Managing and Defining a Growth Culture

Cultural Change vs. Marketplace Response

Looking back, Bain and Company's decision, on the cusp of the dot-com flameout, to develop new IT services capabilities does not appear overly opportunistic. The firm believed that IT had arrived as a genuine C-level topic of concern, but its leadership realized that the degree of IT capabilities it sought would take too long to develop within the firm. So, Bain hired a number of senior people from outside the firm.
Dave Sanderson, the Los Angeles–based head of global recruiting for Bain and Company, asserts that the senior-level hires not only demonstrated their IT knowledge and capabilities, but were also rigorously screened to ensure that they possessed values and experiences consistent with Bain's results-driven culture.

Bain also has continued to invest in its business throughout the peaks and valleys of economic cycles, and Sanderson stresses that his firm "didn't take a dime away from training" in the recent recession.
But Sanderson emphasizes that the firm's growth decisions support its culture. "It's not about a growth culture or a cost-reduction culture," he says. "It's about a culture, period."
Unlike Sanderson, Accenture Director of People Matters Keith Hicks very much believes in the notion of a growth culture. He says that his firm embodies it: Accenture has consistently expanded in the past dozen years with the exception of a recessionary blip.
In addition to hiring, Accenture is advancing its growth culture by "re-recruiting" consultants who weathered the sector's downturn with the firm. The large firm's longstanding program of assigning each consultant a more senior "career counselor" has been reinvigorated. Counselors are receiving computer-based training and participating in instructor-led classes designed to strengthen the career guidance they dispense. A firmwide survey is asking counselees to assess their counselors. Next year, that assessment becomes part of every career counselor's formal performance evaluation.

A Conscious Choice

Firms that manage growth in a way that supports their culture do so methodically.
"Growing a consulting company, with rare exception, is not an accident," says Phil Clement, founder and principal of The Clement Group. "You very much have to pick what your growth vehicle is going to be." Those options include increasing the size of an average project, boosting prices, offering different services to the same clients, or offering existing services to more clients, which typically requires more consultants.
LanpherWilson Corp. President and Chief Operating Officer Paul Wilson focuses more on profitability and retention metrics than he does on his young firm's top line. The consulting firm's first project was billed in October 2002. A year later, the firm boasted 23 consultants. Today, there are 44 consultants and only two full-time employees — a recruiter and a salesperson — who do not bill.
"The companies that are focused on growth decide to look at growth over and above many other things," says Clement, who points out that sustainable growth in the consulting sector hinges on three other actions:

• Being bullish at the right time. Molecular, a 120-employee technology consulting firm based outside Boston, grew 18 percent in 2003, has hired 25 consultants so far this year, and has posted profits during eight of its first 10 years of existence. CEO Ralph Folz says that his firm remained overinvested in sales during the recession, "which cost us but turned out to be a smart move." The firm's current growth and future prospects were fueled by legwork conducted in leaner times, such as a market research project that identified offerings that resonate with clients. The Hay Group recently established a minimum level of training for new hires to receive during their first six months with the organizational and human resources consulting firm. "If you skimp on their first few months, the firm pays later on," says Murray Dalziel, The Hay Group's managing director, global practices. "You wind up with lower utilization rates or retention problems."

• Knowing when to say no. Growth that advances a firm's culture also requires bearish behavior when it is far easier to be bullish. Companies should sometimes pass on extremely profitable work that does not support other strategic goals. LanpherWilson turned down a lucrative project that required highly unique technological expertise the firm did not have. None of the three of individuals who possessed the expertise would accept contract work; each insisted on full-time employment. Wilson passed on the new hire and the work, a decision he believes impressed the prospect — who later requested a bid for a different project. "Firms have certain offerings that they want to bring to the market; they want to work with a certain level of executive and they want to be in certain industries," Clement explains. "If a certain project doesn't meet those criteria, they should not accept it. That's probably one of the most important, and most difficult, disciplines of a growth culture."

• Hiring the right people. Can a new hire deliver this year's work? In two years, will that same hire be able to have two associates under them? In three to five years, will the new hire be able to manage projects? "You have to be careful," says Wilson. "The number one goal is to maintain the great culture that you've built without diluting it with a bad hiring decision."

Organic, Integrative, or Both?

Wilson estimates that it takes up to two years to recover from a senior-level hire gone bad. Given The Hay Group's emphasis on collaboration, Dalziel believes that it may be "easier to work through all of the issues involved in merging a firm than it is to take individual rainmakers and integrate them."

The magnitude of bad hiring decision's impact seems to directly relate to the level of experience of the new hire — a correlation that marks a central challenge of growth management.
"The organic growth model is the one that supports sustained growth," says Clement. "The nonorganic model through which you bring high-level, extremely experienced people into your organization is a great short-term remedy, but it's very difficult on long-term growth."
Most firms express a preference for organic growth, but there are exceptions.
"Typically, companies will look internally first: Can we do it in-house?" notes Sanderson. "But you also have to ask: Can we add the capability and be as responsive to our clients and to the market as we need to be?" Organic growth may be less disruptive, but most successful firms reach a point in their growth where organic growth alone does not meet their needs.
Sanderson points to IBM, which once hired almost entirely at the entry level. "Gerstner came in and changed that, but I don't think that he changed the culture of the company," he adds. "He recognized that the changes in the marketplace required him to go through a change in the practices around the people aspects of the business."
Very few midsize or boutique firms can afford to fund the initial training period new consultants typically receive. "There are great large firms that can sort of handle that for the industry," says Clement.
Boutique firms have learned which large firms produce the best types of consultants. In the technology consulting arena, Accenture is commonly known for churning out strong consultants, while IBM has a golden reputation for producing sales representatives.
Integrative growth may pose greater risks, but it can also deliver other benefits besides speed to market. An exclusively organic approach can lead to a "culture of sameness," according to Hicks, who points to the diverse ideas that Accenture's integrative approach cultivates. "We believe that both of these approaches are necessary and required for success," he adds. "I don't think you can go with one or the other."

Invest Now, Collect Later

Celerant Consulting has grown steadily in each of the past four years through a mix of organic growth and a limited amount of senior outside hiring. In 2001, the firm, an affiliate of Novell Inc., posted $102 million in revenue with 494 employees. This year, the 550-employee firm projects revenues of $155 million.
"A lot of people are in some sort of a turnaround or re-starting mode on growth," says Dwight Gertz, head of executive education for Celerant Consulting Americas. "We actually never stopped growing."
Despite that upward trajectory, two years ago the firm identified three initiatives that would nurture growth into the foreseeable future.
Celerant's ability to produce results and repeat business was vigorous. But Gertz says that the firm had difficulty in communicating the unique value of its work to prospects without having them automatically lump Celerant in with their impressions of other consulting firms.
Celerant also needed to elevate its visibility to higher levels within client organizations. Celerant consultants helped Radio Shack gain roughly $50 million in hard benefits by instituting roll-up-your-sleeves inventory efficiency improvements, but Radio Shack executives above the supply-chain management level still were not sure who Celerant was. "Many of our people don't have a lot of experience in shaking the dust off their shoes and taking the elevator to the top floor," says Gertz. "We found that we frequently did a much better job at delivering the value than at maintaining relationships with the senior executives who benefited from that value."

To address that need, Celerant first set out to articulate its offerings "in a way such that people who don't know us will not have to work with us for 40 weeks on a project before they can say, 'Oh, I get it,'" Gertz explains. Second, the firm transferred a substantial portion of equity to its next generation of leaders to demonstrate a commitment to organic growth. Roughly one-third of Celerant employees now hold equity or options to hold equity in the company. Third, the firm invested in an ambitious executive education program.
The firm's top 80 consultants will spend four weeks on business school campuses (Stanford and INSEAD) in the next three years studying how client and target executives think about their business. In addition to analyzing case studies, studying text books and working with instructors such as Built to Last co-author Jerry Porras, before hitting the books Celerant consultants will interview client executives about their impressions of Celerant.

In addition to getting more consultants comfortable with higher-level client interaction, Gertz also expects the executive education program to help the firm become as cross-cultural as possible. To help a German company run its business, Celerant wants to develop consultants who can walk into the client's Heidelberg foundry, assess its problems, and then stroll into the executive office and articulate a solution.
In 18 months, Gertz wants to be able to glance at the daily calendars of the firm's senior consultants and see a schedule packed with executive-level conversations. "A key measure of our executive education will be our ability to generate a higher proportion of our new leaders internally," Gertz explains. "We're not going to be absolutist about it, but I think that we can grow the percentage of internal promotions to senior positions."

From Gertz's lips to the ears of perceptive leaders.