Transcript

In this episode, Jason and Jeff talk about the difference between managing a brand and building a legacy in the professional services industry.

To start, they take a step outside of professional services to share examples of Amazon and Disney—companies that had long-term views and made big investments, knowing that it was critical to their future success.

“To me, it’s about long-big bets to make future revenue streams that don’t exist right now. Things that you don’t have right now, that you want to have in the future.”

“If I bring that back to a professional services firm, what it’s about is really, what is your focus? Are you trying to hit this quarter’s number? Are you trying to hit a revenue target for the year? Are you trying to win that next project, or win that next account? Or, are you trying to build something substantial? Are you trying to build a practice that is shaping the way the market looks at what it is you do?”

Jason and Jeff discuss what this looks like in a professional services firm.

“It is very different in a legacy-minded firm versus a non-legacy thinking firm. And it happens at the 50,000 feet visionary level, but it happens with every interaction between people within the firm, as well.”

“What separates non-legacy firms from legacy firms, is how that plays out every day, every minute, every interaction. At its highest level, legacy firms, I believe, make each one of those interactions in the context of that longer vision, whereas non-legacy firms don’t even think so much about the long-term in the context of individual interaction.”

Then, they share some attributes of legacy-minded firms.

“One of the best explanations, in my experience, around what it takes to create a legacy, is a strong founder or leadership team that lays out this concept of stewardship.”

“Your obligation is to leave the firm stronger, financially, reputationally, culturally than you found it. That is the mindset of a legacy firm.”

“I believe this is key to legacy firms, is a very strong founder personality that lays out an uncompromising value system, and establishes a culture that is uncompromising.”

Next, Jason asks Jeff two questions:

1. How does a firm avoid losing sight of its values?

2. What if you don’t have a legacy mindset and you’re trying to create a legacy firm? What do you do to kickstart it?

To answer #1, Jeff responds:

“In terms of what you can control, the most important thing in my mind is leadership and the stewardship of the culture. Leaders, stepping forward, holding other leaders, other partners in the firm accountable for their behavior. And not allowing the pursuit of money or individual fame to ever supersede the legacy of the firm. And I think when firms get into trouble. Partners don’t want to confront an elephant in the room, and it’s allowed to run around, trampling everything. In order to confront that behavior, you have to have strong, confident leaders, who understand the culture, who are thinking long-term that say, “Not in my firm.”

To answer #2, Jeff responds:

“You are unequivocal in your values and decision making, and that decision making is not just business bets, it is cultural relevance and integrity that you maintain. You come to a fork in the road and you choose the road less traveled.”

“That pivot point, that decision, that unequivocal articulation of a value, and uncompromising perspective costs you something. And it costs you something very expensive. And if you’re not willing to pay the price at that pivot point, you’re not going to be a legacy firm.”

To close, Jason and Jeff discuss “pivot points” and how that impacts a firm becoming a legacy firm.

“This idea of, as a leader of, putting yourself out there in an emotional way. “I’m sticking a stake in the ground on something that defines the culture of the firm for the long-term,” is sort of a critical piece of this if it’s going to work.”

Transcript

Jason Mlicki: Good morning, Jeff. How are you?

Jeff McKay: Good morning, Jason. I’m wonderful.

Jason Mlicki: I’m excited for this topic. It’s something you and I have talked about, sort of here and there, all over the place, for a while. But we haven’t talked about it directly, and it’s really just this idea of what are you doing? Are you managing for today? Are you managing for tomorrow? Are you, I think you used the phrase, “Are you managing a brand? Or, are you building a legacy?”

And it’s near and dear to my heart because I feel like one of the things that we’ve been saying to the marketplace for a while, is that it’s not about being a voice on a topic. It’s about being the voice on the topic, and shaping the very nature of how the marketplace views the big idea, or views what it is you do. So that’s the topic for today.

So I have some thoughts on where I’d like to start. Well, what about you? Where would you like to start on that big, hairy topic?

Jeff McKay: I want to start with hearing your brilliance.

Jason Mlicki: Well, put the sunglasses on because here it comes. No. One of the things I have been thinking about a lot lately, and I don’t think this is new thinking per se, but it’s just one of the things that I’ve noticed, is that it seems to me that there are certain companies, and I’m operating outside of the professional services arena for a minute, that are willing to make huge strategic investments to get big gains later, right.

And everyone knows the example of Amazon, and I can’t pinpoint or articulate Jeff Bezos’ original words on this, but it was something along the lines when they first went public that, “Don’t expect your money back. If you’re here to get return next quarter or next year, it’s not happening. We’re in this for the decades.”

And the other example I like recently, is I read that Disney estimates they lost about a billion dollars on streaming last year. So they lost, I think, $500 million on their investment in Hulu and another $500 million on their standing up the ESPN streaming application. That’s a startling number to me, but it’s also a recognition that they’re saying, “Hey, we know the marketplace is changing. We know that the future of us having a relationship with consumers through media is in a streaming model. And we’re willing to take a billion dollar loss today for tens of billions or more gain tomorrow,” right.

And it’s sort of this long-term view that I love about those types of stories, is companies making these big investments, knowing that it’s critical to their future success, that they own this mode of delivery, or whatever it might be. So to me, it’s about long-bets to make big, long-big bets to make future revenue streams that don’t exist right now. Things that you don’t have right now, that you want to have in the future.

So to me, if I bring that back to a professional services firm, what it’s about is really, what is your focus, from a marketing perspective or even from a leadership perspective, are you trying to hit this quarter’s number? Are you trying to hit a revenue target for the year? Are you trying to win that next project, or win that next account? Or, are you trying to build something substantial? Are you trying to build a practice that is shaping the way the market looks at what it is you do?

So you’re making a strategic investment in a market, to be a market leader, and where I’d like to go, I guess, is to just talk about what that looks like. As a firm, how do you do that? How do you stay focused on the long-term? And how do you align your firm against that long-term mindset and approach?

So I’ve got some thoughts on that, but before we go there, I guess I just want to hear your thoughts on … I mean, maybe in your experience, do you see a lot of firms that think this way? Or, is that a rarity?

Jeff McKay: I think it is a rarity, because I think legacy firms, by their very nature, are rarities. The way you talked about a day in the life, and the questions that you asked, “Are you trying to get this next piece of business? Are you trying to grow it for this quarter? Are you thinking long-term?”

If you ask most partners, they would answer, “Well, yes to all of that. I’m trying to close this business short-term, so I have the cash and money I need with the vision of long-term.” So I don’t think you’d ever have a partner admit, “Well, no. I’m not thinking long-term. I’m only thinking short-term.”

Jason Mlicki: Yeah.

Jeff McKay: But to your point about, “Well, what does that look like?” It is very different in a legacy firm, a legacy-minded firm versus a short-term thinking. Or, let’s call it a non-legacy thinking firm. And it happens at the 50,000 feet visionary level, but it happens with every interaction between people within the firm, as well.
So what separates non-legacy firms from legacy firms, is how that plays out every day, every minute, every interaction. At its highest level, legacy firms, I believe, make each one of those interactions in the context of that longer vision, whereas non-legacy firms don’t even think so much about the long-term in the context of this individual interaction happening right here.

In one of the best explanations, in my experience, around what it takes to create a legacy, is a strong founder or leadership team that lays out this concept of stewardship.

Jason Mlicki: That’s what I want to hear. So we talked about this leading into the call. What do we mean by stewardship? When we say, “Stewardship,” it’s sort of a mushy word, that I think everyone sort of conceptually knows what it means.

But what do we really mean in this context when we say, “You’re a steward, as a leader of this firm,” what does that mean?

Jeff McKay: This is a really emotional and important word in my life. Many of our listeners know, I left a family business, third generation, and went to work for Arthur Andersen, and coming out of a family business, the whole concept of stewardship is so powerful because it is an extension of the family and of your legacy. My grandfather came over from Ireland and started this auto parts business out of the trunk of his car, in the middle of The Depression.

It sets a tone and an expectation about behavior, and hard work, and this idea that I would never want to do a disservice to my grandfather and his investment of who he is and was into this entity that was the family business.

Jason Mlicki: I wanted to piggyback your story for a second before you continue, was just that I think you’re right. Family businesses, in general, there is a higher, maybe a higher likelihood for that type of stewardship to exist because there’s that feeling of commitment to a prior generation.

And as you know, we have a client that’s a third or fourth generation family business, because you and I have talked about that client. And one of the things that struck me was, when I was talking about who appears to be maybe the next generation of leadership for that company, what he said to me was, he basically said, “I want to do what’s sort of in the best interest of the family. If it’s in the best interest of the family, for me to be the leader of this company at the next level, then I’m happy to do that.”

And I don’t know that he used the word steward, but he essentially was saying exactly what you’re saying, was that it was like he was looking out for the interests of both the company and the family, simultaneously, in a broad sense, at least in his mind. It’s just a really interesting tidbit, so I took this off-path. So go back to where you were headed, I’m sorry, Jeff.

Jeff McKay: You didn’t take us off-path. I think that’s consistent with where I’m going. So when I left my family’s business and went to work at Andersen, which was a completely different industry-

Jason Mlicki: Yeah, that’s a totally different experience, right?

Jeff McKay: I mean, completely different.

Jason Mlicki: Auto parts to the boardroom, basically. Totally different world.

Jeff McKay: But it had the exact same ethos. Arthur Andersen was a lot like my grandfather. He created this baby, and he set the expectations, not with his family members, but with his partners. That there were people who took care of this firm, that gave you a chance to become partner, it’s now your turn to take care of the firm for the generation of partners to come after you. And your obligation is to leave the firm stronger, financially, reputationally, culturally than you found it. That is the mindset of a legacy firm.

Arthur Andersen was high performance, we grew very quickly. We were the only firm in the big four who never merged with another firm. We grew organically and we grew with a sense of urgency because we understood that there was a level of scale that was required to be competitive. But the culture of that firm was so important to the partners, that they did not want to dilute it with a significant merger.

Sure, they bolted on acquisitions here and there, but the concept was, “We have always been Andersen, we will always be Andersen, we will never merge with anyone else,” and it is the legacy that Arthur Andersen laid out for that firm, that drove all of those partners.

Jason Mlicki: I want to dig into that a little bit for a second. It surprised the heck out of me, by the way, you said that you felt the same legacy-type environment at Arthur Andersen that you felt in a family multi-generational auto parts business. Like that is the last thing I would have expected you to say.

Was there something that Arthur Anderson, the man, did in the early stages of that firm to shape the way that firm came to be, well past his time?

Jeff McKay: Yes, and the things that he did, I think, were very similar to what my grandfather and my father did in the business. And I believe this is key to legacy firms, is a very strong founder personality that lays out an uncompromising value system, and establishes a culture that is uncompromising.

There were several mantras that went through Andersen, and one of the most important one, and when I run into partners, and former Andersen employees, they still use this expression where they’re working now, and that expression was, “Think straight, talk straight.” And everybody knew that, and there was a frankness in the firm, there was an honesty in the firm, and that expectation, if you violated it, you felt the repercussions of that.

And there are many examples of that in Andersen. There was that same way in my family’s business. Man, if you violated one of the codes, and all these codes were unwritten, they weren’t part of HR, you were gone. It was that simple, and people understood that, so that culture was solidified. And I think that’s the building block on which legacy firms continue because the longer firms move away in terms of their age from the founder, those values tend to dissipate, and get replaced by shareholders, or professional managers, who start to treat the organization as a corporation, where they’re just an employee, versus a steward of it-

Jason Mlicki: Or an MBA, as everything collapses, right. There was a guy that started an investment fund and basically the strategy of the investment fund was to invest in the places where MBAs weren’t going for jobs. As soon as the MBAs come in, you’ve missed the window.

Jeff McKay: It’s funny that you say that, Jason. Because another thing, culturally for Andersen, he would not recruit from private and ivy league schools. He would only recruit from state schools because he felt the students that were at the state schools were hungrier, and they were more ambitious, and fighters because they hadn’t grown up with a silver spoon in their mouth.

That’s a simplification, but he attracted a certain type of personality to reinforce that culture, and there was probably some ethos of, “Hey, we’re not an ivy league, but we’ll still kick your behind.”

Jason Mlicki: A challenger brand mentality, that people like to use that phrase.

Jason Mlicki: I have a question I want to ask you, and it’s actually, I’m a little bit embarrassed to admit, I can’t put my finger on the story right now. So I think for some of our listeners, the story of Arthur Andersen is a big rear view mirror thing that they may know nothing about, and it’s been a long time since that firm, from what it was, and even I, as we’re sitting here having this conversation, I can’t even remember exactly what happened.

In the interest of time, Jeff, I would love, personally, to hear the story of the demise of Andersen, because Andersen goes from a legacy firm to sort of implosion, relatively quickly. But in the interest of time for our listeners, I’m going to suggest Cliff Notes version, that is what happened. If you want to learn more, Google Arthur Andersen, Google Enron, the intersection of the two, you’ll find a pretty interesting story.

Right, I mean it just completely collapses on itself, and on some level, some of the things that stewarding the long-term that the firm had embraced for decades, just got lost. So I have two questions I’d like to discuss in the boundary of this podcast before we run out of time.

The first is, how does a firm avoid that? How do you avoid losing sight of your values? What are some of the things that we can do to keep from, we have this great culture of looking at the long-term, and how do we avoid losing sight of that? Or, having a cancer get inside of the practice, that’s going to just blow that up? That’s sort of number one.

The number two is, what if you don’t have it? What if you don’t have a legacy mindset? What if you’re the leader that shows up, that where the firm has longevity, it’s been around. But it’s just sort of been going through the motions, and you’re trying to create a legacy firm, what do you got to do to kickstart it?

So those are the two things that jump out to me, is things I’d like to talk a little bit more about before we run out of time.

Jeff McKay: To answer your first question, how do you avoid it?

Jason Mlicki: Yeah.

Jeff McKay: I’m not sure that you can necessarily avoid some situations. Sometimes the environment overwhelms you, and there were political, I mean, real political governmental issues associated with this, with Andersen. So you had these outside forces that play on this, that can sometimes dictate what ultimately happens. Those are out of your control.

But in terms of what you can control, the most important thing in my mind is leadership and the management, I don’t even know if that’s the right word, the stewardship of the culture. And its leaders, stepping forward, holding other leaders, other partners in the firm accountable for their behavior. And not allowing the pursuit of money or individual fame to ever supersede the legacy of the firm. And I think when firms get into trouble, partners don’t want to confront an elephant in the room, and it’s allowed to run around, trampling everything.

And in order to confront that behavior, you have to have strong, confident leaders, who understand the culture, who are thinking long-term that say, “Not in my firm.”

Jason Mlicki: Yeah.

Jeff McKay: “I’m willing to cut this partner lose, I don’t care if he drives $50 million worth of business, he’s gone.” Because I’d rather take that short-term hit than threaten the firm that I love, and I’m building that has been good to me.

Jason Mlicki: I love that comment. It’s that idea of cutting off the star performer, the person that’s producing the outcomes, but is doing it in a way that is counter to the values and belief systems of the culture of the firm. And you make a big statement as a leader when you cut that person off.

You say, “Look, we’re cutting this person off, even though they’re delivering amazing outcomes, they’re doing it in a way we’re just not comfortable with.”

Jeff McKay: And I think that’s the thing that separates legacy firms from non-legacy firms. Is they’re willing to take that risk, that hit in order to set a tone, even though it’s disadvantageous in the short-term.

Jason Mlicki: Well, for them and the business. It’s for both of them, right. It’s going to hurt their pocketbook, as well, most likely.

Jeff McKay: I’ve seen it time and time again. I was just at a firm, who prides itself on its culture, and there are some really good things about the culture that are there. But when you immerse yourself in the culture, and you listen to what people are saying, they’re saying that it seems like growth is more important than people here.

They don’t refer to the founders’ mentality, or the legacy that started all of this, with a fondness. It’s not a shared value system, but they try to make it seem like it is, but the partners aren’t living that way. So it’s just posters on the wall, and value statements that really don’t mean anything. And again, the majority of the firms put that in there, “Here are our values, integrity, and innovation, and collaborativeness, and team work.” Those things are garbage because you don’t need to put those up because the partners dictate that at every interaction.

Another thing that Andersen said that I thought was really powerful that speaks to this, is he told his partners, and you see this in professional services firms because utilization is so important, that partners will horde work in order to hit their utilization number.

Jason Mlicki: Oh, wow.

Jeff McKay: And Andersen said, “Whoa, whoa, whoa, whoa, whoa. That is not happening in my firm.” He told his partners, “If you’re doing anything that someone beneath you could do, or should be doing, you’re holding my firm back. You’re holding yourself back, and you’re holding the people that we need to develop the next generation back, and I will not tolerate that.”

And there was always propensity to push work and responsibility down, in order to develop people. I came out of my family’s business in my late twenties, and I was on the executive team there, and when I got to Andersen, I was amazed at how young some of the people were, managing huge corporate relationships. And it just struck me that there’s this expectation. “You’re a high performer. High performers do this. Let’s get rocking and rolling.”

So as a noob there, you just saw it manifest, and nobody had to tell me that. I picked it up before I even heard the stories.

Jason Mlicki: Yeah. Well, before I run out of time, I want to shift gears a little bit for one last topic, and then we’re going to wrap.

So the topic to me is what I call pivotal moments. I feel like firms have, every firm across its history, you can describe a firm and eras. There are eras that relate to the marketplace, or relate to the leadership of the firm, or what was happening at that point in time. And those eras are marked by pivotal moments. And those pivotal moments are often accompanied by certain things.

There’s the movie Jerry Maguire, right, where Jerry Maguire is, what is he? He’s a sports agent. And one night, he wakes up in the middle of the night with a frustration about the state of affairs in his business. And he writes a manifesto, and he goes to Xerox, and he prints the thing out, and he puts it on the desks of all the partners. And everyone basically laughs him out of the firm. And he goes starts his own thing, which is a totally different philosophy on what it is they do.

And I feel like that’s an example of a pivotal moment, where a leader takes a look around, and takes a gut check, and says, “I need to make a statement about this.” I’ve described these things as key speeches, I’ve pulled that from a guy named Ove Arup, who was the founder of Arup, which is a billion dollar global engineering firm, and really one of the most respected firms in that space, in my mind, in terms of their innovation and the way they operate.

He delivered this key speech at a point in his career that really set the legacy of the firm for years to come. And in fact, we have a podcast companion to this about a key speech written by one of our clients, Gail Hantzsch, the CEO of MSA, which is a multi-regional engineering firm. I also think of like the HubSpot culture code. That’s a big one that’s kind of bounced around the agency community and the technology community, that this idea of this kind of philosophical document that defines some of these things in a very powerful way. But it’s tied to a pivotal moment.

And I mean, it seems to me, I’m throwing this out there just because I’m trying to think through how you influence this, how do you influence taking a firm that’s not a legacy firm, and becoming a legacy firm? Or, as a leader, how do you set the stage for what’s to come?

I kind of agree with what you’re saying, about having values posters on the wall, or on the website. I don’t know much that does for you, but this idea of, as a leader of, putting yourself out there in an emotional way. “I’m sticking a stake in the ground on something that defines the culture of the firm for the long-term,” is sort of a critical piece of this if it’s going to work.

Do you agree? Disagree? I mean, maybe just respond to that and maybe we’ll move to a wrap, or I can cut it off right now because I’m brilliant. Let’s go. No. Easy.

Jeff McKay: I agree with you. There are two things I would say, and this answers the second question that you asked me that I didn’t answer, is what if you don’t have it, how do you get it?

The pivotal moments is spot-on, and that’s what I’m talking about in these individual, small moments of interaction. Every moment of every day, you’re never going to know exactly what that pivotal moment is in the moment, and that pivotal moment may be an accumulation of preparedness, if you will, that enables you to pivot at the right time.

But I think there’s two elements that happen at that pivot point. One, we’ve already alluded to, you are unequivocal in your values and decision making, and that decision making is not just business bets, it is cultural relevance and integrity that you maintain. You come to a fork in the road and you choose the road less traveled.

The second, and this again, is why I don’t think there’s as many legacy firms as there could be. Is that pivot point, that decision, that unequivocal articulation of a value, and uncompromising perspective costs you something. And it costs you something very expensive. And if you’re not willing to pay the price at that pivot point, you’re not going to be a legacy firm.

You have to say, “No,” or you have to say, “Yes.” You have to go against the herd, you have to make a stand, and it’s going to cost you something. Whether that reputation, or money, or a job, something, you’ve got to make a stand.

Jason Mlicki: Yeah.

Jeff McKay: And most firms and leaders aren’t prepared to do that.

Jason Mlicki: Well, it’s interesting because, as you know, one of the core elements of our brand model is this idea of point of view, of the firm or the practice has to have a compelling point of view, and one of the things we talk about is that that point of view should attract and repel. It should bring people in that believe what you believe and push away people that don’t, and more often than not, firm leaders are not really all that comfortable with that.

I mean, the idea of a point of view that attracts people in, they love. The idea of a point of a view that pushes people back, scares the daylights out of them, right. That’s what you’re saying, you’re just saying that there’s a cost associated with this.

So I’m going to suggest we move to wrap. This was an incredible conversation. I want to thank you for actually sort of taking us inside some of the experiences you had, working in Arthur Andersen, a huge legacy firm in its time, and then also telling us a little bit about the demise. I think that’s a really big learning experience for those of us who did not live something like that. That was really valuable.

So thank you, Jeff.

Jeff McKay: Thank you, Jason.