Getting the Boss to Change

One of the most common types of questions I receive is how one can change one's boss. The following is a typical example, received recently by email:

I have been at my consulting firm for approximately six years now, but we seem unable to grow as a practice and I am also concerned that I will not be able to grow personally as a trusted advisor. A large part of the explanation is that our firm has a single, traditional authority figure in which all deliverables, on-goings, and business development must pass through. Many of us are ready to begin trying our hand at business development and having our own clients that buy us and our ideas instead of the authority figure. The authority figure may say that he supports this but does not change actions or behaviours when pushed back on to relinquish control. It is frustrating for me as someone who wants to grow, learn, and make my own mistakes, and also see the practice grow. What can I do to help institute change? Could I successfully broach the subject without getting myself into hot water?

Here are some quick and simple rules to apply in situations like these:

a) People help those who are trying to help them. You must earn the trust and confidence that you want other people to place in you. Give to get. What have you done that would make the other person want to give you a chance?

b) People do things to benefit themselves, not to benefit you. You must make the case why the other person would want to give you what you want. Why is it in his / her interest to do so?

c) Present your change idea not as "Here's what I want" but as "Here's how I can help you."

c) You need to understand what the other person's wants really are. Don't make lazy, short-hand assumptions, such as economic maximisation. You need to find out what their real psychological drivers are (need for glory, need for control, insecurity, vanity) and find a way to give them what they don't yet have enough of. Don't be unethical or exploitative, but recognise that you're dealing with the psychological complexities of a person here, not just a "rational, logical" situation.

d) Try and make it their idea, or at least their refinement of your idea. "Boss, I've been thinking about a way for us to get better at certain things. I've thought of a few options. What do you think of them? Can you think of ways to make them better?"

e) If you want someone else to give you what you want, ask initially for only a little. Ask for a chance, an experiment. Don't rush, don't get impatient -- seduce, don't assault.

f) Engage (make sure the other person is willing to explore the topic); Listen (Explore their true desires and wants); Frame (help them view the issue from a reviswed perspective); Envision (Hep them see what's attractive about a better future situation) and Commit (explore the actions necessary to get to the goal.) Don't rush to the next stage until you're sure you've completed the prior one.

As everyone will have seen, most of these rules are identical to those you would apply in trying to get a client or a parent to give you what you want. They are all closely related, if not identical.

Is anyone else willing to share their "rules of thumb" for managing the boss?

Not Qualified to Manage -- new managing videocast & audiocast

In this, the 6th episode of my live videocast and podcast series, I argue that there are certain core qualities that a manager or managerial candidate must have from the start. These are qualities that cannot be learned or faked. They are matters of attitudes and character: beliefs, principles, values and the desire to help others succeed.

Audio Timeline

00:39 -- Introduction
01:04 -- Management: A passion for other people's success
02:30 -- It's not about being "right", it's about people
05:32 -- Conclusion

You can download Not Qualified to Manage or sign up to receive new videos automatically with iTunes or other video players. (Click here for step-by-step instructions on how to subscribe.) My seminars are always available for download at no cost.

Why You Don't Want Me

Shaula Evans is one of my tech team. The remarks that follow were posted yesterday as a comment to an earlier blogpost about how to buy professional services, but I thought they deserved more prominence, so I have repeated them here.

As you read her remarks, think of marketing and selling your services, inside and outside your organisation. Shaula says:

"I know that you and I agree that many people approach business relationships like a romantic courtship: they put their best face forward, make outlandish claims and set incredibly high expectations, and then, over time, they fail abysmally at the impossible standards they've set and great frustration (and often high drama) ensues for everyone.

"My approach (when I'm on my game) has been the dead opposite: I tell the other person all the very worst things about me, all the things that make me hard to work with or that might make him or her choose a different partner. In business situations over the past several years, this has meant making business partners and clients aware that I am dealing with chronic health problems that currently include insomnia (which can make scheduling calls and meetings a little extra challenging). If partners want to proceed in full knowledge that my health requires certain accommodations, great! And if not ... it is not like I would be able to hide the truth for long.

"When I'm off my game, by the way, which is usually if I am feeling under pressure or insecure, I will start to want to "puff myself up" and pretend to be things I'm not. And typically, I fight down the urge to present a façade, and the relationship goes well, but when I succumb to the fear-driven need to be something I'm not (which happens less frequently, fortunately, as I get a little older and a little wiser), the story usually ends in disaster.

"My most successful use of this technique wound up getting me married. My husband and I met online (through an email discussion list for professional actors and directors), and fell madly in love before we even realised it. Unfortunately, he was in Charleston, South Carolina, and I was in Vancouver, BC, Canada, and we had no prospects of meeting in person until a convention for actors came up in Las Vegas (roughly half way between us!) that we were both planning on attending. We proceeded to chat on the phone, and did everything in our powers to each drive the other one away -- exposing all of our worst flaws and telling all our worst secrets.

"Our reverse psychology trick worked: I proposed an hour after we met in person for the first time, he eventually said yes (after he got over his initial tongue-tied shock; I really threw him for a loop since he had been planning to propose to me and he didn't see my proposal coming), and we have now been blissfully married for over 5 years.

"Back to the mundane world of business. When I have been sharp enough to try to "scare the other guy away," my results always been (almost) as good. Being brutally honest about my own flaws and weaknesses and particular needs seems to have encouraged the person or people on the other side of the table to respond in a direct, honest way (instead of an over-inflated, artificial way), so we could have a real conversation about whether we met each others' needs.

"When I worked as a technical and executive search recruiter, I used this technique, too: telling a candidate all of the worst parts about a job or employer, to find out if they were really interested; and presenting a very balanced and honest picture of the strengths and weaknesses of my candidates to my clients, so they could fairly judge if the candidate was a good match for the opportunity at their organisation. In this way, I built up great, trust-based relationships with both my candidates and clients -- and it was much easier to take care of everyone's needs.

"Of course, not everyone responds well to this approach. Some people are really baffled when you break away from the received conventions of social ritual, and their reactions can range from offended to upset to extremely hostile. Fortunately, such a response is usually a pretty good indicator that our communication styles won't mesh and I'm better off not starting a relationship with that person. ("A bullet dodged," as my husband would put it.)

"You can call this "reverse psychology," or "demonstrating trust in other folks to elicit their trust in you," or "telling the (ugly) truth" -- it all boils down to tell the other people in the conversation what they really need to know, to figure out if they want this relationship, and to have the information they need to move forward on a secure footing. In a way, it's an anti-game approach. And the great thing is, you can initiate this strategy from either side of the table.

"If you ever try to start a new business conversation by outlining all the reasons the other person shouldn't take your business ... I would be very interested to hear the results."

***

I endorse Shaula's insights. Her approach won't always get you the most business, but pursuing that is not the key to either profits or a happy life. The key insight is that in trying to form relationships, business or personal, you'll profit most by having an approach that screens people out quickly who aren't going to like what you do, and brings in people who do. That way, you get a high percentage of profitable, repeat engagements and fabulous word of mouth with a minimum of effort.

Does anyone else have a business perspective on or experience with this approach?

Spa Wisdom

My wife has always wanted us to go together to a spa. The thought has never been appealing; I've always thought of them as sybaritic luxuries. (They are!)

Still, I owed her -- big time -- for all her support, and I eventually agreed. We went to The Golden Door in southern California. (Yes, I always do things to extremes.)

For me, the highlight was not the spa experience itself, but the opportunity to listen to Deborah Szekely, the 80-something founder of the Golden Door, who gave a really fascinating talk one evening.

Among her pearls of wisdom was the advice that, every week, we should take an hour or two to examine what we have done with our time in the previous week, marking everything in one of five colors.

• Green would be used for anything that was a challenging growth experience
• Black would be used for things that were a waste of time
• Blue should be used for things that could have been delegated (even if the other person could only do it 85% as well as you could.)
• Red would represent something you did that was a deposit for your health
• and your own favorite colour would be used for time spent on family, friends and fun

This is more than just "cute." It truly is wise.

In a previous post we have discussed the issues of measuring and judging in running a business. The key insight that ties these topics together is that, as individuals and as organisations, we can only improve if we use our direct experience, taking the time to reflect on what has happened to us, and making small mid-course corrections.

There's no point having experinces, if you don't have a process for learning from them and building on them.

I'm not sure I want to go back to spas for the massages. But if there are people like Deborah Szekely there to listen to, sign me up again!

Personal Notes (Notes, get it?)

Warning:  this blogpost has nothing to do with business and is purely personal!

I got a note from Bill Peper, who has been an active participant in the discussions on this blog (Thanks, Bill!) He wrote:

I appreciate the great information on your site and the insights from your blog.  Your writing has influenced my career more than any other author.  I have a passion for the issues you discuss.  I am an attorney serving as a full-time independent contractor for Standards for Excellence, a voluntary continuous improvement process for GM dealerships.  I carry a few of your handout in my brief case, as they have proven handy.  I also "assigned" lecture 3 of your new podcast series to all of my managers.

I also suffered from severe sleep apnea for 30 years before a friend diagnosed it last year.  And I am a vocal music junkie -- but my tastes tend toward jazz and the Great American Song Book.  I would love to see you identify some obscure singers whose music you enjoy.

Well, Bill, let's restrict ourselves to the Great American Songbook.  (if anyone wants to encourage me, we can discuss jazz and pop some other time.)  I actually do not seek out obscure singers.  My philosophy has always been that as long as there's an Ella Fitzgerald recording that I don't have on CD, why would I want to hunt for anything else?  And when the time comes to play a CD, if it's a choice between Ella and somebody new -- well, quality beats variety any day.  (I have over 200 distinct Ella CDs.)

The same is close to true, for me, with Peggy Lee.  If it's not Ella playing, it's likely to be Peggy.  And (and this one may surprise you) I'd put Doris Day a close third.  She developed an unhip persona, but the lady can sing.  I have over 100 of her CDs.  Not an unlistenable recording in the bunch.  I first fell in love with her on a recording of the soundtrack she did of the ANNIE GET YOUR GUN, with Robert Goulet singing all the male parts.  (It's on one of the Doris Day Bear Family boxes -- absolutely essential

Finally, you want obscure?  That's tough, because different people "know" different artists, but are you familiar with the Boswell Sisters (from the 1930s)?  Backed by the Dorsey brothers, they recorded the swingy-est, close-harmony, swooping, stop-start vocals you'll ever hear.

OK, everybody.  Let me know.  Do you want me to stick to business?  Or would you like to have (VERY occasionally) some music conversations here?  Let the people speak!

Old Secretary

I have had a project on the back burner entitled "What I Wish I Had Known" in which I asked a variety of people what advice they would pass on to young professionals. In the near future, I hope to get this material organised and presented on my website.

One of the contributors is Debra Bender, now retired, who was a secretary (her preferred term) in a law firm. Her advice to young professionals, candid and straight from the hip, is now on her own blog, called Old Secretary.

Debra doesn't pull her punches. Here's a sample of her thoughts.

I once worked for a young associate who was such a pleasure that I suggested he consider teaching a course entitled, "How to Treat Your Secretary." Ken was always pleasant and easy-going, probably a quirk of his personality, but appreciated nonetheless. After reading the first letter I edited for him, he said, "Did I write this? It sounds great!" From then on, we were a team in the truest sense of the word. Even though he asked me to do things that went far beyond duties normally considered "secretarial," I would have done anything for him because I never felt that he was taking advantage of me. Requests were made on an "if you have time" basis and I had the freedom to say "I just can't do that today." Completed jobs were consistently rewarded with gratitude. When I asked how someone so young had learned such an important lesson, he said, with a smile, "At my old firm, I saw what can happen if you make a secretary mad at you and I determined then and there that I would never do anything to put myself in that position." Treat a secretary well and you'll be richly rewarded.

Another thing I will never do is cry in front of someone, no matter how mean and evil-tempered they're being. I have done my share of boo-hooing in bathroom stalls, but I refuse to let the perpetrator know he got to me. My policeman-husband's advice is a bit more pro-active, shall we say. "Don't let them intimidate you. When they come out yelling, just get up out of your chair and stand up, and I promise they'll think twice about carrying on." I have to admit that I've done that once or twice, even shaking my finger in someone's face. It was effective, to say the least, and felt good at the moment, but I'm not convinced it was the best solution, long-term. There's nothing quite as sobering as calm, total, rational silence in the onslaught of a ranting, raving, red-faced temper tantrum.

Since I work for three people, it is critical that everyone is truthful about assignments and deadlines. However, there's always the one who believes that fudging the truth about deadlines will get her work done on a priority basis and, on the opposite end, the one who always waits until the very last second, springs a surprise deadline on me and expects me to drop everyone else's work because his absolutely, positively has to be done before 5:00. Both are dishonest, in their own way, and make my job more difficult and stressful. Jus' the facts, ma'am. Just let me know what has to be done today, what can be done tomorrow, what's priority, what can wait, and then allow me the freedom to work your demands into my other assignments for the day. Another old secretary trick: When everyone's work has to be done at the same time, I simply stop working and say, "Talk to each other. When you've figured out how I should do this, I'll go back to work." It has never failed.

I told you she tells it like she sees it!

Don't Measure, Judge!

The mantra of modern management is (still) "If you can't measure it, you can't manage it" and much analytical creativity goes into trying to invent new metrics (eg "the balanced scorecard") in order to justify and monitor new strategies.  Corporate officers are always asking for (impossible) ROI calculations on such things as knowledge management, customer satisfaction, innovation and the like.

What this measurement mentality misses is the fact that, as human beings, we are remarkably well-equipped to judge things, and we can form an accurate picture of what is going on by looking, talking and interacting, even for only a short period of time.

Take, for example, the issue of whether or not the employees in a business are excited, enthused, energetic and engaged.

In spite of corporate efforts to design questionnaires to monitor performance (including the infamously ineffective and bureaucratic 360-degree feedback programs), anyone walking into a business unit would be able to detect in a minute the difference between a "turned-on" group of employees and one where everyone was operating like a good, compliant soldier.  It would have to be a very sophisticated "measurement" system to capture what any one of us could detect in an instance.

Embedded in the "management by measurement" mentality is a false hypothesis.  That effective management can be achieved through detachment -- that measurements will be reviewed by a top-level (corporate-style) manager who is not involved in a hands-on way in the business, but monitors what is going on through the scorecards.

There is much in business (perhaps most of the crucial decisions) that cannot be measured in such a way that an accurate meaning can be conveyed to the person examining ONLY the measurements.  Measurements can be invaluable in giving guidance to someone who must decide and judge, but are a profoundly pathetic substitute for effective judgments.

The challenge of modern business is not to improve our measurement metrics, but to redesign managerial activities so that the organisation is better able to make good judgments.

How would you think about designing an organisation that outperformed others by making effective judgments?  I don't think we yet have any science on this, but it would probably include:

a) Delegation of decision making to local managers who are more likely to understand what is going on and are able to make better, informed judgments;

b) A clear set of enforced guiding principles and objectives, so that trade-offs are made consistently across the firm

c) Careful selection and apprenticeship of those who are going to be placed in judgment (managerial) roles

d) Finding ways to ensure that the judges are credible and held accountable for their effectiveness

A good starting point for reading on this topic is an article entitled "The New Organisation" in January 21st issue of The Economist quoting Yves Morieux of the Boston Consulting Group.

M. Morieux says that, in the organisation of the future, the main tasks will be to help improve the judgment-based decision-making processes that knowledge workers use, not find better ways to measure their performance.

Anyone else have some views on how you improve an organisation's ability to judge, rather than measure?

Personal Branding

Rajesh Setty has just released a free 40-page e-book called
Personal Branding For Technology Professionals.  Including both concepts and workbook materials, he advocates developing a personal career strategy including some of the following lessons:

• Build your personal brand before you need it
• Give and get a lot of help
• Leverage all your projects
• Practice patience
• Be comfortable with being uncomfortable
• Who you are determines what opportunities open up
• Balance is critical

It is not just technology professionals who would benefit from examining Raj's thoughts.

For those of you who don't know his work, he is the Chairman of CIGNEX Technologies, Inc (a Silicon valley company he co-founded in late 2000), the author of a fabulous book Beyond Code, and a prolific blogger.

Unbounded Cynicism and (Almost) Despair

I hesitate to pass this on for a variety of obvious reasons. However, here goes.

On my website, by each piece of content, I invite visitors to rate (or evaluate) that item and provide feedback. The evaluation scale I offer is "1 to 5" with 5 being a top score.

Giving my article Are Law Firms Manageable? an evaluation of 0 (yes, that's zero) an anonymous correspondent writes:

Law firms don't work for a simple reason. All day long, lawyers advise clients how to screw everyone. In the firm setting they advise CEOs how to screw everyone, the CFO how to screw trade creditors, etc., etc., I could go on.

Lawyers are the ONLY really honest people when it comes to firm management. They know not to trust.

All the other firms where people are trusting someone -- sooner or later, the trusting ones will be screwed.

It's hard to know how to react to this, beyond pointing out that critiquing things anonymously isn't the basis for an intelligent dialogue. Do note something interesting -- the author is saying that lawyers learn to not trust because everyone they serve wants to screw someone and then hires the lawyers to do it. The clients (the business world) are not being portrayed in a good light here. This is not just lawyer-bashing, this is businesspeople-bashing.

I'm a professional sceptic, but the sheer cynicism expressed here is deeply depressing.

Yes, I know that we're all sinners, and that it's naive to believe that other people will always do the right thing, but is it REALLY a practical posture to act on the principle that "sooner or later the trusting ones will be screwed."

Surely there will be a Pygmalion effect -- if people see I always treat their motives with suspicion, won't they respond in kind? Won't I get less from the world by taking that position?

What's the evidence, for or against the cynical versus the hopeful view of the world?

What rule do you live by?

What rules do you teach your children to live by?

The Person Behind The Mask

We are always dealing with two people whenever we interact with a single person. There is the person in their role, and the human being beneath the role. Whether it's a client, a subordinate, a colleague or someone in your personal life, it's going to be the human being, not the "person in role" who is going to give you what you want and need.

A large part of success in business (and perhaps in life) in getting access to the human being behind the mask.

For example, clients like to pretend that they will buy through a logical, detached process, but don't believe a word of it. It's always (ultimately) going to be trust, confidence, comfort and chemistry that will -- at the tipping point -- win you the business.

If you don't like getting to the really personal, emotional level, this is not all good news. Especially if, like me, you don't have a natural proclivity for intimacy. My standard line is that I love audiences -- it's individual people I have difficulty with!

The role versus human being issue reveals itself when I do my consulting work. Very frequently, I will be facilitating or participating in a committee meeting to address an issue. I'll ask "Any questions?" and, often, the room is silent. (We're all in role-to-role mode.)

But as soon as we break for coffee, I get cornered in the corridor or followed into the bathroom (!) by people who want either to ask a really great question or tell me the truth they couldn't tell me in the open meeting.

Until a year ago, I was also a member of the "smoker's gossip club." Banished to the sidewalk outside the building, there were always a few people sharing my addiction, and they would always begin to tell me what was really going on. Having quit smoking, I no longer have access to that form of insider information.

People will always tell you more in informal "off-the-record" situations than they will in meetings. Formal meetings are a ritual dance, not a sincere effort at problem solving.

Early in my career, I used to avoid one-on-one, personal interactions with clients. Now, I try to create situations (for example, pre-and post-meeting telephone conversations) where I can give people the comfort to tell me what's really on their mind.

It's still an effort for me, but I've learned that, to be effective, I've got to do it.

The world is filled with people not "clients" or "bosses", and it's the "people-as-people" who are going to give you what you want, so you had better start working at understanding them -- one at a time.

What approaches do other people use to break through the role interactions and get other people to reveal themselves and their true wishes, desires and concerns?

Managing Works -- new managing videocast & audiocast

In Managing Works, the 5th episode of live videocast and podcast series, I will provide you with a personal example of outstanding management practice. The ensuing analysis contrasts this example with the more common modes of management within companies. The result is clear: helping people to perform to their fullest is not about critique. It is about helping people to realise their own goals and motivating them to attain them.

The content is based on my article A Great Coach in Action.

Audio Timeline

00:40 -- Introduction
01:03 -- An example of fabulous management skills
06:04 -- A comparative analysis of exemplary management skills vs. common management
14:31 -- Conclusion

You can download Managing Works or sign up to receive new videos automatically with iTunes or other video players. (Click here for step-by-step instructions on how to subscribe.) My seminars are always available for download at no cost.

Does Your Organisation Add Any Value? How Do You Know?

In yesterday's post, there is the beginning of a discussion about networks or "hubs" of professionals. I don't want to bring that discussion to a halt, but in this post, I'd like to explore one specific question that arises from the discussion.

If you are an organisation (let's say a company or a firm) made up of professionals who are mobile and can take both their skills and their book of business elsewhere, how would you go about judging or measuring whether your organisation was adding any value above and beyond the sum total of the individual talents (or books of business) of all the individual players?

In other words, how do you tell whether the organisation is contributing anything?

It's been a long time since I was an academic, but I do remember that there was a lot of work around measuring the EVA (economic value added) in corporations. Does anyone know if this can be readily be applied to professional environments?

I can imagine asking people whether they THINK their organisation is helping them succeed more than they could either on their own or (probably a better question) at another firm. I can then imagine asking them IN WHAT SPECIFIC WAYS do they think they are benefitting from belonging to one organisation. But that's pretty soft stuff.

I know there are real differences between firms in this regard. My old model of "Hunters and Farmers" analysed the difference between firms of autonomous entrepreneurs ("hunters") and firms where the value was emebedded in the organisation and everyone worked to make the overall entity succeed ("Farmers" or "One-Firm Firms")

I can usually tell pretty quickly when I visit a firm where on that spectrum they are, but I haven't (yet) thought through a way of assessing it so that (a) managers inside the firm can judge whether they are making progress in building a firm that is cohesive and adds value beyond bringing in the right warlords and (b) observers and analysts could compare the progress of different firms in this regard.

Does anyone want to propose some metrics on measuring or judging "value of the organisation?"

The Branded Free Agent Hub

This question was submitted by email:

I own and run a PR consultancy with 24 professionals. In the 13 years I've been in business, I've lost 7 of my best people. They either open up their own shop or move on to a client. In order to retain the great people, I tried offering bonus compensation (7 yrs ago) and opening up the chances for sharing in the ownership (3 yrs ago). Despite a great culture within the firm, I still had departures.

Now I'm reflecting on the idea of a Branded Free Agent Hub, a place where the best senior Communications/PR talent is exclusively pooled together, but where the senior professionals work independently (and even from remote locations) for their own clients. It could be somewhat like a cost sharing model found in some law firms.

The professionals could work, live and nurture the relationships with their respective clients at free will like an entrepreneur. They could work as flexibly as they wish. The hub would provide all the benefits of a large professional service firm -- stuff we already have in place like coaching, online project management tools, service offerings/packages, service innovation, a strong brand, administration, billing, reverse seminars with clients, sharing of knowledge with peers ...... you name it).

The professionals would bill 100 per cent of their time to their accounts. In return, the hub would keep a percentage of the revenues, say between 10 and 20 percent. The hub would fly under the flag of the brand I've built in the past 13 years.

So what's in it for the client? I presented the model to four of my long time clients. The model is not really relevant to them. They say as long as they can keep the relationship with their consultant and as long as the hub secures the defined service level they'd buy in.

And what's in it for the professional? I talked to some inside and outside peers. They think I'm crazy. They say I'll lose business and above all, I'll lose the professionals who may be savvy experts but not so good in relationships. They could be right. My math tells me that out of the 24 staff I'd have only 6 or 7 who would go for the ride. A ride that, I think, would be beneficial to the client as well as for the professional.

Is the Branded Free Agent Hub a professional service firm (PSF) model that's built for the future?

Boy, this question raises a lot of profound issues. Let me give some quick conclusions, inviting other people to jump in.

First, I have heard other people propose models like this. In fact, over the years, I have been invited to join in on one or two. (I declined.) I have NOT heard from -- or about -- those people ever again, so I don't think the model has had much success in general.

The single best example I know of where it has worked is with the EDGE group (which includes Patrick McKenna). They have an association of consultants who all advise law firms -- each person is independent, but they work together to share knowledge, do joint research, publish a shared journal and do other activities.

I think it works because they all do related things and have many opportunities to work together and learn from each other. If, in your model, the senior professionals did very different things, I suspect the Free Agent Hub would be very unstable. Maybe Patrick or his colleagues would like to join in the conversation here on which of the activities work best for them.

Second, I doubt whether the hub will justify a "commission" of 10 to 20 percent. In many countries and in many professions there have been both informal networks of firms and "aggregators" -- companies who buy up smaller firms and try to add value by providing the network benefits you suggest. The trouble is that the benefits are really worth paying a lot for. Let me give you a quick comment on each one on your list:

Coaching -- "I'm from headquarters and I'm here to help." (No, not worth a lot -- I can get input from my peers in the business community without paying a percentage off the top.)

Online Project Management Tools -- Maybe this was scarce 10 or 15 years ago, but today there are so many vendors offering good software for a variety of things that it's unlikely to be an ongoing benefit. Maybe as a one-time start-up I could use advice on these tools, but I'm not going to pay an ongoing premium to the hub / network / aggregator for their proprietary versions.

Service Offerings / Packages -- Yes, by partnering with other individuals or firms, you may be able to offer a wider range of services, or a new offering that combines in one project a diversity of skills. As I argued, the market recognises an advantage in creating something new, but doesn't consider a broader "menu" as much of an advantage if each of the dishes on the menu are available to them in the market anyway.

Service Innovation -- It's not clear to me that this is a guaranteed result of a hub of independent entrepreneurs. Yes, if they all agree to fund the same, focused research projects, then they can do more together than they can independently, but that requires true joint decisions and joint commitments, which not all hubs / networks / aggregators or firms achieve.

A Strong Brand -- I'm a sceptic that a brand is what the individuals get from the hub. I think of it in reverse -- if the individuals all live to a high standard, then the hub will have value in the brand (which, of course, is more than name recognition.) Exactly as your clients said, the brand value is in the achievement of consistently high standards. Fully-owned firms rarely achieve this, so I have my doubts about whether a loose band of individualists will.

Administration and Billing -- The benefits here are real but very small. Not worth giving away freedom and autonomy to get this.

Reverse Seminars with Clients -- If by banding together you can do more joint listening to and learning from the clients, then this could be a real benefit.

Sharing of Knowledge -- Very beneficial if real and on-going.

My bottom line is this -- I think all the topics I have just discussed need to be addressed whether you are an integrated firm OR a hub or network or aggregator. I don't think structural form is the issue, but whether or not you have the processes in place to capture the "Let's benefit by doing things jointly according to a common philosophy with mutual commitment." If you have that, there is value in your association together. If you do not have that, then being a hub (or anything else) won't solve your "departures" problem.

The right response to turnover and mobility problems is not (just) pay schemes. Instead you (and everyone else) must address the question of why your firm exists -- as a firm. What value does the organisation add above and beyond the individual talents of the individuals?

I discussed these questions in my article Are Law Firms Manageable?

There's a lot more to say on these issues, but let's see what others in the blogosphere say first.

Business Guru Breaks Ground as First Top-Tier Business Author to Podcast

EMBARGOED until Tuesday, April 18, 2006

Toowoomba-based business guru Richard Wood is breaking ground as the first top-tier corporate finance consultant to start podcasting -- making professional audio broadcasts available for download on the Web. The chartered accountant, named one of the top 40 business thinkers in Australia, launches his pioneering podcast masterclass series on management this month -- available free from his website, www.vistageconsulting.com.

Wood, widely hailed as one of the Australia's leading financial management authorities. For years people have asked Wood whether his articles were available on audio format. Until now, the answer was no, but now they are -- for free.

Wood likens the new 15-part series of podcasts, or free downloadable audio broadcasts, to a full university course in management. The new series launching April 18, entitled "Managing Professionals: Attitudes, Skills and Behaviours," builds on the success of Wood's original 14-part podcast masterclass on marketing launched in January, which surpassed 15,000 episodes downloaded and was featured as a "New and Notable" podcast in the iTunes Music Store. The earlier series is also available on Wood's website.

Podcasts are subscription-based audio broadcasts available on the Web. Podcast subscribers automatically receive downloads of new episodes from the Internet directly to their computers. Subscribers can then play back podcasts on desktop or laptop computers, portable mp3 players (such as iPods), and home and car stereo systems. For those new to podcasting, Wood's website includes suggestions on software for playing podcasts, instructions on how to subscribe to his podcast series, and troubleshooting advice.

Wood, one of the most respected consultants in his field, will cover topics ranging from what the latest research says about the key characteristics of effective managers, through motivation of individuals, building teams, earning the trust of those you must influence and judging your managerial success. The series is based on material contained in his many published articles.

Wood stresses that he is on a mission to help businesses realise that effective management remains a source of competitive advantage, but that most businesses choose the wrong people for managerial jobs. "Managers should be interested in helping others, but most look on management as a milestone in their own careers," says Wood. "You can't be an effective manager if people think you are only interested in yourself.

"This series is an attempt to serve individual people who are accepting a managerial role. I want to help them think through the role they have taken on, the responsibilities they bear, and how they can truly add value and make a difference."

Wood's work is dedicated to helping businesses promote and energise people to manage others more effectively -- even where this may involve telling them things they don't want to hear. His website also contains frank, constructive articles and videos about where companies are going wrong, and what they should do to ensure staff are resourced and focused on making clients happy.

The consultant who has lectured businesses for a decade on the power of "marketing as a conversation" is committed to 2-way communication through new social media tools. "The great advantage today of the Internet is the opportunity to create dialogues, and not just one-way pontification," says Wood. In addition to breaking ground with his podcast series, Wood is also one of the first top-tier business gurus to start a web log (or blog).

Wood's new blog and website, launched in January 2006, make thousands of dollars worth of consultancy wisdom available for free and Wood says, "After a long career, I'm very proud to be able to make these resources available.

"I firmly believe that the best way for an individual or a company to showcase both their expertise and their dedication to client service is to prove they have something to offer by giving something for free. Anyone who wants to test my theory can check out the resources available on www.vistageconsulting.com."

If you would like further information on Richard Wood's newest free podcast series, or the resources available on his website, please contact Richard Wood directly at (+617) 4632-6631 or richard@vistageconsulting.com.

Dry Cleaning and Grocery Shopping

In my April 14 post, I argued for the efficiency of providing lower-cost people to help higher-paid people stay fully productive. Among other good comments, Josh asked me the following --

Richard, can this concept be taken too far? Is it appropriate to use administrative staff, or relatively low-paid resources to free up a partner's time to the fullest extent? I know an accounting firm that encourages Senior Accountants and Partners to delegate anything and everything to the firm's admin staff, including non-business related tasks (picking up out-of-town guests at the airport, dry-cleaning, grocery shopping, etc.). Their concept is that time saved will result in more billable hours OR a happier professional. What's your take on this?

Josh -- first of all, everything can be taken too far. Second, I do think it is a good idea for firms to provide "concierge" services to busy professionals, as long as the same principles of wise delegation are applied at all levels. I would not want a trained administrative assistant -- who can add a lot more value through administrative skills -- being used to do grocery shopping.

The principles I argue for imply providing appropriate support all levels, not just the "élite" professionals or the senior people. Special privileges for the bosses creates a very dysfunctional class system. (I'm from Australia -- I know all about that.) But an organised, comprehensive program makes all the sense in the world to me.

Of course, the whole theory of providing good support rests on the assumption that people will use the time that is freed up to their highest and best use -- and this may not always be the case.

First, people often use the "freed-up" time inappropriately. More current billings may not be the missing element in the business mix. I frequently ask people why they are not executing and implementing their own plans for strategy, marketing, people development, self-development or a whole host of things. The answer comes back as a chorus -- "Too busy!"

"Too busy doing what?" I ask?

It turns out that people are too busy overinvesting in making today look good (this month's billable hours) an underinvesting in building a better tomorrow (their own "get better" strategies.)

If they had more free time, they should use it BUILDING their business -- finding the time to do the things they know they should be doing for the health of their careers and business and are not doing.

If more admin staff just results in more "billable hours" it can be simultaneously both a benefit AND a lost opportunity.

Finally, you hint, Josh, at another very important perspective -- does having more support to take care of admin or concierge needs result in HAPPIER people?

Well, fewer frustrations with admin and concierge tasks can eliminate sources of frustration (ie get rid of dis-satisfiers) and that's no bad first step. However, they taught me in business school about Maslow's hierarchy of needs which argued that the absence of dis-satisfaction does not mean satisfaction.

Firms that think they will have HAPPIER people through these programs are fooling themselves. In fact, they can (and do) backfire if the people think that, rather than being supportive, the firm is just trying to extract the last ounce of effort from them. Many people need the break provided by walking to the dry-cleaning store, just to clear their head and can return to their work tasks a lot more focused as a result of taking a break (I'm one of those people.)

This doesn't mean I shouldn't have support services available to me, it just means that the hope that you can eliminate ALL my down time and keep me fully operative all day long is ... well, it's nonsense. You can make me more productive, but not through support alone.

This last point allows me to stress a point where my own work has been misinterpreted and misapplied. I was able to show statistically that firms that can energise, excite and enthuse their people make the highest profits.

However, there's a world of difference between being energised, excited and enthused and having a "nice" work environment with support services, concierge services, crèches, maternal and paternal leave policies, etc. These help make people "happy" but "happy" isn't the goal -- turned on is. And that requires meaningful work, challenge, a purpose, skilled managers and like-minded colleagues -- none of which are provided but concierge services alone.

Yes, give me support -- even for picking up dry cleaning -- but it will all be a waste of time if you don't also help me find the meaning and magic in what you want me to do with the time that has been saved.

The Fat Smoker -- new strategy videocast & audiocast

In the fourth episode of my live video and podcast series, I identify the link between what it takes to effect change in our personal AND professional lives. As you will see, it's never that we are ignorant of what needs to be done, it is a question of having the determination and courage to put these behaviours into action as a way of life. This video is based on my article and podcast of the same name. It was filmed in Estonia in 2005.

Audio Timeline:

00:38 -- Introduction
01:03 -- The fat smoker
02:04 -- The avoided inevitable: Eat less, exercise more.
03:35 -- The courage to change
03:55 -- Go to class, do the homework: The temptation of short-term gains
05:28 -- Conclusion

You can download Fat Smoker or sign up to receive new videos automatically with iTunes or other video players. (Click here for step-by-step instructions on how to subscribe.) My seminars are always available for download at no cost.

False Economies

For many years, I have watched as businesses try to achieve profitability by drastically eliminating support staff positions, thereby achieving significant cost savings in overhead expenditures.

These savings have come at a significant strategic price. If there is no-one to whom you can delegate familiar tasks, then you just end up doing it all yourself. There is nothing "economic" about having high-priced professionals doing their own photocopying, database updates, billing, banking or any other kind of administrative work.

In their rush to be sure that economic resources are well-managed, companies try to judge the need for support people by how well utilised and how busy the support people are. This is a bad measure.

I actually do not care how busy my administrative support is. What I care about is how much of MY time they save.

Do a hypothetical. If an admin assistant costs $40,000 and I can bill $200 an hour, then how many of my hours would the admin assistant have to save me for it to be worthwhile. It's 200 hours, right?

And what's the probability that, if I had a dedicated person available to me, full-time, that that person could save me 200 hours of admin time that I could otherwise spend on building my business? A cast-iron certainty, right?

And yet that 200 hours would only be at 10 percent of that person's 2000-hour year. If they helped more than that, we're really going somewhere!

The two key strategic rules of cost management are these --

First, if something can be delegated, it must be

And

Second, you always want to have excess capacity of your cheapest resource, so that your expensive resources don't end up doing low-value tasks.

Can the Good Guys Win?

Adam Smith has commented on my article Are Law Firms Manageable?

I thought I would pick up the conversation and my reply with this new blog post.

In Adam's summary of my arguments, he asks me a direct question as to whether a group of like-minded people could create a more effective firm, and whether or not that would create a competitive advantage.

As anyone whoever took an economics class knows, you cannot always assume that virtue will triumph. Even if something confers a competitive advantage, that doesn't mean it will always emerge.

I seem to remember from my economics courses hearing about Gresham's Law of money, that the existence of counterfeit money will always drive out the value of good money. The bad guys can triumph by destroying confidence.

So, in a competition between trusting partners and untrusting partners, which will win -- within a firm and between firms?

My life experience is that, as often as not, disorder triumphs. A trusting partnership can and does exist, but it is a delicate flower, easily torn apart unless it is carefully nurtured.

Civilisation will, perhaps, eventually triumph, but in the short run the warlords can and do stamp out what appear to them to be weaknesses.

Trusting, collaborative firms can be sustained, but I am very cynical whether they can be created by transforming today's firms.

As Clayton Christianson reported in his book THE INNOVATOR'S DILEMMA, innovations almost always come from outside the existing order of things, not by getting established players to change.

If a truly collaborative, competitive firm would have an advantage (which I first suggested with my One-Firm Firm article), then why have collaborative firms not triumphed yet? Why are the internally competitive firms so much more common and getting all the press?

Can anyone show that the few collaborative are, in fact, more profitable or otherwise successful?

I can prove it with data outside law firms (Jim Collins has proved it with corporate entities, but could it be that, when it comes to law firms, I am completely wrong. Could it be that collaboration, trust, effective functioning as an organisation is, in fact, not a competitive advantage? I think it is, Mr. Smith, and I think that you think it is, Mr. Smith, it's just that the lawyers don't seem to think so! And they're our clients, right?

Thank You

The great advantage today of the Internet is the opportunity to create dialogues, and not just one-way pontifications. This blog has now been live for over two months, and I would like to thank the many friends, old and new, who have contributed to the conversation here with your comments and ideas.

David Alev, Andreas, Mark Baker, Martin Bamford, Jim Bennett, Mel Bergstein, Friedrich Blase, Anne Braudy, Nigel Burke, Shawn Callahan, David Campbell, CarSinger, Sebastian Carey, Peter Darling, David, Dean, Dennis, Shaula Evans, Peter FRIEDES, Brad Farris, Doug Fletcher, John Flood, Fouro, Dean Fuhrman, David G, Gareth Garvey, Michelle Golden, GordonG, Phil Gott, Andy Havens, Beverly Hedrick, Lori Herz, Dennis Howlett, Huda, Jaylpea, Jld, John, Stuart Jones, Cem Kaner, Rita Keller, David Koopmans, Miriam Lawrence, Wendy Leibowitz, Moe Levine, Howard Lovatt, Suzanne Lowe, Bruce MacEwen, Greg Magnus, Mason, Matt, Ed Mays, Patrick McEvoy, Patrick McEvoy, Mike, Matt Moore, Ludwig Ng, Paul O’Byrne, Mike O’Horo, Orikinla Osinachi, Jan Pabellon, Bill Peper, Lars Plougmann, Joe Reevy, James Robertson, Rolf, Roman Rytov, Rusty Scupper, Rajesh Setty, Michal Sobczyk, Brian Sommer, Nut Suwapiromchot, Ted, Coert Visser, Barbara Walters Price, Ian Welsh

I recently set up the trackback feature on this site in mid March.

Trackbacks are a wonderfully courteous practice peculiar to the blog world that makes a conversational link between blogs, similar to comments.

Most people find the name confusing and they could be more accurately called a "link flag" or a "link notification." When bloggers links to another blog, they can send that blog a notification saying, "Look! I’m talking about your ideas and linking to your site."

The blogger who receives the trackback can publish it on his or her site (usually near the comments), so readers can follow the conversation between one blog and another in the blogosphere.

I would like to also thank the bloggers who have been kind enough to link to this site and send a trackback in my first few weeks in the trackback community.

Adam Smith, Esq.
Adventure of Strategy
Anecdote
Community
Legal Sanity
The Bell Curve Scar
Votala.com

Welcome to the Real World. Figure it Out Yourself!

Adam smith, Esq, reporting on a survey about rising salaries for young lawyers, points out that, and I quote him here -- (a) paying people richly, and (b) expecting them to work like dogs in exchange, is the perfect introduction to what the life of a partner is like.  Consider it akin to an 8 to 10-year hazing process;  I predict that those who emerge alive and kicking at the other end of this funnel will indeed be partnership material.  (end quote)

Adam is astute, as always.  I was once trying to persuade an accounting firm that they should have a managed work assignment system, which could balance the competing needs of developing different people, balancing differing clients' requirements, etc.

His reply was that the unmanaged "Gotcha!" system (whereby juniors ended up on jobs -- or not -- only by having partners act like independent warlords, playing favourites or looking for cannon fodder) was critical as a screening process for partnership characteristics.

He pointed out that, in an unmanaged system, the only people who end up getting developed are those who can sell themselves and otherwise ingratiate themselves;  those who are self-starters willing to take the initiative;  those who can play politics, spot the good people to get to know, spot over-demanding problem people early and avoid them, etc., etc.

These were all essential partner skills, he pointed out.  Anyone who sat there saying "develop me, develop me" was, by definition, a loser who would not make it.  The firm, he argued, MUST NOT look after people, but must test them in action and see who survives.  Anything else would mean a generation of useless, wimpy partner-candidates.

That kind of thinking has mostly (but not entirely) disappeared from accounting firms and (most) consulting firms, but it's alive and well in law firms.

And it's a good argument, isn't it?  Or is it?

It's not.  It's actually rhetoric, not logic.  The fatal flaw of the reasoning is that what it's really saying is that, under the unmanaged system, winners win and losers are rejected.

But the test of a system is not what it does to the extremes -- winners would win and losers lose under MOST systems.

The real question that tests a management approach is not whether it rewards good performance and punishes underperformance, but whether it creates performance.

What does the system do to develop the ones who are neither natural winners, nor natural losers?  Does it help us end up with MORE people who have skills?

To argue that something "screens" for talent (or anything else) is to reject the organisation's responsibility to create something.  Professional businesses are not (or should not be) wholesalers who buy talent at one price and just re-sell it at another.  They must create value.

What Do You Want From Me?

Whether you are being given work to do by a client or a boss, it's common that people will assign work to you badly, and that will cause you problems.

How can you do what they want if they don't tell you clearly what they want?

The key is to take responsibility and ask permission to ask questions.

When someone gives you a task to do, say something like "I really want to do a great job for you, so can I clarify a few things?" Most people will say "Yes." You can then be sure you understand the following details about your assignment --

1. The context of the assignment -- "Please could you tell me what you are going to do with this when I get it done, tell me who is it for, and where does it fit with other things going on?"
2. Deadline -- When would you like it, and when is it really due?
3. Scope -- Would you like me to do the thorough job and take a little longer, or the quick and dirty version?
4. Format -- How would you like to see the output of my work presented? What would make your life easier?
5. Time budget -- Roughly how long would you expect this to take (so I can tell whether I'm on track or not?)
6. Relative priority -- What's the importance of this task relative to the other things you have asked me to do?
7. Available resources -- Is there anything available to help me get the job done? For example, have we done one of these before?
8. Success criteria -- How will the work be judged? Is it more important to be fast, cheap or perfect?
9. Monitoring and scheduled check points -- Can we, please, schedule now a meeting, say, halfway through so I can show you what I've got and ensure that I'm on track for your needs?
10. Understanding -- can I just read back to you what you've asked me to do, to confirm that I got it down right?
11. Concerns -- before I get started can I just share with you any concerns about getting this done (e.g., other demands on my time) so that I don't surprise you later?

Yes, your client or boss should be good at delegating or assigning work and giving you this information anyway. But the truth is that many people won't have thought through what they really want from you until you guide them through their "either-or" choices.

If you have not received answers to these questions, you don't yet know what to do, and the risk of being judged a failure is high!

Don't rely on your superior (or external client) to give you all this information. Pull it out of him or her.

Survey Results -- new strategy videocast & audiocast

In Survey Results, the third episode of my live videocast and podcast series, we will examine the correlation between a company's internal culture and the companies overall financial success. The results (from my article PRACTICE WHAT YOU PREACH) show the key to organisational success is the ability to energise, excite and enthuse the people who provide the organisation's services.

The key is to get on the improvement path. What is the best way to motivate and mobilise your organisation?

Audio Timeline:

00:38 -- Introduction
01:04 -- How does your office live up to its standards?
02:13 -- The constant falter: ANYTHING to do with people
03:50 -- Energy, Excitement, Determination, Passion, and Ambition: the only competitive advantage
05:26 -- Conclusion

You can download Survey Results or sign up to receive new videos automatically with iTunes or other video players. (Click here for step-by-step instructions on how to subscribe.) My seminars are always available for download at no cost.

Who Should Lead?

Carl A. Singer, senior implementation manager at Information Builders Consulting, posed the following question --

In architecture, we tend to assume that the "alpha" Subject Matter Expert will be the firm leader. For ten years my Army Reserve assignment was at the Army War College's Centre for Strategic Leadership. That, my B-school background and my life experiences has led me to question whether and when this conclusion is correct. Can a member of the professional "manager class" who is not a top architect / accountant / lawyer (fill-in-the-blank) professional lead a professional architectural / accounting / law (fill-in-the-blank) firm?

Carl, my experiences match those of your army, B-school and life background in questioning the (apparently common) assumption that the smartest technician should be the business leader.

The manager / leader's task is to help the organisation succeed by building the capabilities of others -- and that is not best done by having better answers than they have and telling them the right path.

Rather, it requires being able to guide other people through the process of building their knowledge and skills. And, of course, being good at something doesn't automatically make you good at teaching others how to do it.

On the other hand, to successfully manage or lead, you MUST have the credibility to be received as a good coach, as someone who has "been there and done it." The professional manager from outside the discipline will rarely be accepted as a coach. It CAN be done, but earning the trust of professionals is very hard.

(I described the coaching process in my article A Great Coach in Action.)

The formula is, I hope, helpful here.

Being able to lead means being trusted, and trust is determined by four things --

• Credibility
• Reliability
• Intimacy
• Lack of Self-Orientation

You have to be credible to lead, but you don't have to be the absolute best.

You do have to be seen as dependable or reliable, able to relate to those you are trying to influence on a one-to-one basis (that's intimacy) and be received as REALLY trying to help the group win, not just burnish your own glory.

Many otherwise fabulously skilled technicians fail these other tests and make pathetically bad leaders.

Who Likes You? And Who Doesn't?

In "The Wisdom of Confucious" (translated by Lin Yutan London, 1958) there appears the following exchange --

Zigong asked Confucious "What would you say if all the people of a village like a person?" "That is not enough" replied Confucious.

"What would you say if all the people of the village dislike a person?" "That is not enough, replied Confucious.

"It is better when the good people of the village like him, and the bad people dislike him."

Confucious died in 479 B.C., but his lesson still applies to strategy, marketing, managing and careers.

The essence of strategy is to achieve a positioning in the market where you can be truly the best on some key dimensions that clients care about. McDonald's is the best if what you want is clean, cheerful fast-food service. Some high-cuisine restaurant is the best in serving customers with other preferences.

As companies keep discovering to their cost, it is certain business decay if you try to please both of these distinct customers. To have some people really like what you have, it is necessary that some other people do not like what you offer.

Picking a strategy takes courage, which is why so few companies stick to their own. They can't stand anyone not liking them. It's like a customer walks into their McDonald's store and asks for a curry, and, since it's cash, we can't resist trying to adapt the restaurant to accommodate the new request.

And that, of course, will quickly make you cease being a finely tuned operation to deliver what you originally chose. You'll stop being the best at anything.

The same is true in marketing. Marketing is not about the number of people you can reach, nor the number of proposals you get to make. The essence of marketing is that you know exactly what your positioning is, and you don't waste time marketing to people who don't want that.

Just because millions of people despise Pepsi and would never think of drinking it (the snobs!), it doesn't mean Pepsi does bad marketing -- quite the opposite. It knows its constituency and plays to it.

All this also true of managing. It is not the job of a manager to be liked, nor to create a culture that can accommodate the broadest possible range of work and employee preferences.

As my research has shown, managers serve best when they create a clear (internal and external) ideology that says -- this is what we believe in around here. If you can believe it too, come on in and welcome. If you can't subscribe to our beliefs and way of doing things, please go elsewhere.

Done this way, companies achieve what Jim Collins in Good to Great called "getting the right people on and off the bus" -- right up front -- and have fewer subsequent management problems.

Since everyone has signed up for the same thing, the organisation can focus on getting to work fulfilling its purpose. The bad people did not like it there and either did not join or they left -- what a brilliant conclusion!

Finally, Confucious' lesson applies to each of us in our career and life. I remember being in college worrying that I didn't know enough about ballet, football, philosophy, what was on TV, modern art, jazz, my appearance. The list was endless on things SOME people would judge me on, and I couldn't possibly shine in all those things.

I also discovered that every discussion everyone alienated someone. The socialists annoyed the feminist who annoyed the environmentalists, who annoyed the religious groups.

There was only one solution, and it wasn't trying to please or be loved by everyone. The right answer turned out to be figuring out what I truly believed in, passionately throwing myself into that, and then seeking out the company of those who liked that, and avoiding the company of those who did not.

So, the test is -- do the good people like you and the bad people don't? If so, all's well!

Good strategic, marketing, managerial and career advice, after all. Thanks, Confucious!

Stop Paying for Performance

The disadvantage of pay-for-performance compensation systems is that they provide a wonderful excuse not to manage.  If someone's performance is down, instead of management seeing that there is an obligation to go help that person, they have a wonderful cop-out.  They say -- "We cut his pay.  We've done our job.  The rest is up to him or her."

Contrast this with what happens in a system where everyone gets a relatively fixed salary or share of profits, which changes as you get more seniority -- if you survive.

In such a system (often called a lockstep system because people move in lockstep up the pay scale), if someone underperforms, you have only two choices.  You either (a) work with that person and help them improve to deserve the same income as their peers or (b) if you cannot restore them to full share, you have to ask them to leave.  Notice that having lockstep without the guts to deal with performance issues is clearly a disaster!  A fixed-share or fixed salary system FORCES YOU to manage, ie to be intolerant of underperformance.

In other words, by not paying for performance, you end up with higher performance by tackling performance issues.  By paying for performance, you get less performance because the system allows you to accommodate underperformance.

As Gilbert and Sullivan said in The Mikado -- A most ingenious paradox!

There are further problems with pay-for performance systems.  If you have lived for the last 20 years in a performance-based system, which is almost always based upon individual pay, then by definition you will have no institutional loyalty.

The system has said to you for the last 20 years -- the heck with the firm, you will be paid on what you do.  We neither require of you to have any loyalty nor do we give you any loyalty, because if your numbers are down, we cut your pay.

So, the individual pay system is designed to minimise firm cohesion and thereby create the sort of "jumping ship" syndrome that we have seen in every profession.

If, however, you have lived for the last 20 years in a system where everyone is in the same boat together, and have all risen and fallen together, based upon sharing in firm-wide results, the probability that the people will stay together through hard times is measurably higher.

For the last 20 years firms have gone out of their way to say, "You are on your own.  Never forget that."  That's the message that every partner in the majority of professional firms gets from their firms.

There has been a very unfortunate history with all this.  Many countries (for example, the UK and the Netherlands) had two ancient traditions, which proved to be unfortunate in combination.  One was a tradition of lock-step compensation.  They also had a tradition of being "tolerant".  Collegiality in Europe meant -- you leave me alone about my flaws and I will leave you alone about yours.

The combination of these two approaches were disastrous.  If everyone gets a fixed share regardless of how they perform, and there is no tackling of performance, you get the famous "free rider" problem.

About twenty years ago, firms began to realise that they had to either start managing their people, or they had to start dropping the equal salary or equal share system, introducing pay for performance.  The bad news, of course, is that instead of doing the sensible thing, which is going toward an intolerant, fixed share or salary system -- in other words, start MANAGING -- they decided to go the other way and remained tolerant (unmanaged) and switch to pay for performance to accommodate wide ranges of contribution.  It has been disastrous.

Compensation as an incentive system is a cop-out or a crutch, just an excuse for not providing proper management.

There are two ways to assess the effectiveness of a compensation scheme.  First, is the money going to the right people and, second, what is the system doing to create desired behaviours and prevent bad behaviours?

A compensation system is and must always pay those that have done well.  Most systems end up paying the right people.  However, the design of the system also influences how people behave, i.e. what aspects of performance they pay attention to.

In assessing a pay scheme, you have to ask whether the system is getting people to do the right things.  Most are not.  Any time you try to use compensation as an incentive scheme, it will backfire.

The minute you tell a bright person what three things will be rewarded, you give them permission to ignore the ninety-seven other things they should be doing to make the firm work.  People do like specificity.  Every year people will come to you and ask what three things they have to do to get a good bonus.  And every year, you must say:  "Gee!  I don't know, and if I knew I certainly wouldn't tell you."

You must pay people as well as you can.  You must be generous and fair, but you must never reduce the compensation system to a formula based upon a limited number of things.  With a formula, you give people the permission to be an ugly human being and no one can do anything about it.

The problem is that firms are trying to use compensation as a means of raising performance, which it is not well-equipped to do.  Most compensation schemes in professional firms are basically saying, "If you succeed we will pay you."  This is a wonderful system for someone who is already a natural superstar and knows how to win, but in a sense unneeded for the superstar.  It doesn't add anything to the success of the firm because the superstar is going to win anyway.

For someone who is not a superstar -- and doesn't know how to win, doesn't know how to develop business, doesn't know how to delegate, doesn't know how to get organised -- then just saying, I will pay you if you do it, is not exactly a tactic that is going to work.  For the person who doesn't know how to raise his or her performance, changing the incentive won't help.  And what about the person who underperforms?  Is cutting their pay really the right way to energise them to perform better?

If you really want to raise firm profits by increasing performance, what you must do is manage people, and that involves one-on-one interactions.  Talk to people and help them raise their game, by encouraging them, exciting them, lift their enthusiasm, and help them deal with their issues.

Welcome and Thanks

A hearty welcome to those of you joining the blog discussions through www.accountingweb.com who have decided to make this their "official" blog.

Many thanks to Rob Nance for this act of faith. Together, I hope accountingweb.com and I can continue to serve the accounting community (along with the other professions who read these chicken scratchings!)

Strategy is Standards -- new podcast & videocast episode

Here is the second in the series of excerpts from my live presentations. You can watch the video version or just listen to the audio version.

The topic, this time, is the proposition that, for a professional firm, its strategy IS the standards that it lives. It follows from this that management's key role is the monitoring and enforcement of the values and principles that form the very core of a firm or company.

I talk here about values and principles not as "aspirations" (We aim to be ...) but as non-negotiable minimum standards. The success of a company comes from deciding on a core ideology and having everyone voluntarily agree to be a part of it.

Timeline

00:00 -- Introduction
00:30 -- The philosophy of managing with values
00:55 -- The only deal breaker: not playing the game
01:38 -- The importance of having organisational values
02:40 -- Conclusion