| Topic Name: |
MC career in LONDON |
| Message Name: |
the truth part VI |
| Date Posted: |
03/26/2001 |
| In Reply To: |
Those who desire a better grasp on what some might call consultancy
fundamentals may want to reach for the profession's noted primer -
Managing the Professional Service Firm - and open to the chapter
titled "Hunters & Farmers."
As its title implies, the text's author, David Maister, suggests that
consultancies most often operate under two distinct business systems.
While the success of the farmer system is built on firmwide
collaboration and a set of shared principles or valu es, the success
of the hunter system is built on entrepreneurialism, opportunism,
flexibility, and quick response to client needs. And the author
underscores the hunter model's dependence on a trusted compensation
system - whose absence, he concludes, cou ld put a firm's competitive
hunters at odds with one another.
While successful consulting partnerships have been built leveraging
the virtues of both the farmer and hunter systems, few observers of
the profession would challenge that given its history, MMG was built
on the latter.
The Bubble & the Cash Crunch
Nearing his late 50s, Thomas Steiner is silver-haired and wears
spectacles. He could, perhaps, pass as savvy investor Peter Lynch, or
maybe just his stunt double. But Steiner has never been one to loom
in the shadows.
"The original vision was to create a 'type one' firm," he recalls,
while applying the "type one" label to McKinsey & Company, Boston
Consulting Group, and Bain & Company - three firms whose founders he
seems to sense a kinship with.
"Bill Bain didn't have the option to sell his firm, frankly - or to
sell it for a multiple of its revenues. The only market at the time
was the other partners, of which there might have been only five, and
the bank," says Steiner, quickly drawing a com parison with Bain &
Company's founder when asked why MMG decided to abandon its "type
one" vision and sell out.
"Now, if we were in the 1950s, like Marvin Bower, we could have gone
for it," says Steiner, who believes McKinsey's founder enjoyed the
advantage of having less competition.
"If we had not been in the dot-com era, it's an interesting question
as to whether we would have sold," says Steiner, who describes the
late 1990s surge in e-business consulting stocks as "the interesting
bubble" - one Marvin Bower never laid eyes on - and one that would
lead USWeb and Mitchell Madison to the altar in the third quarter of
1999.
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While USWeb's stock price may have been the impetus behind the deal,
it clearly was not the only reason why MMG was headed to wed. Having
opened 14 offices around the world and grown from 135 to 800
employees within only five years, the firm had seen i ts cash
requirements steadily escalate. To fund the growth at the end of its
first year, the firm's partners deferred their bonuses. Today,
certain former MMG partners recall the act as one of communal good
will towards the firm - a stipend to help buttre ss the firm's early
days. But many partners now agree that they might have thought
differently had they known the trajectory of the firm's future
growth. "Basically, we'd be told that the firm had just hired 120
people, and the idea was to now go out and hire a bunch of partners
to bring in the business, so all these new consultants had something
to do," recalls one MMG partner. Growth quickly became a div isive
issue for the firm's board of directors, as well as for those
partners who routinely asked the question, "Why not grow at a rate we
can actually afford?"
By its third year, MMG had begun to fund its growth with a loan from
PNC Bank. But by year four, partners were being asked to defer their
bonuses once again.
The Deal
It's doubtful that many of the stock-charting minions who fill the
caverns of Wall Street's investment community ever heard the
energetic buzz MMG created across MBA campuses and the consulting
landscape - at least before July 30, 1999, that is, when Internet
consultancy USWeb announced its intent to acquire five-year-old MMG
for $154 million up front and performance-based kickers at the end of
one and two years.
With USWeb's stock trading in the upper $50 range, the deal could
have made MMG's partners millions of dollars. And Wall Street
insiders offered the marriage their blessing, while emphasizing the
virtues of a union that promised to house advertising, W eb services,
and strategy consulting under one roof.
"It sounded sexy, and it also sounded damn glib. When USWeb bought
Mitchell Madison, they thought they were buying a strategy firm, but
no one ever asked what the nature of their work was, even though it
was in the green book - and I know, because I wr ote it," says Bill
Matassoni, referring to the text MMG doled out to prospective buyers
after enlisting Donaldson, Lufkin & Jenrette to shop the firm around
in the spring of 1999. For his part, Matassoni took charge of MMG's
communications only four month s before the acquisition was
announced - a fact which led many to suspect that Matassoni, a 19-
year McKinsey veteran, had been recruited to beef up the firm's
public image as a means of attracting buyers. After 47 acquisitions
in four years, USWeb/CKS cou ld no longer stand bristling at the
thought of being barred from consulting's lunch table for finicky
dieters.
"Here was USWeb buying strategy with an inflated stock price and, at
that level, the word 'strategy' meant nothing. So, I think you look
back and say we were using language at a level of abstraction," says
Matassoni. Two years after joining MMG and 18 months after joining
USWeb, he has recently left marchFIRST to join Boston Consulting
Group. He's not alone. More than two thirds of MMG's workforce has
left since it tied the knot with USWeb, according to former MMG
partners.
Source: Consulting Magazine, 03/01
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