CM: You have frequently made the point that law firms, accounting firms, and consulting firms are all very similar as far as their talent model goes.
Tierney: The genesis of our thinking is the observation that these businesses are different and similar. Law firms, accounting firms, consulting firms, IT firms, executive search firms, advertising agencies, have more in common than first meets the eye. Although they tend to think of themselves as a profession, or as a vertical, they actually share a business model which underpins their success.
CM: Is this very different from other industries?
Tierney: Well, our next insight concerns any business where your people either are your product or are developing your product. It could be publishing, consulting, it could be software. Ask yourself, if you replaced A players with C players tomorrow, what difference would it make? If you took all the partners of your consulting firm, all the editors of your magazine, and replaced the A players you had with C players, would that make a difference? Of course it would. More and more businesses share that characteristic, where they are star-driven, talent-driven. That was something of an insight for us as well. Technology companies would consider themselves in step with that business model — in contrast with a mining company or a durable goods manufacture, where if you replace A with C players, it would impact the business but not immediately. The cycle times of the businesses are longer, and they are more dependent on market position or cost position or a number of other variables that drive profitability.
CM: Is it safe to say that there few similarities in the way professional services firms source their talent?
Tierney: The how is quite a bit different. For instance, IBM Global Services sources a lot from outside. Technology companies tend to source more from outside, as well as promote from within. A company like Bain tends to promote from within — so does McKinsey. Ad agencies tend to hire lots of youngsters, and then sort through that and find the ones with creative brilliance, and promote them. The business execution tends to be quite a bit different — take compensation, for example. Within law firms, some believe in the lock-step system, and it's very consistent with their culture and how they implement their strategy.
CM: Doesn't the partnership model become less effective as the head count within organizations grows?
Tierney: The partnership model evolves with scale, with globalization; it also changes if the company is public or private. There are variables that cause that partnership approach to morph, if you will. What stays the same as companies globalize or grow from hundreds of partners to thousands? Our observation was that there are certain sets of principles that do stay the same. For example, the principle of peer relationships — people at the partner level are not thought of as superiors or subordinates. Even if they have different titles, they're thought of as partners — and it may sound trivial but it's not. The culture around the partnership allows people to work together in a different way. It also is usually underpinned by a process that allows for more participation. Partners vote on things.
CM: Will a consultancy such as PricewaterhouseCoopers that operates within a partnership culture lose some of that culture's nurturing benefits when it sells shares to the public?
Tierney: When Goldman Sachs went public, it was a partnership vote. It may not be that every partner is voting, but it's a democratic-type process that really underpins even very large partnerships. So PwC would likely still think of itself as a partnership even though it has 10,000-plus partners. This doesn't mean that it is run the way a 25-partner law firm is run, but it does mean that the principles around which the senior executives in that company operate have some of the characteristics of a partnership. There's an open question as to what extent these large, complicated, multibusiness, multicountry institutions will be able to retain the reality of these partnership principles. I don't know.
CM: You have talked about leadership without control, What exactly does this mean?
Tierney: This is the great Catch-22 for anyone in a leadership position in these firms. This is by no means just the chief executive — this is people running practices, offices, and large client engagements. They have leadership responsibility. What does a leader have to do? He has to get things done. In a traditional corporate setting, a corporate executive has a fair amount of authority to tell people what to do. If you tell your plant manager what to do and he doesn't do it, you find a new plant manager. That's how the corporate world works, and there's nothing wrong with that. In a professional services world or any business that is star-driven, you can't tell people exactly what to do, because if you push them too hard they'll find someplace else to work.
CM: Their skills empower them.
Tierney: The very nature of star-driven business is that people are in those professions because they have professional skills and enjoy a certain amount of autonomy. Despite the recession out there, they are highly marketable. These people have options.
The leader has to lead without control — the leader has to influence people's behavior without telling them what to do. This is true whether the company is large or small, in many businesses or few. It is why leadership at all levels is so important to them. It's why leadership supply is so important. You have to find people who can lead without exerting control — and that is a difficult, challenging task.
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