Articles and Interviews

The wave of corporate collapses and upheavals has smashed the reputations of professional service firms, leaving the guardians of public interest—lawyers, bankers and auditors—engulfed in scandal.

Andersen, once the most respected of accountancies, has imploded. Wall Street’s biggest investment banks are under investigation, and in Australia Perth-based broker Hartley Poynton has been at the wrong end of a million-dollar damages action.

According to internationally renowned management thinker David Maister, professional service firms landed in hot water by cutting corners to make a buck. But the big mistake has been the ham-fisted way they have copied the corporate world.

“For the last two decades they have been encouraged to become more business-like,” Maister said. “Unfortunately, that phrase has been misinterpreted or corrupted. They have tended to borrow the worst of business rather than the best.”

Maister is regarded as the leading authority on the operations of the large advertising and public relations agencies, law firms, engineers, architects, financial service providers, headhunters, accountants and consultants.

He said these firms overlooked one thing—in the corporate world the best businesses were run by managers who stuck to their principles.

In the professional services world, however, principles were sacrificed for cash. “In the professions, becoming more businesslike has been taken to mean more attention on the financials, a sort of mindset that says cash trumps everything,” he said.

“With one or two really rare exceptions, professional firms are not places that are driven by values and ideology any more. They are driven by almost a caricature of short-term financials.”

After leaving his teaching post at Harvard Business School in the mid-1980s, Maister has been traveling the world consulting to professional service firms, including some in Australia over the past few days.

He has written books on the topic and his latest, Practice What You Preach, has been on the Wall Street Journal bestseller list.

Maister said the problems confronting the professions had nothing to do with ethics. It was more a case of undermining strategy in the pursuit of cash, he said—about sacrificing long-term gains for a short-term hit.

“Those dramatic and terrible occasions that have occurred only occurred because we had already set the scene that the short term beats the long term. The minute you create a mentality that says, ‘short-term gratification beats everything,’ that’s when you set the scene for ethical lapses.”

Maister compared the short-term versus long-term dichotomy to choosing between having either a one-night stand or a relationship that was mutually beneficial: “Without morally choosing which is right, we can all recognize that you do different things. The techniques for being good at one-night stands are not the techniques for being good at romance.

“But that’s exactly what’s going on in all these businesses. If you get them to reflect, they say they believe in romance. But then they go back to business and say, ‘How do I get laid tonight?’”

In their pursuit of cash, professional service firms end up promoting the wrong people as managers. Rainmakers and superstars usually turn out to be disastrous people managers.

Trouble is that in a market awash with talented lawyers, accountants, financial planners, engineers, architects and consultants, the only competitive advantage is having managers who can energize those around them. Superstars are usually not best suited for that role.

The ones who do it best are those with the emotional wherewithal to motivate and handle the independent, creative and at times difficult individuals found in a professional services firm.

“The problem is that we are choosing managers on the wrong criteria. The central job of a manager is to make people successful, and to make them successful not by being a policeman but by finding a way to energize, excite and enthuse them.”

But there’s a problem: what he’s describing is about attitudes, not skills. Can you teach attitudes? Not surprisingly, Maister believes you can. That’s how he is able to charge a rate that, according to one estimate, runs to U.S.$15,000 ($A27,500) for a day’s work here.

“I won’t say my hit rate is a hundred percent; my success rate is rather like Weight Watchers.

“You can get 10 percent of the people to get religion. But what you have to do is not just the initial religious conversion; you have to play coach to them. You have to drop by every three months and say, ‘OK, you are paying me obscene fees; my job is to keep you honest. Are you still on the program?’”