What It Takes

Seven Secrets of Success from the World's Greatest Professional Firms

Charles D. Ellis

• Publisher: Wiley
• Year: 2013
• Print ISBN:
  9781118517727
• Edition: 1
• eBook ISBN:
  9781118560495
• Topic: Business
• Subtopic: Leadership
• Index: Business

Expert insights on what sets the great professional firms apart from all the rest

Having devoted a career that spans fifty years to consulting with and studying professional firms in the Americas, Asia, and Europe, author Charles Ellis learned firsthand how difficult it is for an organization to go beyond very good and attain, as well as sustain, excellence. Now, he shares his hard-won insights with you and reveals "what it takes" to be best-in-class in any industry.

Enlightening and entertaining, What It Takes explores firms that are leaders in their particular field and the superior people who create and maintain them. Along the way, it identifies the secrets of their long-term success and reveals exactly how they can put your organization in a better position to excel when properly executed.

• Contains many stories of achieving excellence, and addresses the obstacles that top-ranking organizations face in sustaining it
• Includes insights on leaders in their particular field—from McKinsey & Company in consulting and Cravath, Swaine & Moore in law to the Mayo Clinic in healthcare
• Written by one of the most experienced and respected business consultants/advisors of our time

What It Takes skillfully shows you how innovation and a commitment to excellence can drive success, while also revealing how easy it is to fall behind. With it, you'll discover what separates the great firms from the good ones and learn how to attain, and maintain, organizational success throughout the years.

PART I

ACHIEVING EXCELLENCE

Chapter 1

Mission

An Inspiring Long-Term Purpose

“No, Herb. No!” exclaimed a rasping, nearly cracking voice from the back of the large room in Florida where 500 McKinsey & Co. partners were gathered for the firm’s 1996 global leaders conference. They had been listening to Herbert Henzler, the architect of McKinsey’s great success in Germany.

Henzler’s talk—backed up as usual with slides on a giant screen—focused on a series of key words representing the bold actions he felt were needed to ensure McKinsey’s future. Each word was a screen-dominator: INNOVATE. IMPROVE. MODERNIZE. REFORM. The last one-word slide had been followed by a four-word slide: REFORM OUR BUSINESS SYSTEM.

“Herb! No! There’s something wrong with your slide!” The elderly, hunched man was now almost jogging up the middle aisle between row after row of chairs that filled the meeting room. “We are not a business. We are a professional firm! We have a professional system, but never a . . . a . . . business system!”

The agitated interrupter was McKinsey’s former managing partner, Marvin Bower. Despite his 93 years, Bower exuded such assured authority that the room went silent. Henzler’s face flushed as he froze at the speaker’s podium. Attention centered on Bower. He had devoted his long career to making McKinsey a professional firm—never “just a business”—and on this vital distinction he felt he had to be right at all times. As he had done again and again over his 60 years of service, Bower reminded the group: “If there is the shadow of a doubt on something being good for business but not truly professional, do not do it!”

Having made his declaration, Bower returned to his seat near the rear of the room. Ken Ohmae, McKinsey’s storied leader in Japan, was the conference’s next speaker—and the next to be stopped cold in his tracks by Marvin Bower. Ohmae began by lamenting the hierarchical rigidity of Japan’s zaibatsu corporate complexes and their consequent resistance to all consultants, including McKinsey. As usual, Ohmae had a bold, creative solution: At least some of the people in the inner core of Japan’s largest corporate organizations would have to be replaced by open-minded new executives who would be interested in outside ideas and new ways of thinking. The solution, he said, was clear: McKinsey should get into executive search. Implied in Ohmae’s strategy, of course, was that McKinsey would have preferential access to consulting assignments through those new executives McKinsey would place through its executive search: We helped you get your job, so now why don’t you help us get some consulting work with your company?

Back on his feet, Bower was calling out as he again hurried to the front so he could be seen and heard by everyone: “Ken! Ken! We do not do headhunting. It would not be professional to go around pinching the best people from our clients. That would be a clear-cut conflict of interest.” Once again the elderly man stopped any discussion of McKinsey’s being a business. Bower was living another chapter in his lifelong commitment to McKinsey’s being a truly professional firm in which every professional had an individual obligation to dissent.

True to that core value, Bower was leading by dissent, and as so often before, he prevailed. “Marvin took a central role at Florida, lambasting the ‘innovators’ when any of their ideas conflicted with the firm’s priority drive for professionalism and so must be opposed,” recalled Charles Shaw, a longtime senior partner. “He carried the day. Looking back to that day years later, I’m convinced that his argument—both emotionally and intellectually—made a valuable contribution to our long-term success as a professional firm. It clarified for McKinsey what was McKinsey.”

Every great firm has a clear, long-term purpose—an inspiring, engaging mission. This North Star provides the firm’s professionals with extra confidence in the meaning, value, and significance of their work and justifies the intensity of their engagement beyond “making a living” to making a purpose-driven life. In an old story, a pilgrim came to the construction site for what would become Chartres Cathedral and asked the stonecutters what they were doing. One tersely said, “Squaring this stone.” Another proudly said, “Squaring this stone to build a strong wall for a major building.” And the third, with joy in his heart, said with a wide smile, “Building a great cathedral to honor the glory of God!” With which stonecutter would you want to work?

Most young men and women coming out of the leading graduate schools—each with wide-ranging freedom of choice—will take the upper-middle pathway of a good job with a good firm, knowing they will earn more than enough to enjoy their time on earth. But a few of the best will choose a more demanding path. Wanting their careers to be more than just a series of high-paying jobs, they will seek employers with a truly compelling mission. For the most capable few who want to make a significant difference, good is not nearly good enough. And these purpose-driven people are as indispensable to each great organization’s achieving its mission as being part of a great firm is essential to them. Only mission-driven organizations can consistently attract, inspire, and engage exceptional professionals in the continuously demanding work of producing superb service for the most interesting clients. And only mission-driven organizations can attract and keep important clients dealing with important challenges. That’s why only organizations with a compelling mission can achieve and sustain excellence.

Marvin Bower’s seminal contribution to McKinsey was understanding and articulating the value to the firm and its people of living for and with a higher purpose or mission: being not just a business but a profession and all that that implied. As a young man Bower had graduated from Brown University and gone on to Harvard Law School because he wanted to join Cleveland’s leading law firm, the firm that eventually became Jones Day. But he failed to make the top 5 percent in his class and the Harvard Law Review, so he was rejected. Determined as always, Bower decided to return to Harvard, this time to the business school, and try again. He made the top 5 percent at Harvard Business School and was a student editor of the Harvard Business Review. This time the Jones Day firm admitted him.

Determined to understand what had made that firm great, Bower did what he would so often do during his later years at McKinsey: He made a list of the key factors. Client interests were always put first and clearly ahead of the firm’s; confidences were always maintained; no assignment was taken unless it was really necessary and could not be handled by the client company’s in-house counsel; partners always felt both the freedom and the responsibility to disagree with clients if that was in the client’s interest; and partners consistently took time to coach associates on ways their work could be improved and on how they could keep their fees relatively low by being more creative than other firms in solving problems.

As a young lawyer serving as secretary to numerous bondholder committees organized to work out defaulted bond issues, Bower saw a pattern. The CEOs of the failed companies had needed information for sound decisions, but their employees, deferring to hierarchy, hadn’t dared tell the insulated CEO what was really going on. Bower estimated that the managers could have saved 10 of the 11 companies if only frontline knowledge had been taken to the CEO. He became convinced that top management of corporations needed the same quality of independent, expert professional advice on business problems as his law firm was giving on legal matters. He began discussing with his wife, Helen, the great opportunities—and the risks—of switching from law to business consulting.

Early in 1933, Bower was working for a bondholders committee during a corporate reorganization in Chicago. Also on the committee was James O. McKinsey, the son of an Ozarks farmer, who had started a relatively small accounting and management engineering firm. McKinsey, impressed by a paper Bower had written on clothing manufacturing, asked about his career plans and offered to interview him. Bower was reluctant at first because his wife feared moving near “Chicago gangsters.” But when Jones Day cut all staff salaries by 25 percent, Bower decided to interview with “Mac” McKinsey. As McKinsey explained his firm, Bower sensed that aside from its work in accounting it was becoming just the kind of professional firm he was interested in—working on business and management problems the same way law firms worked on legal problems.

Bower joined McKinsey in late 1933 as one of the world’s first “career consultants.” This was a change from the norm of experienced industrial executives becoming consultants for stints of a few years and then either “returning to industry” or retiring. Bower went into McKinsey determined to do as much as he could to help it develop into the kind of firm he envisioned.

James O. McKinsey’s success in consulting peaked at Marshall Field & Co., the big Chicago retailer, where he directed a major study in 1935. He charged what was then considered a substantial fee: $50 a day. At Marshall Field, McKinsey’s shocking report—delivered orally after just four months—recommended selling the 24 Fieldcrest mills in the South, as well as the Chicago Merchandise Mart, the nation’s largest dry goods business, and the wholesale division, which had been the traditional core of Marshall Field’s business but was a long-term money loser.

Having reported losses for five straight years, directors of Marshall Field urged McKinsey to become chairman and CEO and implement his comprehensive overhaul. Recognizing that advising was not doing, McKinsey, who had an incorrigibly high need for achievement—his work was his life—and a desire for real wealth, decided to take this challenge, test theory with practice, and try to prove that he could implement his concepts.

The work at Marshall Field—cutting off whole divisions, closing departments, firing hundreds of old-timers, and restructuring every part of the business—was exhausting and produced a dozen threats on Mac McKinsey’s life. He saved Marshall Field but ruined his health: he caught a cold that became pneumonia before penicillin was available and died suddenly at age 48 in 1937. As Bower lamented, “My personal loss was that the man I admired most—my hero—was gone. My career loss was that I had had less than two years to learn from my mentor.”

Although his firm had specialists in functional areas, McKinsey always preferred to take the generalist point of view required of top management. His holistic diagnostic approach centered on major policies and the strategies needed to implement them. Basic to McKinsey’s concept of management consulting was not just figuring out how to produce more efficiently, but deciding whether to be in a particular business at all. “Mac McKinsey’s greatest contribution to consulting, as well as to business,” Bower believed, “was his concept of the integrated nature of managing a business and the process of management as [organizational] components interacting. Mac’s second contribution to consulting was his demonstration of independence by thought and deed and his willingness to tell the client the truth just as he saw it. From Mac, I learned basic concepts and ways of managing. Most important is the concept that making major improvements in a business can best be achieved when tackled as a whole. Mac also thought managing should be kept as simple as possible.”

With the foundation laid by Mac McKinsey, Marvin Bower became the architect and chief builder of what would become the world’s largest and most admired firm of top-management consultants. Monthly Saturday training sessions with everyone coming provided Bower with the pulpit from which he would preach the policies and unifying practices he traced back to Mac McKinsey, particularly devotion to the “professional approach.” The firm moved deliberately away from overtly selling its professional services; Mac McKinsey had believed that if clients were well served, McKinsey’s services would sell themselves. (Others would argue that, while not calling it “sales,” once it gets started the firm is accomplished at persuading clients to enlarge or extend engagements and is exceptionally successful at developing regularly repeating clients.) This belief in the importance of serving clients well led naturally to the view that each client is a client of the whole firm, not just of an individual consultant, and so must have full access to all the firm’s resources. Mac McKinsey made another enduring impact on the firm through his conviction that a professional firm should invest in its reputation by having its offices well located and attractively furnished.

An effective mission has to resonate both within the firm and outside. Bower insisted on the term management consulting to get away from such alternatives as efficiency experts or management engineering, which he found unprofessional. He insisted that consulting should be recognized as a profession and as a career. Training would be rigorous and continuous. Since major prospective corporate clients operated nationally, Bower saw that the firm must also be nationwide, with offices in major cities, and that those offices must all be identifiably part of a “one-firm firm:” Policies and procedures would be the same in all offices. A series of consulting guides—leaving room for judgment where unusual circumstances warranted some variation—were carefully prepared on such topics as manufacturing, organization, and management information and control.

Descriptive terms and phrases matter in defining a firm’s mission. When others proposed a marketing brochure for the firm, Bower’s first impulse was to condemn the idea as unprofessional. However, he changed to hearty agreement when he saw that creating the brochure—with himself leading the process—could be an effective device for getting internal agreement on values even before any external distribution. The result was a 42-page hardcover booklet titled Supplementing Successful Management. Bower made sure it explicitly committed McKinsey to becoming a truly professional firm.

Advocating the professional approach at every opportunity, Bower led the firm from 1950 to 1967, finally stepping down at age 64. During this period McKinsey decided to concentrate on consulting and get entirely away from accounting and actuarial services—and from executive recruiting, which had brought conflicts of interest, little professional satisfaction, and inadequate compensation. (In his proposal at the Florida conference, Ken Ohmae had touched an old nerve.) Bower gave talks, wrote memos, and frequently admonished his associates until two colleagues took him aside and said that while they agreed with him on McKinsey’s mission, he was hurting his own cause with so much repetition. Bower accepted their advice on method and promptly began what he called “persuasion through pointing up success,” watching for opportunities to commend others for taking the professional approach and leading from behind rather than from the front. But it was still Marvin Bower persisting with the same message.

As the unrelenting advocate of the professional approach—and making it stick and flourish—...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Foreword
• Introduction
• Part I: Achieving Excellence
• Part II: Sustaining Excellence
• Afterword
• Thanks
• About the Author
• Index