5
Your Role as the Leader1
“Managing for results starts at the top of the organization.”
—August J. Aquila
Any time we experience a high-performance culture, we generally see a strong leader (or leaders) at the helm. As mentioned in chapter 2, “Superior Performance Comes From Alignment” (table 2-2), nine performance variables must be managed. Three are at the organizational (firm) level, three are at the process level, and three are at the performer (individual) level. The more these nine variables are aligned, the more individual performers will work at a superior level and reach their potential.
Although all nine variables and all three levels of performance (organization, process, and performer) are important, peak performance starts at the top (with the senior leaders) of the organization level, guiding organization goals and vision, design, and management. From there, process and individual performance must flow. In this chapter, we discuss what successful managing owners do to effectively lead the firm. We share with you a new leadership model and then explore four key aspects of leadership—direction, execution, commitment, and personal example—all within the context of the firm.
Even Managing Owners Need Assistance
In our 30-year association with hundreds of professional service firms, each has seen the number, scale, and complexity of their challenges increase significantly. Serving as managing owner, never the easiest of roles, is now one of the most complex and challenging roles in any organization.
Yet, the managing owners we know admit they took the role without a real understanding of what it entailed or confidence in their capabilities to perform the role effectively. They also describe how the typical high-need-for-achievement culture within professional service firms made it almost impossible for them to ask for help when needed.
In the past 2 years, August and Rob Lees asked more than 150 owners in a cross-section of accounting, consulting, and law firms across Europe and the United States what they believe successful managing owners do. Unless given permission to reference the examples, or they exist in the public domain, all examples are anonymous. The model illustrated in figure 5-1, which synthesizes both interviews and our interactions over the past 30 years, describes what managing owners must do to deliver the sustained high performance their partners, clients, and markets want and expect.
Figure 5-1: What Successful Managing Owners Do
(Adapted from the Leadership Model in When Professionals Have To Lead: A New Model For High Performance, Thomas J. Delong, John J. Gabarro, Robert J. Lees, Harvard Business School Press, 2007. © 2012 Robert J Lees, August J Aquila, Derek Klyhn.)
Translating these expectations into reality through strong and effective leadership is the mark of the truly successful managing owner. Leaders who provided a clear sense of direction or vision and the strategies for achieving it, who got and sustained their partners’ commitment, who helped owners and the firm’s people deliver outstanding client service, and whose individual performance reflected everything they wanted the firm to stand for created a firm culture of sustained high performance and profitability.
What Successful Managing Owners Do—The Leadership Model
The model of what successful managing owners do is adapted from the leadership model in When Professionals Have to Lead: A New Model for High Performance by Thomas J. DeLong, John J. Gabarro, and Robert J. Lees. We have used their dimensions of direction, commitment, execution, and personal example, but have modified the behaviors to identify what successful managing owners do. Because we firmly believe that firm context should be a major influence on the choice of managing owner, we have also made context an explicit variable rather than the implicit one it is in When Professionals Have to Lead: A New Model for High Performance.
We hold that professional service firms are different from their corporate counterparts in a number of ways. These differences affect their functioning and, therefore, their leadership. Regardless of ownership structure, the majority of professional services firms either operate as partnerships or prefer to operate as partnerships. The compressed hierarchies that make relationships as critical internally as they are externally are also a significant influence, as are the people who work in them. Professional services firms are full of achievement-oriented personalities who join the firms to interpret the profession’s body of knowledge and serve clients. Most owners consider anything remotely bureaucratic or administrative (in fact, anything that gets in the way of serving clients) as an absolute curse. They rarely want to get involved in anything that smacks of management or leadership, preferring to leave that to others, but, and it’s a big but, most owners do want their say in the firm’s goals and how things get done. They believe they have a right to be heard and that their opinions should count. Another factor that has an impact on the way firms (and managing owners) function is that managing owners are generally elected by their peers and operate with their goodwill.2 When managing owners are limited in the terms they can serve, the re-election process can be an unwanted distraction from the real challenges managing owners face.
So, how do successful managing owners respond to internal and external challenges? The first thing they do is set direction.
Setting Direction
A leader can embrace many activities under setting direction, but the following five are those most noted by owners with whom we talked:
Provide a compelling direction and strategy.
Know where the firm is and what is possible.
Focus people’s attention and actions around key priorities.
Constantly assess the firm’s markets, and determine when and how to respond.
Share successes that clarify what the future looks like.
Without exception, owners with whom we spoke talked about the need to have a clear sense of direction, but what they considered even more important is the translation of that direction into a compelling vision and the need to develop strategies for achieving it. If the vision isn’t compelling, if it doesn’t resonate with the owners, then their willingness to take action is greatly reduced. As a result, the firm’s momentum is stifled. Put simply, owners must “own” the direction and strategies because they are the people who will implement them, but the managing owner helps sustain their enthusiasm.
We mentioned in chapter 3, “Building a Compelling Vision,” that the managing owner of one firm returned from Harvard Business School’s “Leading Professional Service Firms” program with renewed energy and a determination to drive the firm forward. So, he outlined his vision for moving from a regional to a national firm. He shared his vision with his fellow owners, but then, nothing happened.
To the owners, the vision was too aspirational—achievable, they believed, only through a merger they also believed would not be beneficial to them. Concerned about the lack of action, the managing owner visited each office to talk through the plans. During these visits, the owners’ concerns surfaced. Recognizing his mistake, the managing owner reset the vision and started the journey over, helped this time by a specially selected group of influential owners. Supporting the reset vision with a clearer description of its meaning and a concentration on a small number of key priorities, the managing owner quickly found the support and momentum he knew the firm needed. This focus ensured people’s energy wasn’t dissipated across too many initiatives. This time, the firm made rapid steps forward and quickly gained industry recognition for its outstanding client service.
This managing owner reflected on how one of his mistakes was to get too far in front of his partners, even though he knew what was (and wasn’t) possible. One owner put it succinctly, “Great managing partners have keen antennae; they just seem to know what the mood is and how to get their partners on board. It’s like they have a sixth sense.” That sixth sense doesn’t come naturally; it comes from being accessible and finding out what owners are thinking. Each managing owner said it took time, but they all said it was worth it, as did the practicing owners who felt their views were taken seriously and that they could influence what the firm was doing. Despite the difficulty of scale (growing from one office to a number of offices), managing owners of the large international firms recognized the importance of keeping close to their partners. It was harder to do, but all of them had mechanisms for allowing their partners to share their opinions.
Understanding markets and knowing when and how to respond was also identified as a key factor in a managing owner’s success. When Nick Land took over as managing partner of Ernst & Young’s U.K. firm, he knew that continuing to do what the firm had done before was not the answer. At the time, he wasn’t certain about the right answer, but it rapidly became evident that moving to industry sectors and colocating professionals in the same service lines was what the firm needed to do to improve performance. At the time, none of Ernst &Young’s competitors were organized by industry sector, and the move gave it an advantage over its competitors and led to a major uplift in revenues and profitability. What was really important in the move was that the arguments to make these moves became compellingly self-evident. Everyone knew it was the right answer and lined up behind it.
In both of these examples and others we heard about, managing owners engaged their colleagues by reinforcing vision with stories about successes—things that were working. The stories were also shared throughout the firm to help clarify what people would be doing in the future and to validate that the firm was travelling in the right direction.
This clarification of what the future looks like in detail enhances owners’ commitment to the direction, vision, and strategies for getting there. As every owner told us, it is a crucial part of a successful managing owner’s armory.
Gaining Commitment
The second activity a leader needs to embrace is gaining commitment. Again, there may be many ways to do so, but we believe the following five are key.
Take Fellow Owners With You
In our work with managing owners, we talk about the importance of owners “walking together” by sharing that common vision. If owners are to share the vision, however, they must play an active part in determining the firm’s direction and, critically, how it’s going to get there. In many firms, particularly those with multiple locations, owners may give their proxy to the managing owner (or executive team) to determine barriers facing the firm and alternatives for overcoming them, as well as opportunities for achieving sustained performance. In the best firms, owners debate their options, and although it is incredibly rare for every owner to agree with every aspect of the vision and strategy, they line up behind final decisions. There are generally no destructive conversations at the coffee machine or water cooler wherein owners question the wisdom of chosen actions. Unsurprisingly, this unity within the owner ranks can significantly enhance the firm’s ability to achieve concerted momentum.
Although scale makes engaging all owners extremely difficult, it doesn’t make it impossible. Smart managing owners engage in one-on-ones and small group conversations, so everyone has the chance to share their views. The point about engagement—about taking other owners with you—came up in every discussion during our research, and its importance should not be underestimated. Simply voting in owner meetings ensures the silent majority remains silent. These individual conversations may be more difficult to have, but they are critical if all owners are going to play their part in moving the firm forward.
Motivate, Empower, and Trust Your Fellow Owners
Engaging owners and keeping them committed takes much more than involving them in the decision-making process, however. Successful managing owners understand there are levels of commitment, and the only way to get sustained commitment is through a culture of trust and empowerment, underpinned by a shared belief in what are now commonly considered old-fashioned values. Without doubt, the most emotive element of our discussions was the loss of shared values. Nearly every practicing owner spoke passionately about the loss of partnership values as their firms’ leaders responded to competitive challenges. As values waned, bureaucracy increased (inevitable, to an extent, as scale increases). This loss of values is an issue we keep coming across in our consulting work. A senior owner in one of the Big Four accounting firms summed up our discussions when he described how if owners don’t consider their legacy (what they will leave behind for those who follow), you end up with a group of mercenaries. Mercenaries (those who think of themselves first or are in it for the money) have no interest in their fellow owners or the firm.
Create Balance Between the Business and Profession
Successful managing owners balance the need for the firm to be a business with the values of ownership. They manage this delicate balancing act of being corporate at the top and practice-based below, and it is neither easy nor impossible. The trick is to understand that moving away from a practice-based firm will result in increased operational efficiencies. Trust must be at the core. Earlier, we mentioned professionals loathing anything bureaucratic, but we know of many firms that ask their partners to account, in detail, for every minute of their time. To ask achievement-oriented professionals at the top of their field to provide what, to them, is bureaucratic data implies a lack of trust and respect for their expertise, position, and being. It is simply a motivational disaster that distances owners from the firm and its goals. Owners know they must account for their time, but we know too many firms that, often at the behest of the finance function, ask for a level of specificity that drives owners to distraction. Smart managing owners have figured this out. They know what motivates their partners and, using their keen antennae, stay tuned into the mood of the partnership and know when to tack and when to stay on course. It’s an exercise in sound judgment, something successful managing owners demonstrate in abundance.
Keep Repeating the Message
Successful managing owners also use sound judgment by being visible and accessible. They also know when to increase each. In one firm, there was a significant disagreement between the managing owner and his colleagues about the managing owner’s visibility. Believing he had put the firm on the right track, the managing owner decided to manage the majority of his communications through his practice leaders. The problem was that practicing owners firmly believed the move was a mistake. They wanted the managing owner to be visible, to manage by walking around, and to share as widely as possible how they would deal with the issues they faced. This need for visibility was exacerbated by the downturn in revenues immediately after the financial crisis and the uncertainty it generated. In this instance, the managing owner failed to respond to his partners’ needs. This is certainly not the only example of managing owners failing to adjust their plans in the light of changing circumstances. The message is clear: to take your partners with you, you continuously judge the mood of the partnership and respond accordingly. You may not change your stance, but you must explain the reasons behind your decisions and, when necessary, gather support for them.
The previous example highlights another reality when dealing with owners—for all their intelligence, they can lack a degree of self-confidence that requires constant reassurance they are doing the right thing. In the Ernst &Young example we referred to earlier, Nick Land worked the need to change into all his interactions with his partners. There were times when Nick wondered if his colleagues would ever “get it,” but he kept repeating the message to help reduce any uncertainty owners had about the firm’s direction and what it meant. Constantly repeating the message is time consuming and, at times, deeply frustrating, but it’s absolutely key to sustaining commitment. The key is to repeat the message three times to those who are most enthusiastic and likely to support the vision for every one time you repeat it to those who are not.
Focus on the People Who Want to Go With You Rather Than the People Who Don’t
It’s best to focus on the owners who want to go with you rather than those who don’t. Not all owners will agree with every decision the firm makes. The benefit of focusing on those who want to go with you is creating and expanding a group of influential owners who can influence other people’s behavior.
Execution
Gaining commitment to the firm’s direction and way of getting there is vital to ensuring success, but success hinges on what people actually do. Professional services is an execution game. The challenge for all firms is not only to clarify vision and strategy but to execute flawlessly. Our discussions led to five dominant activities:
Initiate activities that drive and support the strategy.
Appoint people who help get things done.
Help owners become effective leaders.
Help clients and the firm’s people exceed their own expectations.
Stay on top of the firm’s finances.
Momentum is critical in driving change, so it is no surprise that the initiation of focused activities that drive and support the strategy is key. However, a mistake we see is initiatives with too much time between them. Time enables people’s attention to revert to “the day job,” that thing professionals like to do best: serve clients. Although client service must never be compromised, managing owners must not let their partners’ attention be diverted from implementing strategy. Owners find it all too easy to revert to client work (what they are typically good at and what many like doing), and successful managing owners recognize this reality. So, they strive to keep their partners’ heads up with a combination of focused activities: incessant repetition of the message and upbeat sharing of successes throughout the firm.
Appointing people who can help them get things done is another key part of any managing owners’ armory. Managing owners must appoint people they trust to key positions. This means they identify people who have good character and the capabilities to help them implement their plans. These people are the managing owners’ ambassadors—day-to-day representatives of the message who operate as leaders in their own right, influence others, and help others play a positive part in shaping the firm’s future.
Our final point about appointing others is that choosing the right professional management group is as important as choosing the right partners. A theme that emerged from our interviews is that performance of the professional managers (finance, business development, human resources, talent management, IT, and marketing) has a direct impact on the owners’ perception of the managing owner’s performance. Why? Because the managing owner generally hires or appoints people to these roles. Many practicing owners cited the need for greater clarity about what the professional managers were trying to do and told us that, in the absence of this understanding, the owners used their own criteria to evaluate professional managers’ performance. Knowing what is good when it comes to professional management functions is another thing that differentiates successful managing owners. They recognize it is good to have people who are experts in their functions, but it’s great if these people can use their expertise to influence owners’ actions in a way that enhances the firm’s performance.
Leaders in every firm we know understand the need to deliver outstanding client service. Not all firms, however, make the connection between outstanding client service and the need for development and work flow processes that enable their people to deliver high levels of service—investing in people, so they’ll invest in clients. In their Harvard Business Review article “Putting the Service-Profit Chain to Work,” James L. Heskett, Thomas O. Jones, Gary W. Loveman, and W Earl Sasser, Jr., found the undeniable link between satisfied and loyal employees’ work and service and the satisfaction and loyalty of clients. So, exceeding employee expectations is the ingredient for exceeding client expectations. Differentiation through faster, better, and more efficient delivery is a clear source of competitive advantage and, critically, economic advantage.
The importance of this dual focus is well understood by successful managing owners. So, they ensure their firms maintain effective employee development processes, those in which learning occurs on the job and that enable an associate to gain competencies and provide client value much earlier in their employment.
Successful managing owners also engage fellow owners with both will and skill as coaches—those who believe developing people is a critical function of their jobs and who have the capabilities to do so. They also evaluate both individuals and the process along the way. Investing in talent is certainly common sense; sadly, however, it’s not common practice, and employees are left to their own devices when it comes to choose continuing education.
Good coaching is certainly expected of owners. In When Professionals Have to Lead: A New Model for High Performance, DeLong, Gabarro, and Lees explain the need for coaching and leadership. Although most owners understand and accept the need, it’s far too common that they don’t understand what effective coaching and leadership look like or are not equipped to coach and lead. In our discussions, every practicing and managing owner remarked that successful managing owners invest time, energy, and resources in helping other owners become effective leaders. Successful managing owners developed clarity about effectiveness and how to provide learning experiences to grow their colleagues as needed. They understood the simple truth that owners have the greatest impact on the firm’s culture; what they do and how they do it will influence how other professionals behave. As one managing owner put it, “The owners have got to be leaders; if turning them into great leaders takes up a lot of my time, in my opinion, that’s time well spent.”
Another theme that evolved from our discussions with managing and practicing owners was the need to stay on top of firm finances. They didn’t mean the managing owner had to actually keep the firm’s books, even though this is what the managing owner of one firm opted to do. Although eliminating the finance director clearly saved the firm money, no one believed it was the highest and best use of the managing owner’s time because it diverted his attention from the leadership role owners believed he should have been playing.
Nevertheless, it was critical for this managing owner to have his finger on the financial pulse of the firm and be involved with major financial investments.
Personal Example
Direction, commitment, and execution don’t mean a lot unless the managing owner sets the personal example. Following are key activities that, when performed well, show fellow owners and employees they are serious.
Demonstrate an Unswerving Commitment to Being the Best
Not every firm can be the market leader, but every firm can have a culture of excellence, one in which people are encouraged by internal systems to be their best and are rewarded for doing so. A culture of excellence sets a firm up well for reinvention as the market and people change.
Professionals like to work in firms they believe are best, do stimulating work with great clients, and work with colleagues they see as intellectual equals. To sustain the supply of talented people in their firms, successful managing owners must remain clear and focused on “best in class” both now and in the future.
Using their network to keep abreast of regulatory, economic, technological, and social trends is another activity that successful managing owners do well. They also consider the impact of these trends on their firms and either develop or refine internal strategy, processes, or structure to deal with them appropriately. This keeps the firm ahead of the curve and, as a result, in front of competitors.
The issue of reinvention and the suitability of the current leadership model in the future came up in our discussions with many owners in the Big Four accounting firms and large international law firms. Expressing concern about their firms’ difficulty in embracing diversity, the owners questioned how long it would be possible to continue with the “we know best” approach implicit the U.S. and U.K. colonization models. Although those responsible for current processes are often the people who need to break with tradition and value the differences of others, the owners with whom we spoke were hopeful and confident their leaders can rise to the challenge. They knew the break with tradition would not always be easy, but they firmly believed success on a global scale would be sustainable only by engaging people with a wide variety of backgrounds.
Seek and Listen to the Opinions of Others, But Know When it’s Time to Act
Seeking opinions of others is important, but the key is knowing when we have enough input to make an informed decision and act. Successful managing owners understand this balance. They understand the causal link between delay and the dissipation of energy and don’t let things drag to the point where the loss of energy and commitment compromises strategy delivery. The ability to “take the firm’s temperature” (to know where owners stand) and act accordingly is a core skill.
Stay Close to Their and the Firm’s Key Client Relationships
Another significant application exhibited by successful managing owners is their ability to stay close to key client relationships. We define close in the research as not doing fee-earning work but being more than the review partner. Close is facilitating serious conversations with key clients about their issues, remaining abreast of what is going on in their markets, and serving as the go-to person when informed comment is required by external agencies. Success with clients is often a key factor in a managing owner’s election, so most people likely think every managing owner would automatically stay close, but they would be wrong. We met several managing owners who told us the job of managing owner was too complex to stay close to clients other than informally. This surprised us and left us concerned about how managing owners see their role and make the best use of their teams (particularly their professional managers). Certainly, managing owners deemed to be successful by their practicing colleagues all stay close to their and the firm’s key client relationships. They recognize the loss of credibility that stems from not doing so, the potential loss of touch.
Reinforce the Need for Sustained High Performance Through Their Own Actions
Asking owners to sustain high levels of performance and embrace different views and ways of doing things is impossible if the managing owner doesn’t do it himself or herself. Role modeling is a prerequisite and something successful managing owners do. Avoid the minutiae of management.
Great role models avoid the minutiae of management. Without exception, practicing owners want their managing owner to be an effective and authentic leader. They want a leader who acts with honesty and integrity, is clear about who he or she is, and understands what he or she is good at and needs help with. These leaders earn their partners’ respect for who they are, what they do, and how they do it. Owners did not want their managing owner to disappear into minutiae and cease to be visible for more important things than time and billing, accounts receivable issues, or other administrative detail. It wasn’t that owners believed detail was unimportant; they simply saw it as a professional manager’s function or role. Owners did recognize there would be times when the managing owner should get involved in specific or extremely challenging administrative issues, but they wanted it to be the exception rather than the rule and for the managing owner to use such times as teaching moments.
Take on the Tough People Decisions
We asked about other things practicing owners wanted their managing owners to do. An overwhelming response was, “We all know who the underperformers are, and the impact of not dealing with them takes its toll.” When we asked about that one more thing effective managing owners do that others don’t, in almost every case, it was to tackle the tough people decisions. Dealing with underperforming owners or those who either can’t or won’t embrace change is a difficult and complex task and should be handled in accordance with the partnership’s values.
Ask for Help When Needed
We have placed ask for help as the final behavior in the model. It is also where we started— helping managing owners who struggle independently to make sense of their role. Despite the classic professional service firm phenomena of managing owners who don’t ask for help and, as a result, owners who do not provide it, we notice that successful managing owners ignore convention and ask for help when they need it. Wise managing owners face this reality with the confidence to ask for help when they need it. Creating a culture in which asking for and accepting help is a challenge worth winning. When you do, performance improves, and that’s what every managing owner we know aspires to do.
Final Thoughts
Universally, the responsibilities of managing owners are too important and complex to allow the filling of this role to chance. No firm wants to fill this important role with someone who lacks the skill and will to lead successfully now or in the future.
Ideally, what this means is that we need a group of owners who are groomed as possible managing owners in the future. No one managing owner can do it all, especially as the firm gets larger. The right person to lead a major geographic, cross-cultural expansion isn’t necessarily the same person who will make tough decisions that correct financial performance issues or deal with significant changes in the firm’s business model. So, a best practice is to identify potential leaders and give them a variety of operational, technical, and functional experiences that not only develop them but also lets them lead critical initiatives in the firm.
Being the role model and making the tough decision are critical for success. We know from our work and research in professional service firms that successful managing owners are strong and effective leaders with a vision that excites and energizes others, who help both clients and team members contribute in their own unique ways, and who model everything the firm stands for.
With clarity about the behaviors that deliver high performance and success, however, every managing owner can make a huge difference to the firm’s overall performance and success.