Using Culture to Accelerate Growth: A Guide for Consultancies

Key Takeaways

• Culture’s Crucial Role: A well-defined culture is essential for attracting talent, guiding behavior, and maintaining consistency within consultancies.
• Success Stories: Successful firms like Elixirr, Solidiance, and Secure State highlight how diverse cultural values can drive performance and brand identity.
• Small Firm Advantage: Strong culture is vital for small firms to differentiate from larger competitors and attract top talent.
• Defining Values: Focus on honesty, uniqueness, and practicality when establishing core values. Avoid being generic.
• Consistency is Key: Align culture with the firm’s Unique Value Proposition and ensure leadership exemplifies desired behaviors.
• Managing Growth: Middle management plays a crucial role in maintaining culture as the firm grows.
• Risks of Conformity: A strong culture must remain adaptable to avoid the pitfalls of groupthink and ethical blind spots.

As an undergraduate, my philosophy Professor told me “the alternative to having a philosophy is not having ‘no philosophy’ but having a bad philosophy”. We can say the same about culture in consultancies.

The Importance of Culture in Consultancies

If you think culture is, as an old boss of mine put it, ‘for sandal-wearing yoghurt-munchers’, you won’t get an absence of culture, but you will develop one that is inconsistent and damaging to your performance and brand.

Culture is crucial to the growing firm not only because it attracts and maintains great talent, but also because it ensures people act in the right way without having to create rules and monitoring for all situations. In my view, creating and articulating a strong culture can benefit a firm as much as any financial, marketing or pricing strategy.

Examples of Successful Consultancy Cultures

For my latest book, I interviewed 80 founders of consulting firms that grew and sold their companies, typically at a value of 8 times EBITDA. The most successful firms I interviewed not only had strong cultures but were great at communicating cultural values in their messaging, brand and marketing.

• Elixirr’s culture emphasises innovation: ‘We help our clients break away from the pack. We craft tailored, state-of-the-art solutions. Never copy and paste’.
• Solidiance’s was more aggressive – ‘We fight to win’, ‘We punch above our weight’ ‘We like dirty, dangerous work’.
• Secure State emphasised a fun and a laid back approach where there was a fridge of beer and people bought their dogs into work.

For others, culture focused on being practical and hands-on, the best in the market, the smartest in the room, the most ambitious for the client, or on being honest and frank.

The Role of Culture in Small Firms

Culture is especially important for the small firm because it cannot rely on its brand to win in the two markets crucial for consulting success: employees and clients.

You need to give great consultants a compelling reason to work for you, rather than going to a well-known firm or starting-up by themselves. In addition, a strong culture means that people know how to behave without detailed rules and prescriptions: this is especially important when you scale and the risk of bureaucracy stifling innovation increases.

A great culture distinguishes your firm from the vanilla cultures of larger firms. If you examine the espoused values of the large firms, they are loosely the same: ‘integrity, team-work, diversity, blah blah’.

This is because they need to play safe and appeal to the mass market. You don’t have this problem, and in fact, if you try to compete with vanilla, you’re likely to fail. For this reason, it is worth having an honest, frank discussion about what your values are and the type of culture you will create. I emphasise honesty here, because if you are inauthentic you will get found out, and those that find you out will post their findings all over the internet.

Principles for Defining Your Consultancy’s Values

There are some basic principles when thinking about the values you prize:

• Be honest
• Don’t have a long list. Five is better than ten, and three is better than five.
• Think about what you don’t want on the list
• Focus on what makes you unique
• Think about what clients you love working with (and those you don’t)
• Think about what type of people you want with you (and those you don’t!)
• Don’t be vanilla

To embed your values into the firm’s culture, they need to be consistently and universally demonstrated by leadership and woven into all aspects of the firm, from recruitment and promotion to client selection and branding.

Values also need to be reinforced by the traditions of the firm and the competences it prizes, as well as the symbols and artefacts of the culture. However, nothing is more important than behaviour. Let me illustrate this with an old story.

The Power of Consistent Behavior in Shaping Culture

In 1966, researchers put 5 monkeys in a cage with a ladder leading to some bananas hanging at the top of the cage. Every time a monkey climbed the ladder, the whole troupe were sprayed with icy water.

Eventually, no monkeys tried to get the banana s. When the experimenter replaced an original monkey with a new one, the new one tried to climb the ladder but was jumped on by the other monkeys. Eventually, the new monkey knew not to try. One by one, each original monkey was substituted with a new monkey and the cycle of climbing, icy showers and learning was repeated each time.

Eventually, there were five monkeys in the cage who had never been sprayed with water but who refused to climb the ladder. None of them knew why. The lesson is that consistent behaviour creates norms, and you are one of the first monkeys.

The most important thing is a strong sense of consistency between Unique Value Proposition, your niche and your culture. There is no point saying you have a culture which values work-life balance if your high-leverage business model means that juniors are hammered or saying that ethics is fundamental to the company if you do PR for the coal industry. Clients and employees can sniff out disingenuous firms, and you are likely to lose both.

The Impact of Culture on Business Success

As Louis Gerstner, the former CEO of IBM, put it, ‘culture isn’t just one aspect of the game – it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value’. Successful firms almost all mentioned their culture or values as a fundamental pillar of their growth. Creating a great culture has huge advantages.

It can lower turnover and attract quality new candidates, make the firm more attractive to buyers, and reduce the overall need for mentoring, management and supervision. Perhaps most importantly, it guides the actions of employees instead of relying on a host of rules and regulations.

Although I have found little correlation between growing and selling a consultancy and the job satisfaction of the employees within that consultancy , unsurprisingly, those with happier employees had much lower turnover, which is especially important for small firms struggling to attract quality talent.

Generally speaking, it is necessary to treat employees who are highly skilled in a rare area very well indeed, especially if their deliverables are ambiguous and thus dependent upon their good-will or work ‘beyond contract’.

A great culture does not happen spontaneously. It is something that has to be fostered and also articulated. In effect, it is a (relatively) Unique Value Proposition for employees.

It is managed by both hard and soft mechanisms which include:

• Clearly articulated and communicated non-negotiable values
• Consistency between UVP, strategy, branding and marketing
• Consistency between articulated values and actual practice (rhetoric vs. reality!)
• A clear link between cultural priorities and recruitment, training, reward, and promotion.
• Clear symbols, rituals and stories representing and reinforcing your culture
• Strong emphasis on company and team camaraderie and ethos
• Leaders who consistently exemplify the desired cultural behaviours
• Some form of democratic participation of employees in forming & reforming cultural priorities

By developing a specific culture you attract some but also repel others. However, being vanilla is not an option. Vanilla people go to vanilla brands like Deloitte or Accenture, so there is no point competing in that space. You are better off nailing your colours to your mast and attracting people who think like you.

Maintaining Culture During Business Growth

The challenge, however, is how to maintain a strong culture when the firm grows beyond 30-40 employees. The key to this, in my experience, is middle management. All the points above should be maintained, but in addition, middle management need to be incentivised and encouraged to be champions for culture if it is going to permeate a larger organisation.

Of course, there is a risk to a strong culture, which is that it can promote conformity and a bias against change and innovation. I feel this is what happened to McKinsey & Co. in the 2000s, when an incredibly strong traditional culture no longer matched the shifting values of clients and wider public.

The series of ethical scandals and how they were handled, to me, showed that McKinsey & Co. did not only have a problem with ethical practice, but were incapable of seeing how bad it was. The cultural and economic dangers of ‘groupthink’ emphasise the importance of a culture that is both strong, but also reflective and open to change.