There is an industry-wide trend towards virtual, dispersed teams. Our research indicates that current business practices associated with the recruitment, utilization and retention of consulting professionals causes both margin compression, and a significant loss of revenue opportunities. Inadequate support systems force unwanted turnover that drains profitability by a factor of five times the median consultant’s salary. Inefficient and unverified skills matching for each subcontractor pool of 2500 consultants, deployed at a 5:1 ratio, prevents the capture of approximately $80m of additional revenue, $12.5m in net income and $.01 in earnings per share. The use of itCONSULTmp’s roster of benchmarked best practices reduces the cost of validating candidates for both permanent and temporary hires by an average $32,000 per recruiter per year, and further leads to a re-allocation of up to 15% of a manager’s time currently wasted on non-billable invoice reconciliation and client queries. The use of best practice, electronic skills and requirements matching, drives the efficient deployment of subcontractors towards more valuable, and more professionally attractive high-skill assignments. itCONSULTmp’s benchmark research reveals that such best practice usage delivers a 7% higher EBITDA, and a 17.6% lower Cost of Sales than the consulting industry average. The macro, industry-wide trend towards the application of these best practices, and the network efficiencies which they leverage, will inevitably become the norm. We project leadership in this space will be highly rewarded.
Archive for October, 2013
The German Psychologists’ victorious quest for parity … Or: Can consulting services be commoditized???
How the sophisticated application of data analysis and de-mystification of “unique solutions” will let you not only survive but thrive in a hostile, no-growth environment – while former competitors may become extinct!
German Psychologists had been advocating for the appreciation of their science and profession for several decades. But it was not until German and Swiss Psychologists united at the University of Bern in the early 1990’s that their dream would become reality. How did they do it? By raising the bar when it comes to the application of mathematics, particularly statistics and research design to a new level. In the most comprehensive therapy outcome meta analysis ever conducted, commonly practiced therapy approaches including pharmacological treatment were scrutinized for their efficacy remedying the most common psychiatric disorders. The results led to true parity for psychologists and changed health care administration irrevocably:
Particular therapeutic approaches were found to be significantly superior over pharmacological treatment in their efficacy mid- and long-term for most psychiatric disorders.
- Even if less credentialed and/or academically trained professionals follow the identified and standardized best practice treatment protocols progress remains significant in mid- and long-term efficacy and superior to other approaches applied by expensively and expensively trained experts.
- Long-term psychoanalysis failed to prove its efficacy and hence to justify the status quo.
- Practitioners of therapeutic schools that failed to prove their efficacy were denied reimbursement by health insurance providers. These approaches are therefore becoming extinct.
Old-school psychoanalysts had always claimed that their approach should be considered more of an art, something that cannot really be captured, standardized, explained or reproduced easily. Unless, they said, you have undergone your own psychoanalysis, and years of weekly therapy sessions. The burdensome economics and inefficiencies of such a dogmatic approach equates to the value of a single family home or the acquisition of an advanced degree. Two of the most renowned and prominent psychoanalysts of their time conducted a comprehensive therapy outcome study which re-oriented and re-defined the critical success factors for psychoanalysis. (Wallerstein, R.S. (1989). Forty-two lives in treatment: A study of psychoanalysis and psychotherapy. New York: Guilford Press.). This seminal study revealed embarrassing results for the “psychoanalysis as an art” school of thought. To avoid economic extinction one must, 1.) utilize sophisticated data analysis tools to capture best practices and increase transparency and predictability, and 2.) even a unique solution provider must scientifically prove efficacy in comparison to competitors.
There are both striking parallels and existential lessons to be drawn from this narrative for the practitioners and business owners of consulting services enterprises.
READ ON PILGRIM………………………………………
Companies use personality tests for a variety of purposes, such as employment screening, assessing leadership potential, fostering corroboration and teamwork, and so on.
The most widely used is the Myers-Briggs Type Indicator (MBTI), created by Pennsylvania housewife Isabel Myers. This particular test is utilized by 89% of the Fortune 100, given to 2.5 million people each year to identify strengths and enhance teamwork. She thought the test could bring about world peace.
The Minnesota Multiphase Personality Inventory (MMPI) was developed in 1946 to sort mental patients into diagnostic categories. It was then expanded in an attempt to describe normal people.
Of course, popularity does not imply scientific validity. What is worse, most companies keep these tests confidential so the data cannot be scientifically tested to determine effectiveness.
These tests are also popular among consultants, who are paid good money to administer them in a convivial atmosphere. But the fallacy is the tests measure what we are like and who we are, not what we know, believe, or can do. They confuse labeling personality with understanding it.
The tests are also reassuring confirmations of what people already know about themselves, what psychologists call the permanency tendency. They also tend to validate the positive characteristics we all believe we possess, the so-called Pollyanna principle.
Companies might as well bring their people together to play with Ouija boards, which are equally entertaining while having roughly the same empirical validity. As they say, if you really want to learn what someone is like, marry them or work for them.
Annie Murphy Paul, former senior editor at Psychology Today, has written a scathing indictment against these tests, labeling them modern-day phrenology, in her book The Cult of Personality Testing: How Personality Tests Are Leading Us to Miseducate Our Children, Mismanage Our Companies, and Misunderstand Ourselves. Here a few of her more condemning facts:
…[A]s many as three-quarters of test takers achieve a different personality type when tested again, and the sixteen distinctive types described by the Myers-Briggs have no scientific basis whatsoever.
The sly brilliance of using personality test[s] to label employees is that, by dint of answering the test’s questions, employees appear to be labeling themselves. … Under this banner of respect for individuality, organizations are able to shift responsibility for employee satisfaction onto that obliging culprit, ‘fit.’
And research has found little connection between indicator types and real-life outcomes. There is scant evidence that MBTI results are useful in determining managerial effectiveness, helping to build teams, providing career counseling, enhancing insight into self or others, or any other of the myriad uses for which it is promoted.”
Professor Erkko Autio, department of management at HEC Lausanne, in Switzerland, pointed out the same defects with respect to the current fad of “emotional intelligence” in a letter to The Economist:
It might interest you to know that not a single serious study has ever been able to demonstrate a link between “emotional intelligence” and leadership effectiveness. The most robust and consistent single predictor of leadership effectiveness is, simply, intelligence. Emotional intelligence sells well, but scientific evidence supporting it is almost as solid as that supporting the effectiveness of homeopathy (The Economist, Aug 26, 2006: 14).
Professor Autio is certainly correct in the assertion that intelligent quotient (IQ) is a better predictor of executive effectiveness, as The Bell Curve has empirically demonstrated. If you were confined to learning one number about an individual to predict their standard of living, you would be hard pressed to find a better one than their IQ.
That being said, firms are not confined to knowing just one thing about their potential or existing employees. As Rabbi Daniel Lapin wrote in Thou Shall Prosper: “You are best understood and appraised by others on the basis of the things you believe rather than on the basis of the things you know.” Or, I might add, rather than on the basis of your personality or year of birth (see Generational Astrology).
We are better off understanding people’s beliefs if we want to even begin to understand how and why the Germans of the Third Reich could carry out their murderous orders in acquiescent servility, or the people who flew airplanes into buildings killing innocent civilians on September 11, 2001.
Trying to simplify the spirituality and soul of a human life by labeling it with a personality type (or even an IQ) is to disregard the uniqueness and dignity of individuals, which requires judgment and discernment far more than measurement. As Peter Drucker once wrote, “There is no such thing as an infallible judge of people, at least not on this side of the Pearly Gates.”
I am not going to offer a replacement to personality testing because you don’t need to replace meaningless practices with anything. I will suggest, instead, that you follow the wisdom of Chinese philosopher Lin Yutang, from his book, The Importance of Living:
To me… man’s dignity consists in the following facts which distinguish man from animals. First, that he has a playful curiosity and a natural genius for exploring knowledge; second, that he has dreams and a lofty idealism…third, and still more important, that he is able to correct his dreams by a sense of humor, and thus restrain his idealism by a more robust and healthy realism; and finally, that he does not react to surroundings mechanically and uniformly as animals do, but possesses the ability and the freedom to determine his own reactions and to change surroundings at his will.
This last is the same as saying that human personality is the last thing to be reduced to mechanical laws; somehow the human mind is forever elusive, uncatchable and unpredictable, and manages to wriggle out of mechanistic laws or a materialistic dialectic that crazy psychologists and unmarried economists are trying to impose upon him. Man, therefore, is a curious, dreamy, humorous and wayward creature. In short, my faith in human dignity consists in the belief that man is the greatest scamp on earth.
Uncertain business conditions, slower growth in domestic markets, gains in productivity and continuing movement of work offshore are conspiring to create a bleak picture of total employment in business services (primarily finance, HR, procurement and IT) in North America and Europe. The Hackett Group projects a 46% decline from the baseline employment level of 8.0 million business services jobs in 2002 to 4.3 million by year-end 2017. Underlying this outlook is a complex reality consisting of shortages of specialized skills combined with an excess of commodity skills. Therefore, although total demand for labor capacity is in decline, a war for differentiating talent is in full swing. Service delivery organizations that most effectively wage this war will be tomorrow’s world-class performers.
Published by The Hackett group
By Erik Dorr, Michel Janssen and Honorio J. Padrón III
Benchmarking will become ‘de rigeur’.
Conventional wisdom says there must always be a tradeoff between efficiency and effectiveness, but world-class IT organizations are more productive than their peers, with fewer full-time equivalents (FTEs) per 1,000 end-user equivalents, and their costs are 15% lower. In fact, the typical company can save up to $26 million by closing the gap to world-class IT performance. Moreover, the benefits of world-class IT performance accrue not just to the function itself but also to the company as a whole. Due to a focus on reducing needless complexity, more transactions are completed electronically, leading to lower labor and operational costs for business partners as well as suppliers and customers. Although the journey to world-class performance may take five or more years, a company is likely to see marked improvements within two.
While “world-class performance” is often used colloquially, The Hackett Group’s empirically based research methodology defines world-class IT organizations as those that are in the top 25% of organizations as measured against a set of efficiency and effectiveness metrics. Also, conventional wisdom says that IT organizations inevitably must accept some efficiency in exchange for more effectiveness, but world-class IT organizations defy this premise. They are able to outperform the majority of other companies in The Hackett Group’s IT benchmark database (called the “peer group”) in efficiency measures such as cost, complexity and project delivery performance as well as effectiveness measures such as project ROI, business enablement and extent of process automation.