Fixing What’s Broke — Guiding a Firm to Its Full Growth Potential
In Part 2 of our two-part episode, Jeff dives into what professional service firm leaders can to do overcome or avoid dysfunction and help their firm reach its full growth potential.
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Jason Mlicki: Hi Jeff, so last time we talked, you took us sort of deep into your thought patterns on what you call the BS of PS, which is really this real deep dive on why professional services firms tend to be dysfunctional, and how that manifests itself in the real problems it creates for firms that want to reach their full growth potential. And of course, then I cut us off and said we’re out of time and pushed us into this today.
My goal today is to talk about what do we do about it. If this is the dysfunctional layer of this firm, and you broke this down into two parts, that there’s restructural dimensions of dysfunctionality, things that just inherently the way a firm has to be organized sometimes, or is organized other times, creates issues, and then just the human dynamics of any company, but then there’s also some unique human dynamics of a lot of firms as well. But you also pointed out there’s a lot of other names for this. You call it the BS of PS, but others call it what? I don’t know, what do they call it? I didn’t know there was other names for this.
Jeff McKay: There are great names, and I would love if listeners have a different name, send me an email, because I would love to add to my list.
Jason Mlicki: You’re collecting a list?
Jeff McKay: Yeah, and it’s funny, many of these names have come to me either from working in firms, and I won’t share which name goes with which firm, but they have come to me through partners that have pulled me aside, or over drinks, shared their dissatisfaction with how their firm functions. When I started hearing all these different monikers, it just got me thinking, and I don’t even know how I landed on the BS of PS, but it’s where I am. But here’s how you know if your firm has this problem running through it. All right we’ve all heard of our culture is up or out. That could be healthy, that could be unhealthy. How you look at up or out will tell you something about which one of that it falls into.
Jason Mlicki: The other interesting thing about that, on the up or out, is how many firms say they have a culture of up or out, but there’s not really that many outs.
Jeff McKay: That could be just as dysfunctional, because a healthy culture should be a crucible where you’re burning off the unwanted characteristics of individuals or of the culture. I think that’s … If you’re not up and out to some degree, then you’re probably not healthy. That’s why I say it could be both, but if you’re all up or out, and try to get you up and out as fast as possible, and just kick you out the door, and take pride in keeping the people that work 100 hours a week, and they survive the 100 hours, and family wasn’t important to them so they’re willing to do that, that’s not a healthy culture. So up or out could be either way, but that’s a very common one. Dog eat dog is another popular one. I think that reflects that inter-resource allocation of practice versus practice, but if you have a dog eat dog moniker, you have BS of PS.
Jason Mlicki: You’ve got the BS of PS?
Jeff McKay: A caste system. Those people that are in, and those that are out. Those that are part of the old boys’ network. You probably have a BS of PS. If you describe your firm as one of a culture of optionality, we talked about that on the last call. There are firms that refer to their culture as culture of optionality.
Jason Mlicki: They actually say that? They actually say that’s-
Jeff McKay: Yes.
Jason Mlicki: Do they say it as a good thing?
Jeff McKay: No, it’s a bad thing.
Jason Mlicki: Okay. I thought you were implying that they …
Jeff McKay: Because it gives the impression that we have consensus, but we really don’t. Survival of the fittest, which goes back to the up or out, but that is life is brutish and short in our firm. One of my most disturbing ones that I heard was “We eat our young.” That speaks to two of the major issues that we spoke about last time, fear of failure, so you look for a scapegoat, and we don’t want to admit we’re wrong, so we’ll blame somebody else. We’ll sacrifice them. So, those are some of the names. There’s many others, but those are the things that you’ll see. Those all tend to be somewhat testosterone laden, but you can have passive BS of PS as well, monikers, non-confrontational, we all get along, those are other monikers that we hear.
Jason Mlicki: So, in a way you’re saying if I’m new to a firm, I’m an up and coming future partner or whatever, I just joined this firm, and I’m not really sure what I got into yet, if I start hearing some of these phrases, I should be a little bit concerned? I should be a little bit cautious, go, “Wait, what’s going on here?” Is that what you’re trying to say?
Jeff McKay: Yes.
Jason Mlicki: Okay.
Jeff McKay: Yep.
Jason Mlicki: All right. These are all evidence of dysfunctionality, that there’s some inherent dysfunctionality in the firm that is going to limit our ability to grow to meet our full potential.
Jeff McKay: Oh, the dysfunction’s going to be there. These monikers are a reflection of its magnitude.
Jason Mlicki: Oh, okay. So, the dysfunctionality is always there, you’re saying?
Jeff McKay: Yes.
Jason Mlicki: Just how big is the problem and how much is it limiting the firm’s potential?
Jeff McKay: Yes.
Jason Mlicki: Okay, so it’s the degree. When these things are coming out, that means it’s extreme? It’s a major problem?
Jeff McKay: Yes.
Jason Mlicki: Which is kind of obvious, I guess. If someone said to me “We eat our young”, I think I would probably think it’s time to make a move.
Jeff McKay: Unless you were a senior hire.
Jason Mlicki: That’s true. That’s true. All right, so what do we do about this? I mean, if I’m the … Well, first off, maybe that’s the first question is, who can deal with this problem? Can the marketing leader attack this issue head on, or does it have to come from the top leader in the firm?
Jeff McKay: This is a leadership issue. It’s not a values poster issue.
Jason Mlicki: Whoa, whoa, whoa, whoa. Time out. Time out. Totally agree with the comment, but that’s implying that the marketing person is only interested in making values posters, right?
Jeff McKay: Oh, did I say that? I didn’t mean that.
Jason Mlicki: Yeah. I mean, I don’t think you mean that.
Jeff McKay: But most firms look to marketing for their internal brand and communicating that, and that often is how values are disseminated, wall posters, or listed on the website, because that’s easy. That’s the path of least resistance. But this is very much a leadership issue. As a matter of fact, if we take a step back, and we look at the two causes of structural and humanness, those are also the solution. Let’s take a look at the humanness point first. It’s a leadership issue because leaders create culture, and leaders create culture not based on what they’re necessarily rewarded to do, but they create a culture based on who they are as individuals. The culture that starts with their teams, manifest their worldview and who they are as an individual.
That’s why these human issues around fear create so many dysfunctional issues. Firms need leaders, and I would say they need prudent leaders, that live for something greater than hitting a number, getting a partner title or a corner office, that they see human interactions whether that’s with clients, or their employees, or the broader community as an opportunity to impact lives. It’s not that they have to become psychologists or priest or some kind of management gurus, but that they have to unleash the positiveness in other human beings. They have to lead. They have to be willing to take the risk of stepping out as leaders, and helping the firm and their teams and their individuals become who they’re capable of becoming, and not be so consumed with their own success. Because when we become too consumed with our own success, that’s when we begin to eat our young and sacrifice others for our own gain.
Jason Mlicki: I guess my question is, I kind of think through my experiences, and I feel … Am I an outlier? I feel like I interact with more leaders that meet the characteristics of what you’re describing, and far fewer leaders that don’t. It’s the rare exception where I see a leader that is more interested in their own success, and less interested in everything you’re describing. Does that mean I’m living in a weird bubble?
Jeff McKay: You definitely live in a weird bubble.
Jason Mlicki: That’s for many reasons, but …
Jeff McKay: No and yes. You might live in a weird bubble, because Rattleback as a firm has that value. Therefore, you are attracted to clients who share that value. You may have a disproportionate representation in your sample size as a result.
Jason Mlicki: Okay. Yeah, that’s why I asked the question, because as you’re saying this to me, I’m thinking to myself, I don’t see how this is going to change the issue, because that’s what I see most of my clients have, and I would say I do have some clients that are not meeting their full growth potential and they know that, and they’re frustrated by it. Changing their behavior as leaders is not going to change much, because their behavior’s already good, in my opinion. At least based on what I see. Okay?
Jeff McKay: Yes, but it can always be better.
Jason Mlicki: True.
Jeff McKay: I have a set of questions, and I won’t go into those now, but there are a set of questions that prudent firms, and prudent leaders, ask themselves around the firm’s driving philosophy. That part is somewhat easier, but it’s the individual questions that leaders ask themselves about, are they becoming who they were meant to be in the firm? Can they become who they were meant to be in the firm? What is happening with our employees, and asking those similar questions of their employees. That takes that directional, a positive direction, and amplifies it. I have a series of questions that leaders should be asking themselves on a regular basis around their leadership style, and what they’re ultimately trying to achieve.
Jason Mlicki: When we’re talking about the BS of PS, and we’re talking about the dysfunctionality of the firm that blocks our ability to meet our greatest potential growth, and other desired outcomes, and now we’re talking about the solution, are we saying that the solution is to develop better leaders? To be better leaders, and develop? Is that sort of the solution to get optimal growth?
Jeff McKay: It’s part of it.
Jason Mlicki: Okay, so let’s hear the rest of the story.
Jeff McKay: I said the causes are human and structural.
Jason Mlicki: Okay.
Jeff McKay: While matrix systems can be incredibly dysfunctional, I believe there is no better structure to amplify the positive performance of a leader, because of the multiple interactions, whether it’s direct line or dotted line across that matrix, positive leadership amplifies very quickly through a very human-based organization like a professional services company.
Jason Mlicki: Is that because the leader’s interacting with more diverse people in the firm, and then the leaders behaviors get amplified faster? Is that the …
Jeff McKay: Yes.
Jason Mlicki: Okay.
Jeff McKay: Yes. It amplifies positively, it amplifies negatively.
Jason Mlicki: Negatively as well.
Jeff McKay: But because of that crossroads of those three, and sometimes more dimensions, you can have a positive impact more quickly. But within the … At the convergence of that structural and human dimensions, I think the top firms that are overcoming these roadblocks to dysfunction, or at least minimizing them, do several things. The first thing is they focus on a few performance indicators, but they don’t measure just the quantitative outcome or result. They look at how that result is achieved. They’re willing to learn and change and adapt as leaders, and followers, in how we go about achieving the outcome for the firm.
Second, and we’ve talked about this several times already, because of the insecurities that exist in these high performers, the best firms, the prudent firms, don’t punish failure. They reward learning. In healthy firms that are overcoming this dysfunction, failure is accepted, and their parameters about what good failing looks like, but it’s always driven towards learning and growing in performance for the individuals, for the team leader, and the firm.
Third, the firm sets very clear expectations around the culture. Not platitudes, but everybody knows how you get hired, and everybody knows how you get fired, and they self-police. They have those difficult conversations with one another about behaviors. It’s just not correcting people, but rewarding positive behaviors, but it’s done within the context of stewardship for the firm, and the well-being of the team and the individual. They take the matrix structure, and they use that to their advantage.
They very clearly delineate who has responsibility ultimately for certain functions or roles or responsibility. Who owns a client relationship? Who owns product development? Who owns distribution? Who owns clients service? Who owns recruiting? Whatever those functional capabilities are, and they just engineer the friction out of the system. Instead of leaving them open to interpretation, they define them strategically so that they’re not wasting time and energy, political capital, and effort trying to answer the questions that drive growth. Most firms just lack those kind of language because it’s path of least resistance. It’s so much easier to just put that practice’s name up on the website, or whatever.
Jason Mlicki: Yeah. Yeah.
Jason Mlicki: So as you’re talking, I’m having this really random left field voice in my head telling me something to say, and I want to share it. Have you ever heard of the company General Magic?
Jeff McKay: No.
Jason Mlicki: You ever heard of the iPhone?
Jeff McKay: Yes.
Jason Mlicki: Did you know that the company General Magic essentially created the iPhone, in all its glory, in 1990? I mean-
Jeff McKay: I’m getting a little history lesson, keep going.
Jason Mlicki: Basically everything that we think of as the iPhone, so basically the ability to text people and deliver memes and such like that, the ability to access email, the ability to make phone calls, the ability to access the internet, at least the internet at its stage in the early ’90s. General Magic was this company that fell out of Apple. There was this futurist guy there, so if you think about your roles of a marketing function, he would be the visionary. This guy goes around the company, and starts collecting all this input into what the future of technology looks like post-computers, post-Mac, and he conjures up this idea of this pocket device that’s basically a smart phone. They figure out that they can’t build it without an ecosystem, so he convinces Apple to let him leave, spin this thing off, and he cuts a deal with Sony and AT&T and a couple other partners, to basically build what is the first generation smart phone in the early ’90s.
Anyway, they go on this five year journey trying to create this product, and they have a lot of road blocks along the way, most of them, there’s all these reasons, but of course the thing fails, as you well know, because we didn’t see a smart phone until what? 2005? I don’t remember when the iPhone finally hit the market. But the reason I’m sharing this story is, what strikes me as so interesting is that the culture of Silicon Valley rewards this in a tremendous way. All the people that fall out of General Magic become the visionaries and entrepreneurs. A lot of them roll back into Apple, so some of the guys that worked on this work go back into Apple, and ultimately become key product people that help launch next generation products, ultimately the iPod and the iPhone and all those types of things. Some of them spin off and end up at Microsoft. I remember there was a guy that basically falls out of there, gets frustrated, and ends up at Microsoft, and becomes one of the key architects of ultimately Windows and the core OS.
It just strikes me that the reason I’m sharing this really random story out of left field is it just strikes me that there’s a culture that is Silicon Valley and tech companies that is almost the opposite of the culture that we see and describe and feel in these firms, and it also feels like Silicon Valley culture is the culture of tomorrow, and the culture at these firms is the culture of yesterday, in that they’re struggling. I want to make the argument, when we talk about talent and we talk about how firms get the best of the best, I think they’re starting to lose. Google’s getting the best of the best. Apple’s getting the best of the best. Uber, Tesla, they’re getting the best of the best. They’re beating McKinsey, I’m fairly confident of that. I don’t know if McKinsey would say it, and I don’t know if we would see it, but they are.
The reason I’m saying all this, what I love about what you’re saying in the BS of PS is it feels so much to me like you’re describing a roadmap for these firms to act and behave and operate more like their Silicon Valley brethren have since the ’70s. Of course, those Silicon Valley companies are taking over the world in a lot of ways, or at least the ethos of that type of company is really changing the fundamental dynamics of the global economy, and they have been for 30 years. Totally random comment, I totally realize that. I took us way off course, but-
Jeff McKay: I don’t think you took us off course at all. We’ve talked about SaaS companies devouring the professional services industry. I think the best firms have either already dealt with the BS of PS, deal with it on an ongoing basis, or will get to it very shortly. The firms that try to compete with Silicon Valley, and I’ve written about this recently, fall short of creating structural and a leadership dynamic that really removes these dysfunctional barriers, and they’re recruiting, you see it more based on contemporary identity politics, diversity initiatives, or they promote an employer brand of some kind. It’s incomplete, it’s not getting to the heart of the humanness that comes into these organizations, and is negatively impacted by the matrix structure. It falls short. For them to be successful, they have to go deeper than those types of contemporary business conventions, and attack this issue.
Jason Mlicki: Attack that head on.
Jeff McKay: We have, we’re switching things up, and having interviews with some firms that I think are making the right moves in this direction coming up in some of our other podcasts, so stay tuned for those.
Jason Mlicki: Well, when this topic came up, the BS of PS, I, of course, read the white paper. I read the eBook you wrote, and I even told you when we first started talking, I kind of read it, and I was sort of lukewarm, like I don’t know if I fully understand the threat that you’re trying to bring forward here. The more we’ve talked about it over the last two episodes, really, I love it, and I love so much about what you’ve packed into this story, this idea of there’s structural and human dimensions that force the dysfunctionality in these firms, and that there are real leadership and structural and cultural solutions to them that, if we lean into them, we can really have a lot of success. I love this model. Definitely worth reading, and I can’t wait to hear some of the dialogue that you’re all having on our behalf with some really smart leaders around this topic. Thank you for sharing it with us today.
Jeff McKay: My pleasure.