Strategy's Strange Bedfellows

The Cohen Group, The Gingrich Group, former National Security Advisor Samuel "Sandy" Berger's Stonebridge Kissinger McLarty Associates tout their principals' executive and/or legislative experience as a means of helping companies, mainly U.S.-based Fortune 100 corporations, solve business problems. These boutique firms also enable their founders and followers to remain active in shaping public issues and national debates after leaving their government posts. "As we sat and thought about what kind of firm we could create, we hoped that we could find something that combined the public policy aspects of government life with the benefits of being in the private sector," says Nelson Cunningham, managing director of Kissinger McLarty Associates LLP and former chief of staff in the White House Office of the Special Envoy under Thomas "Mack" McLarty, who now serves as vice chairman of KMA. Cunningham and McLarty (President Clinton's first Chief of Staff) found their niche in 1999 by establishing KMA as a Washington office of Kissinger Associates International, which Kissinger opened in 1982. Gingrich, who also wanted to maintain a role in shaping public policy, much prefers the challenge of management consulting to, say, heading up a think tank. "I think it's much harder to be a consultant helping to solve real problems than it is to be a theorist," he notes.

The nature of the problem-solving consulting services these boutiques offer varies. The Cohen Group, which opened earlier this year, and KMA focus much of their attention on ensuring that the international playing field is level for multinational corporations. When a large telecommunications company encountered market access problems in Latin America, for example, it contacted The Cohen Group. "They needed to know what the leadership is actually thinking, the most effective ways the problem can be approached with local government officials," says The Cohen Group president and COO Robert Tyrer, a former chief of staff for the Department of Defense and longtime Cohen colleague. "Much of our services focus on problems with legislative or regulatory processes in a foreign country. We're working on a situation for an Asian client who has a particular problem in an Eastern European country regarding a financial transaction they undertook that has become snarled and needs to be unsnarled in some fashion."

KMA provides solutions to similar problems. "We focus more on a company's relations with the government world in the foreign countries where they operate," says Cunningham, "and not so much on the internal practices of the client."

The Gingrich Group, on the other hand, spends more time working with large companies and start-ups on internal strategies, particularly communications and marketing. "We look for clients who represent both a profit opportunity and a public-policy opportunity," Gingrich says, ticking off a list of clients: Idle-Air Technologies, which produces systems that prevent resting truckers from having to idle diesel engines for heat or air conditioning; Millennium Plastics, which produces water-soluble, biodegradable plastic that can be used to make golf tees or picnic utensils; and NetSchools, which aims to equip every student with a laptop.

While those engagements might sound familiar to career consultants, the fee structures probably do not. "Our fee structure is a monthly retainer," says Gingrich. "We don't do any hourly billing." His group occasionally takes an equity stake in what he refers to as a "baby company," but Gingrich notes that most of those stakes have not paid off. The Cohen Group also avoids billable hours, preferring to go with annual retainers or, occasionally, monthly retainers.

What ultimately differentiates these boutique firms is the brand cachet of their principals. "Having been the Secretary of Defense of the finest military in the world certainly gives one added visibility and credibility," says Cohen. "I have traveled the world over many times and have established relationships that will endure, not only for those who are currently in office but for those who are out of office and will come back into office and those who are coming up. The experience has been invaluable, and in terms of brand name it has an impact wherever we go." And when it comes to developing an effective communications strategy, Gingrich notes, "There aren't many people who designed something like the Contract with America."

Guidance vs. Lobbying

Another commonality these boutiques share is what they won't do. "We don't do any lobbying," says Tyrer. "We don't do any direct contact with the Hill or the executive branch."

But these assertions, which Gingrich and Cunningham also make, are quickly tempered with explanations of the kind of guidance the firms do offer. "We do no lobbying of any kind," says Gingrich. "But we're very comfortable sitting down with a company if they tell us what they're trying to get done, and giving them a sense of the context in which they're trying to get it done and how they can be effective."

The Cohen Group also helps clients develop a better understanding of regulatory issues and perspectives held within the White House, Congress, or the Department of Defense. "We're working with a client right now that wants to position itself better in relation to a particular type of defense program," says Tyrer. Specifically, the client would like to see the defense program reshaped so that its offerings become a more attractive option. "We can't do that for them," Tyrer notes. "But we can give them our guidance. We can say, 'Here's a way you might pursue this issue to give you the desired result.'"

Not that there's anything wrong with lobbying. "There are a lot of good companies and good people who do it," says Cunningham. But KMA and similar firms prefer to occupy a niche within management consulting.

Enlightening Alliances

Because these groups are, by dint of their leader's stature, niche operations, mainstream consulting firms have little to fear in the way of market-share loss. "Our practice is by nature a boutique practice because it relies so strongly on the relationships and the strengths of the principals in the firm," says Cunningham. "It's a not a cookie-cutter business where you can take 28-year-old MBAs and throw them into the mix successfully." KMA prefers a mix of about 15 former ambassadors, congressmen, chiefs of staff, Secretaries of Energy, and Fortune 100 CEOs.

Stonebridge's staff boasts a similar range of titles. "With Accenture, for example, you may not know who you're getting, but you're getting that brand so one person is the same as another to you," says Tyrer. "Because this is based on Secretary Cohen's name and the team we put together, we place a very high premium on giving our clients a lot of attention. I think that will be a limiting factor on growth. I could see us growing to twice our current size, but I could not see us growing to 30 people."

The Cohen Group's latest staff addition, Paul R.S. Gebhard, became available only after stepping down as special assistant to Secretary of Defense Donald Rumsfeld.

Gingrich would like to add staff, but only in a moderate, careful way. "I can see us having 15 to 20 account executives in two years," he says, "and maybe 40 in, say, four years." Those new additions, he adds, will be trained to The Gingrich Group doctrine, a set of principles developed over the CEO's 40 years of public involvement.

Despite The Gingrich Group's size, however, PricewaterhouseCoopers (PwC) and its 40,000 worldwide employees believe there is much to gain from a strategic relationship with the firm (see "Why Mr. Gingrich Went with PwC"). Through that alliance, Gingrich introduces PwC to decision-makers at prospective clients and PwC provides The Gingrich Group with office space, equipment, and support, and forums for testing and flexing his ideas.

"He overflows with ideas," says Ron Bachman, a PwC principal based in Atlanta who forged the alliance. "He's a tremendous thinker and we've benefited from that. I think he's benefited by keeping the stimulation of the kind of talent we've had in our firm. We've generated substantial business from those introductions that he's made."

Like most consulting companies, politically grounded firms seek out strategic affiliations. The Cohen Group has ties to PR firm Fleishman Hillard, law firm McDermott, Will & Emery, and private equity fund Thayer Capital. It's currently hammering out a relationship with an investment bank. "It allows us to offer a one-stop approach to addressing the many types of needs a client might have," Tyrer notes.

The Cohen Group does not currently have an alliance akin to The Gingrich Group's relationship with PwC, but that could change. Tyrer notes that his firm has participated in early discussions about an alliance with at least one Big Five consultancy. The same holds true for KMA (Kissinger heads Booz-Allen's international advisory board).

"Law firms and other service organizations come to us when they have reached the limit of what they can do for their client," says Cunningham. "In those cases, they need extra political or international clout to help them carry out their goals. Could it make sense someday to ally with a management-consulting firm? I think so, absolutely."

Blame it on Globalization

Globalization and its attendant challenges have helped fuel the need for expertise that only a few — a Kissinger, a Cohen — possess.

"I don't think there's any question that this type of expertise is becoming more valuable," says Russ Gerson, managing director, head of global financial markets practice for A.T. Kearney. "As the business world becomes more global, having knowledge of the intricacies of the economic and political systems and having the relationships are increasingly important. There are people out there who have deep academic and business knowledge. There are people out there who have strong understanding and knowledge of governments and political systems. It is a rare skill to have both of those combined — and this is the important part — with the specific relationships within those countries."

Without those relationships, global expansion is risky, notes David Bowe, senior consultant for Crisis Management Worldwide and a former member of the Central Intelligence Agency. "CEOs and executives, seeing opportunities in the global marketplace, will get on an airplane and then meet someone at planeside in a nice suit, with a smile, who gives them a good dinner," Bowe says. "Shaking that hand has all kinds of potential for disaster for that firm. I think most executives look at the global marketplace at surface level. It looks good. There is money to be made out there. There is opportunity for expansion, so why not go? But unless you've tested the depth of the water, you had better be very careful."

Bowe and other former government officials offer businesses a different set of optics through which to look at risks and opportunities. Judging from the their successful entrance into management consulting, the field may soon be seeing more been-there, done-that perspectives.

Sidebar: Why Mr. Gingrich Went with PwC

When Newt Gingrich left Washington in 1999, he received some welcome advice from a constituent who happened to be a PricewaterhouseCoopers (PwC) consultant.

Ron Bachman, a PwC principal based in Atlanta, served on the former Speaker of the House's congressional committee and worked as the local chairman of Gingrich's Medicare task force.

"When he decided to get out of Congress in late 1998, I approached him after having read that he was thinking about getting into healthcare consulting," says Bachman, who offered Gingrich guidance in setting up a consulting practice. "As I saw what he wanted to get into, I suggested that we talk to some of the PwC partners to see if a relationship made sense."

PwC formed an alliance with The Gingrich Group in May 1999, a few months after the new firm set up shop. In addition to healthcare, The Gingrich Group focuses its consulting activities on environmental and public policy issues. The functional scope of the services concentrates on developing communications strategies and capitalizing on periods of change — economic, technological, political, or otherwise.

What Gingrich describes as a "contractual, strategic relationship" with PricewaterhouseCoopers equipped his organization with infrastructure and guidance as it opened for business.

PwC provides The Gingrich Group with office space, equipment, and support staff in his Washington and Atlanta offices. "We help them, they help us," Gingrich adds. "We do a lot of things in collaboration with them." Some of those endeavors include speaking engagements, such as an event in Switzerland presented to PwC's European clients by Gingrich and PricewaterhouseCoopers Global Managing Partner for Consulting Scott Hartz. This speech and dinner presentation explores the effect of the new U.S. presidential administration on the European economy. "This event is about Newt and Scott talking about issues that are important to the client," notes Javier Ortiz, office of the chairman with PwC, "while leveraging their combined thought leadership."

Gingrich earns a significant income from speeches he arranges through the Washington Speakers Bureau, and his PwC interaction adds to his value as a thought leader and leading speaker.

"I bring our people to him to discuss ideas, and he can find out about some of our leading-edge thought that he can factor into his speeches in areas such as healthcare, technology, and globalization," says Bachman. "This is where he gets his benefit, if you will, because the compensation that he gets is relatively minor. In fact, when he was looking at options, it was almost embarrassingly low, compared to what he could have received from many other organizations, including law firms."

In addition to exposing its people to a thought leader, PwC capitalizes on Gingrich's relationships — particularly his connections with leading CEOs. "I sit down with him usually once a month and we go over target clients that PwC would like to provide services to," Bachman notes. "We go through some new products and ideas that we think we can target toward some of those clients. And we see if he has a relationship that might open a door, allow for a meeting or introduction where we can share what it is we can do for those clients or prospects.

Because PwC has a large Washington practice, most of Gingrich's helpful connections occupy the business world. "Make no mistake — he can help us understand the flow of work or who might be the best connection … but we already know the people there," Bachman notes. "Where he's been most helpful is outside of the government practice, and that is connecting us to hospital CEOs, industry CEOs and chairman, where most of our consulting practice really is."

What Gingrich does not do is lobby. "He takes no compensation from us for any government work that's generated [as a result of his guidance]," says Bachman. "He made a couple of things clear as we were developing a relationship. He didn't want to work directly for any foreign government, and he preferred not to work directly for a law firm. He wanted to connect to an organization that had some thought leadership and a lot of smart people."