In the old days, a professional business was a special kind of organisation, one that was designed to bring into balance the demands of the client marketplace and the marketplace for talent.
The way firms or companies attracted young talent was to offer an apprenticeship -- the expectation that people would join the firm and would be helped to progress along a reasonable well-defined career path until they either became one of the senior officers of the firm (partners, for example) or moved on. People joined the firm for careers, not jobs.
This didn't necessarily mean that people planned to stay with one company for life. It did mean that, if the system was not exactly "up or out", then it was at least "grow or go." Talented people didn't expect to stay at a given "level" for extended periods of time, and firms did not want them to.
Senior people, in the past, understood the aspirations of young professionals, their ambitions, their fears and their needs. After all, they had come up in the same system. And it was a system. Explicitly or implicitly, everyone knew what the "deal" was -- what was being exchanged for what.
All that's gone now, of course. Companies did a number of things to abandon the apprenticeship model:
a) Lengthened the time and odds of making it to "partner-level" positions
b) Started hiring experienced people at advanced levels, thereby "blocking" the path for those who were coming up the old way
c) Established permanent non-partner positions, also "blocking the path" and signalling that not everyone was expected to have career advancement
d) Made partners lives so stressful and unattractive that many junior people increasingly question whether the benefits of partnership are worth the efforts that an apprenticeship would require
e) Placed greater pressure on partners to generate work and serve clients, thereby reducing the amount of partner time available for mentoring, coaching and development of juniors
f) Shifted responsibility for developing people away from senior professionals and reassigned it to trainers and HR departments (!)
g) Started holding back crucial feedback on whether or not people were going to "make it": ostensibly this was to avoid making misleading promises for future promotions, but increasingly gave the impression that the firm wanted people to hang around "one more year" without the firm having to give any reciprocal undertaking
h) Stopped viewing their employees as future partners, and started treating them like REAL employees -- resources to be consumed, not assets to be grown
The problem with shift from an "apprenticeship" model to an "employee" model is that it couldn't have been done at a worse time -- right when there was a scarcity of talent, and when a new generation of people came along who could not conceive of investing seven or ten or twelve years of their lives to "make it."
This is not just a minor change, but a major revolution. Every assumption on which the professional business model was built has gone out the window. Firms don't offer apprenticeships, and younger people don't want to serve one. (See the June 11 blogpost at Adam Smith, Esq.)
Firms that abandoned the apprenticeship model now bemoan the fact that turnover among the junior ranks is extraordinarily high and juniors are not "loyal." Well, duh!
Apprenticeship is dead, but no-one is quite sure what has taken its place. Whatever it is, it doesn't seem to me to be a well thought-out, internally consistent set of policies and practices. It's a patchwork quilt covering up the gaps in an old fabric that has been forever torn.
11 comments:
Hi Richard -- I find your observations really interesting ... and very accurate!
I myself am pretty new into the working world and did the it old-fashioned way -- at the bottom.
And really, I can't see doing it any other way.
I have had the opportunity to see how the company works and help out on such a diversity of projects.
I don't know what the future holds, but I am confident that the manner in which I entered the workforce will enable me to be far more successful in my career as the years progress.
Although I can not speak about professional services businesses, I think the trends that you mention above apply to other companies as well.
The trends you mention, however, can be viewed differently.
It is now the responsibility of the individual professional to manage their own careers and development.
They have to chart their own path, neither waiting for their employers assistance or their permission to become the business person or professional they strive to be.
The responsibility has shifted, without a doubt.
As employees realise that they are responsible for things previously provided by career-long employers, they can chart their own path and request the mentoring that they need.
On a related note, could it be that the growth of the "life coach" industry is in direct corelation to the trends you indicate above?
It seems that people are finding their own mentors.
One more item could be added to Richard's excellent list of reasons for the death of the apprenticeship model: the securitisation of the firm.
Apprenticeship models were/ are largely partnership models.
The reward of achieving officer/ partnership status is one thing in a privately held firm where the ownership vests in the senior owners.
It is quite another in a firm governed by the financial demands of outside owners.
When it became commonplace to seek buyouts, to talk of multiples of revenue for the "owners" of the firm, things changed.
It moved from a sense of stewardship toward the young people who were the firm's future toward a corporate model where financial returns, usually of a short term nature, were dominant.
This wasn't just some emotional shift, either.
Anyone buying a professional services firm will want a return on their investment -- say, 15% conservatively, given that buying a PSF is risky.
Even at a multiple of 1.0, 15% ROI to the investor is considerably more than that in terms of impact on the bonus pool.
It is not easy to find that kind of added value in new efficiencies or synergies with an acquiring firm.
The net effect on existing employees -- particularly those within a few years of achieving officer or partner status -- is demoralising.
The net effect on newer employees is pay pressure.
Perhaps Richard knows: what is the success rate of mergers and acquisitions in the various PSF businesses?
I'm guessing -- not high at all.
Great points, everyone.
Charlie, you are particularly astute in adding the securitisation and "loss of stewardship mentality" arguments to the mix.
Measuring the success rate of M&A in professional service firms is hugely difficult, because it depends on whose success you are judging.
As you point out, the current owners at point of "sale" (or going public) can make out like bandits, while leaving behind a firm that is no longer as energetic or motivated because of the loss of the future ownership incentive.
Exceptions can be found.
Some would argue that Goldman Sachs has managed the transition, because it still makes enough money at the top to provide the incentive to stick with the apprenticeship.
You could also argue that some of the marketing communications conglomerates made money from their acquisitions because they substituted better current financial disciplines for the apprenticeship motivation.
However, the most common result of acquisition is the phenomenon you describe -- loss of OOMPH!
Some would say that's what happened with AT Kearney's acquisition by EDS and many technology consulting firm acquisitions.
But here's my real point: I don't want to be falsely nostalgic or romantic about "old models".
Professional businesses were always tough to make it in.
I just wonder if there are well-thought out "systems" for living in the post apprenticeship, post-stewardship world.
Both Goldman and Accenture are public companies, and THEY seem to be doing soemthing right.
So it must be possible.
I just think
(a) it's not commonly well done and
(b) I'm not sure I understand the new model properly.
This is a great post, Richard.
I am going to link back to it, because many of my readers need to see this in print.
I listen to HR go on ad naseum about employee retention.
We need to keep the "good ones".
The high performers.
Who do we lose?
The high performers.
Why?
You nailed it.
(f) drives it home.
It is so refreshing to see people out here in the blogosphere discussing the root of the problem instead of new and inventive ways to treat the symptoms.
Richard:
Not just because you were kind enough to refer to an earlier piece of mine I feel compelled to comment: This is one of yours "for the ages".
You have articulated what has been lurking in the back part of my brain in an inchoate, somewhat dreaded state of subconsciousness.
If you're right -- as I desperately fear you are -- that the old apprenticeship model is well and truly broken, then we need courageous and long-term thinkers to help us invent a new paradigm.
(The apprenticeship model was the antithesis of short-term thinking, and anything worthy of replacing it must be as well).
The irony, if there is irony and not just tragedy, in the current situation is that it's precisely the high performance/ high achievement people who see through the fog-machine of performance (non-) reviews and rhetoric about "commitments to professional development" and who are the first to opt out of the exploitative, demoralising system.
After all, they have options.
Perhaps only when the cost of this supra-normal attrition among the "best and brightest" begins to really hurt will firms be motivated to look beyond the common wisdom for revolutionary new paradigms.
I wish you or I (or anyone!) could show the way, but the prospect is awfully dark right now.
My feeling on this is that demographics, as much as economics, is responsible.
There were too many people baby boomer type people at the top of firms, and to continue to make junior people partners at the same rate required growth that just wasn't there in the market place.
So the choices were to ruthlessly prune the babyboomers, or to betray the youngsters.
Which would you do, if you were a babyboomer in charge of a firm?
Very interesting post, which makes me glad I've just jumped into corporate life from professional services.
Richard,
This reminds me of a conversation we had recently with our youngest associates in which we told them we hired them because we believed that each of them had partnership potential.
They were shocked and amazed that these thoughts were even a part of our hiring process.
They had been told during their educational career that they would have 7 or jobs in their lifetimes.
They assumed that we had hired them with the belief that they were not long term employees.
The demographic point is a good one -- altho presumably one that will resolve itself in the next 10 years as the boomers start to retire.
Another point is that professional services firms required lots of eager young grads to do the donkey work -- and they were motivated by the lure of a well-paid partnership in the future.
The back-office aspects of this donkey work are increasingly being outsourced to India, Eastern Europe, China, etc.
Do they require the same number of apprentices as in the old days?
Accenture & Goldman Sachs get mentioned.
Much of Accenture's growth has been in outsourcing rather than "pure" consulting.
Does outsourcing require an apprentice model to be successful?
Richard -- pursuant to another blog posting about getting word of your work out, I just wanted to let you know that I passed a link to this posting along to a colleague who found it VERY relevant to some work she's currently doing ....
Thanks for posting ...
Many thanks, Jeff!
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