms is driven primarily by two key factors: the degree of customisation in the firm's work activities and the extent of face-to-face interaction with the client. Both of these characteristics (customisation and client contact) imply that the value of the firm is often embedded less in the properties of the firm and more in the specific talents of highly skilled individuals. The consulting firm must therefore compete actively in two markets simultaneously: the "output" market for its services, and the "input" market for its productive resources, the professional workforce. It is the need to balance the often conflicting demands and constraints imposed by these two markets that creates the special challenge of structuring and managing the consulting firm.

Leverage Structure

The consulting firm may be viewed as the modern embodiment of the medieval craftsman's shop, with its apprentices, journeymen and master craftsmen. The early years of an individual's association with a consulting firm are, indeed, usually viewed as an apprenticeship, and the relation between juniors and seniors is the same: the senior craftsmen repay the hard work and assistance of the juniors by teaching them their craft.

Every consulting project (and hence every consulting firm) has its own appropriate mix of three kinds of people. By tradition, these are called "finders, minders and grinders." This refers to the three main activities that make up consulting work. Finders (usually the most senior level) are responsible for bringing in the business, scoping and designing the projects, and engaging in the high-level client relations necessary during the work. The main responsibility of minders is to manage the projects and the team of people working on it. Grinders (the lowest level) perform the analytical tasks. Naturally, this is an idealised structure and, depending on the firm, all may participate in analysis and/or junior people may be delegated tasks associated in the ideal model with higher levels.

The required shape of the organisation (the relative mix of juniors, middle-level staff and seniors) is usually described as its leverage structure, and is primarily determined by the (aggregate) skill requirements of its work: the mix of senior-level, middle-level and junior-level tasks involved in the projects that the firm undertakes.

Getting the leverage structure right is key to the consulting firm's success. If a firm brings in a mix of client work that requires more juniors, and fewer seniors, than the firm has in place, higher-priced people will end up performing lower-value tasks (probably at lower fees), and there will be an underutilisation of senior personnel. The firm will make less money than it should be making. The opposite problem is no less real. If a firm brings in work that has skill requirements of a higher percentage of seniors and a lesser percentage of juniors, the consequences will be (at least) equally adverse: a shortfall of qualified staff to perform the tasks and a consequent quality risk. Matching the skills required by the work to the skills available in the firm (i.e., managing the leverage structure) is central to keeping the firm in balance.

Leverage and the People Marketplace

The connection between a firm's leverage structure and the people marketplace can be captured in a single sentence: people do not join consulting for jobs but for careers. They have strong expectations of progressing through the organisation, from grinder to minder to finder, at some pace agreed to (explicitly or implicitly) in advance.

While the pace of progress may not be a rigid one ("up or out in x years"), both the individual and the organisation usually share strong expectations about what constitutes a reasonable period of time for each stage of the career path. Individuals who are not promoted within this period will seek greener pastures elsewhere, either by their own choice or career ambitions or at the strong suggestion of the firm.

Few firms offer career positions at the middle-level or junior ranks. Partnership or ownership is usually restricted to those who attain the highest levels. In recent years, however, which have seen a people shortage or "war for talent," some firms have experimented with offering profit sharing, stock options or other financial incentives to allow those who are not at the highest levels to share in the firm's overall success. This has not removed the expectation that most staff will continue to strive for promotion to the highest levels.

This promotion system serves an essential screening function for the firm. Not all young professionals hired will develop the project management and client relations skills required at the higher levels. While good initial recruiting procedures may serve to reduce the degree of screening required, they can rarely eliminate the need for the promotion process to serve this important function. The existence of a "risk of not making it" also serves the firm in that it puts a degree of pressure on junior personnel to work hard and succeed.

The promotion incentive is directly influenced by two key dimensions: the normal amount of time spent at each level before being considered for promotion and the "odds of making it" (the proportion of juniors promoted.) For any given rate of growth, a highly leveraged firm (one with a high ratio of juniors to seniors) will offer a lower probability of making it to the top, since there are many juniors seeking to rise and relatively few senior slots opening up. A less leveraged firm at the same rate of growth will need to bring along a higher percentage of its juniors, thus providing a greater promotion incentive.

Leverage and Profitability

A consulting firm's leverage is also central to its economics. The rewards of partnership or ownership (the high levels of compensation attained by vice presidents or senior partners) come only in part from the high hourly (or daily) rates that the top professionals can charge for their own time. A significant portion of profits derives from the surplus generated from hiring staff at a given salary and billing them out at multiples of that salary. By leveraging its high-cost seniors with low-cost juniors, the professional firm can lower its effective hourly rate and thus reduce its cost to clients while simultaneously generating additional profit for the partners.

The market for the firm's services will determine the fees it can command for a given project; its costs will be determined by the firm's ability to deliver the service with a cost-effective mix of junior, manager and senior time. If the firm can find a way to deliver its services at the same quality with a higher proportion of juniors to seniors, it will be able to achieve lower service-delivery costs. (Note that this is true whether the firm bills by the hour or on a fixed-fee basis.) The project team structure of the firm is therefore an important component of firm profitability.

The Client Marketplace

Degrees of client contact and customisation vary from to firm, or even practice area to practice area. Some differences between types of practice are shown in Figure 1. This defines four kinds of professional practice, which for the purposes of example we'll call Pharmacist, Nurse, Brain Surgeon and Psychotherapist.

The Pharmacist

A Pharmacy practice is one where the client is trying to buy a relatively familiar service and does not require very much counseling, consultation or contact. The client wants the service performed to strict technical standards at a minimal cost. Notice that this type of practice is defined as a standardised process conducted with little, if any, client contact.

This does not mean that the result cannot be highly customised, merely that the process to be followed in producing the result is well specified. While this type of work is common in systems installation and other IT firms, it can also be found in high-end strategy firms, where component analyses of cost structures, market shares, competitive positioning and many other studies, as valuable as they can be, have been highly proceduralised and can be conducted with thoroughness and accuracy by junior staff. The method of conducting these analyses does not vary from job to job.

Quality standards, in the sense of "conformance to specifications," must be high for this work, since the client will be "swallowing the pills." However, the client does not require that the pill be specifically designed for him or her. The client wants to buy well-established methodologies and procedures, not innovation and creativity.

The client is in effect saying, "I have a headache, and I know that you, along with many others, are licensed to dispense aspirin. Don't waste your time and mine trying to convince me that it's brain surgery that I need. I've done this before, and I can tell for myself the difference between the need for aspirin and for brain surgery. I want aspirin! What's your best price?"

The Nurse

The Nursing practice also delivers relatively familiar (or "mature") services that do not require high levels of innovation. However, it differs from the Pharmacist practice in that the emphasis is not only on the ability to dispense the pill (which still may be required), but also on the ability to counsel and guide the client through the process. This time, the client wants to be nurtured and nursed: "Help me understand what's going on; explain to me what you're doing and why; involve me in the decision making; help me understand my options. Be with me and interact with me throughout the process until this is all over. I need a front-room advisor, not a back-room technician." (The nursing practice can be distinguished from the pharmacy practice by the proportion of total project time that is spent in contact with the client.) Practices that work in this area are those where the consultant's approach to is to help the client (and the client's organisation) arrive at its own decisions and conclusions, rather than performing independent studies and presenting the consultant's recommendations. This requires interpersonal and consultation skills in addition to analytical skills.

The Brain Surgeon

The Brain Surgeon combines high levels of customisation, creativity and innovation with a low degree of client interaction. The client is searching for a practitioner who is at the leading edge of his or her discipline, and who can bring innovative thinking to bear on a unique assignment. Here, the client says, "I have a bet-your-company problem. Save me! I don't want to know the details, just find the right answer! If I wake up in the morning, I'll pay your outrageous bill! I'm not shopping on price, I'm trying to find the most creative or technically superior provider I can." Consulting firms positioned here tend to be regarded as leading thinkers, and tackle unique, one-of-a-kind problems in the areas of strategy, technology or organisation.

The Psychotherapist (or Family Doctor)

Finally, the Psychotherapist (or Family Doctor) practice is one where the client says, "Again I have a bet-your-company problem. This time, I don't want you to give me the anesthetic and leave me out of the process. I want to be intimately involved in the problem-solving process. What I'm really trying to buy is someone who can sit down with me, help me understand why my company is falling apart, how I should differentiate between a symptom and a cause, what I must deal with and what I can afford to postpone. Sit down with me and my executive team and help us understand our problem and our options."

As with the Brain Surgeon, the emphasis for the Psychotherapist is as much about creative diagnosis as it is about execution. When buying the services of a Nurse or Pharmacist, clients know what they want done: they are hiring someone to execute it. But with Brain Surgeons and Psychotherapists, the clients are seeking help determining what needs to be done as well as how to do it.

Psychotherapy practitioners can be found in most high-end consulting firms, since many client projects contain an initial diagnostic component. Except for solo practitioners and other small firms, few consulting firms spend all their billable hours in this activity.

Differences Between Practices

There is a market for all four of these kinds of providers, and they all represent "honorable" ways of being of value to clients. However, the four services described represent four profoundly different businesses. Virtually everything, from marketing to hiring, managerial styles to economics, key skills to career paths and performance appraisal criteria, varies significantly depending upon which service the firm is trying to provide.

Consider, for example, how each of these providers makes money. The Pharmacist is in a fee-sensitive business where the key to economic success lies in finding ways to dispense the "aspirin" at a very low cost (without compromising quality). This means getting the work done with a minimum of high-priced senior professional time and extensive use of either low-cost (junior) time or time-saving tools such as methodologies, systems, templates and procedures. The Pharmacist is in a low-fee, high-leverage business.

The Nurse also needs to have well-established procedures, methodologies and tools, but if the Nurse has superior counseling skills, then he or she can command higher fees than the Pharmacist. Since the client is buying a relationship with a "primary care provider," he or she will be less inclined to shop on price and more likely to pay a premium for an advisor they can work well with and trust.

However, since much of the work is likely to involve client contact, there is probably a little less chance to leverage (by using low-priced junior professionals) for the "front-room" portion of the work. The Nurse thus makes money by charging higher fees than the Pharmacist, but probably employs lower leverage.

The Brain Surgeon is paid for innovation, creativity and frontier technical skills. Accordingly, the Brain Surgeon has even less ability to get projects done by leveraging junior resources or established methodologies. Instead, the Brain Surgeon firm makes money if (and only if) it is truly recognised by the market as being a leading-edge practitioner that justifies premium fees. Brain Surgeons make money through high fees and low to modest leverage.

The Psychotherapist (or Family Doctor) has the most unleveraged business of all. Since most of the work is face-to-face counseling at the highest level of the client organisation, little use can be made of junior staff (except for background analytical work in support of the Psychotherapist's efforts).

The Psychotherapist makes money in one of two ways: Either high fees are charged or a diagnosis results in work that can be referred to other parts of the "hospital." In other words, the Psychotherapist may not be very profitable on a stand-alone basis, but makes money by being a "relationship manager" and generating work for others.

The Need to Focus

The categorisation scheme used here does not define whole disciplines, but rather different market segments. For example, some clients for a service like market research may (historically) seek out a Pharmacist (the work, in their view, being mostly programmatic and performed with little need for ongoing client contact). However, other market research clients may want pioneering work and require (and request) extensive diagnosis, and also want a great deal of ongoing client interaction. They may seek a provider with demonstrated Nursing or Psychotherapy skills and methodologies. Which box a firm is in is determined less by the profession it practices than by the market segments it is trying to serve.

And therein lies the problem! Suppose that you are a highly skilled tax practitioner who handles complex, frontier tax problems through creative, innovative thinking (i.e., you are a Brain Surgeon). A client comes along who wants to get their basic tax forms completed to ensure compliance with all tax laws. Since this is your client, it's a tax problem and you're a tax provider, it is tempting to conclude that you're the perfect person to help the client.

Wrong! As a Brain Surgeon, you are probably high-priced, and your key talent is creativity and complex problem solving. Completing tax forms and ensuring compliance is a Pharmacy job; it is not work for a Brain Surgeon. A Brain Surgeon may have the tendency to treat all problems as if they required Brain Surgery: The client says, "I'd like to buy some aspirin," and the Brain Surgeon replies, "Sure! But first, get on the operating table so we can investigate and find out whether it's aspirin you really need!"

(Of course, the opposite problem is equally unacceptable. If a client says "I have a unique bet-your-company problem," it is not very sensible to respond by saying, "Let us show you our established methodology based on years of solving identical problems!")

Even if you as a Brain Surgeon recognise the need to treat a problem as an "aspirin" job, it would still be a misallocation of resources for you to do it, since low-cost, methodology-driven activities are not the Brain Surgeon's key talents. In fact, everyone will lose if you, a Brain Surgeon, do it yourself: The client will not get low cost, you will be underutilising your talents (and will probably find the work dull) and your junior staff will be denied the opportunity to perform work that, while old hat for you, might be interesting and skill building for them.

What this analysis points out is that while it may be acceptable for a firm to be a "full-service hospital" with capabilities to meet a broad range of client needs, it is not acceptable for individual professionals to try to do so. It is highly unlikely that any one individual will excel simultaneously at all the virtues of efficiency, creativity, counselling and diagnosis.

While Brain Surgery is the traditional self-image of many professions, the harsh reality is that Brain Surgeon needs probably represent a very small percentage of the total fees paid in any profession. It is also true in "real" health care, where surgeons may be the most glamorous providers but represent only a tiny fraction of the health care needs of society.

Ownership and Governance

Among the many things that are affected by the market positioning (i.e., mix of services) of the firm are ownership and governance. The traditional model in consulting has been a privately held partnership, with all significant decisions being made after extensive consultation with the senior group. This model matches well with a Brain Surgery or Psychotherapy practice, which requires significant power and autonomy to be left in the hands of the senior practitioners. A related, but different, part of the partnership tradition is that senior people are rewarded by the income they derive during their time at the firm, and not from the increase in the value of the firm itself. (Many firms transfer their ownership between generations through an "in and out at book-value" system.) Ownership is restricted to those currently practicing within the firm.

However, recent years have seen the emergence of publicly held consulting firms. Theoretically, there is nothing in the corporate form or in public ownership that would prevent the preservation of a "partnership ethos," with decision making through extensive consultation and the retention of significant autonomy for senior practitioners. However, when a firm has gone public, the value of the shares (and hence the company) takes on a greater significance, and this inevitably affects the process of decision making. A greater emphasis is given to building the systems of the firm to embed value in the firm, not just in the individuals who belong to it, and this often leads to greater codification. It is easier to "own" a chain of pharmacies than a rambunctious group of brain surgeons and psychotherapists.

Structural Trends

Two trends suggest where the bulk of the market lies. First, clients are buying fewer services as if their problem is totally unique. They more frequently want to tap into a firm's accumulated experience and methodologies in order to benefit from the efficiencies that come from dealing with providers who have done it before. They are buying less brain surgery and more aspirin. (The widespread use of technology also has the effect of allowing complex analyses formerly performed by Brain Surgeons to be conducted by junior staff, thus reinforcing this trend.)

Second, clients are increasingly reluctant to say to their professionals, "You take care of things and report back when it is done." More and more, clients want to be involved in the process, or at a minimum be kept informed of their options, kept up-to-date on progress and assisted in understanding what is going on and why.

From these two trends, we can hypothesise that the bulk of the market is moving towards Nursing (established, proven procedures with high client contact) and away from Brain Surgery. As reflected by the amount of price competition in most professions, the Pharmacy also represents a high percentage of fees. While critical, the role of Psychotherapist is not a high-volume area. It is filled with those few individuals who have sufficiently earned their clients' trust and confidence so that, whenever the client has a problem, the Psychotherapist is called in to diagnose what is needed.

Most professional firms put new entry-level people to work in the Pharmacy first, so they can learn the key technical skills of their profession. As time progresses, people have historically moved in one of two directions, either following the technical career path to Brain Surgeon or the client contact career path to Nurse.

Psychotherapists have tended to evolve from the more creative Nurses, although not all Nurses can make the transition to being accepted as the client's prime diagnostician. While it is possible for Brain Surgeons to become Psychotherapists, it is rarer. Unless a professional learns the basic client contact skills early in his or her career, they are difficult to develop later.

This traditional approach to career development (often called "paying your dues") is increasingly under attack. Consider the Pharmacy service. Under the traditional career model, the aspirin is being dispensed by professionals temporarily working in the Pharmacy, serving their time until they are promoted to a higher-level service. This method of having the aspirin dispensed by "Brain Surgeons in training" is not entirely aligned with the clients' interests.

Unlike the Brain Surgeon firm, which can only afford to hire the best and brightest from the top schools, a focused Pharmacy practice would, appropriately, view these as the wrong people to bring in. Not only do they command higher salaries, but their superior intellect may be inappropriate for the service the Pharmacy is trying to provide. If a firm's business is making hamburgers, it will not want to hire people who are dreaming of the day they can leave and become Cordon Blue chefs. It will want and need people who are excited about hamburgers.

A focused Pharmacy practice should be able to hire people without a formal education in its specific area, since smart people can learn to apply well-defined methodologies and tools. Training and development should be structured and formal to ensure that new people can quickly learn to apply the firm's established methodologies. (This is exactly what is happening in some management consulting firms, which now hire people with degrees in such diverse fields such as anthropology and liberal arts.)

Employees in the Pharmacy are not promised a fast-track promotion and career path. In fact, there should be no traditional "up-or-out" policy. (This is one reason why the big accounting firms, increasingly realising that much of their business is Pharmacy, have recently moved away from such policies).

The Nursing practice requires capable people who are not only able to apply methodologies but who are able to work well with clients. One common approach is to hire individuals who have prior industry experience working in client environments in order to maximise the chance that these individuals can empathise with the client situation.

Guru Associates: A Numerical Example

Let's consider a numerical example (Figure 2) to see how the forces at work in a consulting firm inter-relate. Guru Associates, which engages in a variety of projects, nevertheless has a "typical" project that requires 50 percent of a senior's time, 100 percent of a middle-level person's time, and the full-time efforts of three juniors. In order for the firm to meet its economic goals, it requires that seniors and managers be engaged in billable work for 75 percent of their time, and juniors 90 percent.

Guru Associates currently has four seniors. If it is to meet its target of 75 percent billed senior time, its available senior time will be four multiplied by 75 percent, or the equivalent of three seniors working full-time. This implies six projects if the typical project requires 50 percent of a senior's time.

With six projects, the firm needs the equivalent of six full-time middle-level staff according to the project team structure. (Each project requires 100 percent of a middle-level person's time.) At 75 percent target utilisation (billed hours divided by available hours), this means that the firm must have eight middle-level staff (6 × 0.75). Similarly, at three juniors per project, the firm needs 18 full-time juniors (at 90 percent billability, that means 20 juniors).

Simple calculations such as these show that, with eight seniors, the firm would need 16 managers and 40 juniors. The proportions remain constant: one senior to every two managers and every five juniors. Unless there is a change in either the project team structure (e.g., the types of projects the firm undertakes) or the target utilisation (matters that will be discussed below), the firm must keep these ratios constant as it grows.

This seemingly simple-minded calculation relating the staffing mix requirements of the work to the staffing levels existing in the firm is in fact of extreme importance.

If we know the salaries of the staff members and their billing rates, we can construct the pro forma income statement of this firm at full utilisation. (Figure 3)

The role of leverage is amply illustrated by Guru Associates. The four seniors (partners) personally bill a total of $1,200,000, or $300,000 each. At per-professional overhead costs of $40,000 (including the costs of all secretaries, administrative staff, space, supplies, etc.), this would result in a per-partner profit of $260,000 if these seniors were totally unleveraged.

With a healthy seven staff members per senior, partner profits now total $420,000 each. About 60 percent of each partner's profit comes not from what he or she bills but from the profit generated by the non-partner group. Thus the benefits of leverage!

It should be immediately stressed that high leverage is not always good. As we have already observed, having high leverage is completely inappropriate if the firm has a high level of Brain Surgery or Psychotherapy work. What we can say is that leverage should be as high as the requirements of the work allow.

We now turn to Guru Associates' position in the market for staff. Guru Associates has the following promotion policies: It considers that it requires four years for a junior to acquire the expertise and experience to perform the middle-level function, and it expects to promote 80 percent of its candidates to this position. A lower percentage would be insufficient to attract new juniors, and a higher percentage would imply that insufficient screening was taking place (i.e., that there was no room for hiring mistakes). From middle level to senior is also expected to take four years, but because fewer candidates develop the critical client relations skills that Guru Associates requires, on average only 50 percent of the candidates make it.

We shall now trace the evolution of Guru Associates over time. Among the eight middle-level staff, we may assume that, since it takes four years to make senior, in any given year there are one-quarter (i.e., two) of these managers in their final year as middle-level staff. If Guru Associates is to abide by its promotion policies, then it can expect to promote 50 percent, (i.e., one candidate) in that year. Whether by firm policy or by the personal decision of the individual, the non-promoted candidate will leave the firm. (Note that this result tends to happen in most consulting firms regardless of whether the firm has an up-or-out policy. Middle-level staff may, if allowed, hang on for another year or two, but most eventually leave if not promoted. As we shall see, there is a strong incentive for the firm to encourage them to leave, since they are occupying a slot eagerly being sought by the juniors coming up behind them.)

Counting both those promoted and those leaving, we have reduced the number of middle-level staff by two and increased the number of seniors by one. Since we now have five seniors, we require ten middle-level staff (unless the mix of project types changes), and have six remaining. We must seek out four new middle-level staff from among our juniors. Of the 20 in the firm, we assume one-quarter (five) will be in their final year as juniors. Since our expectation (or policy) is to promote 80 percent at this level, we will indeed promote four out of the five to fill our four available slots. (The fact that these figures match is not, of course, fortuitous. The percentage that can be promoted at a lower level is determined by the shape of the professional pyramid.) Like the "passed over" middle-level staff person, the fifth junior may reasonably be assumed to leave the firm.

We now have 15 juniors left. However, with five seniors and ten managers, the firm requires 25 juniors: it must hire ten. These changes are summarised in Figure 1-7, which follows the same logic for years one through nine.

In year five, the first batch of middle-level staff that were promoted from junior in year one will be ready to be considered for promotion to senior. It will be recalled that there are four of them. If promotion opportunities are to be maintained, then 50 percent will be promoted (i.e., two) and two will leave. This creates a total of ten seniors. With a total of ten seniors in year five, 20 middle-level staff are required. Of the 16 in the firm the previous year, four have been promoted or have left, meaning that a total of eight juniors must be promoted. Fortunately (but not fortuitously) there are 10 juniors who were hired in year 1, and are to be considered for promotion. The expected 80 percent target may be maintained!

What must be stressed at this point is that we have arrived at these staffing levels solely by considering the interaction of the firm's leverage structure with the promotion incentives (career opportunities) that the firm promises. What we have discovered by performing these calculations is that the interaction of these two forces determines a target (or required) growth rate for the firm. As Figure 1-7 shows, Guru Associates must double in size every four years solely to preserve its promotion incentives. If it grows at a lower rate than this, then either it will remove much of the incentive in the firm or will end up with an "unbalanced factory" (too many seniors and not enough juniors) with a consequent deleterious effect upon the firm's economics.

If the firm attempts to grow faster than this target rate, it will be placed in the position of either having to promote a higher proportion of juniors or to promote them in a shorter period of time. Without corresponding adjustments, this could have a significant impact on the quality of services that the firm provides.

We have seen that the leverage structure and the promotion policies together determine a target (required) growth rate. It should be acknowledged, however, that there is another way of looking at the relationship between these variables. An equivalent way of stating the relationship would be to observe that, if given a growth rate and a leverage structure, the promotion incentives that result can be specified. We may see this by examining Figure 8 once more. Suppose that we had constructed this by specifying the growth rate and the project team structure. We would then have discovered that we could afford to promote only four out of five juniors and one out of two managers. We would also have discovered that we would have a built-in, or target, turnover rate averaging over 4 percent (two resignations per year for the first four years, while the average number of non-senior staff was 45.5).

In this example, Guru Associates can achieve what would be considered an extremely low target turnover rate if it achieves its optimal growth. However, the norm in many consulting firms is a much higher rate than this, often reaching as high as 20 to 25 percent or even 30 percent. The key point to note here is that, given a growth rate and an organisational structure, the target turnover rate of the firm can be specified. (This does not, of course, tell us what the actual turnover experience of the firm will be. We are considering here the turnover that the firm requires to keep itself in balance. While it may be able, through its promotion system, to ensure that the actual rate does not get too low, it may have to use other devices to ensure that the actual turnover rate does not get too high through too many people quitting.)

In most professions, one or more firms can be identified that have clearly chosen a high target rate of turnover. Under this scenario partners (or shareholders) can routinely earn a surplus value from the juniors without having to "repay" them in the form of promotion. This high turnover rate also allows a significant degree of screening so that only the best stay in the organisation. Not surprisingly, firms following this strategy tend to be among the most prestigious in their industry.

This last comment gives us the clue as to why such firms are able to maintain this strategy over time. Individuals continue to join these organisations, knowing that the odds of "making it" are very low. In the eyes of many potential recruits, the experience, training and association with the prestigious firms in the industry make the poor promotion opportunities at such firms worthwhile.

Young professionals view a short period of time at such firms as a form of "post-post-graduate" degree, and often leave for prime positions they could not have achieved (as quickly) by another route. Indeed, most of the prestige firms following this strategy not only encourage this but provide active "outplacement" assistance. Apart from the beneficial effects that such activities provide in recruiting the next generation of juniors, such alumni/ae are often the source of future business for the firm when they recommend to their corporate employers hiring their old firm (which they know and understand) over other competitors.

The ability to place ex-staff in prestigious positions is thus one of the pre-requisites of a successful churning strategy. (An exception might be provided by those professions where legal requirements such as professional certification necessitate that juniors spend time in a firm. However, even here the prestige firms provide active outplacement assistance.)

Growth and Profitability

Before we leave the topic of growth, we should take a quick peek back at Guru Associates. How did its growth contribute to its profitability? Let us perform our analysis on the basis of constant (year zero) dollars, to remove the effect of inflation. By implication, this means that the salaries and billing rates at each staff level remain the same. What does the firm's P&L now look like? Figure 1-8 repeats the analysis of Figure 1-6 using year-five staffing levels instead of year zero.

The result? Per-partner profits have not increased! In fact, they have remained precisely the same!

What this simple example shows is that there is no necessary relationship between growth and profits. As we have seen, growth in a professional firm is driven primarily by the need to attract and retain staff, and is critical for that reason, but it is not a guarantee of higher per-partner profits.

Why is this so? We shall explore the reasoning in greater detail in subsequent chapters, but the basic fact is this. If a firm grows subject to two conditions, as Guru Associates has, whereby (a) the mix of client projects (and hence fee levels) remains the same; and (b) the project staffing (or leverage) is such that the same proportion of senior or partner time is required to handle each project, then the number of seniors or partners that the firm requires will correspond exactly to the growth rate. In consequence of this, the profit pool may increase because of the higher volume, but it must be shared among a correspondingly increased number of partners.

If per-partner profits are to increase, then one of the two conditions must be broken. Either the firm must bring in a different mix of business commanding higher billing rates (i.e., find higher-value work for its people to do) or it must find ways to serve the same kinds of work with an ever-increasing proportion of junior time and a declining proportion of senior time.

It is an interesting observation to note that few prominent consulting firms act as if growth were profit-neutral. Indeed, rapid growth is often listed as a primary goal of the firm, and advances in top-line growth are used as a primary internal and external measure of success. If justified in the name of providing career opportunities for staff, this indeed makes sense. However, if desired on profitability grounds, it looks like many consulting firms are fooling themselves!

Summary: The Key Role of Leverage

Perhaps the most significant management variable to be disclosed by the previous analysis is the choice of the mix of projects undertaken and the implications this has for the (average) project team (i.e., leverage) structure. As we have seen, this latter variable is a significant force in influencing the economics of the firm, its organisational structure and its positioning in the client and people markets. The leverage structure, in the sense used in this book (the average or typical proportion of time required from professionals at different levels) has not been a variable that is routinely monitored by firm management. However, as we have shown, its role in balancing the firm is critical.

It is possible, and not uncommon, for the firm's project team structure to change over time. If it is possible to deliver the firm's services with a greater proportion of juniors, this will (in general) reduce the costs of the project. Competition in the market for the firm's services will, over time, require the firm to seek out lower costs for projects of a particular type, and there will often be opportunities for an increasing proportion of juniors to be used on projects that, in the past, required a high proportion of senior time. What in past years had the characteristics of a Brain Surgeon project may, in future years, be accomplishable as a procedural or Pharmacy project.

When considering new projects to undertake, it is usually more profitable for the firm to engage in one similar to that recently performed for a previous client. The knowledge, expertise and basic approaches to the problem that were developed (often through significant personal and financial investment) can be capitalised upon by bringing them to bear on a similar or related problem. Frequently the second project can be billed out to the client at a similar (or only slightly lower) cost, since the client perceives (and receives) something equally custom-tailored: the solution to his problem. However, the savings in costs incurred by the firm in delivering this customisation are not all shared with the client (if, indeed, any are). The firm thus makes its most money by "leading the market": being able to sell as a fully customised service (at a fully customised price) what increasingly becomes a service with reproducible, standardised elements.

While it is in the best interests of the firm that similar or repetitive engagements be undertaken, this is often not in accord with the desires of the individuals involved. Most individuals that join consulting firms do so out of the desire for professional challenge and variety and the avoidance of routine and repetition. While they may be content to undertake a similar project for the second or third time, they will not be for the fourth or sixth or eighth.

The solution, of course, is to convert the past experience and expertise of the individual into the expertise of the firm by accepting the similar project but utilising a greater proportion of juniors on second- or third-time projects. Apart from requiring a lesser commitment of time from the experienced seniors, this device serves the admirable purpose of training the juniors.
For all these reasons, we might suspect that, over time, the proportion of juniors to seniors required by the firm in a particular practice area will tend to increase. If this is allowed to proceed without corresponding adjustments in the range of practice areas, the basic project team structure of the firm will alter, with significant impacts on the economics and organisation of the firm. The dangers of failing to monitor the leverage structure are thus clearly revealed.

Figure 1

Different Types of Practices

Figure 2

Guru Associates

Figure 3

The Consequences of Guru Associates' Promotion Policies

Figure 4

The Economics of Guru Associates -- 5 years later

Advice to a Young Professional

1. The real keys to success are not smarts or qualifications or belonging to a brand-name firm. Rather, success is derived from courage, drive, energy, passion, ambition, enthusiasm, excitement, initiative, discipline, a dream and enough self-confidence to keep trying.
2. Some people are blessed in being able to find contentment, while some are cursed to pursue happiness. But which do you want? Buddhists believe that all life is suffering, and suffering comes from wanting things (desire). Their solution is to learn to stop wanting. My version is that if you truly can't get something then you're wise to stop wanting it. (It's a pretty good defense mechanism anyway.) But you've got to want something -- bad -- or you'll never accomplish anything.
3. What do you want to do with the rest of your life? Stupid question. You'll be a different person five years from now. Decide what you want to do with the next three years. Throw yourself into it. If it turns out that it's not for you, you'll move on. Most careers that look like a logical progression were, in fact, a series of unplanned, opportunistic choices.
4. Don't get depressed. It's amazing how many times you can mess up in life and still succeed. George Washington barely won a battle in the Revolutionary War. He triumphed by not losing -- just staying in the game ensured victory.
5. Forgive yourself your weaknesses, but not completely. Don't expect perfection today, and not even next year: but make a binding commitment to improve. Apply the same principle to others.
6. If it can be delegated, it must be. Never work on something that someone less experienced than you can do -- your career will be on hold and you'll become more and more obsolete with each passing day.
7. Be an individual, not a member of a class or subset. Step up to the plate, and don't sit around bemoaning the disadvantages that your group (class, gender, race, religion) labours under, valid as they might be. No one owes you anything. It's too easy (and useless) to blame others (parents, spouse, boss, co-workers). Take responsibility. When the system oppresses you, you have three choices: give up, fight the system or get to work regardless. I can't say which choice is morally correct, but I do know which choice moves you forward.
8. Logic and rationality will only take you so far; the most important thing you can learn is how to interact with other people. Everything you'll want in professional life (and outside it) will come from another person: a client, a colleague, a superior or a subordinate. Do you know how to get other people to (willingly) give you what you want? As a good first approximation, think of others as being like you, not as "them." If you want to influence someone, ask yourself, "Would that approach work on me?"
9. What qualities do you try to show in a romantic relationship? Are you understanding, nurturing, sympathetic, supportive, considerate and kind? Apply the same to everyone you deal with and you'll get more of what you want from them.
10. When searching for a romantic partner, looks are nice, brains are nice and money is nice, but character is essential. Ultimately, the same is true in all business relationships: character is the most important thing you should look for in a partner, an employee, a client, a boss or a supplier.
11. When dealing with clients, subordinates or anyone else, remember that people are motivated more by meaning than by money. Help them find the drama, the excitement in what they do (or what you want them to do). And never lose sight of the meaning in what you're doing.
12. People may forgive you for a mistake you've made, but they don't forget. The worst thing is to ignore it and move on. Repair fences when you can. You'll be working a long time to re-earn lost trust and confidence.
13. It's never too soon to start getting good at business development. Practice your client relationship skills on every job you do. The better you are at business development, the more choice you'll have for saying, "Sorry, I'm too busy," to people you don't want to work for.
14. Broken promises are remembered more than kept promises. Do what you say you are going to do. It's better to have the guts to say up front, "I'm not sure I can get that done on time," than to accept a task that you can't deliver on.
15. The worst thing you can do if you want to get somebody to listen to you is to criticise him or her. As human beings, when attacked we attack back. And we attack back even when we are in the wrong. Many of us fall into the trap of thinking, "I know I'm right, so I'm going to tell the others how wrong they are!" It's tempting, but it doesn't work. The goal is not to be right; the goal is to get what you want.

The Auditing Debate

Any way you look at it, the audit business cannot continue much longer as it is. If years of "clean" audits are no guarantee that billions of dollars of previously reported profits are, in fact, illusory, then what value does an audit actually provide? Parliament and the ASIC are vigorously investigating this, but there is a grave danger that they may be focusing on the wrong problem.

Auditing is a business full of paradoxes. The providers think they're providing one thing (carefully phrased as "an attestation that financial accounts based on information provided by management are in accordance with generally accepted accounting principles.")

The investing public, the users of the service, continue to believe (despite the profession's best efforts to tell them otherwise) that the service is something else: a protection against fraud, reliably affirming the financial health of the enterprise being audited.

Many people seem to think that auditing's problems are due to the conflicts created by audit firms also providing consulting services. Legislators and regulators are today holding emergency hearings about whether auditors should be able to provide these additional services, and (in anticipation of their rulings) four of the big five either have spun off their consulting divisions or have plans to do so. Amid all this activity, one point goes unrecognised: how irrelevant it all is!

The problem of auditor independence is not, ultimately, about the provision of consulting services. The conflict is built into the auditing system itself. Auditors are supposed to be independent of management, providing a neutral "attestation" that financial reports are a fair reflection of the business.

Yet who hires the auditors? Who pays them? Who retains them? Who can fire them? Answer: Only the company they are supposed to be auditing and no one else. Even if they never did a dime's worth of consulting, auditors would be conflicted.

The problem is made even worse by the way the output of an auditor's work is structured. They are permitted, in reporting to the public, only to issue a standardised letter with fixed language basically saying one of two things: either "We concur," or "We have reservations" (usually with no elaboration or explanation). Since the latter option is equivalent to dropping the guillotine, it's not used too often. There's not much else auditors are allowed to do.

Imagine that management is doing something questionable or on the edge. The auditor's choice is either to go along or to resign and cause a public scandal (and a loss of their own revenues). How much ability do you think they have to influence that management team? All they've got is a threat to resign (or, close to the same thing, to issue a qualified opinion) and management knows that if they do that they'll hurt their own business (lose substantial revenue).

What happens? Honourable, well-intentioned people try, with integrity, to get management to do the right thing, but unless they have incredible guts, they are forced to accept a lot of grey areas before they have to pull the trigger. If they are to do their job, auditors need more than these options for reporting their findings.

It is readily understandable that auditing firms have historically looked for additional services to provide. The auditing "product line" is an unattractive business. It's a low (or no) growth, declining-margin, highly exposed-to-litigation business.

Why would a firm that had other options want to nurture this product line? True, it does have the virtue of providing an annuity, a good, regular, dependable cash flow, year after year. And (here's the rub) firms view it as a base from which they can cross-sell their other services.

Notice that selling additional services includes not only consulting, which is getting all the attention, but a myriad of accounting services that will remain even if Parliament and the ASIC succeed in banning the provision of consulting services. The key distinction to be made is not between accounting and consulting, but between "attest" services (which include such things as certain tax services), where the firm serves the public by attesting to the accuracy of data, and "advisory" services, where the firm serves management.

Complete independence can only be achieved by complete separation of attest services from advisory services (an option that does not yet seem to be part of the public debate).

Even if not legislatively mandated, this separation could be a decent business choice. Most accounting firms, until recently, thought of themselves as audit firms who happen to provide a range of other services.

Now they have become professional service firms in which audit is just one of their products (and a diminishing, ever-less-attractive one at that). Maybe they should (on good business principles) drop their least attractive line of business and let someone else take it over.

The auditing function is needed, and someone has got to provide it. But to make it truly independent and free of any conflicts, we would need to find a way to construct firms that provide only attest services paid for not by those being audited but by someone else.

I haven't heard too many options for this being discussed, but one way could be for all publicly listed companies to pay a tax into a general fund (perhaps based on their revenues) administered by a government agency, which in turn would pay (private) attest firms to perform the audit.

Could a business that provides only "attest" or "audit" services survive to be an attractive business? There would be challenges. An audit is a product, not a career. Saying you are an auditor is like saying that you know how to make (or supervise the making of) one thing and one thing only -- an audit. You are effectively betting your career on a single product -- a risky move at best.

That wasn't a bad bet back in the good old days when demand for that one product was high, when the market placed a high price on it and when clients didn't shop for your product predominantly on price. Alas, all that has changed. Someone who is a pure auditor (rather than an accountant) will have a serious career problem.

Every year, all of the accounting firms (including our poor auditor's own firm) are furiously working hard to train vast numbers of younger people to know how to do what our auditor knows how to do -- supervise an audit. So, each year our poor auditor's existing knowledge and skill is becoming less scarce and less valuable. His (or her) asset is rapidly depreciating in value.

Of course, this sad situation is true of all professionals. They all must continue to build new skills to stay ahead of the pack. But how does our poor auditor, who wants to remain an auditor, do this? The great business virtue of auditing, that it is recurring work, year after year, is its greatest career trap for the auditor.

He or she is not going to learn new things rapidly by auditing the same companies year after year. Keeping up with the latest changes in accounting regulations helps but can hardly be called rapid skill building. The best and most obvious way to continue to build skills is to stop auditing the same clients and trade up to doing the audit of larger, more complex client organisations who have stretching, challenging audit issues.

Not a bad solution, but unfortunately one that is available only to a tiny percentage of those trying to earn a living as auditors. Not every partner can audit the Fortune 100. In fact, it's fairly safe to say that the vast majority of auditors, if they are to keep their skills and knowledge valuable, will have to start doing something besides auditing. They will either have to become accountants and (upon leaving the attest firm) provide accounting and finance-related services that clients view as worthy of high fees, or they will have to be creative and find other things in our society that need an attest service.

This actually may be the saviour of the attest business. Many financial, insurance and physical exchange transactions in our economy depend on the parties trusting each other that the underlying reality matches the terms in the contract (the goods are in the warehouse, we actually do have this many subscribers and so on). There could be incredible value and a great business for a company that (for once) could credibly provide truly independent, non-conflicted, third-party attest services. Whether or not this becomes a reality is up for debate, but one thing is clear. Contrary to the current Parliamentary and ASIC debate, the problem is not as simplistic as "auditing" versus "consulting."

Let's address the real problem!

The Psychology of Waiting Lines

Introduction

In one of a series of memorable advertisements for which it has become justly famous, Federal Express (the overnight package delivery service) noted that: "Waiting is frustrating, demoralising, agonising, aggravating, annoying, time consuming and incredibly expensive." ¹

The truth of this assertion cannot be denied: there can be few consumers of services in a modern society who have not felt, at one time or another, each of the emotions identified by Federal Express' copywriters. What is more, each of us who can recall such experiences can also attest to the fact that the waiting-line experience in a service facility significantly affects our overall perceptions of the quality of service provided.

Once we are being served, our transaction with the service organisation may be efficient, courteous and complete: but the bitter taste of how long it took to get attention pollutes the overall judgments that we make about the quality of service

The mathematical theory of waiting lines (or queues) has received a great deal of attention from academic researchers and their results and insights have been successfully applied in a variety of settings. ² However, most of this work is concerned with the objective reality of various "queue management" techniques: for example, what the effects are upon average waiting times of adding servers, altering "queue discipline" (the order in which customers are served), speeding up serving times, and so on. What has been relatively neglected, however, is much substantive discussion of the experience of waiting.

As Levitt reminds us, "Products are consumed, services are experienced." Accordingly, if managers are to concern themselves with how long their customers or clients wait in line for service (as, indeed, they should), then they must pay attention not only to the readily-measurable, objective, reality of waiting times, but also how those waits are experienced. It is a common experience that a two minute wait can feel like nothing at all, or can feel like "forever". We must learn to influence how the customer feels about a given length of waiting time.

In this paper, I shall discuss the psychology of waiting lines, examining how waits are experienced and shall attempt to offer specific managerial advice to service organisations about how to improve this aspect of their service encounters. down in separate components, so that practicing managers can begin to think about the available tools they can use to influence the customer's waiting experience.

I also hope to identify testable propositions offering the opportunity for future research. The First and Second Laws of Service. Before we discuss the laws of waiting, it is necessary to consider two general propositions about service encounters and how these are experienced.

The first of these is what I have come to call "The First Law of Service" is simple, but powerful, and can be stated as a straightforward formula:

S = P - E.

In this formulation, "S" stands for satisfaction, "P" for perception and "E" for expectation. If you expect a certain level of service, and perceive the service reviewed to be higher, you are a satisfied client. If you perceive the same level as before, but expected higher, you are disappointed and, consequently, a dissatisfied client.

The point, of course, is that both the perception and the expectation are psychological phenomena. They are not the reality. In a benevolent world, both the perception and the expectation will have some connection to reality, but they are not reality. Accordingly, all service managers must pay attention to three things: what was actually done to or for the client, what was perceived by the client, and what the client expected. Fortunately, all three can be managed.

Sasser (et al) provide good examples of both managing the perception and the expectation of waiting times. For the former, they offer the example of 'the well-known hotel group that received complaints from guests about excessive waiting times for elevators. After an analysis of how elevator service might be improved, it was suggested that mirrors be installed near where guests waited for elevators. The natural tendency of people to check their personal appearance substantially reduced complaints, although the actual wait for the elevators was unchanged. ⁵

As an illustration of how expectations can be explicitly managed, they note that some restaurants follow the practice of promising guests a waiting time in excess of the "expected time". If people are willing to agree to wait this length of time, they are quite pleased to be seated earlier, thus starting the meal with a more positive feeling. ⁶

This last example deserves further exploration. When I have discussed this anecdote with a variety of serving personnel, they always reaffirm its wisdom. As one waiter pointed out to me: "If they sit down in a good mood, it's easy to keep them happy. If they sit down disgruntled, it's almost impossible to turn them around. They're looking to find fault, to criticise."

As a result of these conversations, I offer by "Second Law of Service":

It's hard to plan catch-up ball.

The corollary to this law is the proposition that there is a halo-effect created by the early stages of any service encounter, and that if money, time and attention is to be spent in improving the perceived quality of service, then the largest payback may well occur in these early stages.

Having established the importance of the interplay between perceptions and expectations, we shall turn to an examination of the various tools available to managers in influencing these. In each of the sections that follow, the title of the section should be considered a proposition concerning the psychology of waiting.

We begin with one of the most familiar:

Occupied Time Feels Shorter Than Unoccupied Time.

As William James, the noted philosopher observed: Boredom results from being attentive to the passage of time itself. ⁷ A more colloquial version might be "A watched pot never boils". The truth of this proposition has been discovered by many service organisations. In various restaurants, it is common practice to hand out menus for customers to peruse while waiting in line. Apart from shortening the perception of time, this practice has the added benefit of shortening the service time, since customers will be ready to order once they are seated, and will not tie up table space making up their minds).

A similar tactic is to turn the waiting area into a bar, which also adds to revenue as well as occupying time. Use can be made of poster, reading material (or even shifting lights, rolling balls and other "adult toys") to distract the waiter's attention away from the passage of time. "Theme" restaurants (such as Victoria Station) which provide interesting memorabilia to examine also are applying the lesson of occupying waits as part of the service.

In some situations, such as telephone waits, it is difficult to "fill up" time in a constructive way. The familiar "Muzak" played by some organisations when their telephone-answering agents are busy is, to many people, an added annoyance rather than a benefit. In large part, this is because the activity (listening to music) is totally unrelated to the service activity to come (whereas, the use of menus and bars cited above successfully integrated the waiting experience into the total service experience).

This suggests that the activity provided to "fill time" should (a) offer benefit in and of itself, and (b) be related, in some way, to the following service encounter.

The best example of this I ever encountered in relation to telephone waits was the story of the sports team that, when lines were occupied, played highlights of the previous week's game. In one memorable incident, a caller was transferred from the queue to the receptionist, whereupon he screamed "Put me back, (so-and-so) is just about to score!"

It should also be noted, however, that there can be circumstances where a service may choose to fill time with an unrelated activity. In certain medical or dental waiting rooms, there appears to be a conscious attempt to distract the patient's attention from the upcoming activity, perhaps on the grounds that to remind the patient of what is about to occur might heighten fears and hence make the wait more uncomfortable.

The wisdom of this I cannot attest to (I have read too many National Geographic magazines). Even in this context, it is possible to provide service-related distractions. Many medical clinics provide weighing machines and eye charts, in the waiting room: I have even seen patients merrily occupied with self-testing thermometers, breath-strength equipment and the like.

People Want to Get Started.

One of the other virtues of handing out menus, providing a drinks bar and other methods of service-related time-fillers is that they convey the sense the "service has started: we know that you are here". I would hypothesise that people waiting to make their first human contact with the service organisation are much more impatient than those who have "begun": in other words, pre-process waits are perceived as longer than in-process waits.

Again, I appeal to common experience to reflect the fact that one's "anxiety" level is much higher while waiting to be served than it is while being served, even though the latter wait may be longer. There is a fear of "being forgotten". (How many times has the reader gone back to a maitre d' to check that his or her name is still on the list?).

Many restaurant owners instruct their service staff to pass by the table as soon as the customers are seated to say "I'll be with you as soon as I can, after I've looked after that table over there". In essence, the signal is being sent: "We have acknowledged your presence".

One walk-in medical clinic that I studied decided to introduce a triage system, whereby all patients were first met by a nurse who recorded the patient's name and symptoms and decided whether or not the patient could be treated by a registered nurse practitioner or should be seen by a doctor. Even though the addition of this step in the process had no impact on the time it took to see a medical service provider, surveys showed that patients were pleased with "reduced waiting times". The point, of course, was that they felt they had been "entered into" the system.

Anxiety Makes Waits Seem Longer.

A large part of the concern that we feel to "get started" is due as noted above, to anxiety. In the cases cited, the anxiety was about whether or not one had been forgotten. Anxiety can, however, come from other sources. Nearly everyone has had the experience of choosing a line at the supermarket or airport, and stood there worrying that he had, indeed, chosen the wrong line. As one stands there trying to decide whether to move, the anxiety level increases and the wait becomes intolerable. This situation is covered by what is known as Erma Bombeck's Law:

"The other line always moves faster"

Is there anyone who has not had the experience of choosing a line at the supermarket or airport, and stood there worrying that we had, indeed, chosen the wrong line? On a recent (open-seating) Qantas shuttle fight, my fellow passengers formed an agitated queue at the boarding gate long before the flight was due to depart, leading the attendant to announce: "Don't worry, folks, the plane's a big one; you'll all get on."

The change in atmosphere in the waiting lounge was remarkable. Similar effort to deal with customer anxiety can be seen when airlines make on-board announcements that connecting flights are being held for a delayed flight, when movie theatre managers walk down the line reassuring patrons they will get in, or when customer service agents in airport lobbies reassure waiting patrons that they are indeed waiting in the correct line and have sufficient time to catch their flight.

One of the poorest examples I know of manning anxiety is when I am on standby for a flight, and the agent takes my ticket. Now I am anxious not only about whether I will get on the flight, but also about whether I will get my ticket back. I have been asked to give up control of the situation. At least if I had my ticket I could change my mind and go to another airline. The prescription for managers resulting form this discussion is: ask yourself what customers might be worrying abut (rationally or irrationally), and find ways to remove the worry.

Uncertain Waits Are Longer than Known, Finite Waits

The most profound source of anxiety in waiting is how long the wait will be. For example, if a patient in a waiting room is told that the doctor will be delayed thirty minutes, he experiences an initial annoyance but then relaxes into an acceptance of the inevitability of the wait. However, if the patient is told the doctor will be free soon, he spends the whole time in a state of nervous anticipation, unable to settle down, afraid to depart and come back. The patient's expectations are being managed poorly. Likewise, the pilot who repeatedly announces "only a few more minutes" adds insult to injury when the wait goes on and on. Not only are the customers being forced to wait, but they are not being dealt with honestly.

A good example of the role of uncertainty in the waiting experience is provided by the "appointment syndrome." Clients who arrive early for an appointment will sit contentedly until the scheduled time, even if this is a significant amount of time in an absolute sense (say, thirty minutes). However, once the appointment time is passed, even a short wait of, say, ten minutes, grows increasingly annoying. The wait until the appointed time is finite; waiting beyond the point has no knowable limit.

Appointment systems are, in practice, troublesome queue-management tools. They suffer form the problem that some customers may make appointments without showing up (a problem endemic to airlines, hotels, dentists, and hair cutters) and also from the fact that it is often difficult to decide how far apart to schedule appointments. If they are too far apart, the server is left idle waiting for the next appointment. If they are too close together, appointments begin to run behind and, since they cumulate, tend to make the server further and further behind.

This is a particularly acute problem because a customer with an appointment has been given a specific expectation about waiting times, and a failure to deliver on this premise makes the wait seem longer than if no appointment had been made. This does not mean that appointment systems should never be used. They are, after all, a way of giving the customer a finite expectation. It should be recognised, however, that an appointment defines an expectation that must be met.

Unexplained Waits Are Longer than Explained Waits

On a cold and snowy morning, when I telephone for a taxi, I begin with the expectation that my wait will be longer than on a clear, summer day. Accordingly, I wait with a great deal more patience because I understand the causes for the delay. Similarly, if a doctor's receptionist informs me that an emergency has taken place, I can wait with greater equanimity that if I do not know what is going on. Airline pilots understand this principle well; on-board announcements are filled with references to tardy baggage handlers, fog over landing strips, safety checks, and air-traffic controllers' clearance instructions. The explanation given may or may not exculpate the service provider, but is it better than no explanation at all.

Most serving personnel are repeatedly asked about the circumstances in waiting situations. The lack of an explanation is one of the prime factors adding to a customer's uncertainty about the length of the wait. However, knowing the length of the wait is not the only reason a customer wants an explanation. As the Federal Express advertisement points out, waiting is also demoralising. Waiting in ignorance creates a feeling of powerlessness, which frequently results in visible irritation and rudeness on the part of customers as they harass serving personnel in an attempt to reclaim their status as paying clients. In turn, this behaviour makes it difficult for the serving personnel to maintain their equanimity. For example, on a significantly delayed flight, one cabin attendant was forced to announce to the passengers: "Please pay us the courtesy of being polite to us so that we can reciprocate in kind."

Naturally, justifiable explanations will tend to soothe the waiting customer more than unjustifiable explanations. A subtle illustration of this is provided by the practice of many fast food chains which instruct serving personnel to take their rest breaks out of sight of waiting customers. The sight of what seems to be available serving personnel sitting idle while customers wait, is a source of irritation.

Even if such personnel are, in fact, occupied (for example, a bank teller who is not serving customers but catching up on paperwork), the sight of serving personnel not actually serving customers is "unexplained." In the customers' eyes, he or she is waiting longer than necessary. The explanation that the "idle" personnel are taking a break or performing other tasks is frequently less than acceptable.

Unfair Waits Are Longer than Equitable Waits

As Sasser, Olsen, and Wycoff (1979) note, one of the most frequent irritants mentioned by customers at restaurants is the prior seating of those who have arrived later. They observe: "The feeling that somebody has successfully 'cut in front' of you causes even the most patient customer to become furious. Great care to be equitable is vital" (1979, 89)

In many waiting situations, there is no visible order to the waiting line. In situations such as waiting for a subway train, the level of anxiety demonstrated is high, and the group waiting is less a queue than a mob. Instead of being able to relax, each individual remains in a state of nervousness about whether their priority in the line is being preserved. As already noted, agitated waits seem longer than relaxed waits. It is for this reason that many service facilities have a system of taking a number, whereby each customer is issued a number and served in strict numerical order. In some facilities, the number currently being served is prominently displayed so that customers can estimate the expected waiting times.

Such systems can work well in queuing situations where "first in, first out" (FIFO) is the appropriate rule for queue discipline. However, in many situations customers may be ranked in order of importance, and priorities allocated that way. A good example is a walk-in medical facility which will frequently break the FIFO rule to handle emergency cases. Also familiar is the example of the restaurant that has a finite supply of two-person, four-person, and large tables, and seats customers by matching the size of the party to the size of the table. A final example is the use of express-checkout lanes in supermarkets, whereby customers with only a few items are dealt with a special server.

All of these cases represent departures form the FIFO system. In some, the priority rules are accepted by the customers as equitable and observed -- for example, the supermarket express checkout. In other illustrations, such as the restaurant with varying sizes of tables, the priority rule that seats customers by the size of party is less accepted by the customers, and frequently resented. The rule may serve the restaurant, but the customer has a harder time seeing the equity benefit.

Similarly, special service facilities for important customers may or may not be accepted as equitable. For this reason, many service facilities physically separate premium servers (for example, first-class airline check-in counters) form the sight of regular customers so that the latter will not resent the special service rendered.

A slightly different example of the equity problem in queue management is provided by the serving person who is responsible not only for dealing with customers present in the serving facility, but also for answering the telephone.

How many of us have not had the experience of waiting while a receptionist answers the telephones, and consequently felt a resentment that some distant customer was receiving a higher priority than we who have made the effort to come to the service facility? The example can be extended to those people who answer their telephone while you are in their office. By answering the phone, they are giving you a lesser priority than the random caller.

The main point to be stressed here is that the customer's sense of equity is not always obvious, and needs to be explicitly managed. Whatever priority rules apply, the service provider must make vigorous efforts to ensure that these rules match with the customer's sense of equity, either by adjusting the rules or by actively convincing the client that the rules are indeed appropriate.

The More Valuable the Service, the Longer the Customer Will Wait

The example of the supermarket express-checkout counter reminds us that our tolerance for waiting depends upon the perceived value of that for which we wait. Special checkout counters were originally provided because customers with only a few items felt resentful at having to wait a long time for what was seen as a simple transaction. Customers with a full cart of groceries were much more inclined to tolerate lines.

Airlines, too, have discovered this principle and provided separate lines for those with simple transactions (such as seat selection), medium-difficulty transactions (baggage check-in), and complex transactions (ticket purchase or modification). Specialisation by task does not necessarily reduce the aggregate amount of waiting in the system; however, it serves well to allocate the waiting among the customer base.

That perceived value affects tolerance or waits can be demonstrated by our common experience in restaurants -- we will accept a much longer waiting time at a haute cuisine facility than at a "greasy spoon." In universities, there is an old rule of thumb that if the teacher is delayed, "You wait ten minutes for an assistant professor, fifteen minutes for an associate professor, and twenty minutes for a full professor." This illustrates well the principle that tolerance for waits depends upon perceived value of service -- perhaps with the emphasis on the perception.

It follows from this principle that waiting for something of little value can be intolerable. This is amply illustrated by the eagerness with which airline passengers leap to their seats when the airplane reaches the gate, even though they know that it will take time to unload all the passengers ahead of them, and that they may well have to wait for their baggage to arrive at the claim area. The same passenger who sat patiently for some hours during the flight suddenly exhibits an intolerance for an extra minute or two to disembark, and a fury at an extra few minutes for delayed baggage.

The point is that the service (the flight) is over, and waiting to get out when there is no more value to be received is aggravating. A similar syndrome is exhibited at hotel checkout counters. Just as pre-process waits are felt to be longer than in-process waits of the same time duration, so are post-process waits; these, in fact, feel longest of all.

Solo Waits Feel Longer than Group Waits

One of the remarkable syndromes to observe in waiting lines is to see individuals sitting or standing next to each other without talking or otherwise interacting until an announcement of a delay is made. Then the individuals suddenly turn to each other to express their exasperation, wonder collectively what is happening, and console each other. What this illustrates is that there is some form of comfort in group waiting rather than waiting alone.

This syndrome is evidently in effect in amusement parks such as Disneyland, or in some waiting lines to buy concert tickets when a sense of group community develops and the line turns into almost a service encounter in its own right; the waiting is part of the fun and part of the service. Whatever service organisations can do to promote the sense of group waiting rather than isolating each individual, will tend to increase the tolerance for waiting time

Conclusion

The propositions presented here are by no means meant to be an exhaustive list of all the psychological considerations involved in managing customers' acceptance of waiting time. Not discussed, for example, is the importance of explicit apologies and apologetic tones in preserving the customer's sense of valued-client status.

Similarly unmentioned are cultural and class difference in tolerance for waiting. It is said of the English, for example, that if they see a line they will join it. I hope, however, that the managerial reader will have gained a greater appreciation both for the psychological complexity of queues, and for the fact that the psychological experience of waiting can be managed.

The propositions given here can be researched not only by academics for their general applicability, but also by managers for application in specific service situations. The main point of this chapter is that the waiting experience is context specific. By learning to research and understand the psychological context of their own waiting lines, managers can have a significant impact upon their customers' satisfaction with the service encounter.

Notes

1. Fortune, 28 July 1980, p. 10
2. A notable exception is the brief discussion given in Sasser, Olsen, and Wyckoff (1979). A good summary of the work of psychologists in this area is provided by Doob (1960).

References

Buffa, E.S. (1983), Modern Production/Operations Management. New York: John Wiley and Sons.

Doob, L.W. (1960), Patterning of Time. New Haven, Conn.: Yale University Press.

Sasser, W.E., J. Olsen, and D.D. Wyckoff (1979), Management of Service Operations: Text, Cases and Readings. New York: Allyn and Bacon.

The Laws of Service Businesses

1. Products are consumed: services are experienced.
2. It ain't what you do, it's the way that you do it: that's what gets results.
3. If it's done in the back room, it's a product: If it's done in the front room it's a service.
4. People don't care how much you know until they know how much you care.
5. Satisfaction = perception minus expectation.
6. Every customer interaction is a mini-play, with roles and a script: Some improvisation and ad-libs are allowed, but only the best actors can pull them off.
7. When there's a problem, separate the complainer from the complaint: They both need handling.
8. Service the client/customer as well as the assignment.
9. Pick one or two dimensions of service and do those better than anyone else and you'll have a natural market of those who agree that the dimensions you chose are the most important ones.
10. Your best efforts to raise service level should be at the beginning of the service encounter: Create a halo effect. "Start as you mean to continue." First impressions count.
11. Anything can be standardised, and there's usually a big market for it. McDonald's makes more money than the finest restaurant.
12. In the backroom you measure: In the front room you judge (and you have to be there to do it).
13. There is a triangle formed between the firm, the service provider on the front line, and the customer. The bond between the customer and the service provider is the strongest: the other two links need constant management attention.
14. Quality (and "good service") is in the eye of the beholder: Not everybody defines it the same way.
15. The most difficult part of management is getting the relevant information: Processing it to arrive at a good decision is relatively trivial.
16. Talk in the customer's language, not yours. Both the engineer and the gentleman want to know what the garage did, but they speak different languages.
17. Never underestimate the symbolic significance of anything. When the customers can see the hamburgers being cooked, it says more about quality than anything you can say.
18. In a service, the front-line personnel are simultaneously salespeople, production workers, management decision makers and part of the product.
19. Familiarity breeds boredom.
20. What do customers want? Don't guess: Ask them. The act of asking is part of the service ("we care").
21. There are two ways to satisfy customers: Give them what they want or make them want what you give.
22. The customer has a role in the service "Mini-Play": Does s/he know her/his lines?
23. Fill in the idle time (Keep the customer occupied).
24. In services, quality control = personnel selection, motivation.
25. Make the intangible tangible (the strip across the toilet bowl).
26. The server can be "paid" (in part) in psychic rewards by the customer.
27. Memories of poor service last longer than memories of good service: Only the exceptions are remembered.
28. Service managers must be player/coaches, not policemen.
29. Service ethics: Do you market the objective benefits or the psychological?
30. Most services, one way or another, are "hassle-absorbers". Absorb hassle for the customers and they'll pay through the nose.
31. Front-room workers tend to be higher status than backroom workers. This has got to be managed against. Everyone's important: Or at least they must believe it.
32. The best way to monitor service performance is to be a customer.
33. In the best services, the providers are indistinguishable from the customers: The same beliefs, tastes, attitudes. Empathy is all.
34. What you see is what you get. Individual service providers are integral parts of the total service experience. Thus, the service is judged not only by the competence of the service employee but also by his/her physical attributes. Careful personnel selection can be used to help differentiate the service, reassure the customer, or demonstrate the results of the process.
35. In the mood. The reason for the purchase of a given service must be considered in designing an optimal operating system because the emotional aspects of the service delivery system must fit with the emotional orientation of the customer. For example, travel agents must respond to the enthusiasm and trepidation of the vacation traveller, while bank tellers must project efficiency.
36. Accidents will happen. Since it is often either impossible or prohibitively expensive to eliminate errors, the service firm must be able to deftly handle the impact of the infrequent mistake.
37. A smile is cheap to provide. (Impact on service perceptions is great: Manage for service personnel morale.)
38. In a service, there's nothing more important than time.
39. In any service, there are four groups: the sick (who really need you but can be hard to help), the early sick (who you can usually help), the worried well, (who don't really need you but want to hire you) and the well (who don't need you).
40. The minute you think you know how it works, you're dead.
41. Remember: The lowest person in the firm is the often the one talking to the customer.
42. In multi-site businesses, you must ask not only how headquarters controls branches, but also how headquarters adds value to branches. What's the benefit of belonging to the network?
43. A critical service firm risk factor: Burnout of front-line people: monitor it, and allow for it.
44. How our people deal with customers will be influenced greatly by how we deal with them.
45. Don't underestimate the value (in the minds of employees or customers) of a nicely turned phase: Make it memorable!
46. What counts with regard to customisation is not what customer sees, but what we have to go through. There are lots of ways to produce a customised service with routine activities. The way to make money is to get the customer to pay a customised price for standardised activities.
47. The essence of the good service manager: Find romance and excitement in the ordinary.
48. Service manager as producer, director of the "Mini-Play": You can design the set, rehearse the actors, rewrite the script: But your employees will give the performance.
49. Senior management fosters a commitment to service by exemplary personal behaviour, and engaging in dramatic service gestures.
50. The need for skill building and team building is continuous.
51. An eternal task: internal marketing of the firm to its employees.
52. Measure frequently -- judge infrequently.
53. In customised, front room work, manage the objectives, not the procedures.
54. Managing the culture is the main operating lever in services management.
55. When you're the boss, it's hard to get employees to give you the truth.
56. The best philosophy to communicate: "No-one will be punished for making a mistake. No-one will be forgiven for failing to learn from their mistakes".
57. The urgent drives out the important (if you let it).
58. "A person doesn't build a business. A person builds an organisation which builds a business."
59. If the employees don't believe it, neither will the customers.
60. The customer is not always right, but you have to act that way.