Will Uber Kill Time-Based Billing?

Why would Uber’s business model impact the standard billing method of established professional firms?

An interesting observation was made on a radio program I was listening to last night.  Apparently a number of taxi operators in larger cities in the US are now doing all their pricing up-front for the passenger before they start the trip.  This means that the old  method of turning on the meter and charging what the end result was is becoming redundant as the taxi operators have worked out that the customer wants pricing certainty.  If the cabdriver doesn’t provide it, the customer will go to Uber…

The disruption Uber has caused within the taxi industry globally has been well documented, however, it did get me thinking.

With increased penetration of up-front pricing for work that used to be based on an set (arbitrary?) rate by time, customers from all segments of the economy are going to start to question the logic of entering a transaction with no known end price.  Where very other industry is going down the path of providing pricing certainty on commencement of a piece of work, why do the professions still believe they are immune from the impacts of the change?

In many respects, the taxi industry is similar to the professions – time by rate and it doesn’t matter to the provider how many hours (or miles) are spent on a job as they will know they are getting paid “for what they do”.  The sad thing is this has been ripe for exploitation (who hasn’t been in a taxi which “took the long way” to get somewhere?)  Unfortunately, it doesn’t create a great experience for the user of the services as they just have to grimace and wear it.

Disruption in pricing and business models is going to increase and roll through many other industries and professions that used to work on the time by rate model.  Customers are experiencing more of it and are going to demand more of it.

Those firms that start on the path to pricing on purpose will see themselves gain a competitive advantage – those that don’t will wonder what the hell happened.

Have a look around the Verasage site – there’s lots of rich material in here (esp recommend a solid listen to Ron and Ed on their “The Soul of Enterprise” podcasts).

The professions are going to become “Ubered”.  I hope they are ready for it.

Beware the Progressive Promise

With more firms moving to the Verasage pricing model (good on them – great move), we occasionally come across examples where firms haven’t really arranged their systems and processes to support the delivery of services.

idea

We are fortunate enough to be picking up a new customer (via referral) from a competitor who has “productised” their offering and built their model around cloud accounting.  Terrific.

The customer in question has been working with their accountant for many years and supported them as they moved the model to an agreed pricing platform (I don’t believe based on our discussions with the customer that the firm is anywhere near value pricing their services).  They had been paying the monthly direct debit to cover all the services required.  They had been providing all the information required to enable the firm to do what was required.

Now, put yourself in this customer’s shoes.  They’ve been paying a monthly amount to the firm for the various compliance obligations for the past three years.  However, they have only just now received the financials and tax returns for 2013/14 and 2014/15.  Are they frustrated?  Bloody oath.

To be clear here, they are pretty happy with the quality of the work they were getting – when they got it.  They were driven up the wall by the constant chasing up to get information from the firm.  They like the accountant they have been working with.  But they feel like they have been “left for dead”.  The experience they have had has been very unsettling for them. As they said – “we’ve paid for the work, why hasn’t it been done?”

Many firms are making the move to productising their offerings and moving more to an agreed pricing model.

They fall down badly though when their focus is on marketing and “brand building” rather than service delivery.

Having your customers pay into your account regularly is great for your cashflow.  When you’re not delivering the services agreed to under that model, you have a problem.

The firm our new customer was going to is widely lauded as a “leader” in its field.  It is held up as a paragon of virtue and “a major disruptor”.  The problem is, the lived experience of their customers doesn’t support the hype.

We will be making sure we deliver our agreed services to them on time and support them up hill and down dale.  We will also regularly check in with them to ensure they are happy with our delivery and service.  The great thing is, once they get embedded into our firm, they are wanting to refer a whole heap of their mates to us who are also with this “progressive” firm as they are all having the same experience.

The other thing is, we are value pricing the engagement with the customer.  They are wanting a heap more real-value services and they are more than happy to pay for them.  This is money the “disruptive, progressive” firm was leaving on the table by productising their offering.  The firm’s focus wasn’t on the customer, and that has created a marvellous opportunity for us.

When you do go down the path of changing your model, please ensure that you deliver what you agree to and keep the customer in the loop.  It’s no use being a “leader” in the industry/profession if your walk doesn’t match your talk.

You also need to have the value conversation with the customer and listen to their needs and wants.

Ends up being a far better outcome for all concerned.

Could not say it better myself!

Only just received the 2015 copy of the “Good, Bad Ugly” report on the Australian Accounting profession prepared by Business Fitness.  Makes for interesting reading.

head in the sand

There are a couple of points that are worth repeating:

  • revenue per partner has decreased by 8.9%;
  • average client fees have reduced by over 18% in the past two years;
  • for firms using timesheets, productivity is falling;
  • lower marketing spend over the past three years; and
  • 6% increase in firms using outsourcing (reasonable number, but not very many firms are doing it).

There is one very telling comment made in the introduction to the statistics in the report (my highlights):

When analysing the 14 years’ worth
of data relating to high-performing
firms, we can conclusively say that
productivity based on chargeable
hours has no correlation to
profitability.

Having just returned from the Verasage get-together in Boston, it has become even more apparent that the old models of firm management are not only redundant, they are dangerous.  Much of the discussion at the symposium related to the way successful firms focus on relationships – both internal and external.  This has to do with building, maintaining and honoring decent relationships.  Not relationships where everything is about flogging the crap out of your people and billing the hell out of your clients.  Relationships which are based on trust, accountability and common goals.

Having seen the damage done by the Almighty Billable Hour and looking at the impact this approach has on the cultures of firms, it amazes me that so many firms still use this model.

There is change already here in our industry and, as the GBU report reveals, this change is having an all-pervasive impact on our profession.  Either adapt or die.

The Pain of Old Firm Management

This week, I attended a seminar where, to be frank, there were some arguments put that had me considering the option of tearing my skin off and rolling in salt – it would have been less painful.

Hell

Consider some of the points made at in one of the presentations at the seminar (and this is not an exhaustive list, my comments/thoughts are in italics):

  • You should get your “star performers” and keep loading them up with work as they get in front of the pack.  In effect, reward them for their great performance by loading them up even more and putting more pressure on them – what an incentive that is!;
  • Apparently, your WIP balance is a leading indicator for your firm (!) – not sure how this works, but some in the room lapped it up – how exactly is the WIP report a lead indicator other than for the bills you are going to raise at the end of the month which will be the cause of the client complaints in the month following?  So, maybe it is a lead indicator – of client complaints – the higher the WIP, the more complaints;
  • The seminal approach to customer happiness: “If you touch the client, you bill the client – for everything”.  This phrase reminded me of a discussion I had the other week with a somewhat more visionary firm in Adelaide.  They have some folk who are not all that happy not recording the time they spend working on/for/with/around their customers.  I asked them during the discussion “Do you record the time you spend thinking about your customers over the weekend or at night when you’re at home?”  Of course they don’t.  However, according to the approach being promoted, you should.  Work that out, or, better yet – set a budget for it!;
  • You need to budget for write-offs each month;
  • References to “fixed price estimates” – what, exactly, are these? I have been racking my brain about this – if someone can provide some clarity for me around this concept, I would be grateful;
  • Apparently, client satisfaction is important, “but we do have to make a profit though” – in essence, the firm’s goal is profit first – if that has anything to do with happy customers, all well and good.  To me, this seems somewhat arse-about;
  • You need to ensure that your clients understand that their actions reduce firm efficiency – OMFG.  So, we should punish the clients for interrupting our work – actually laughed out loud at this one; and
  • Clients need to pay for the inconvenience they cause – as it would seem that they are the cause of all the problems that exist in the first place.

According to the sage presenting this, “clients don’t understand how accounting firms work”.  Really?  Do they need to?

It was argued that firms need to focus on productivity and efficiency at any cost as these are your major drivers for profit.  You need to ensure that you are flogging the be-Jesus out of your people (they will apparently love you for it) and encouraging them to work harder so that you can load them up even more.  This bit I found offensive.  People are volunteers in your business – they can choose to turn up or not.  I hear many firms complain about staff-churn and turnover – any bloody wonder!  If your culture sucks, you get the team you deserve.  Culture is the result of the language, behaviors and focus of a business.  If these are all based around profit at any price, then they get the culture that supports that.  Won’t be happy or contributory or collaborative, but it will be, well, there.

I have been a willing recipient of the famous “Verasage Headache” on numerous occasions.  They are positive, challenging and serve to help me grow.

Unfortunately, the headache I received from this session was entirely different.  It is a headache based around people being measured on productivity and chargeable hours rather than on effectiveness and customer relationships.  It is a headache that resulted from arguing that the customer is there to be charged heavily and charged often – this based on the theory that any bill they get from you will be a good bill (driven, of course, by your “leading indicator” WIP report).

So, at the end of the session, I felt sad.  Very sad.  There were owners and managers of accounting firms in the room who were assiduously taking notes – picking up tips to make them better at flogging the crap out of their people and not really giving a shit about their customers.

Tim, our GM, was at the session with me.  His words at the end of it summed the whole thing up beautifully – “Pretty scary shit actually”.

The salt room beckoned.

 

The Medical Approach – The 3 “Abilitys” (and Cheese)

Friday night last week was not a bad night – a bit cold and wet, but with a roaring fire and some lovely wine and cheese, the evening progressed very comfortably ( I can highly recommend the Tarago River “Shadows of Blue“).  One of my best mates came around to watch his football team get flogged – it was such an enjoyable spectacle that we ended up watching soccer and the Tour de France.

Over the course of the evening, we discussed many things and one of the topics we covered was the “ideal” approach that Doctors should have with their patients.  To provide some context, my mate is a specialist Surgeon and has built a wonderful reputation in his field.  He also teaches trainee surgeons and is on the examination panel for the Royal Australian College of Surgeons.  All this is very surprising considering he supports Carlton Football Club.

As our conversation opened up, he shared with me the three factors that make for better doctor/patient relationships.  His view was that where these three factors are in place and in order, the patient is happier, the health outcomes are generally better and there are fewer claims for adverse outcomes against the specialist.

The factors and the order?  They are:

  1. Availability;
  2. Affability; and
  3. Ability.

In precisely that order.

patient satisfaction

Expanding this approach through to other professions, it appears to me as though this might just be the most simple and easily understood “guide” for all of us.

Think about the customers whom you love dealing with.  They will be the ones you make yourself readily available to.  They are also the ones where you have a great personal relationship.  And, generally, they won’t be overly focused on your technical ability as the relationship is the thing that resonates most with and for them.  They respect your technical ability, but they value the relationship.

Over the weekend, I have reflected deeply on this approach and I believe it is something that we all should be aware of in our dealings with customers (in fact, everyone).

If you have a customer who is a pain and who you avoid contacting, nothing good is going to happen from the relationship.  This situation is one where you need to consider the real value that you are bringing to the relationship and determine whether it really is one that you should maintain.  Where you recognise that you don’t currently have the desire to be as available for a customer as you should be, is the relationship able to be recovered or should it be terminated?  I know that over my career, I have had numerous situations of this type.  They are really hard work and, even though you might get great results for them, there is very little satisfaction derived from the outcome.

Secondly, if you have a customer around whom you cannot be yourself and where you find your communication stifled and difficult, does this allow you to bring your “full game” to the relationship?  If you aren’t being yourself (or worse, if they aren’t being themselves), can this be rectified or should it be discontinued?  Again, there have been numerous occasions where I have had customers around whom I had to adapt my style and deliver with a very “serious” (so-called “professional”) demeanor.  This is hard work – for them and me and my experience tells me that the absence of this factor in a relationship makes the whole process less satisfying for all concerned.

The ability thing I am leaving out here as, if the first two factors aren’t present, it doesn’t matter how good your ability is, the relationship will be difficult to nurture and develop.

This is only a short post to introduce the approach to this forum.  I would love to get your feedback on this – it appears to be so simple, concise and to-the-point that you may wish to consider using it in your customer selection and retention process.  I will be.

Now, where has that cheese gone?

 

 

The Measurement Focus

In recent posts here, I have argued as to the effectiveness of various forms of measurement and their utility in managing outcomes.

I have just posted in further detail on our firm website (and, to keep Ron and Ed happy, I haven’t referred to cricket, but rather Aussie Rules football).  I encourage you to have a read – let me know what your thoughts are.

It’s the focus on measurement that stuffs everything

Over the past few days, my understanding of “why” firms won’t move from the timesheet model has had a breakthrough.

It’s really quite simple – people feel they need to “measure” their performance in some quantitative manner.  This means that they prefer to use an inherently subjective measurement forms the basis of their perception as to how they have “gone” in doing their work.  This sheeted home to me the other day when I was having a chat with one of my gurus at work.  They wanted to know whether they had progressed over the past year and how successful they had been in delivering outcomes.
The discussion turned to the methods we could use to assess how they had performed. All good, but the conversation then progressed to a point where we were discussing the difference between qualitative and quantitative measures. Now, being accountants, we inherently prefer to use quantitative measures – things like gross margin, profitability, ROI, efficiency and the like.  All good and useful in some respects, but the measurement is usually only an indication of something else that relates to qualitative issues.

Let me explain.  In our conversation, we talked about the things that were really important to our firm – things like development of each other in technical and non-technical ways (communication, customer relations etc).  These things are incredibly difficult to measure – so difficult that I am not aware of any way of objectively assessing them.  As I pointed out to my team member, they had contributed incredibly to the development of one of their support people over the past 12 months. They had lead by example and created a more rapid pathway for the person concerned to develop their career – personally and professionally. The leadership provided and coaching and development have formed a platform for the support team member that will take them through their career.  As I asked “How do you value that?”  What method do we use to assess this level of contribution?  In my view, such an assessment is going to be subjective and no two people would come to the same conclusion as to the “value” of that work.

In assessing this type of contribution, if we were using timesheets, we would be able to point out that the estimated time (do we record it in 6 minute or 10 minute increments) that might have been allocated to “development” or “training”.  But, much of the training related to customer work so, should we allocate it to the customer?  If we did allocate it to the customer, they would have every right to get pissed off that they were being “charged” for training.  So many decisions!

How much time should we take in this work?  Is here a benchmark or average (you know – where the best of the worst meets the worst of the best) that we should use to determine the input required?  No.  Everyone is unique and learns in their own particular style.  There is no one over-arching approach that works for everyone and therefore, the time spent tailoring the training approach to achieve the best outcome is of incredible value (also, the trial and error process undertaken to work out the most effective approach).  The value that my resident guru added to her team member was the combination of a range of skills, talents and abilities that they have developed over many years.  And then, how do we attach an “hourly rate” to that?  At the end of the day, does the arduous quantitative process we would need to go through to get the result add anything valuable to our analysis or inform our decision making?

geniusThe thing that really matters is that the outcome is effective.  The process in itself is inefficient until such time as the trainer and trainee have worked out what works for them.  Using a “one size fits all” approach will only create average outcomes and no-one wants to be average!  Spending the time to work out effective outcomes is far better than recording the time spent.  For example, if we knew that it took Manager A and Team Member B 20 hours to work out the most effective training method for Team Member B, can we use that when we look at the potential training time needed for Team Member C?  Of course not. B and C are different people with different learning styles.  To use the metrics from B to design the process for C stands a wonderfully unlikely chance of being useful to anyone for anything.

The measure of effectiveness should not be merely based on some subjective assessments that inform us of little and guide us nowhere.  The effectiveness of what has been done in training lasts a long time (a lifetime?) and to try and reduce it to a number is devaluing the contribution that has been made.

And, because the analysis and assessment as to the effectiveness of what you do is so inherently subjective, most firms cling on to timesheets – they know they’re not right. They know they are subjective.  They know they are a pain in the you-know-what.  But they are too scared to let them go as they believe it’s all they have.  Sad really.

Regrets? They’ll have a few

OK, so we’ve all got them.  You know, those things that we look back on and think “what the hell – why did I do that?” or, (even worse) “why didn’t I do that?”

I’ve had plenty – more of the former type than latter, but it all forms part of the rich tapestry of life that we humans form part of.  And, much as we may regret things, it helps us develop into the people we are and forms the foundations of who we will be.  Great.

apple

BUT, what would happen if you knew that something was going to happen and, despite every nerve in your body screaming at you to do something, you didn’t “do it” (whatever “it” might be) – is that really a regret?  If you adopted a stance of denial, does that turn into a form of regret?

How is it that, even when confronted with massive amounts of evidence supporting a reality that is going to occur (and I’m not talking “consensus” here) – I am talking incontrovertible facts – you still don’t make the moves that are required?

I’m not going to launch into semantics here (I will leave that to my far more learned colleagues in Verasage), I am just trying to posit the argument that often times, people do not do what they should and don’t take action when they should or find a million reasons not to do something they know they need to because, well, they have lost something.

What is the loss they have made?

Consider if you will the current state of the accounting profession.  We are seeing massive changes set upon us – mainly from technology/cloud solutions, but also from offshoring operations.  Did you know, for example, that most of the Big Four have established offices throughout Asia to which they “in-source” their compliance work at (about) AUD10 per hour?  I know of an Australian example where a large corporate has moved a significant volume of their processing/admin work to a Pacific nation as the effective wage rate there is AUD1.20 per hour – a bit better than the award rate over here!

This is all happening now.  Today.  To our beloved accounting profession.  And what are the vast majority of our colleagues around the world doing about?  Nothing.

I posted some time ago about the changes that were occurring to our profession.  The changes that were coming then are rolling out even more quickly than I anticipated.

So, what is the profession doing to adapt to this change?  Not much.  Some of us a screaming to all who can be bothered to listen that there needs to be a change in business model.  Hardly anyone seems to be listening.  Or caring.  And we are not, by the way, being “chooky looky” – the sky is falling in!

What are most accounting firms doing to try and combat the inevitable?  They are trying to be more efficient.  Making better time recording platforms and putting greater emphasis on staff productivity.  Anyone recall Danny DeVito in “Other People’s Money”?  Buggy whips.

To make the process more precise isn’t what’s required in the accounting profession today (or tomorrow).  As Ron Baker is fond of saying – “I’d rather be approximately right than precisely wrong”.  Bravo Ron!  But tell that to the Luddites who persist with a 1950’s business model 65 years after it was made common place and 64 years after it became redundant.

The time-sheet is an anachronistic tool that does not fit with today’s requirements.  Staff hate them, admin hates them, managers hate them and Partners/Directors hate them.  The people who hate them most however, are the second most important people in your business – your customers.

In some respects, I am advocating a “back to the future” scenario – get rid of time-sheets – but with some important changes.  Changes like agreeing the scope of work and price up front with your customer.  The change which includes and involves your people in determining scope – and price!  The one where you truly empower your people to shine rather than record their misery in 6 minute increments.

Ed Chan of Chan & Naylor last week posted on Linked In.  Chan’s argument is that accountants sell time.  No.  We don’t.  We sell solutions to our customers’ problems.  His argument is that the “solutions” (I am expanding his argument a little here, but I believe it is in the same vein as what he has written) are all compliance-based whereby all we are doing is the “same thing” for each client.  As I have illustrated above, the basis of a lot of the compliance work is going to be automated or off-shored.  So scalability only applies if you’re doing basic, processing and bookkeeping work.  Not exactly what we’re trained for is it?

Similarly, setting an arbitrary hourly rate to charge them for your time isn’t reflective of their need or the value that they place on the work to be done.  Using the same rate for everything you do makes you pretty “average”.  And remember – average is where the best of the worst meets the worst of the best.

My belief is that every customer is unique and have their own set of fears, needs and the like.  To try and put them all in one basket is to demean both them and the people who work on their files.

Chan’s argument is also based on the premise that all you have to do is to hire more people and more customers will come to you.  Oh, to live in such a wonderful world!

From my experience (such as it is), the only way you can achieve this is to discount your offering to a level that drives people to you.  And then, what happens to “the margin” that Ed believes is the Holy Grail?  That and the fact that you’ll generally get the bottom-feeding clients who don’t value what you do anyway and will bring a whole heap of their “friends” along with them – High School Chemistry – like attracts like.  You will also not exactly engage your people as they merely become cogs in a never-ending grind out of tax returns.  Inspiring isn’t it!

So, in Ed’s world, where “you build a business to prepare a tax return”, I believe there will be regrets.  Lots of them.

Customers don’t want tax returns.  They want advice.  Support,  Counsel.  Encouragement.  SOLUTIONS.  The tax return work is only there because the government stipulates it.  Nobody really “values” it in the true sense of the word.  And the ultimate disruption?  I know of at least one of the Big Four that will be offering their clients compliance work for $0 in the coming years.  How’s “the margin” on that?

Getting the business model right for accounting firms is critical given the disruptive times we are in.  Making a bigger or cheaper version of what exists won’t answer the challenge – it merely cements in a race to the bottom for those firms that don’t adapt.

Regrets?  Yep, I have them.  A number of them.  One I do not have however is getting rid of time-sheets and moving to a business model that will sustain our business, our people and our customers for a long time.

Oh – the loss they have made that I referred to above?  It’s a loss of self esteem and belief in why they do what they do.  And that, my friends, can be scaled!

What PKFs Can Learn from Country Music

Modern country music blends the best of traditional American values of hopes and dreams with classical rock rhythms and melodies.  It is difficult for even the most ardent anti-cowboy listener to avoid toe-tap while listening to some of the classics and modern hits alike.  Country stars crossover to rock and pop a even some country singers are involving aspects of rap (with a better vocabulary and message, of course).

Yet, even if you aren’t a fan of modern country music, there are lessons to be learned.   Studying (and implementing) their success benefits all aspects of our firms and professions.

First, the historical legends are never far from center stage.  Those trailblazers that helped established a fledgling musical style are honored and revered.  The history is rebuilt into the future.  The young stars and hopefuls know their history, know how their music was developed, and proudly expand their offerings to a new generation without abandoning what came before.  Innovation and collaboration are two hallmarks that separate country music and most professionals.

Country, more so than rock and pop,  certainly appears to collaborate frequently.  They produce duos and join forces for songs and tributes that expand their individual capacities.  I rarely witness true collaboration in CPA, Law, or other Knowledge firms.  PKF’s are fearful of collaboration believing there is no benefit and only risks of losing an edge over the (perceived) competition.  In fact, this stubbornness by leaders of these professions creates excessive waste in human capital, fixed capital, and redundancy.  What we all need to do is constuct more duos and collaborative services where we align to serve new  and mature markets, alike.

Country music stars of today coach the stars of tomorrow, as they were coached by former stars. Even though they have separate bands, labels, and musical styles, the leaders of today invest in relationships by assisting the newcomers.  And when the newbie wins a prestigious award that the stars of today were nominated for, these leaders hoot and holler, clap and cheer, and genuinely support the winner without whining about their current popularity or success.

PKFs rarely, if ever, help develop the talent of their future competition.  PKFs see the world as a zero sum game instead of one of abundance.  They don’t value sharing their love of their work and guard their ideas like they wholly own them.  PFKs struggle to even share within their organizations and frequently treat each of their own in ways akin to how a Piranha treats a fledgling fish.

Envision how PKFs could change the world by working together rather than apart?  How firms could coordinate talent across party lines to serve the public good?  How firms could end duplication and specialize where they are strong and collaborate where they are weak?  How leaders could spot the young talent and help nurture even if it is a long-term strategy?

You can’t fake true admiration and awe.  I was privileged to attend Entertainer of the Year, George Straits’ final large venue concert.  He is clearly loved and beloved by fans and fellow performers alike.  He shared his stage with nine (9) other superstars of today and yesterday.  Each of whom he had collaborated with, toured with, coached, and supported.  The tears of joy shared by, between, and among these stars was genuine and moving. Even when one of the stars slipped on a lyric, there was laughter and happiness.  The value of being a family; and not just a competitor.

Leaders of PKFs should learn from the success of country music.  Learn to share with others the love of your profession.  Find talent wherever it is and coach, teach, and admire their future growth.  Find other firms and professionals to collaborate with and share your joint talents for the benefit of all.

Silo thinking is rotgut of the professions.  It is time to expand our horizons and partner up for a stronger and more collaborative future.

Partnerships: Lessons from the Army

A little over a year ago, I read a fantastic book by Thomas Ricks title The Generals:  American Military Command from World War II to Today.  It is a fantastic book on leadership, vision, character, failings, and resurrection.  For over a decade, I have been part of a chorus of colleagues wailing against the Partnership Model for CPA and other professional knowledge firms (PKFs).

 

As an outside observer of local, regional, national, and global firms, I have first hand witnessed the daily dysfunction that the Partnership Model creates and the carnage it leaves behind.   Partnerships as they are formed are more about protecting their firm’s bounty rather than increasing it.  Partnerships are more frequently about inequality among a band of supposed equals as it about collectively working together for the benefit of the firm.  Partners within partnerships are more frequently rewarded for individual actions rather than firm driven results.  Partners in partnerships more frequently sacrifice others before they sacrifice themselves.  Partnerships destroy more value frequently than they create even when their measured numbers increase, the toxins of the partnership permeate thorough the firm and its human capital.

Compare Partnerships with the Army.  Both have an overall mission/vision.  Both have groups of individuals, each with a personal vested interest in the success of the organization.  Both have to learn how to nurture a process for finding, recruiting, and retaining talent.  Both have specialists.  Both have career paths.  Both have roles that focus inwardly on producing results while others have roles of interfacing outside the organization.  The list of similarities could continue.  Ultimately a Partnership shares a lot with the Army.  Except in one major distinction.  Leadership.

The Army treats ultimate leadership differently.  Yes, the Army promotes within their groups and specialties. The Army rewards for time served and skills learned, just like Partnerships.  Except for the last major promotion, the processes are similar.  It is the last step that separates the Army from the Partnership and it is this last step that truly matters.  The Army transforms a soldier during the promotion to General.  Generals leave the insignia of their specialty behind.  They become Generalists.  Generals aren’t merely superior rank, they are to be the superior leaders of the entire organization and not just their current assignment to a Company, Brigade, Division, or Outpost.  As Ricks writes (p. 35 of 1407 on my iPad (how does one site a page when we can change the font?):

As brigadier generals, the newly promoted officers are instructed in a special course – they no longer represent a part of the Army, but now are the stewards of the entire service.  As members of the Army’s select few, they are expected to control and coordinate different branches, such as artillery, cavalry, and engineers – that is, to become generalists.

Compare the above to Partnerships.  Partnerships promote within their current groups.  They do not promote leaders for the benefit of the firm. They promote within their departments, or offices, and silos.  This is a mistake.  It leads to the continuation of the status quo. It leads the the hoarding that stops cross selling.  It leads to the world of Me instead of We.  It leads to choosing to benefit internally rather than externally.  We promote and reward the specialists at the time and leadership position that requires a generalists.

Substitute Rick’s terms of artillery, cavalry, and engineers for tax, audit, and consulting.  Partners in firms should be leaders of and for the benefit of the firm and not just their department.  They should be able to lead across the platforms and not merely within their chosen field.  Managing Partners should have demonstrated true multidisciplinary leadership by having lead in all departments and divisions with only one goal:  enhancing and protecting the firm.  This is why MPs should never have customer responsibilities.  the firm is the customer.  Partners should have leadership responsibilities first, including vision, nurturing, coaching.  Let the senior managers (think Colonels , Lt. Colonels, and Majors) provide the services, direct customer leadership, and technical review.  That is their speciality.  Partners should be their visionary leader with their hearts and minds on the organization and its components and not about the working papers that are collecting dust on their floor or credenza.

The Partnership Model is broken.  It regularly destroys value and interferes with the firm’s future.  When reality finally sits in and the firm  tires of listening to the mundane voices of the common consultancies, look to the Army for wisdom.  Promote leaders with vision and make the generalists and have them direct across the organization.  In this way, the firm flourishes, egos diminish, and the customer is truly served.