The Unique Boutique

• Their overhead tends to be much lower than that of large firms, so they can offer their services for less.

• Smaller firms tend to be specialists, allowing them to make an effective case for offering clients a superior level and quality of service.

• Boutiques are typically very good at building relationships with their clients, and despite their diminutive size, they often bring their more targeted customer base a more customized service.

"By definition, they are boutique because they're perceived to have more knowledge in specific areas," says Patrick McKenna, a consultant to professional services firms. "They therefore can provide better service to the customer in their areas of specialization."
No one is challenging the survival of the brand name consulting firm; there's no denying that the benefits of working for a large firm are numerous, from compensation to prestige. But for consultants looking for a certain lifestyle or specialization, smaller boutique firms may offer a good home. Consulting talked to owners and employees of four such firms to get some insight into what life and work is like for these mavericks, and to understand the trade-offs — if any — in this alternative career path.

The North Highland Company
Atlanta, Georgia
Number of Consultants: 175
Number of Employees: 250

David Peterson vividly remembers the moment he made the decision to start his own consulting firm: while working at Ernst and Young and traveling constantly throughout the year. One evening Peterson came home to see his young daughter turn to her mother and ask: "Does Daddy still live here?"
That night he imagined a firm where consultants did not have to travel several days out of the week and where personal and professional life could co-exist reasonably. It is vision that is still vivid in his mind.
At first, he thought he would be leaving the big leagues — that he would not be providing the same types of customers with the same level of service. But he has slowly come to the realization that big really isn't necessarily better and that large firms "don't have all the answers to client service."
So in 1992 Peterson launched North Highland Company in Atlanta to offer Fortune 1000 corporations an alternative to the Big Five. Today, North Highland's 250 employees staff seven offices throughout the United States. The company has made the Inc. 500 list for three consecutive years as one of the fastest-growing consulting companies in the country.

At the core of his business model is the idea that consultants should work and live where their clients do. Peterson says that this model keeps consultants focused on doing a good job for the clients, which he argues is the essence of consulting.
"We think that it creates one of those virtuous cycles: If a consultant is committed to working and having a life in a specific city, then they're all the more committed to keeping that client happy," says Peterson.
Embracing this philosophy means changing the way people think about the consulting profession's relationship with its clients.
"What's missing in the consulting world is [a different kind of] professionalism to make long-term relationships work," says Peterson. "Most consultants are so interested in career enhancements or making money that they lose sight of this idea."

This is not to say that Peterson has no use for the brand-name consulting companies. He considers them an excellent source of talent.
Peterson's HR strategy consists of hiring consultants with several years'  experience with large firms rather than hiring talent directly from b-school. The average North Highland consultant has 14-1/2 years experience. What is surprising is that Peterson appears to have access to the pick of the litter even though he doesn't try to compete dollar-for-dollar with his bigger competitors. Many seem willing, if not eager, to take the lower pay in exchange for a more reasonable lifestyle and the chance to build equity in the company.
Compensation was a trade-off consultant Nancy Neuringer was willing to make. Prior to joining North Highland this year, Neuringer worked for Deloitte Consulting for more than four years, where she commuted every Monday from her home in Atlanta to cities like Phoenix and Toronto and returned home late on Thursday.

When she learned about North Highland, she was overjoyed. "I was told repeatedly that saying, 'I don't want to travel,' is not a bad thing," she says. And with that, she took a pay cut and joined the firm.
Ironically, she reports that a saner way of life has actually translated into more time with her clients than she had when she was with Deloitte. The only people seeing less of her, it seems, are the friendly airline and airport personnel who may have grown accustomed to her weekly commute.
"Today, I'm at the client site 40 hours a week at a minimum," Neuringer says.
And beyond local client work, Peterson encourages his employees to get involved with the local community — whether through church groups, local politics, or the company softball team. At a recent quarterly meeting, employees discussed the benefits of being part of the community from both a social and a business perspective. After all, you never know where the next client will come from. The strategy appears to be working for Peterson. North Highlands grew by 33 percent last year.

Crossroads LLC
Irvine, California
Number of Consultants: 65
Number of Employees: 100

This summer, Holly Felder Etlin joined Crossroads LLC — an Irvine, CA–based consulting firm that specializes in financial restructuring — after a 23-year stint at Deloitte Consulting. There, she had served as the national director of the Reorganization Services Practice from 1995–2000.
Today she is a principal in Crossroads' Financial Advisory Practice. For Etlin, of all ironies, joining a smaller firm after serving for ten years as a partner in one of the most prestigious firms in the nation had everything to do with access to opportunity.
Because of her work in the rarefied field of corporate turnaround and crisis management, the very fact that she worked for one of the profession's powerhouses limited the scope of engagements she was able to pursue.
"In the post-Enron environment, because Deloitte was part of an accounting firm, we did experience a number of restrictions as to the type of work we could take on." And as the crises and potential conflicts of interest mounted, she even ran into questions about the strategic fit for her division in the context of the larger firm's vision, interest, and goals. None of which she has to worry about now.
"Turnaround and crisis management is Crossroads' primary business, as opposed to being an ancillary portion of a much larger one. For me, that makes a huge difference in how we go to market and the kind of support I get as a partner here."
And that is exactly what Dennis Simon, a Price Waterhouse alum who founded Crossroads, envisioned when he started the company in 1997. His story is a carbon copy of Etlin's.
"After spending six or seven years running a turnaround group for Price Waterhouse and realizing that the cultural characteristics did not match up with what I thought were the client needs, I left and started this business."
Today, with 100 employees, the company is divided into five strategic business units: turnaround management; operations improvement; corporate restructuring; investment banking; and valuations.

And, given the state of the economy and business management, and the number of bankruptcies in recent months, Simon appears to have found a niche that will keep him and his employees busy for some time. "While the economy is creating opportunities for us, to some significant degree, incompetence has always created opportunities for us. There are winners and losers in every industry. They're just a little more visible now, since the losers are so large."
Crossroads hires seasoned consultants — the average consultant has 25 years of experience — to operate in a flat organizational structure. The business model to support this strategy calls for a compensation structure and promotion pathway that is not often replicated at the Big Five legacy consulting firms. At its core, it is a performance-based structure in which the fortunes of the consulting staff rise and fall with those of the clients. This is in stark contrast to those of most large firms, which tend to offer compensation packages that are driven by the overall profitability of an entire business.
"This structure does not lend itself to being responsive, in my view, to the needs of an underperforming company that needs immediate change and leadership to help be an agent of change," he says.
The highly accountable compensation structure does not appear to have dampened his recruiting efforts. In fact, half of the consultants at the partner and managing director level came from Big Five consulting firms.
"For me, joining Crossroads was about going back to the roots of the business that I had joined many years ago before the consulting firms really evolved and changed to what they are today," says Etlin. "When I say I can bring a team to a client engagement and the most junior member of that team has eight years' experience in the restructuring field, that's pretty compelling."
Clients like Day Runner think so, too. In 15 months, Simon and his team took the personal calendar firm from being on the verge of extinction — running $35 million-a-year deficits — to posting $10 million a year in profits.

RHR International Company
Wood Dale, Illinois
Number of Consultants: 120
Number of Employees: 68

Not all boutique consulting firms are born from larger ones. Not all are managed by MBA grads. Nor are all of them brand-spanking-new. RHR International Company, a consulting firm that specializes in corporate psychology, got its start in the late 1930s from four psychologists who went into business to conduct personnel evaluations for large industrial companies.

They began applying their expertise in clinical psychology to different facets of organizational behavior. By 1945, the partnership of Rohrer, Hibler & Replogle was formalized. Today, the company's practice is delivered from 15 offices in North America and Europe, using psychological assessment techniques to develop the strengths of individuals, the effectiveness of teams, and the overall performance of organizations.
All of the consultants have doctorates in psychology specializing in individual, small group, and organizational behavior dynamics, helping senior management understand and manage the unique psychological forces at work in their companies.
"The theme of the company is not about what functional knowledge you need to be an effective leader," explains Ed Ryderband, managing director of the New York office. "Rather, we help executives leverage that knowledge as a person. We think that the niche is very relevant and that it has bearing on how companies select leaders for senior positions."
Ryderband has been at RHR for five years, and like many of his colleagues left a larger firm in favor of a smaller company. Ryderband left a partner position at the Hay Group, a consulting firm with 1,200 consultants in 20 countries. He was looking for an alternative because the larger firm "had become pretty product- and process-based, and not client-based."
RHR clients are generally medium- to large-size corporations in a wide variety of industries, including manufacturing, public and private utilities, and service industries such as banking and food service.

To serve their clientele, the company maintains a recruiting mix of academic and industrial psychology professionals, and then proceeds to put them through an intensive training program that stresses business drivers and industry challenges.
"We make a big issue out of not being a bunch of psychologists operating in a vacuum. The latter is important, because people want to know if we know the business world."
Specific areas on which the company focuses include employee retention and development of key managers, adapting people to changing requirements in the market, improving teamwork, and integrating people and organizations following a merger.
For years, the company grew organically and by referral. Recently, though, RHR has started to market its services to various marketplaces. The company is also beginning to work more closely with other consulting firms on projects. Given the state of corporate America, the company's services will remain in demand. "In terms of selecting the right executive in the future, there's going to be more of an interest in people's character as well as their more obvious business management and leadership capabilities."

Princeton Consultants Inc.
Princeton, New Jersey
Number of Consultants: 40
Number of Employees: 45

Change is difficult for any organization to successfully — much less, gracefully — manage. And facilitating change is often what management consultants are brought in to facilitate and execute. But turning their own organizations on a dime is not something top players in the profession do particularly well.

This is the one trait that boutique firm Princeton Consultants has counted on for over 20 years to keep it competitive in the hyper-competitive consulting field. Perhaps one secret to the firm's longevity is the fact that the founder, Steve Sashihara, was never burdened by the traditional conventions of the profession. He started the company right after graduating from Princeton University, with the idea of unifying what were then two vastly different units of consulting: IT and management consulting. And in the ensuing decades, he has had to reinvent himself and the company several times to survive and thrive.
"In times when the game rules keep changing and the industries come and go, the ability to be nimble and to define your value proposition rather than sell the same stuff over and over again is critical."
It's an idea that he drives home at his own company on a daily basis.
He found that while most strategy firms focus on understanding corporate intent and formulating policy, they see implementation as a messy detail. Technology companies, on the other hand, often see technology as the main catalyst of change and consider strategic planning a one-time up-front exercise before the action starts.
"Our theory was that if we could combine these two, we would rock," Sashihara says. The end result is a company that drives its projects from a strategic, best practices viewpoint, and powers them with the latest in IT.
In order to offer this combination, Sashihara says that he tends to recruit people with academic backgrounds. These people, he says, are good at original research and are "prewired to retool themselves if the field changes."
As the economy tightens, Sashihara and his team are now competing more often with the larger firms for the same clients. His strategy is to be more innovative than the competition.
"Often times if a client gets four bids, they'll say, 'We got three carbon copies, but you approached it from a completely different angle.'"
Sashihara also says that he often can come in at half the price of the larger firms, "not because we want to be known as the low-cost consulting firm, but it's true that if you approach a project with three people instead of 15 with giant binders, you can accomplish a great deal at much less expense."
It's the exact environment J. Webb Friedly, a director at the company, was looking for. After working for a top-tier consulting firm for three years and not having a lot of interaction with the client, Friedly moved to Princeton Consultants and within a month was interacting with senior executives on projects. He has been with the company for six years and plans to stay, because he believes there is real value in the company's product and innovation. Rather than "reselling catchphrases and sending in large teams to a client in order to teach younger consultants the business, I feel like things are very straightforward here and the value is up front."
With 40 consultants and only five nonconsulting employees at Princeton, there is no doubt plenty of opportunity to participate in projects. "The same people who are going chest-to-chest with the executives are the same people developing the product," says Friedly.