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Secrets of the Big Firms

by: Michael W. McLaughlin
Summary

To learn why and how large firms manage to turn in consistently strong business performance, you have to look beyond the stereotypes.

Body

IT consulting jobs
 
 
 
You won’t have any trouble finding critics of the big consulting firms. As with all giant organizations, there's always something to find fault with. But too many critics discount the success of large firms and lose sight of the valuable lessons any consultant can learn from the big players.
 
 
To learn why and how large firms manage to turn in consistently strong business performance, you have to look beyond the stereotypes.
 
 
Easy Targets
 
 
My ears perked up at the forty-minute mark of the speaker's presentation on professional services marketing:
 
 
"It's easy for large firms to make money. They have so many feet on the street that selling is simple, practitioners have others to do the marketing, and their large, entrenched client base gives them a natural sales lead stream."
 
 
Two audience members on either side of me nodded in agreement with the speaker.
 
What struck me was how some observations—spoken with great certainty—can obscure the facts and cause important points to go in one ear and out the other without having any contact with the gray matter in between.
 
 
It is tempting to conclude that large firms have substantial advantages in the market and so succeed with ease. Look at many of their balance sheets and you'll find a solid base of capital, few liabilities, and enviable cash flow. By most other performance measures, too, large firms are doing well. Revenue and profit per employee are strong and gross margins are holding steady.
 
 
Is Size an Advantage?
 
 
Those who snipe at the big firms do hit the mark on some points. Many of the big firms lean on centralized marketing functions to push their brands into the market. And the large firms are, well, big. Many have elaborate support structures and a collection of practice offices located in high-rent office towers. Then there are those highly-compensated executive partners who roam the halls of corporate headquarters, supposedly thinking big thoughts.
 
 
The "advantages" of size come with a steep price that you should not overlook: corporate-style overhead costs, which require large-firm consultants to charge higher, and less competitive, consulting fees than less burdened firms.
 
 
The large firms do enjoy the benefits of an extensive client base. To be sure, that network of clients can provide their consultants with an initial audience for their perspectives and services. But one thing is certain: the days when clients simply hand over work to any firm—even an incumbent—have gone the way of the full-service gas station.
 
 
But many large firms are highly profitable and have been for decades, so they must be doing something right. Contrary to the opinion of the speaker I listened to, any sized practice can appropriately scale and use the strategies and tactics that keep the big firms aloft in good times and bad.
 
 
Mastering the Craft
 
 
Leaders of the large firms know that few things wreak havoc with client relationships and erase profits faster than a project meltdown—or a project that fails to launch. That's why they invest so heavily in professional development programs to help practitioners master the consulting process.
 
 
These firms focus substantial resources on building consulting skills in seven fundamental areas: problem definition; fact gathering; advanced problem analysis; creative thinking; solution development; client communication; and project management. When you equip talented people with the right consulting process skills, you free them to focus their creativity on uncovering what the client really needs them to do. And they get the work done faster.
 
 
Some consultants would rather read the dictionary than slog through the details of how to conduct performance gap analyses, revenue and cost studies, and business process diagnoses. But walk into a business operations improvement engagement, for example, without command of these tools and expect just about everything to take longer and cost more than you originally planned.
 
 
Take Your Best Shot
 
 
In 1994, Michael Jordan, one of the best professional basketball players of all time, signed a minor league contract with the Chicago White Sox baseball team. That year, Jordan's batting average barely broke .200 and he struck out 114 times in 127 games.
 
 
After that ill-fated season, Jordan returned to his roots as a basketball player and led his team, the Chicago Bulls, to three more NBA titles. When Jordan strayed from his specialty, he struck out—literally.
 
 
Large firms understand the value of specialization. They know clients buy based on their perception of a professional's ability to solve their particular problem and that person's depth of industry expertise. So, practice leaders have built firms chock full of specialists.
 
 
Time and again, I hear consultants say they fear that specializing will limit their target markets. But that's just not the case. For instance, if you offer systems improvements services to the financial services sector, you have thousands of potential clients to work with.
 
 
And specialization doesn't mean that you can't offer additional, related services to your clients. It means that you have to position yourself to take your best shot and then communicate to clients clearly about what else you can do to help them.
 
 
Large firm leaders know from experience that, whether we like it or not, clients buy from specialists. That seems unlikely to change anytime soon.
 
 
The Ties That Bind
 
 
It's not an accident that the large firms sustain long-term relationships with clients. The reason is simple: firm leaders allocate the lion's share of their marketing energy to grow high-value, mutually beneficial relationships.
 
 
Senior practitioners identify the essential relationships they want to grow and then create a systematic strategy for doing it. And the results of their efforts matter within their firms. The success of the relationship plan has a direct impact on a practitioner's earnings.
 
 
Client executives can be loyal to a brand, but that bond isn't nearly as durable as the connection between individuals. A firm's brand can open a client's door, but the client's perception of value determines whether that door stays open. Big firm consultants may have a somewhat captive audience, but the "annuity" client is a rarity in this business.
 
 
The outside observer of a large firm may see the flashy marketing collateral and miss how its consultants nurture and grow their most important relationships over the long haul. That can include helping clients with business and career issues.
 
 
A client's world moves more quickly today than ever before. The average tenure of CEOs and CFOs is less than four years. A CIO changes careers about every three years, and the CMO lasts a bit over two years. Most client executives live in a constant state of transition, so the strong relationship builder helps clients manage those complex transitions.
 
 
Looks Can Be Deceiving
 
 
Sometimes it's hard to figure out what a big consulting firm actually does for clients. Large firm marketers regularly crank out slick, but confusing, marketing communications. The somewhat muddled impressions of large firms mask what so many of the firms excel at, namely, delivering service efficiently, bringing specialists to each engagement, and growing professional relationships.
 
 
Those at the top of large firms often play it close to the vest and seldom reveal what's really going on inside their firms—to the market or even to their own business advisers. When these firms leave clues about the foundations of their success, it's wise to pay attention.
 
 
___________________
 
 
Michael W. McLaughlin is a principal with MindShare Consulting, LLC, a firm that creates innovative sales and marketing strategies for professional services companies. He’s the author of Winning the Professional Services Sale, and the coauthor of Guerrilla Marketing for Consultants. His newsletters, Management Consulting News and The Guerrilla Consultant, reach a global audience. Before founding MindShare Consulting, he was a partner with Deloitte Consulting, where he served clients and mentored consultants for more than two decades.
 
 

Author Details

Michael W. McLaughlin
Principal
MindShare Consulting, LLC

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