Short Takes

European Borders

The British Are Coming

Just how British firms organize themselves to exploit markets in mainland Europe has entered a new period of development, according to a survey of over 170 British-based companies.

The concept of a single European marketplace rather than separate national ones is strengthening, according to the report "Europeanization, Globalization, or What?" by U.K. consultancy Collinson Grant, Financial Director magazine, and Manchester Business School. As a result, two-thirds of the large and medium-size businesses surveyed are now working toward creating a regional or pan-European structure, and 55 percent regard Europe as their home market.

Larger companies are leading the drive to exploit markets in mainland Europe, and in the process are getting even bigger. These firms are more likely to fully integrate their acquisitions than smaller ones are, and they are more driven by a desire to reduce costs when planning a takeover.

When firms look to restructure, relocate businesses to, or even invest in businesses on the mainland, commonly perceived disincentives to investment may not be so critical, according to the report. Only 28 percent of the British executives surveyed think that the cost of labor is the principal factor in their choice of new locations, while less than a third consider that government regulations, incentives, and fiscal policies are important factors. However, 43 percent thought that trade union activity does influence their planning.

The Consultancy Query

DiamondCluster CEO Mel Bergstein Responds to the Amplified Gloating of Privately Held Rivals

CM: How do you believe the events of September 11th have impacted the consulting sector?

Bergstein: I think everyone realizes what happened here, and it's that following September 11th the country shut down, and as far as the impact on consulting in particular, it was especially hit … travel was a big issue. We actually banned travel for a week. I would say it took three to four weeks for us to get back to some degree of normalcy where you'd actually talk to clients about anything other than terrorist activities. I think everyone was in shock. It took a month out of basically any ability to develop new work and since then what we've seen is that business is trying to get back to normal, and I think we're starting to see our clients talk to us again about growth and clients anticipating some budgets starting the first of the year.

CM: Eighteen months ago, certain publicly held firms suggested that the age of large private partnerships was coming to an end inside the consulting sector. Today, certain private partnerships tell us that the publicly held firms are now "unwinding," and are unable to last through a full economic cycle. How would you respond to such thinking?

Bergstein: There is a bit of gloating going on and private partnerships clearly felt the pain while we were in the bubble — their turnover was enormous. But I think this logic is not very sound. It has only been within the last ten years that professional services firms could go public, and so I think it's premature to say that firms can't survive the cycle. I think the logic that is being used against us is the logic of tradition, and I believe these big private firms, where partners have made a lot of money over time, are definitely afraid that their model could be broken and might not survive. I still believe that in the end the public firms will attract and retain talent better than the private firms, but time will tell, and we are certainly being sorely tested right now, no question about it.

CM: Some suggest that private firms can hold on to their clients better — that since they don't have to answer to Wall Street, they can afford to spend more to keep their clients happy in a down economy.

Bergstein: I don't think that's true. I think that basically your ability to hold on to clients during bad economic times is really about the culture of the company, and it's not about whether the company is public or private. My recollection of the old days at Andersen Consulting was that those partners were not very tolerant of a drop in their personal earnings, and you can trace secession as having to do with changes with partner income quite often. I think investors have taken a long-term view. My belief is that partners are a lot less forgiving than public investors are. I think investors believe that the business model works in the long term, and we have a great client base and we will work our way through this. Now, having said that, my sense is that McKinsey partners, as far as we can tell, are operating for the long term. Those partners have sacrificed. So, I think it's a cultural issue. It's not a public versus private. I think investors understand cycles way better than the partners in private firms do.

CM: Should consultancies that partner with Microsoft be concerned that its CEO, Steve Ballmer, now sits on Accenture's board?

Bergstein: My sense is that Microsoft and Accenture are such large companies in their respective industries that I just don't think it means that much. … In fact, since he's now on the board, there will need to be a higher standard of disclosure, as far as what Microsoft and Accenture do, and this might serve the industry well. So, in some ways this might be the reverse of what some people may suspect.

Client Engagements

Celerant Revs Up Formula One

Can you name the sport that sells over two million tickets a season, generating $500 million in revenue and a televised viewing audience of roughly 360 million people for every event?

It's called Formula One Racing, and one of its teams recently turned to Celerant Consulting to help optimize its game plan.

While in the early stages of the relationship, Celerant is helping the Jordan Grand Prix Team minimize fault recurrence, speed up modifications between races, and significantly reduce fault-response times. The team transports 18 tons of material to each race and currently employs a staff of 260.

Every two weeks, 17 times a year, people tune in to follow 11 teams representing 10 engine manufacturers, including Jaguar, BMW, and Mercedes. The Jordan Team, founded by Eddie Jordan in 1991, is currently fourth in the Formula One circuit.

The team's goal is to become the number one Grand Prix team in the next three to five years. Don't look for Celerant's name to appear anywhere on a Grand Prix racing machine, however. The consultancy opted not to barter fees in exchange for advertising.

Relationships

Tips for Creating Effective Teams           

Many of the world's best CEOs often fall short of creating and managing an environment in which their top executive teams can be effective. The Hay Group offers the following misconceptions and realities about team leadership.

Misconception: Great CEOs always make great team leaders.

Reality: The very "take charge" traits that often help CEOs rise to the top can wreak havoc in a team setting. Instead, CEOs should be more democratic — letting a team be a team by making members believe that their voice will be heard and that what they say matters. Too many top teams are no more than a periodic meeting of department heads who report information to the CEO.

Misconception: CEOs and other top team leaders should be out front, "modeling the way" for the rest of the team.

Reality: This management style, called pacesetting, may undermine the confidence of team members. It guarantees that the ideas generated by the group will only be as good as the leader's — and prevents the synergy that leaders desire on teams. The leader should focus on setting the goals and defining and enforcing effective team behavior, and then step back.

Misconception: Top teams require a fluid environment so that team members can collaborate as they see fit.

Reality: Teams need boundaries, rules, procedures, and norms to be effective. These come directly from the leader, who must enforce them. Without these parameters, team members can lose focus and begin to feel that some members aren't pulling their weight.