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Are You Valuable, or Are You Overhead?

If You're Overhead, Go Home!
The Professional Services Model

After working for two weeks with a major financial institution on a large change project, I noticed a bright, smiling face. This person stood out in this Dilbert-like setting. Everyone else looked frustrated and depressed, and seemed to slog through the hallways. This dramatic contrast was explained later in the day when the bright, smiling face was introduced as the newest employee, starting just that morning. The department manager said to me, "Don't worry, she'll be just like the rest of them soon."

This was a sad and, unfortunately, all too common example of how an organization can extinguish the flame of motivation and innovation that exists in every employee.

The Challenge

Rhetoric concerning a new emphasis on human capital is prevalent, but accounting, management, and reward systems have not kept pace. To truly get the most from our human capital, we must replace the hierarchical structures that were created in the Industrial Age and do not support today's Information Age.

For help with an alternate organizational structure, we can look to professional services firms, such as law, accounting, and management consulting firms.

Background

The Industrial Age caused business to focus a great deal on improving efficiency, as evidenced by assembly lines and interchangeable parts. With relatively unskilled workers and the focus of work on simple production, hierarchical structures were appropriate.

As layers of hierarchy are added in a company, managers can become insulated from the customer. Power and influence center within the hierarchical organization. This internal focus is inherently promoted by something as fundamental as how we reward managers. Traditionally, staff and assets controlled, rather than strategic contribution, have been key compensation criteria.

We have also layered each new management fad on top of this infrastructure without concern for how the infrastructure must change to accept these new practices. Under the guise of efficiency, we have created rules and procedures. We have become more efficient, but are we effective? Today, organizations must find the balance between efficiency, the firm's ability to achieve goals with a minimum of resources, and effectiveness, the firm's ability to adapt its goals and innovate to meet the changing needs of the marketplace. To be more effective, we may need to accept some redundancy, as successful large organizations such as 3M have done, creating stand-alone entrepreneurial units.

Value

I once was a principal in a small consulting group that eventually grew to be acquired by a Fortune 100 services firm. Our only significant asset was the human capital represented by our staff. We operated implicitly on the principle that each person must create value because anyone who was not adding value, especially in terms of client projects, was considered overhead.

Interestingly, we had no titles, no middle management layer, and no promotions. The position and income of each employee was based on the work the person was capable of performing. You see, if a project manager had a need on a project and particular consultants were capable of performing the task to our standards, they were valuable. If not, they weren't. It was that simple.

Our organization provided a built-in incentive to learn and grow. We were by default (without a formal training program) a learning organization. As consultants increased their capabilities, they were in greater demand. We could then charge a higher fee for these individuals, which translated into higher bonuses. This approach makes value creation a high priority for each employee.

Midland Life Insurance in Columbus, Ohio provides a perfect example of economic value-added at the individual level. Midland has approximately 225 employees including many "generation-Xers". In a department briefing, the need for temporary contract underwriters to meet a spike in demand was being discussed. Although this young team was not trained in financial management, they analyzed and questioned each component of the arrangement with a keen eye on the bottom-line. The group even suggested a less expensive alternative for housing. This type of discussion is evidence of a culture that places a high importance on value creation every step of the way.

One of our jobs as managers is to protect fiscal integrity. How much more effective could we be if everyone in the organization were this zealous? How do we make every department, no matter the business, work like a professional services firm?

Leadership

Leadership truly is an art. As Max DePree describes in Leadership Jazz, the best leader is both an idealist and a realist, expecting the best but anticipating the worst. There is often a level of frustration for a good leader. This frustration causes friction. Nature provides many examples in which friction is a good thing, such as in the creation of gemstones. Friction created by an idealistic leader can translate into innovation. This natural phenomenon will occur in the right environment. Too many roadblocks however, suppress true leadership.

Hiring

Finding the right team members is critical to success. Some people do not belong in a high-performance environment. Each new employee must be productive immediately. This process of enabling new employees to be productive begins during the interview process. All parties that will interact with the new employee must be represented in the interview process. Being honest with the candidate is crucial, sometimes requiring someone to play the "bad cop" and describe the challenges of the position.

The most important part of the hiring process lies with the interview team rather than the candidate. The interview team must justify its decision, which should be unanimous, as with a jury. This full support paves the way for the new employee, whose supporters usually are motivated to serve as mentors.

When the candidate starts, you can smooth the transition by assigning a mentor, creating action involving a client the first week (no reading manuals), and monitoring the new employee's progress as closely as possible. For challenging positions it may take a year for employees to feel really good about their contribution or the job. You need to smooth out the rough spots during this period.

Reward Systems

Traditional programs to reward performance conflict with change and growth efforts. These programs honor the hierarchy, differentiate the individual, and control costs. Instead, reward systems need to positively affect personal behavior, focus efforts on serving the client, and enhance collaboration in the workplace.

We need to create an environment with both natural (intrinsic) work reinforcers and external (extrinsic) rewards and recognition. Both types of rewards should be directed to the behaviors necessary to achieve results.

Motivation

Sports psychologist Dr. Jim Loehr's work on motivation can be applied to business. For the greatest end result, he suggests that peak performers be internally rather than externally motivated. The driving forces of internal motivation are excellence, quality, and personal satisfaction, with a focus on the present. When we are externally motivated, we are trying to prove something with our performance, such as beating the competition or trying to avoid looking bad, and we are focused on the past or future. Comparatively, the internal motivators have a more enduring quality.

Guiding Principles

• Focus on the client
• Collaborate
• Perform only value-added activities
• Increase speed of responsiveness and innovation

Envision an organization where there are no turf wars, with happy people supporting each other without questioning motives, departments working together seamlessly, and people taking initiative, looking for value-added activities and abandoning overhead activities. Sound like nirvana?

If we take the steps to create a "professional services firm" mentality in every area of the company, from the maintenance staff to the executive suite, this high-performance culture is possible. Start today!