Articles and Interviews
Profit From People Power
by Kath Waters 2002
David Maister says he has a new way for managers in professional service firms to lift revenue and profit, but they are not going to like his suggestion. Maister, a professional services management consultant based in Boston, says profit and revenue increase when managers put coaching, energizing and enthusing their employees at the top of their list and do not allow technical, financial and client issues to take precedence.
His advice sounds logical, but Maister says that even the best-qualified managers have not been trained to take his advice. Using himself as an example, he says, “I have every business degree that the planet has to offer, and I was also a professor at Harvard Business School. But when I walked out that door, I made the terrifying discovery that the world is filled with people. I had been immensely trained in business and received literally zero education in managing.”
Maister believes his experience is typical and that there is a widespread deficiency in management training. He says his new book, First Among Equals, cowritten with fellow professional services consultant Patrick McKenna, is designed to fill the gap. Six weeks after the book was released in Canada and the United States in April, its initial print run of 20,000 copies sold out, Maister says. A second print run went on to the shelves in May. The publisher, Simon & Schuster, released 1000 copies of First Among Equals on May 10, ahead of Maister’s speaking tour in Sydney and Melbourne in August.First Among Equals is the follow-up to Maister’s Practice What You Preach, which was published in 2001. Practice was based on research conducted in 139 offices of 29 professional services firms in 15 countries. Maister says his research found that the firms making the most money provide service that exceeds their customers’ expectations. “I was able to prove that, to provide outstanding value, you must be able to excite and enthuse your people,” he says. “Not be nice to people, not make your people happy. The test is, are they turned on?”
In conducting the research and writing Practice, Maister created the market for the sequel. “Having proved with the last book that skills of managing are determinative of profits, I had a lot of my clients say, ‘OK, if we buy that, how do we get trained in managing?’” According to Maister, there are four main reasons managers do not make managing employees their first priority: the job of managing is poorly defined, managers are not chosen for their people management skills, managers are not trained in people skills and managers are not financially rewarded for spending time motivating their employees.
Maister argues that the job of managing has little to do with rational thought, intellect or education. “It is an emotional skill,” he says, “but when you tell managers their job is to influence emotions, they say that is not what they were trained for.”
Most managers are promoted because they are technically the best in their profession, or are good at getting new business. “We almost never test who deserves to be the manager because they are good at influencing the emotions of others,” Maister says. “Then, we don’t train people in managing people—we teach them finances, or how to analyze a market.”
In the professional services sector, managers continue to service clients. Lawyers, accountants and engineers are expected to lead by example: they have the highest charge-out fees and are expected to pull in the highest revenue. Profit-sharing agreements in most professional firms reward this approach; those who spend time away from clients managing their employees earn less.
Maister says managers also shy away from face-to-face interaction with their employees for personal reasons. “When I come to work in the morning, if I have a client or a technical issue to deal with, that is a lot more comfortable to me than tackling Julie, my business manager,” he says.
“Logic tells me Julie is top priority but, because I am not trained in it, because I am not comfortable with emotions, I do what is bad for me and leave the people side until last. I want to stress that these managers are not dumb or bad. But, unfortunately, I think there are a lot of people out there like me.”
Maister says that, although managers are not usually trained in, or comfortable with, people management skills, they can draw on experience in their personal relationships to develop their coaching skills.
“We all have to deal with relationships in our personal life,” he says. “If dad is doing something crazy and upsetting the family, you have to tackle the issue. You don’t just tell dad he is an idiot. Hopefully, over time, you develop a bit of practice and skill at giving dad negative feedback. There are ways of doing it.”
Maister’s research showed that coaching was often used in a firm, even when the approach was not explicitly supported by the chief executive. “In the research, I wasn’t looking at the big boss, but at office heads,” he says. “I found out some were making a lot more money than others—double the margins and double the revenue. They said to me, ‘The boss wants the money, and I figured the way to get it [was] to focus on turning on my people.’”
Maister says that other books on the subject of people management, such as Dale Carnegie’s 1937 book How to Win Friends and Influence People and The One Minute Manager written by Spencer Johnson and Kenneth Blanchard in 1983, are not “respectable” in business circles. He hopes his book improves on previous titles because of its “how to” style, which focuses on case studies of real businesses, their approaches and the results they have achieved.
Maister is not optimistic that many firms will take his advice. He says little has changed in the way professional services firms are run since he wrote his first book, Managing the Professional Service Firm, in 1993, and little is likely to change in the next five years. “No, I am not an optimist,” he says. “That is because I am a fat smoker. I know what is good for me. I know what to do—eat less and exercise more—and how to do it. But just because I know what is good for me doesn’t mean I will do it.”
According to Maister, people are most likely to change if they face a crisis—”If a heart attack comes along, it is amazing how healthily people can live”—or if they are strongly motivated by a need to succeed.
Intelligence and education no longer provide the competitive advantage they once did, Maister says, but energy, enthusiasm and drive are still rare. “I have seen the strategic plans of many of the professional services firms in Australia and, I promise you, they are all identical,” Maister says. “That is not because they are dumb, it is because they are all smart; they all know what needs to be done to win. Knowing what needs to be done to win is not hard; what is hard is finding the discipline and energy to actually do it.”
The drive to thrive
David Maister, an American professional services management consultant and author of books including Managing the Professional Service Firm (1993), True Professionalism (1997), The Trusted Advisor (2000), Practice What You Preach (2001) and First Among Equals (2002), charges $U.S.15,000 a day for a single presentation, plus first-class air fares to and from the speaking destination. In the past three years, he has written a book a year, and has reduced his traveling schedule from 200 days a year in 1998 to 125.
Maister holds degrees from the University of Birmingham and the London School of Economics, and has a doctorate in business administration from Harvard Business School. He taught courses in managing service businesses and manufacturing companies at Harvard from 1979 to 1985. His books have been printed in 11 languages.
Maister says, “I have had the most wonderful career. It is not because I am smart. I think [my books] are good books, but I don’t believe they are brilliant. The success I have had comes because I outperform my competitors on energy, drive and enthusiasm, because [those qualities] are scarce.”
Maister has a suggestion about the crisis over the credibility of audit firms caused by the collapse of companies such as Enron Corporation in the United States and HIH Insurance in Australia, and it has nothing to do with banning audit firms from providing nonaudit services.
He says the solution is to establish a system that prevents auditors being paid by the companies they audit. His suggestion is to tax all publicly listed companies and use the revenue to fund a “quasigovernment” body that manages competitive tendering for audits and then chooses and pays the auditors. The audit firms would still be privately owned professional services firms.
Maister says, “That way, there would be no conflict of interest. I believe all the other solutions being discussed are imperfect. We need to find some way—and mine might not be the best—to stop companies hiring the auditors.”