When you think of companies that rate high on the employee-satisfaction list, the usual suspects come to mind—the established powerhouses like GE, Charles Schwab, Nordstrom and Southwest Airlines. Even comparatively "young" companies like Cisco and Microsoft have made their mark.
Yet, chances of finding a professional service firm that rates high on the employee satisfaction scale are less common. In this country it is almost unheard of for an engineering, architectural, advertising, public relations or consulting firm to make any "most admired companies" list. The chances of locating a gaggle of happy employees in, say, your local law firm are about as slim as finding John Rocker alone on a New York subway.
It is not that such service firms do not flourish—many do. But the best of them are learning that by creating good corporate environments they are being rewarded with significant gains in retention, loyalty and ultimately even greater impact to the bottom line.
Some firms are placing emphasis on training and professional development, which can make a big difference, particularly in recruitment and retention. Others are making use of flexible work schedules, sabbatical leaves and comp time for putting in extra hours. Still others cite management development opportunities and entrepreneurial activities, which expose people to new ideas and new ways to develop the business. Such firms, like dpr Construction, Glumac & Associates and the Omnicon Group, are breaking the business-first, people-second mold and learning that good corporate environments, as they relate to service firms, and higher profits go hand in hand.
Producing a good environment in a service firm, where commitment to employee satisfaction is a priority, comes out of a complex set of efforts and activities, says James Heskett, who has studied and written about service firms extensively. Among his books are The Service Profit Chain (Free Press, 1997), which he co-wrote with W. E. Sasser, Jr., et al, and Corporate Culture and Performance (Free Press, 1992), which he wrote with John Kotter.
As a member of the Harvard Business School faculty for the past 35 years, Heskett has studied the demands of managing a service firm well. "Given the challenges, it is a wonder that any of these firms survive," he says.
A typical professional service firm is led by dedicated, educated, sophisticated people who are tops in their respective fields, "which is exactly the problem," says Heskett. "A top litigator or gifted architect is probably not going to be an effective manager at the same time. Too many things can get in the way: ego, the blast furnace of pressure from the partners to attract new clients, and the requirement to keep up on current developments in one's field. The needs of employees just seem to fall through the cracks. Except at the best firms, of course."
The best firms often show up on the client list of one of Heskett's former Harvard colleagues, David Maister, acknowledged by many as the authority on the management of professional service firms. While a young faculty member at Harvard more than 20 years ago, Maister took a liking to service firms rather than the retail, hotel and airline service companies then on the business school radar screen. Eventually he made this market his niche and has built a practice that has him spending about 40 percent of his time in North America, 30 percent in Western Europe, and 30 percent elsewhere on the globe.
"Most professional service firms have nothing to sell but their people," says Maister. "There are no machines or widgets to bail you out of trouble and keep production going. So, whether the goal is to serve clients better or attract top talent, in the end you have to find out what makes people tick. The problem is, they don't teach you how to do that at law, architecture or engineering school."
In his latest book, Practice What You Preach (Free Press, 2001), Maister reveals the results of a survey he undertook among 139 professional service firms in 15 countries. More than 5,600 employees making salaries of $25,000 and up were asked to assess their internal operations in terms of customer service, work quality, market reputation, profitability, growth, work environment, teamwork, innovation and career development.
The survey confirmed what many have known for years. Financial performance is a function of client satisfaction and employee attitudes about quality. Client satisfaction and employee attitudes about quality are a function of employee satisfaction. And employee satisfaction is a function of high standards, coaching, and ability to make decisions.
Maister's survey also revealed that while people in service firms feel very comfortable within the technical, intellectual, rational and artistic limits of their work many see the "people" side of business as an uncomfortable and unfortunate necessity. "When people are selected to join the ranks of management, most firms focus on business skills over people skills," Maister says. "The ability to energize people is rarely a priority, but our research tells us it should be given much more weight than it is normally given."
Firms like Redwood City, Calif.,-based dpr Construction represent a new generation of professional service firms that are making corporate culture, rather than pure expertise, the main ingredient of competitive advantage and the guarantor of success.
Protecting that prize culture asset at dpr begins with self-proclaimed prime minister of corporate culture and chaos, Lou Bainbridge, who for more than 10 years, has facilitated the company's four-hour orientation program. Nuts and bolts, land-leveling and foundation-building, though, are not topics on the agenda. Nor will the orientation involve a discussion about the myriad of niche markets the company serves, in biotechnology, pharmaceuticals, microelectronics, healthcare, entertainment and commercial office construction.
Rather, Bainbridge and his new colleagues spend their time talking about the core concepts that underscore how dpr does business. Business that, in 2000, drew in, which is $1.9 billion in revenue not a bad record for a firm started by three dreamers on $750,000 of pooled money smack in the middle of the early 1990s recession.
Throughout orientation, new dpr recruits hear talk of values and critical success factors, five-year base camps and job-site metrics, big hairy audacious goals and "ever-forward champions" who, like Bainbridge, are the evangelists of a carefully constructed corporate culture.
Any competitor that attempts to emulate dpr's modus operandi, though, faces a problem. Culture—that set of quintessential corporate traits that define "how things are done around here"—cannot be bought, borrowed or easily replicated.
"I would suggest one thing to people who are trying to change a corporate culture in a developed professional services company: Don't try it," says Farzad Shahbodaghlou, dpr's head of corporate training and development. "Our founders were fortunate enough to focus on culture and concepts from day one, and that is a huge advantage. Most organizations don't have that luxury."
One of the first things dpr's founders did was to bring in as an advisor Jim Collins, the then-Stanford Graduate School of Business professor and co-author with Jerry Porras of Built To Last: Successful Habits of Visionary Companies (HarperBusiness, 1997), one of the best-selling management books of the 1990s. Collins helped set in motion all the key concepts that are in place today, including dpr's big hairy audacious goal of being one of America's most admired companies by 2030. The process was helped, of course, by the absence of an existing culture to get in the way.
So what can an established firm do to change its culture and create the type of workplace in which people thrive? Asking employees how the company is doing is sometimes enough to promote a more positive environment and to get people moving in the right direction. This has been the experience of Lee Papa, president of Consultant Providers, a Beverly Hills, Calif.-based firm that promotes quality by conducting client and employee satisfaction surveys in real estate management and other professional services. "When we are asked to come in and review the management practices of companies, we find that the most profitable firms have two things in common," says Papa. "One, they are totally committed to providing excellent service. Two, they constantly assess and measure employee satisfaction. It is much easier to call yourself a good employer than to actually take the steps."
One firm that decided years ago to take the steps is San Francisco-based Glumac & Associates, a consulting engineering firm established in 1971 that now has 175 employees working out of five West Coast offices. Of the company's 56 partners, 24 have been at Glumac for 10 years or more. Much of this stability and longevity emanates from founder Richard Glumac, whose attitudes about how to manage people with extreme honesty and fairness were shaped by a bitter experience with his prior employer.
As a young engineer with six years experience, Glumac was asked to fill a senior management gap when one partner in the firm underwent open heart surgery, which at the time required a lengthy recovery period. Promises were made about partnership for Glumac once the executive returned. New business cards were ordered, and there were handshakes all around. Glumac buckled down and went to work. Three months later, the senior partner returned and seemed to have conveniently forgotten the whole thing. Glumac was stiffed, and he never forgot how that felt. When he founded his own firm, he knew what he wanted.
"It's nothing formal or fancy, but our philosophy is to treat people with respect," says Glumac. "We route out managers who make life difficult for their people. We don't want our engineers sitting around worrying about what the boss said or what he or she meant or didn't mean. That is a waste of company time and we have no time to waste."
Glumac & Associates has had one unprofitable year in its existence, which was in the recession year of 1993. For the only time in company history, Glumac had to let people go. It nearly killed him to do it, he says. Beyond layoffs, salary cuts came for those that remained: 15 percent for partners, 10 percent for associates, and 5 percent for employees. "We turned the company around within a year or two and paid all that salary loss back to every person," Glumac says. "We were very proud of that."
At the other end of the economic spectrum is the much-admired Omnicom Group of New York, a holding company for more than 100 companies in advertising, marketing services, specialty communications and digital media. Its 2000 revenues exceeded $6 billion.
In February of this year, Fortune magazine ranked Omnicon, which has been growing at a 25 percent-a-year clip since 1995, near the top of its list of most admired companies in the categories of quality of management, employee talent, use of corporate assets, product quality, financial soundness and long-term investment value.
Omnicom's most visible zealot is executive vice president and chief growth officer, Thomas Watson. Aside from his responsibilities for developing cross-divisional revenue opportunities and strategic growth, Watson is responsible for executive education and professional growth of the company's senior management team. He is well aware of the potential pitfalls of managing professional service firms, given the nature of the people involved: creative with high ego and intellect. This "all-star" attitude often translates into a high-stress, high-turnover environment.
Watson feels that his only sustainable competitive advantage comes through the management of talent. He also believes culture influences profit. Both, he says, are antidotes to turnover. While ceo John Wren runs the company, Watson runs "around" the company. "It is my job to embody the principles by which we operate the company," he says, which include education and pooling resources. "We require our senior managers to be learners," Watson says. "And we want people who share their ideas and collaborate."
Aside from sharing a commitment to employee satisfaction, the people we interviewed for this article operate in widely different setups with apparently little in common. Not all professional service firms have the history and resources of Omnicom, for example, or even dpr Construction. Some are small outfits structured along the lines of Glumac. So, what is it that makes the difference? What are the main ingredients for enhancing employee satisfaction?
There is no single recipe for success; every professional service firm has its own unique culture. But the best of them effectively manage the delicate balance between supportive corporate behavior and the bottom line. And they maintain that balance through good times and bad.