In June, I completed the Leading Professional Service Firms Program at Harvard Business School. The program is one week long and attended by approximately 150 Partners, CEOs and VPs of professional service firms such as law firms, accounting firms, IT firms, consulting firms, and marketing firms from countries all over the world. The experience was incredible; I learned a tremendous amount from the Harvard professors teaching the program as well as my fellow attendees.
At the end of the program, I came away with over 15 key insights and action items that will have a positive impact on our firm’s growth and operations. In this blog post, I’d like to share two “unexpected takeaways” in the hopes that they might be helpful to others, whether you’re managing a professional service firm or looking to hire one.[/intro]
#1: Culture Matters … it REALLY Matters
Without clearly defined values that employees live and breathe every day, professional service firms can lose profitability, morale, and top talent.
In a leadership role in a professional services firm, it’s easy to get caught up in the day-to-day details of putting out client fires, managing the financials of the business, or managing employees. After studying 15 case studies at Harvard, it became evident that leaders of companies also need to be facilitators and ambassadors of the firm’s culture. Your employees’ time and effort are what make you money after all!
Take Bridgewater Associates, the world’s largest hedge fund with $150 billion in global investments, for example. The firm was founded and is still run by a hyper-intelligent and charismatic leader, Ray Dalio. The firm has innovative investment products such as its flagship fund, Pure Alpha. But many experts at educational institutions such as Harvard and experts in the media cite that it is Bridgewater’s culture of “radical transparency” and adherence to its Principles that is the unique ingredient for Bridgewater’s consistently remarkable success over its 37 year history.
Whether you’re a global consultancy firm like Mckinsey, a financial services firm such as Bridgewater, or a large iconic ad agency such as Ogilvy & Mather, the importance of maintaining culture by living clearly defined company values and principles is an extremely important factor in a firm’s success. Conversely, when a company strays from its company values, it would lead to the business unraveling, profitability eroding, ethical misconduct, and top talent leaving.
#2: Bigger isn’t always better
Profitability and being laser-focused on which clients your firm is best equipped to serve can trump top-line revenue and headcount growth.
Wachtell, Lipton, Rosen & Katz is a New York law firm that was ranked as the Most Prestigious Law Firm to Work For by the AveryIndex.
If this is the first you’re hearing of Wachtell, Lipton, Rosen & Katz, here’s the reason anyone who is responsible for managing and growing their service firm should pay attention to them: Wachtell grosses the most revenue per lawyer of any law firm and are the only law firm in the world that makes more than $5M per partner. They are highly profitable and consistently top the Am Law 100 list. Even though Wachtell has an attorney headcount in the hundreds and bigger law firms have headcounts in the thousands, Wachtell’s success proves that bigger isn’t always better.
Wachtell was able to achieve remarkable accolades by focusing on being highly selective with their clients and avoiding legal work that is routine or chore-like. Rather, they focus on premium clients and legal work that is new, challenging, and ultimately more profitable. Premium fees have put Wachtell in the position to pay their attorneys a premium compensation structure, helping them attract the best legal talent in the world. Wachtell has used this talent to think innovatively; an example is when they famously created the “poison pill defense” in the 1980s which was a historic innovation in the legal world to prevent hostile takeovers. Innovations like these have allowed Wachtell to differentiate themselves from competitors, win awards and snag high profile cases.
It’s easy to get caught up in the idea that growth is synonymous with success: increased top-line revenue, more clients, and more employees. However, after studying Wachtell, I found it’s more important to articulate the vision for your firm, the type of clients you and your firm’s employees will enjoy serving the most, the type of work your firm wants to do and become known for and then align your entire company’s direction to these decisions.