Common Traits of Success

Blair and David consider the hundreds of firms they have each worked with over the years to identify the characteristics of highest performing firms and what they have seen agency principals do to succeed.

Transcript

Blair Enns: David, today the topic is high-performance firms, and I know this is something you've given a lot of thought to. Let's just set some context here. How many firms have you worked with in a consulting capacity? Forget about the people who have been in seminars, et cetera or people who read your stuff. How many firms have you worked with one to one?

David C. Baker: About 800 now over the last 21 years.

Blair: Wow, quite a few. In those 800 firms, at some point, there's a threshold above which these firms you would consider to be high-performing firms. What are your characteristics? How would you describe a high-performing firm?

David: That's interesting. As you were asking that question, the first thing that flashed across my mind was this phrase that I'm sure you've heard as well that says, "If you can't measure it, you can't manage it." That's what I call, "bumper sticker" management consulting where in short-- and it can go on a bumper sticker but the more you think about it, the more it's bullshit. That was flashing across my consciousness as you were asking that question because I can answer the question around the areas that lend themselves to measurement.

We can talk about fees per full-time equivalent employee or what the principal should make from a compensation standpoint or how effective their work is in the marketplace and so on. There are some other things that I think they, the principals, might say are just as important to them which don't lend themselves to measurement like, for instance, the culture of a place or how do we quantify the value that a principal senses from being their own boss. In many cases, there's this unquantifiable part about it because they're taking on more financial risk, they're not making as much money in some cases.

The other side of the ledger is that, "I'm not working for somebody else and I really like that. I like the fact that I can pivot when I want to. I don't have to protect my people from other bad managers and so on." You asked the question like how do we determine a high-performance firm, then we just talk about some of the things that really are easy to answer and that would be what somebody is making. I can't conceive of somebody making less than, speaking in US dollars terms, less than $170,000 and that seems like it's the entry point.

Then they need to be climbing up there so that on a fixed regular basis they're making say $400,000 and then they should be getting half to two-thirds of a substantial net profit at some point. That would be one way to measure it. Is that the kind of thing you were asking about?

Blair: Yes, and I'll ask you more about other measurements and financial measurements but you seem to have started off by saying that a lot of it would be, if not subjective, then difficult to measure. I suppose that culture can be measured but not easily. I'm sure you can put your clients into, if we wanted to really generalize, one of two buckets probably more buckets than that. You just look at somebody and go, "That's a high-performing firm." Financial almost certainly has to be part of it. I think you and I encounter principals of firms who are entombed in their firm, or trapped by it or feel the weight of it.

David: It's like they started their firm motivated by more freedom and they actually have very little freedom because now they have to come to work to feed the machine whereas just before, they felt a little trapped but they could just quit. Then they weren't responsible for other people. Those buckets are interesting to think about without necessarily measuring the water level in the buckets. What are the buckets? One of them is financial. Another one, I ask myself this question with every engagement and many times I'll actually talk about it with the client I happen to be working with and it's this, "Would I want to work there?" Thinking about the people, the culture, the processes, the opportunities and so on.

That would be another one. Would I want to work there? Then, of course, you could turn that around and say, "Well, does the principal want to work there?" Money, do I want to work there. The other is, are the relationships they have with their clients such that the clients are having "aha" moments frequently from insights that the firm is giving to them? That's an important bucket to me because in many cases firms have slid into this implementation side of things and so they're really more of a service-provider than they are an advisor or guide to their clients. Those are three big buckets in mind but obviously, one of them is much easier to measure than the other ones.

Do you ever ask yourself that question when you work with a client whether it's on-site or on the phone? "I'm not looking for a job but I'd love to work for them or with them" or "I can't see myself working for them." Do you ever frame it that way?

Blair: Yes, I have two questions I ask myself of everyone of my client's businesses. The first one is, "Would I want to own this business? Do I think there's something valuable here that you take in the marketplace and I can see it would be fine, it would be lucrative? The second one is probably the most important one and that is, "Would I want to sell this business?" What I mean by that is I imagine being the salesperson picking up the phone and calling somebody you don't know, just imagining that conversation and saying, "Hey, I represent this firm. We do this. Do you have any interest in discussing how we might help you?"

When you've removed the third party you just try it on. Most of the firms, at least in the beginning, the answer is, "No, I wouldn't," because the value propositions are so broad and sometimes meaningless that you just can't imagine smiling and dialing all day long.

David: Then the gap you're trying to close is partly what the engagement or the training is, is getting it to a firm that you'd be interested in owning or selling. Something I've been working on in that regard is just how to measure it more and I haven't landed on the exact answer but here's my thinking about that. You answered that question because so much of your consulting is around that, the selling and what it is that they're selling, and how they sell it, and so on. Picture there's this agency out there and I'm at a party and I hear that a good friend of mine that I care about is thinking about working there, they have an offer, and that's out of the blue to me I didn't know what was happening.

What's my first reaction? Is it to encourage them to work for that firm or to insert some soft warnings like, "You probably want to think about that. You might want to ask a couple of these questions because once you get in there, I think you'd find it difficult to adapt to this particular part of their culture." It's almost like the net promoter question that we've learned to-- It's like that single question, "Would you recommend this to a friend?" It's flipping that around and saying, "Would you recommend that a friend you care about take a job there?"

I started down that path, and at first, it was like, "Would you recommend that a friend come work with you at your place?" It became a weird question because people were thinking in the category of, "I don't think friends should work together." Now it's about, "If you don't work there--." Anyway, that's an interesting to measure. How do we measure success? Would we want to own it? Would we want to sell it? Would we want a good friend of ours to work there?

Blair: One of your buckets is would I want to work at this firm and expressed differently, would I want a friend to work there? On what basis would you make that decision about whether or not you want to work for one of these firms?

David: One basis would be, are they good people? Do I trust them? Do they know how to fight fairly?

Blair: I like that phrase.

David: Can you fight fairly with your spouse? Do they know how to fight fairly? Do you trust what they'll say about you? Is there a sense of camaraderie or loyalty? The flip side of that would be, do they throw people under the bus? Vendors, or clients, or employees, do they people under the bus? That would be one category for it. Another would around, do I really feel like they have something that they're doing that's worth it or is it just marketing bullshit? Could I stand in front of a room of six people in a conference room and could I with a straight face talk about the value that we're bringing there? That's another bucket. That's obviously hard to quantify.

Blair: How important is the work to you like when you look at what the firm does? When you were talking about standing in front of a room I'm thinking we all look for different levels of meaning in our work and I sometimes make this dismissive comment about some ad agencies where I say on your tombstone it's going to say, "He increased share of the adult wet cat food segment by 2%," but that's me imposing my judgement on the fact that selling cat food or whatever it is maybe we should be looking for deeper meaning. That's me imposing my values on other people.

Maybe we're getting a little bit off topic here but when you're trying on the idea of working for a firm or having a friend go work for that firm, how important is how meaningful the work is not just they're a good marketing firm or they do great creative and you can stand up in front of an audience and feel great about that, but how important is the meaning of the nature of the work that's being done?

David: If we're talking about a product or a service that people genuinely need and it's a service or product or value, I could get behind and get pretty excited about it. I would say that most of the things that marketing firms, ad agencies, design firms are helping their clients sell are okay. I don't object to the products or services so much as I object to how they are sold. That bothers me more than the actual product or service.

Blair: Tying this back to high performing firms, when I say the term "high-performing firms", you conjure up some specific firms in your mind? You probably have like one, or two, or five or maybe as many as a dozen different firms that start to pop into your head?

David: Yes.

Blair: When you think of the high performing firms that you've worked with and you look at the works that they do, do you see that they're doing something that's more meaningful than, say, a firm that's struggling?

David: By meaningful, do you mean meaningful for society or do you mean more cutting-edge effective marketing for them?

Blair: I mean, meaningful for society. Trying on the idea of going to work for this firm or having a friend go work for that firm and think, "Wow, they're really making a difference" or they're doing something on social change, or just to pick one. I don't mean to skew it that way but they're doing something that's really beneficial to humankind or the planet or something.

David: That's interesting. They would probably answer that question differently than I would but whether they're making a big difference for humanity, wouldn't be at the top of my criteria list for successful firms. It would be more about helping their clients sell effectively without wrecking the brand and without wasting money, and so on. When I think about the different options on the scale of meaningful for humanity, there are some categories that are very meaningful for humanity. Then there are some that are really devastating for humanity. Then most of them are right in the middle and I'm fine working in the top and the middle.

I just don't want to work in the bottom and so in the big, vast middle, and then the smaller top. As long as it's in one of those two, I don't care too much, but I do care deeply about whether they are really moving the needle on behalf of the client. I think maybe another way to phrase that is incompetence really pisses me off. As long as it's a product or service that isn't evil, then I'm drawn to this whole competence thing. Are they really doing something with their client's money?

Blair: Let's talk a little bit about the way the firm's structured. Do you see any patterns, in particular, starting with the ownership structure? Are most of these high performing firms, do they have one sole owner or how frequently do you see partnerships and even maybe in partnerships of more than two owners who are working in the business together as partners? How often do you see that?

David: I'm working on a research study right now to figure out how multiple partners changes the decision making. It's not good, obviously but I'm wondering how bad it is. If you add a second partner, does it just double the time it takes to make a good decision, on the other hand, is maybe the decision a lot safer? I've seen many very successful firms with two and sometimes three. It's really hard to find a successful firm with more than three partners, honestly. In fact, my first thought when I see a firm like that is, "Okay, somebody's going to go, maybe not right now, but it's going to happen," and so that in terms of partnership.

One thing that I've seen, this is a scary thought. I did this study around personality profiles, and I'm using a slightly different tool than you are and looking for different things. There were almost 14,000 people that participated within the marketing field that was a sample size but a small portion of that sample was just successful principals. I ran that through statistical software SPSS, and I'll try not to bore anybody here. I ran it through there to see if there was a common characteristic in where people were, from a personality standpoint, and without a single exception, and this was more than 1300 successful principals.

Without a single exception, every one of them was control-oriented. They were risk-takers. They had a killer instinct. That was the only pattern, so many successful principals were organized and many weren't. Many were process-driven, many weren't. This one's really interesting that many were extroverts that style lends itself to selling in an older traditional way more based on relationship and many of them were not extroverts at all. They were introverts or I would prefer to describe them as matter-of-fact" people. That one pattern was without a single exception true of that group, is that they had a killer instinct.

I've been thinking about that killer instinct thing for quite a while. I don't know exactly how to define it, because it's a newer thought to me. That would be one common characteristic of these kinds of firms. The other is confidence. We've talked about that so I don't need to go into it but confidence either comes from, in this case, it comes from their mommy, who told them they were great even when they weren't necessarily. They grew into that over time, or confidence from marketplace acceptance. They didn't start out that way but clients started to believe the story and then it filled itself.

David: That's really interesting that question about the common characteristics and the structure and so on. Let me ask you a question about that because you have more experience in this side. Can you think of many successful firms where the principal most responsible for business development is also managing client relationships to some degree? Have you seen that work or do we need to separate those?

Blair: If I think of high performing firms, it doesn't imply size so much.

David: Not necessarily, no.

Blair: Not necessarily, but there's a size threshold where at some point, you just can't do it. It doesn't stop people from trying to do it but I think you get to about that 12 people or so. The answer is I see it. I see people trying to do it often because they really like selling and they like serving and maybe they have high affiliation needs so they lean heavily on relationship and then they connect with other people who have high affiliation needs. Therefore, they're in a relationship and nobody wants to get out of that relationship so that standard, "I killed it, you clean it" role that your typical business development person would be in some people's personality profiles or motivational makeup keeps them from being able to extricate themselves from relationships.

I would say, I can't think of any of the firms that I would consider to be high performing firms where that is the case. That is almost always a constraint or a limitation.

David: The client issue may not be more important in the bigger picture, but it's more urgent and so you can put off whatever business development activity you would have been doing to either solve the client issue that you are managing or maybe stepping in because the head of account service asks for your help and so it distracts you from the business development. Overlaying this on the question you asked earlier, this is an example where partnership is really good because you could have somebody whose primary responsibility is business development.

You can have another partner who can lend that partnership weight to other issues without distracting the first partner who's managing the business development process. In other words, the roles of the two or the three partners are such that they don't look like a stack of plates all doing the same thing running their own little companies under the corporate umbrella. They're doing different things so it looks more like interlocking circles in the Olympic logo. That's clearly is the most effective partnership but that doesn't have to happen either.

I know and, you know many large firms with one principal that are very successful, it is a good example of how to use partnership in that sense.

Blair: Thinking of those large firms that are run by one owner, operator principal, what are the characteristics of that individual's role? Are you seeing patterns in terms of, what they do and what they don't do from successful firm to successful firm?

David: Absolutely, yes. I think of three things that they do and these would be non-negotiable in my mind. Not in any particular order, but one of them is running the business. Most of them are comfortable doing that. Some don't like running the business. They're conflict-averse. They don't like numbers. They don't like projections. They're not patient, particularly around the people's side. They try to bring somebody in between them and the people to manage the HR function, to manage the high-level people. That always works at the beginning and then it always fails. That's not an overstatement. It's always better and that it's always devastating.

They have to run the business. If they don't want to run the business, then they shouldn't grow. It's just a very simple corollary there, you can't have one without the other. The second is positioning, making decisions about positioning the firm and the lead generation plan that many of the things that you help many clients with. Then the third is just and this is very minor, but it seems like prospects expect somebody important to drop in on the process at some point. This demonstrate by that activity that the agency views this as an important moment in their history. That would be the third role for a partner.

The things that they have to get out of are in order. There's really strong research to support this. The first is being the control tower at the firm. The way I help principals think through that is, if you run into a client in a social setting, and you're chatting and they say, "By the way, what's the status of such and such?" You should never be able to answer that question. Never without asking somebody else first. That's the first thing they have to get out of. If they don't, their involvement is very unsustainable. They start to lose it because all this detail in their head just bogs them down. The second would be managing client relationships. You'd sit down with every client and say, "Who's your primary day to day person?" None of them should give us the principal's name.

Those transitions happen in order, but over time and they're tied directly to how big the firm is. You would have somebody else as the control tower when you're above about six or seven people. You wouldn't be managing any client relationships unless you have other partners. If it's just you as a partner, you wouldn't be managing any other client relationships at 12 or 13 people, and then you keep moving out of different roles as the firm gets bigger and bigger. Probably behind your question is this idea of how important it is for principals to understand their role if they're going to be a successful firm. I think that is undeniably tied to success, is figuring out their own role.

Blair: In particular, you're talking about the things that they need to get out of, so they're left with three roles versus running the business.

David: You mentioned one of those three roles is dropping into the sales, is that right?

Blair: Yes, but not so much that the new possible client gets attached to them and wants to work with them but more just like I envisioned it as just 20 minutes on a two-hour phone call and saying, "Folks I'm so excited about our opportunity, and you're in great hands. I want to talk to you about the history of our firm and what's so important about our culture and our standards for customer service and so on." Then just bob out. It's just like an executive dropping in behind enemy lines and then leaving again and let other people be the occupying force.

David: Blair, I'm curious about what you see because we sometimes even work with the same clients, but we're looking through different eyes in many cases. When you look at what makes firms successful because we've already talked about the definition of that but what makes firms successful are there some things that I really missed that stand out in your mind based on your years of consulting and experience?

Blair: I think it almost always comes back to positioning, and I don't want to beat that dead horse. I feel like we're always talking about it, but you got a firm that's got a distinct value proposition claim of expertise in the market. The one thing that I'm still getting my head around is culture because I used to be so dismissive of the term culture. I don't know if culture creates a high performance or high performance drives culture. Maybe you could give us your thoughts on that. Most principals of creative firms or marketing firms talk about culture. For years I've just been so dismissive coming from the sale side of things. I would think there are two cultures, there's a culture of winning, and there isn't.

[laughter]

Blair: Anytime I heard somebody talking about the importance of culture I would think that's your rationale for not creating a culture of winning of us all going for the brass ring to see how good we can be individually and how good we can be as a firm and we're all going to hold each other accountable. Whenever I hear somebody talking about culture, I'd think that's your excuse for not being able to build a winning firm. Now I think that's just so short-sighted. As I'm adding employees in my business, I've just been struck by how important culture is. The most important thing I ever do might not be the work that I do for my clients. It might be the people I'm able to bring together in my business.

David: Yes, 20 years from now, some firm that you advised or went through your training programs, they may remember your name, they may remember some principals, but by that time they all have thought that they thought them all upright. You won't be getting credit for them at that point.

Blair: Yes, it won't take 20 years.

[laughter]

David: These people will remember almost everything about how their career developed under your watch. The culture and what they've learned, the opportunities you gave them, and how you corrected them at a certain point 20 years from now. That would be so impactful to them. I do feel once you do have employees your purpose in life is quite different than before.

Blair: Yes, I'm seeing that in my business. I can see the patterns. There isn't a high performing firm without a strong culture. I'm curious what comes first, high performance drives culture or culture drives high performance?

David: I think culture drives high performance, but I hesitated because there are high performing firms if we just measure that financially.

Blair: Financial, yes.

David: There are high performing firms with terrible cultures. I don't have any interest in working for those because I'm not generally very successful at helping people change culture. It is what it is. If they have a vision for it, I can help them reach that vision more easily, but I can't change their heart around culture. That's interesting.

Blair: You're right.

David: Great question.

Blair: Great answer. Let's pick this up on a future episode where we go deeper into the topic of culture, and I further reveal that I know nothing about it other than I'm being struck by how important it is.

David: That's the name of our podcaster is just the things we know nothing about.

Blair: Yes, why else would we want to talk about them? Great. All right. Thanks, David. This has been great.

David: We'll talk soon.