In the Land of Giants: Seven Small Consultancies are Energizing the Profession

By Joanne Summer

Princeton Consultants: Building a Firm with Superhuman Resources
Princeton Consultants, Princeton, NJ
Founded: 1981
Top Brass: Founder and President Steve Sashihara
Offices & People: 2 offices (Princeton and New York); 65 consultants
Revenues: About $20 million
Specialty: Strategy consulting

When consulting firms say they hire only the best and the brightest, they are usually engaging in a bit of hyperbole. Not so with Princeton Consultants.

This firm has built a strong practice and even stronger reputation by hiring bright minds from top-notch universities and putting them to work at solving business problems. Never mind recently minted MBAs from the top five business schools. Princeton’s consulting talent comes via the Ph.D. programs in nuclear physics, chemistry, and other specialties at universities like Princeton, Yale, Oxford, Stanford, MIT, and Harvard.
“We want to have a high level of innovation, but we also want to have the high-level technical capabilities to deliver on that innovation,” says Steve Sashihara, the firm’s founder and president. To accomplish that, Princeton has assembled an impressive cadre of what Sashihara calls Renaissance people or scientist-poets who are brilliant and well-rounded. “We are interested in people who are brilliant on the right side of the brain and on the left side of the brain,” he says. “The pool of these people is larger than you would think.” In many cases, the firm hires academics who are more comfortable as generalists than in the specialist roles thrust upon them in academia. “They’re vilified and chased away in academia and a lot of corporate environments, but we love those people and they have a great home here,” he says.

This group of broad thinkers has helped the company grow from its roots as a boutique firm writing customized software and to work through what Sashihara calls a “mid-life crisis” in the early ’90s.
“We were no longer happy being the techies in the back room being thrown a cookie now and then,” he recalls. “We felt that the stuff we were doing was really the leading edge of how companies could change themselves.” However, when the firm was ready to augment its technical savvy with broader management consulting work, its clients were a bit resistant at first. “Clients were telling us, ‘Don’t change what you’re doing, because there is such a high BS factor in consulting, and you guys are selling the good stuff,’” says Sashihara.
As for the future, “we don’t want to be the little cool firm with a boutique — ‘The Mouse That Roared’,” says Sashihara. “We want to be a major Class I firm.”

CDG & Associates, Inc.: Consulting as an Open Book
CDG & Associates, Inc., Dallas, TX
Founded: 1981
Top Brass: Founder and President Cynthia Driskill
Offices & People: Headquarters in Dallas, with virtual offices around the country;
75 consultants, 100 employees total
Revenues: About $20 million
Specialty: Human resources systems

What is the recipe for building a cohesive group of 75 consultants who are scattered around the country and come together only at a client site? For Dallas-based CDG Associates, Inc., the answer lies in equal amounts of client commitment, employee ownership, and open-book management — mixed together well.
CDG Associates built its reputation in the clearly defined niche of human resources information systems (HRIS) consulting.

Cynthia Driskill, the firm’s president and founder, views the firm’s culture as a distinct competitive advantage. “We have an unusually hard-working group of people for whom teamwork and conformity are very important,” she says. “The sense of mission is very clear — the client always comes first.”
Part of this likely stems from the fact 40% of the company is owned by employees through an employee stock ownership plan (ESOP), and that Driskill is a staunch proponent of open-book management. “We disclose pretty much everything, so every CDG employee is continuously updated on our financial performance,” she says. “This reinforces that feeling of connectivity because, when you have a virtual company, the great risk is that individuals will feel isolated and alone.”

Rather than hiring consultants simply based on their skill set, Driskill is looking for a culture fit first and skill sets second. “You can learn a product, but the cultural fit you really can’t adapt,” she says, adding that the hiring process lasts anywhere from three weeks to three months.
The approach seems to be working, with the firm boasting a virtually unheard-of 90% retention rate among consultants, as well as an 89% return rate among clients. Moreover, the open-book approach begins during recruitment, with candidates gaining access to the firm’s financials after signing a nondisclosure statement. “They can get a real sense of where we’re going and how we operate — kind of ‘The Good, the Bad, and the Ugly,’” she says. This, of course, is much easier to do when the firm has a good story to tell. “One of our great strengths is our financial stability,” says Driskill, who was presented with Ernst & Young’s Entrepreneur of the Year award last year. “Our financials are just gold.”

Bridge Strategy: Spanning the Strategy Gap
Bridge Strategy, Chicago
Founded: 1998
Top Brass: CEO and Managing Partner Steve Sheridan, and Vice President
and Managing Partner David Calfee
Offices & People: 3 offices (Chicago, San Francisco, and Stamford, CT); 50 consultants
Revenues: About $20 million
Specialty: Strategy and implementation consulting

In our list of seven small consulting jewels, Bridge Strategy is the new kid on the block. Founded in 1998, the firm and its consulting staff are looking to shake up the block a little bit. In fact, the founding members established the firm with an eye toward addressing some “gaps in the consulting industry,” according to Steve Sheridan, the firm’s CEO and managing partner. They should know. All the firm’s founders have 15 to 25 years of consulting experience with major firms like BCG, Andersen Consulting (now Accenture), and McKinsey & Co.
“We designed our business model to address the gaps that we saw in the consulting industry and the issues that clients were grappling with,” says Sheridan. For one thing, those clients conveyed a growing irritation that senior practitioners in the major firms were notorious for being available at the opening and the closing of the account, but rarely in between. For another, clients showed signs of “chronic fatigue syndrome” brought on by large, yearlong initiatives. “The pace of change in this marketplace suggests that the chances of achieving an outcome 12 months from now are very low,” says David Calfee, vice president and managing partner. “You have a much better chance of achieving a preordained or desired result with a 3-month time frame.”

To respond to those client concerns, Bridge Strategy specializes in identifying areas where a client can produce fast impact and long-term results. It avoids large-scale transformational projects and those that require end-to-end solutions providers. Moreover, it has a low-leverage model, so that clients get advice directly from seasoned consultants. “The firm tends to look for the areas of strategy where you can get quick return on your investment, which tend to be smaller, less leveraged projects, where they can compete very effectively with the big firms,”  says Ford Harding, president of Harding & Company, a Maplewood, NJ–based consulting firm.
The approach has worked for the firm. Even with the low-leverage model, its revenue per consultant was $375,000 last year. And to maintain that close contact with clients, the firm hosts frequent off-site meetings at which clients can discuss the issues they face and what they’re looking for in a consulting firm.
At the same time, the firm’s leaders acknowledge that the window of opportunity for making customer responsiveness a competitive advantage is closing fast. “It’s a very competitive marketplace,” says Sheridan, adding that the large firms know “what has to be done for them to remain current. We’re mindful of the need to be relevant, but also nimble.”

Canopy International: A Different Kind of e-Consultancy
Canopy International, Newton, MA
Founded: 1996
Top Brass: President and CEO John Campbell
Offices & People: Headquarters in Newton, MA, with other offices
in Burlington (ON), the U.K., Los Angeles, and Fairfax, VA;
80 consultants, about 100 employees
Revenues: $11 million in 2000; forecasted revenue for 2001 is $15 million
Specialty: E-commerce systems integration

The recent past has not been kind to e-consultancies. So why is e-business consultancy Canopy International included in our list of seven small jewels? Because there are exceptions to every rule.
For one thing, Canopy does not focus on becoming yet another full-service e-business consulting firm. “The whole first wave of e-business had a lot to do with the front end — strategy, user interfaces, and branding,” says Chris Maynard, the firm’s director of marketing. “We chose early-on to focus on the technology underpinnings of e-business. And we feel that the market in the second wave of e-business is much more serious about the technology underpinnings and integration among businesses,” which is where Canopy’s expertise lies. That means focusing on integrating the systems that make e-commerce run — order processing, manufacturing, billing, accounts payable, and so on.

So far, this approach seems to be working. Last November, the firm hosted the Open Applications Group (OAGI) B2B Vendor Challenge by providing e-business integration services and support to its participants. The “Challenge” was issued by the OAGI’s Customer Council members to promote interoperability among leading business applications through open standards.

Although the firm weathered the departure of its CEO late last year, Canopy seems to be on track for a strong 2001. Indeed, since its founding in 1996 by NEC Corporation as an ERP implementer, Canopy has refocused its business and, in the process, assembled an impressive client list that includes, Champion Paper, Honda, Sony, and Warner-Lambert Company. “We were able to evolve from ERP    integration to enterprise application and B2B integration and grow at the same time,” says Maynard.

The Alexander Group: Selling to Sales
The Alexander Group, Irvine, CA
Founded: 1986
Top Brass: President David Cichelli
Offices & People: Scottsdale (AZ), Irvine (CA), Stamford (CT), Atlanta, Austin (TX), Chicago, San Francisco; 125 employees total
Revenues: $20 to $25 million
Specialty: Sales effectiveness consulting

When you find your niche, stick with it. That is the approach The Alexander Group has taken as it has staked out some exclusive territory in the area of sales effectiveness consulting. And, interestingly enough, it hasn’t been competitors who have given The Alexander Group a run for their money — it has been the firm’s clients themselves.

“Sales organizations look like impenetrable fortresses of confidence,” says David Cichelli, the firm’s president. Even though the market for sales effectiveness consulting is large, the challenge most firms working in this area face is finding ways to breach that fortress and educate potential clients in a nonjudgmental way about how the firm can help them. “It’s too intimidating for a lot of consulting companies, and it’s hard for us, too,” he says. “Some of the toughest people to sell to are salespeople. The first thing they ask is, ‘What do you know about sales?’ And, ‘Have you ever sold anything?’”

To breach the defenses of sales organizations, The Alexander Group has become best known for sales compensation. Although they do a lot of other things, too, sales compensation remains The Alexander Group’s primary point of entry into a client. Part of the reason is that a good sales compensation program is a must-have for most sales organizations, and an area in which they are more than willing to ask for help.
Once The Alexander Group has a foothold with a client, it can win other types of work or provide sales-related software. “Back in the days of re-engineering, when everybody was figuring out how to take costs out of a company, this firm was figuring out how to get revenues into a company,” says a consultant who works closely with the firm. “And it has established a very special position in their knowledge of how to get the most out of a sales force to drive top-line revenue growth, as opposed to bottom-line growth.”

“We define our business by our buyer, not by the product that we sell,” says Cichelli. “Our buyer is a vice president of sales who is dealing with a series of issues. Mature companies are concerned about price erosion and cost of sales. Young companies are concerned about scalability. So whatever they’re concerned about in terms of go-to-market strategy and customer coverage is what we’re going to be working on.”

M.F. Smith & Associates: Aiming for the Middle
M.F. Smith & Associates, Morristown, NJ
Founded: 1978
Top Brass: CEO and Founder Michael F. Smith
Offices & People: 100 consultants, supplemented by about 300 subcontractors
Revenues: About $15 million
Specialty: Generalists

In 1978, Michael Smith opened the doors of his consulting firm, M.F. Smith & Associates. To mark the occasion, he deposited $100 of “capital” in a checking account and vowed to begin looking for a job if the account balance ever fell below zero.

Fast-forward to 23 years later, and Smith has realized a considerable return on that initial $100 investment. M.F. Smith & Associates is now a $15 million firm with more than 100 consultants, and has made the Inc. 500 list of the fastest growing privately held companies two years in a row. “In essence, we grew the entire business organically on that hundred dollar check,” says Smith.

The secret to the firm’s success? Instead of aiming for the big guns in the executive suite, M.F. Smith unabashedly targets middle managers and directors at large companies.
“We’re not interested in dealing with CEOs, because they’re externally focused. They’re dealing with Wall Street and a lot of other things, and there’s only one of them,” says Smith. “By dealing with managers and directors who have 500 people working for them, you are working with someone who is dealing with budgets and operational efficiency, and they have a very real need.”

Once working with a client, Smith and his colleagues scope out projects with very specific parameters and goals. “I would much rather work on a series of projects for a client than take on a sort of never-ending relationship,” says Smith. As a result, “we have a tremendous amount of client loyalty and trust” that has resulted in a 93% level of repeat business.

In addition to its own clients, about 15% of the firm’s business comes from what Smith calls “private-label” consulting. “Large, prestigious consulting companies will sometimes take on an engagement and get themselves into a pickle where they need some additional resources,” says Smith. “We provide them with consultants at our standard rates for their projects. We even carry their business cards.”
As for the future, Smith is confident in his firm’s ability to continue to grow. “You see the highs and lows more in companies that are selling more smoke than substance,” he says. “I think you will find that a good, substantive consulting firm just keeps moving along.”

RHR International: Helping Management Help Themselves
RHR International, Wood Dale, IL
Founded: 1945, as Rohrer, Hibler & Replogle
Top Brass: President Allen Parchem
Offices & People: 15 offices (10 in the U.S., plus Toronto, London, Brussels,
Cologne, and Moscow); more than 80 consultants
Revenue: $25 to $50 million
Specialty: Management counseling

In these days of scarce talent, companies need help in supporting the growth and development of their management and executive talent. Enter RHR International, a firm that has developed a niche in providing private psychological counseling to management.   

Founded by three psychologists in 1945, RHR came to be inside an era when psychologists were not taken seriously in business. The firm began by helping senior managers select people who would be a good fit for their organization. “They wanted to create a firm of psychologists who happen to be businessmen,” says Jeff Durocher, the firm’s director of marketing. Today, the firm specializes in executive selection and development, change implementation, developing high potential employees, team building, succession planning, merger integration, and executive education.

And all its consultants are doctoral-level psychologists with business experience. “We hire less than 6% of our applicants, because we require both,” says Durocher. Most psychologists have only academic or health care backgrounds, and few have much business experience.
Moreover, the firm only takes on projects where it can have an impact. “We like to build a partnership and work through the problems together,” says Durocher. “If the company fails, then we feel like we failed, too.”
As the firm continues to grow, it is facing some challenges, not the least of which is its ambivalence about growth.

For one thing, as its client base becomes more global, the company must determine whether to continue to provide personalized, face-to-face interaction with such a far-flung client base or to come up with some form of intervention formula to implement from a distance. “Face-to-face is very powerful, and we don’t want to lose that power,” says Durocher.
For another, the firm is approaching a milestone of $50 million in annual revenue, which could have important implications for the path going forward.
“Our feeling is that you become a much different kind of culture when you go from $50 to $100 million,” says Durocher. “We really enjoy the collegial culture we have, and we’re not sure we want to lose that.”