A Consultancy of Generalists

In addition to its headquarters in Boston, Parthenon today has offices in San Francisco and London. Counted among the areas the firm's 130 employees today focus on are strategic planning, e-strategy, merger integration, acquisition and due diligence screening, and operational and profit improvement. Understanding how the firm established itself during the past decade requires a look back to Achtmeyer's time with Bain & Company, Parthenon's pioneering use of the consulting-for-equity model, and the firm's commitment to cultivating and maintaining a boutique approach to client service.

A Founder's Roots

Achtmeyer joined Bain & Company after earning his undergraduate degree from Princeton. He rejoined the firm after graduating from Dartmouth's Tuck Business School and spending a year as an assistant to the chief executive at Hoover Universal, an automotive parts manufacturer. "I thought Bill Bain and the people he put in place were first-rate," says Achtmeyer. "It was an exhilarating time."
One of those people was John Rutherford, who mentored Achtmeyer and later served as his sounding board when Achtmeyer, as a Bain director, helped guide the firm through the fallout from an employee stock ownership plan and other growth-related challenges. "John and I sat down on many occasions and asked each other if we could take the best things we'd seen at Bain and leave behind the stuff we didn't like … if we would like to do it," Achtmeyer recalls.

The pair's "Best Things at Bain" list included a focus on the chief executive, the consultant as a generalist rather than as an expert in a particular practice, and the seed of an idea about charging clients, at least in part, based on the value of the advice given. "We saw those concepts, at the beginning of Bain, as being real differentiators," Achtmeyer notes. "But as the company grew to be 1,200 people, some of that changed."
He remained with Bain through its subsequent restructuring, but made it known that he "wanted to go do [his] own thing, which they respected."

The Equity Gambit

Achtmeyer and Rutherford, who had retired from Bain a year prior to cofounding The Parthenon Group, implemented the practice of equity-for-consulting in 1992, a year after opening their doors. Although Bain & Company did not implement an equity-based fee model during Achtmeyer's tenure with the firm, he credits Bill Bain with cultivating the idea of charging clients for the value of the advice rather than for the number of hours of advice provided.
"We thought it would be interesting to say, 'Let's take some of our fees in the form of equity or performance-based compensation and do that at a fairly aggressive level,'" Achtmeyer says of Parthenon. "We've had anywhere from 10 percent to 17 percent of our revenue come in the form of equities. My view was that if we really believed that our advice was high-quality and could lead to improvements in value, then we ought to be willing to put our money where our mouth was."

Although a consulting firm's willingness to share in the taking of risk with clients can be a major selling point to clients, the model is not without its challenges. Achtmeyer says that the model was initially dismissed by Parthenon's competitors as gimmicky. Plus, consultants were not as inspired by equity compensation in the early 1990s as they were by 1997. Chief executives also can be tight-fisted when it comes to sharing stock, and the market, as the past six months underscores, has its ups and downs. "I think one of the closely held secrets is that consultants are generally the most risk-averse folks in the world," Achtmeyer says. "They get high levels of cash to join a company and then they get high levels of cash for whatever they're doing. And the client pays that money."

Most of the equity Parthenon takes in exchange for its services is private. "There are very few chief executives who actually feel that their equity isn't undervalued, so they're a little more persnickety about you taking it," he adds. "You're much more likely to take it in situations where private companies are going public." And, yes, Achtmeyer acknowledges that the market fluctuates, but he does not see that as a deterrent to Parthenon's fee strategy. "My view is that you will be collecting a portfolio of equities every year," he says. "When you have a downturn in the market, that must mean by definition that the next pool of equities you take will be at a lower value. And, over time, we all know that equity is better than cash."
Achtmeyer and the managing partners share that message with the rest of the firm, because most employees, even on the administrative level, share in the equity.

A Generalist Concept

The second tenet Achtmeyer and Rutherford established at their firm was the notion of consultant as generalist. Kosmo Kalliarekos, a Parthenon managing partner and founding member, drives home this point in his careful description of his role with the firm.
He explains that while he is the point person for Parthenon's e-business strategy activity, an e-business strategy "practice" does not technically exist at the firm. "I principally introduced the rest of our firm to e-business, but we did not necessarily create an e-commerce practice area," Kalliarekos, 36, notes. "I've helped our firm in understanding and internalizing New Economy practices into our core practice, and all of us are well versed in e-business practices because they are a core part of any kind of strategy development effort for any company right now."
Achtmeyer says that during their time with Bain & Company, he and Rutherford noticed that the consultants who thrived were the generalists who were able to move around and provide insightful advice in a variety of industries. "The consultants who were less the movers and shakers were those who depended upon the same kind of studies, another best demonstrated practice or reengineering study, within an 'expert group' area. In my opinion, if you really are more expert than the client organization is in their industry, there probably is a bit of a problem with that client organization."

Smart, but Humble, Advisors

Like other consultancies, Parthenon's managing partners have developed the intellectual architecture of the firm with top business school graduates. Many of the firm's consultants come from Tuck (where the William F. Achtmeyer Center for Global Leadership research center has been established) and Harvard (where seven of the 11 managing partners earned their MBAs), although other business schools, including Wharton, MIT's Sloan School, and Stanford, are represented as well. The recruiting mantra at Parthenon is "smart, nice, and driven."
Rather than exclusively relying on metrics such as grade point average and GMAT scores, the managing partners look for more subjective measures of intelligence. Each candidate meets with six to eight partners during the screening process. "My sense of smart is how articulate people can be about explaining what they want to do, what they have done, and whether or not they captivate you in the course of that discussion," Achtmeyer notes. "Most of the people at the Harvards, the Stanfords, and the Tucks of the world already have crossed the smart threshold. What we really need to spend a lot of time on is figuring out if they are going to have the humility required to be a good advisor."

That is a particularly important quality for Parthenon consultants, with an average age of about 39, to possess in their dealings with senior executives. That's also where nice — in the form of humility and empathy — comes in to play. "When I hear someone say 'culture,' it usually sounds so cheesy — I picture clip art of two hands shaking," notes Jill Segal, 30, a partner who joined Parthenon from Monitor Company in Cambridge, MA, in November 1999. "But there definitely is something extremely unique about the culture here. Everyone from the administrative staff to the managing directors is treated in a very respectful and equal way. Bill feels very, very strongly about that sense of mutual respect."

He also feels strongly about having a sense of humor. "A lot of the people you meet in this industry take themselves way too seriously," he says. "No matter how good our advice is, there is undoubtedly another approach." Parthenon lures the smart, nice, and driven (and funny) through the promise of opportunity and a boutique setting. When she announced her intention to leave Monitor, a senior consultant there questioned Segal about her decision. "He said, 'You know, Jill, Bill Achtmeyer does not need you to help him run his company,'" she recalls. "I realized that might be true, but I wanted a chance to make a difference at a smaller firm. Within my first five months at Parthenon, Bill asked me if I'd help open the San Francisco office, which was a huge strategic move. In the end, I declined for personal reasons, but the fact that I was asked demonstrates the opportunities that are available here."

Now that The Parthenon Group has a successful decade under its belt, Achtmeyer and his managing partners can worry less about survival and more about healthy growth. "We've given ourselves a lot of cushion with the injection of equities that have created significant value beyond the cash that we would have received," Achtmeyer notes. "Now we really have to concentrate on only two things. First, we need to maintain a familiar, nurturing culture so that we don't grow simply for growth's sake. And second, we need to deliver such high-quality work to our clients that we don't lose any of them."