Firms that are perceived by their employees to actually practice what they preach are more financially successful than their competitors, says consultant David H. Maister, based on a worldwide survey of 139 offices in 29 professional service firms in 15 countries in 15 different lines of business.
Maister asked the simple question: Are employee attitudes correlated with financial success? The answer, he found, was "an unequivocal 'Yes!'" Further, the author shows that high levels of employee commitment and dedication "cause(yes, cause) a demonstrable, measurable improvement in financial performance." Maister proves that if your firm doesn't promote enthusiasm and high morale in your employees, your firm will make less money.
So, how can you create a culture in your firm that promotes growth and superior financial returns? Maister discovered that the most successful firms surveyed excelled by doing well on things to which most, if not all, firms pay only lip service: commitment to clients, teamwork, high standards, employee development, and other familiar topics. However, what distinguishes the best from the rest is that the best live up to their own standards.
Digging deeper by conducting in-depth interviews with managers and employees of the firms he surveyed, Maister has found that the key to success is not the systems of the firm, but the character and skills of the individual manager. He explores in detail the central role of the manager (what he or she must be, must do, and must require of others). The reader will find specific action recommendations from the managers and employees of these "superstar" businesses on how to build an energized workplace, enforce standards of excellence, develop people, and have fun all as powerful profit improvement tactics.
Practice What You Preach can help any manager increase firm growth and profitability, and will provide proof to firm executives that great financial rewards come from living up to the high standards that most businesses advocate, but few achieve.
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About the Author
David H. Maister, one of the world's leading authorities on the management of professional service firms, is the author of several successful books, including Managing the Professional Service Firm, True Professionalism, and Practice What You Preach, and coauthor of The Trusted Advisor.
Read an Excerpt
How to Use This Book
The book is written for the practicing manager. I have tried to write the text in plain language, and defer all statistical language and presentation to the appendices. Those who wish to investigate the supporting data in depth can look there. However, if you choose, you should be able to read straight through the book without referring to the appendices.
Whatever contribution this book makes lies less in innovative conclusions than in the fact that I have tried to present new evidence to support important, but perhaps familiar, conclusions. (Hence the book's title: the message is not to preach new things, but to practice what most managers and firms already preach.)
Accordingly, the book is built around the evidence, quantitative and anecdotal, that I obtained. It unfolds slowly, presenting the results of analyses one at a time, building up from the simplest to the most complex. Similarly, rather than open the book with the major lessons learned from the case studies as a whole, I invite you to read each of the case studies one at a time, and experience them as I did, with (I hope) growing cumulative impact. The summary is deferred until the latter portion of the book.
For those who do wish to get the book's main conclusions right away, there's a relatively simple way to do it. Skim chapter 1 then jump straight to chapter 7 (The Predictive Package); chapter 9 (The Path to Performance); and Chapters 20 to 23 (Lessons). These chapters summarize the most important statistical and case study evidence in the their most essential form.
However, the story is richer than those chapters alone, and I hope that most readers will come with me as I recreate the journey of discovery that this research took me on.
Keep an eye out for lessons in the evidence that I may have failed to stress! While I will provide summaries and tell you what I think the lessons of the evidence are, you may want to keep a yellow highlighter pen handy to mark the lessons you deem to be the most important.
Copyright © 2001 by David H. Maister
Table of Contents
How to Use This Book
1. The Survey
Financial performance and employee attitude questions2. Tramster: A Case Study
Trust, respect and integrity3. How Successful Offices Did It
Enthusiastic, committed and dedicated people4. Northport: A Case Study
The right combination of fun and discipline5. Correlations with Financial Performance
An uncompromising determination to achieve excellence6. Mustang Communications: A Case Study
Build your people and the rest will come7. The Predictive Package
Nine attitudes that predict profits8. Archipelago: A Case Study
The best management is one-on-one9. The Path to Performance
The factors that cause financial performance10. Tigrette: A Case Study
Talent doesn't outweigh personality11. Firm or Office? What's Driving Things?
The individual manager is disproportionately influential12. Mortimer Ransford: A Case Study
The Culture Cop: non-negotiable cultural minimums13. The Effects of Office Size
Size makes things harder14. Bellerephon: A Case Study
You've met Alice, haven't you? Essential human qualities15. Age Levels
Your younger staff's views predict profits best!16. Arkwright, Sutton: A Case Study
It's about relationships, stupid! Walk the halls!17. Additional comparisons
Geography, lines of business and leverage18. McLeary Advertising: A Case Study
Don't go home if someone else needs help19. Julie's Perspective
Don't be afraid to live your values20. Lessons: The Manager
What managers must be, believe and do21. Lessons: Creating the Success Culture,
Intolerance, requirements and community22. Lessons: Developing People
Creating an energizing workplace23. Lessons: Other Topics
Hiring, Training, Rewards and Clients24. It's Not One or the Other, It's Both!
People development IS business development25.The Courage to Manage
Strategy versus expediency. Do what you say you'll do.
The Financial Performance IndexAppendix Two
The 74 QuestionsAppendix Three
The FactorsAppendix Four
Impact of Improving on Each QuestionAppendix Five
How the Top 20 Percent Offices Did ItAppendix Six
A Note on Structural Equation Modeling
About the Author
Together with many consultants and authors, I have long argued that if you (first) energize and excite your people, they will serve your clients well, and you'll (then) make lots of money. But is there any actual proof that this is the right sequence?
There is some. The Service Profit Chain by Heskett, Sasser and Schlesinger argues the case for this model convincingly. Kotter and Heskett, in Corporate Culture and Performance investigated the relationship between culture and profitability. In First, Break All the Rules, Buckingham and Coffman reported on the behaviors of successful managers in a way that supports the core proposition. In Built to Last, Collins and Porras described the characteristics of successful industrial corporations in detail and arrived at similar conclusions.
I present in this book the results of a study that assembles data and evidence on the factors that drive financial success. Surveying 139 offices of 29 firms in 15 countries in 15 different lines of business, I asked a simple question: are employee attitudes correlated with financial success?
The answer, as this book will show, is an unequivocal "yes!" The most financially successful businesses do better than the rest on virtually every aspect of employee attitudes, and those that do best on employee attitudes are measurably more profitable. What is even more powerful, as the book shows, it is attitudes that drive financial results, and not (predominantly) the other way round.
None of this should be taken to mean that client service, client relations and quality are not crucial. As we shall see, they are. Conventional wisdom is right in saying that quality and great client service gets results. (We will provide proof of that, too.) However, what conventional wisdom forgets is that great client service is itself a product of other things. To get great client service, it turns out, you must first energize your people to deliver it. And that brings us to what may be the prime mover of this entire chain of effects: the skills and behavior of the manager in creating and driving everything else.
Of all the goals that businesses say they have (make money, please clients, attract and develop talented staff), the least well done are those related to managing people. Yet not only are people a key link in the chain of activities that create profits, but we are also living through a war for talent a people crisis where every business is short of people. To be weak in this area (as so many firms are) is akin to shooting yourself in the foot.
The study produces very specific (and nontrivial) findings. We shall see that the most financially successful operations share a number of characteristics:
- Management is seen as operating in accordance with the firm's overall philosophy and values. They practice what they preach, and there are no disconnects between the walk and the talk.
- Management is trusted by those they manage. Individual managers act in the interests of their group, not just to advance the manager's personal interests.
- People's personal potential is being fulfilled and realized, according to the people being managed.
- There is a high degree of loyalty and commitment, again driven by individual managers.
- Compensation systems are equitably managed.
- Firms do not compromise their standards in hiring simply to meet a capacity need. People quality is seen as high.
The evidence shows that these are high standards that few managers (or management teams) reach consistently. They are not easy to achieve. They require courage, an ability to confront difficult situations, and an ability to take a long-term perspective when many pressures cry out for much earlier gratification.
The standards are not commonly achieved, but when they are, we can now show that they cause (yes, cause) a demonstrable, measurable improvement in financial performance (including growth rates as well as profits).
The standards are tough. They do not say, gently, "we encourage teamwork." They say things like "we have no room" for individualists. The message is that management must have the guts and courage to enforce the standards they frequently preach.
The list of key profit drivers revealed here represents a balanced package. There is no one secret to success. We shall see that you have to do well on a combination of client relationships, compensation system fairness, skill building, and other factors. Robert Kaplan and David Norton wrote a wonderful book, The Balanced Scorecard, about the importance of paying attention to a well-chosen mix of performance areas. This book can tell you precisely what that balanced scorecard needs to be.
Most of the findings confirm what other writers (and I) have been advocating for years. What's new here is that this study presents substantial evidence.
Some of the conclusions are new. Among the top factors predicting profitability are the issues of trust and respect. These were not introduced by my personal theories. They were the result of cold statistical analysis. The study shows that where trust and respect between management and employees are high, financial performance predictably goes up.
Surprising? Maybe. But we are rarely (if ever) taught how to win, earn, or give trust and respect in our formal education. This book will show you how. It reaffirms the importance of personal character in leading a firm to greatness.
On a related point, the book shows that success in management is less a property of firms (the systems of the business as a whole) but, instead, is mostly about the personality of the individual manager within the operating unit. Success is about personalities, not policies.
In spite of presenting extensive data and statistical analysis, the core of the book is not the numbers. It is the interviews, anecdotes, stories and personal experiences of the managers who got the best results in this survey. I report on who the paragons are that were able to achieve truly stellar financial results, while also energizing, enthusing and exciting their staff. What, precisely, do they do?
Although they asked to remain anonymous (a condition of doing the research), these superstar managers gave permission to reveal their concrete secrets. The findings will challenge you. How well, it will ask, do you pass the tests of trust, respect and integrity? Are you seen as practicing what you preach? I will show that if you can't pass these tests, you will make less money!
The data used in this book come from a survey of 139 offices in 29 firms owned by the same publicly held marketing communications company. Sixty-eight percent of the offices were in the United States, and 32 percent were in other countries, including Belgium, Brazil, Canada, China, England, France, Germany, Hong Kong, Ireland, Italy, Japan, Mexico, Netherlands, Scotland and Spain.
The businesses covered in this study include advertising, public relations, brand identity consulting, health-care consulting, direct mail, Internet (web) marketing, promotion, public affairs consulting, employee communications and many others.
All the firms have significant autonomy. Each of the firms (indeed, each of the offices) is free to choose its own management style and approach, thus allowing us to examine the implications of differing office cultures and management styles.
The range of firm sizes was from one office to twenty-four offices. The individual offices ranged in size from 10 to 351 employees. The average number of employees in any given office was 43.
The word "employee" in this survey covered everyone working in the firm, from top to bottom, from top managers to mailroom clerks. No distinction was made between partners and nonpartners, owners and employees, managers and staff. Similarly, employees in all roles were surveyed, including both fee-earning staff and those in support roles.
There were a total of 5,589 individual respondents (a 55 percent response rate), after eliminating offices with fewer than ten people and all employees earning less than U.S.$25,000 per year.
How Does All This Apply to You?
If you are not in the marketing communications business, I suspect that, throughout this book, you will ask yourself, "Does any or all of this apply to me?"
Let's start with the obvious: This study does not include accounting, law, architecture, financial services, executive search, engineering or a host of other businesses and professions. So, we don't have direct data here for those (or many other) businesses.
On the other hand, we do have a great deal of diversity here. We have businesses ranging from premium-fee consulting operations to low-fee, high-volume execution-intensive businesses. We have businesses with immensely high leverage and those staffed almost entirely with senior-level counselors. We have businesses that deal only with the client's executive suite, and others that have to work through purchasing directors.
Some of these businesses have ongoing relationships that last for decades, while others have to compete every time for every individual project. Some are large, global operations while still others are tiny, regional operations working far from major financial centers or other big cities. And many national differences are covered in the database.
As a result of all this diversity, any lessons we can glean that seem to apply across all these businesses have a good chance of being lessons that should be taken seriously by businesses not explicitly included here. That's my hypothesis, but you be the judge.
Copyright © 2001 by David H. Maister
Most Helpful Customer Reviews
Almost everyone will agree that professional firms must provide great service and terrific relationships to their clients. Some firms will provide these attributes at the expense of their own employees and others will not. Practice What You Preach establishes a quantified relationship to higher profitability in one publicly held marketing communications firm between those offices that nurtured their staffs as much as their clients. What made the difference? The attitudes and practices of the managers in the higher profit offices accounted for almost all of the variation. General Schwartzkopf once said that you should ¿be the leader you want to have.¿ That¿s the essence of the message of this book for achieving higher profitability. To make more money in pofessional offices, select and encourage leaders who will set high standards, serve as a good example, police the culture to improve it, and enable people to learn and make progress. Few works about management and leadership have the superb quantifications involved in this book. The foundation comes in 5589 individual responses (to about 10,000 questionnaires distributed) in 139 offices of 29 firms owned by the same public company. Each office was characterized by four profit tests to establish a profit index. Then differences in employee survey responses were tested against the profit index. Taken in many different cuts, Mr. Maister tells you which questions best correlated statistically with higher profit index numbers for an office. Each key observation is supported by a case example of one office that did well in this dimension. First, he relates what the head of the office said about the office¿s success and culture. Then he provides a composite interview with the people who work in the office. By comparing the two sets of responses, he then points out the key intersections. It¿s a fine way of making statistics come to life. He goes on to use more sophisticated statistical methods to establish which factors together are most significant, and how these factors appear to interact on one another. I was impressed by the quality and thoroughness of this work. He goes on to drill down to find even more nuances. For example, testing how the youngest employees feel about their work, compensation, and opportunities is the acid test of how well you are doing. As you would expect, cultures usually work better in smaller offices where communication is less likely to become diffused. The book ends with long lists of practices that seemed to have helped. If you want to know what to do, you should pay the most attention to the summary lessons in chapters 20-25. If you have trouble following all of the statistical analysis early on, just skip back to those sections. Then go back and read the case studies. At that point, you may be ready for the statistical chapters. The only weakness in the study¿s design is that it failed to include a comparable set of surveys with clients of the offices. That would have made the richness of the conclusions greater and the persuasive value of the work higher. How can you set high standards that delight clients and make everyone want to exceed those standards while enabling them to do so? You will find many excellent ideas in this impressive book. Be the professional service firm you would like to hire! Donald Mitchell, co-author of The Irresistible Growth Enterprise and The 2,000 Percent Solution