How High-Growth Firms Outperform the Competition
Hear the secrets of this year’s Fastest Growing Firms and why they are OK with breaking the rules in the areas of hyper-growth, talent and technology
Late last month in Seattle, Consulting magazine celebrated its fourth annual Fastest Growing Firms award. In all, 65 consulting firms were ranked based on their three-year growth rate. The top firm Simplus, grew a staggering 940 percent between Dec. 31, 2014 and Dec. 31, 2017. Not far behind, the No. 2-ranked firm, RedCloud Consulting, grew at an impressive 856 percent. How do they do it? How do they manage to outperform the competition year after year when everyone’s playing by the same rules? Glad you asked.
The Fastest Growing Firms get together is actually a two-day event, which is sponsored exclusively by Deltek. We’re thrilled to have the firm as partners for this event three years running. The awards dinner, where we hand out the hardware and celebrate the firm’s accomplishments, is Thursday evening. We follow that up on Friday with a forum focused on learning some key takeaways from these Fastest Growing Firms.
Turns out, these firms have a few tricks up their sleeves when it comes to how they are structured, how they operate and how they manage to maximize profitability. Yours truly moderated a 75-minute panel discussion made up of some of the top firms in the industry — including three of this year’s Fastest Growing Firms — to discuss hyper growth and how it impacts profitability, talent, technology and the future of the profession. What follows are highlights and takeaways from the discussion.
Technology, Transparency and Talent
Here are the panel participants:
- Brett Alston, Managing Partner & Co-Founder, RedCloud Consulting
- Natasha Engan, Senior Vice President of Global Consulting, Deltek
- Lance Evanson, EVP Strategy & Business Development, Simplus
- Mark Rheault, Founder & CEO, Infinite Leap
- Brian Turner, President of Consulting, Point B
Kornik: How do firms effectively manage hyper growth? How fast is too fast?
Everson: “We started out using growth as the lever that we wanted to pull down all the way. Grow as fast as you can, but we realized pretty quickly that only worked if customers were satisfied, so then we started focusing on customer satisfaction. After that, we really started to get concerned with profitability. So, now we have these three levers that we are really focused on—growth, customer satisfaction and profitability. Can you focus on all three of those things at the same time? Simplus took a unique approach in that we went through three rounds of funding from venture capital. Sometimes people look at me like I’m crazy but it’s been extremely profitable for us. It’s been rocket fuel. Half our growth has been organic and half has been through acquisition. That extra capital has allowed us to re-invest in the business and hire the resources we need to maintain all three levers.”
Turner: “Our 2018 has been a rocket year, as it probably has been for a lot of folks in the room. The three levers we focused on this year were one, data intelligence—we really ran that business aggressively this year. The second lever for us was to leverage different assets to enhance the business; we acquired a digital studio that has allowed us to bring creative talent to solve traditional consulting problems. And, finally, the third lever is we placed a big emphasis on customer centricity. The key focus was driving on existing client development and driving more than one Point B business into that customer. That was very successful.
Alston: We’re a relatively new company and we focused our efforts in three areas—supply, demand and operations. Growth for growth’s sake is something we’re not interested in, and that can be a real organization killer, believe it or not. We are 100 percent self-funded and a real bootstrap organization. We had to be very precise and specific about the markets we’re investing in. Clearly, cyber security is one of them.
Rheault: There are a few key metrics that we focus on. One is every year we set our sites on between 50 percent and 90 percent growth and we’ve been able to achieve that and have come in at 264 percent over the past three years. We’re very pleased with that. We try not to take on any additional capital. We’re trying to go the non-VC route and still maintain that 50 percent to 75 percent growth rate. We like to have about 80 percent of our revenue come from recurring revenue, such as software services etc.
Engan: I would just want to add one point — data is critical. Having data visibility into the inner workings of your firm—where your business is performing and where maybe you’re falling short. One of the biggest challenges we face — and we finally have the data to prove this out—is doing more with less. The labor market is extremely tight and extremely expensive. We have about 400 people in our consulting organization and we’re heavily involved in the Nordics, and that’s the happiest places to live. So, fringe costs have been going up double digits there so we had to figure out how to retool our labor pool. How do we leverage more technical aspects about how we productize our service offerings? We’ve been heavily focused on that and we’re making some progress; we had our attrition rates go down 50 percent year over year. We’ve had a lot of success there, but the real key was the productization of our service offerings that has increased our customer satisfaction and increased our margins.
Kornik: Natasha just touched on a topic that’s always top-of-mind in consulting, but particularly in high-growth situations, and that’s talent. Managing the talent through growth is key. And a harder part of that is maintaining your firm’s culture through that growth. How do you do that?
Everson: Culture is key because it ties directly into the attrition factor and it’s often why people leave. We take our culture very seriously. We ask our people about it all the time and the No. 1 factor for job satisfaction is career progression. If you go to work for a big firm and start out as an analyst, it’s going to take you a long time to progress to where you want to be. It might take 30 years to make Partner.
Kornik: And this next generation is eager to spend 30 years at the same company…
Everson: Right? So, clearly identifying what the career path was and how that path could be affected inside the organization was a big key for us. We’ve identified leaders from various parts of the organization, and we have what we call Change Champions, they are highly respected within the organization and they are influencers and they meet with the CEO for an hour every month to discuss what’s going on within the organization. Those Change Champions are switched every six months. As a result, we can affect change within our organization very quickly.
Rhealt: We are a small company and we grew this company a little differently. We have very little overhead. Almost everybody works out of their house and we use technology tools to communicate. We do have some regional offices where we have client concentration but nobody has to go to the office. We use technology to communicate across four different continents and multiple time zones etc. Finding the best talent anywhere it is and using technology to let them work how they work best has been really exciting; and it’s really something that isn’t done a whole lot, especially in consulting. It’s been fun to watch. Here’s something: About 20 percent of our workforce doesn’t even have a home address; they travel as part of their lifestyle. They look at this as a benefit of the job. As long as they have a laptop and the Internet, they pretty much continuously travel around the world. It fascinates me because I wish this concept were available when I was young.
Kornik: That’s so interesting, Mark…. traveling as a perk of consulting? Boy, that sure sounds strange for those of us who have been in or covering consulting for a while.
Turner: Here’s a head scratcher because we were in such a hot market bity we actually constrained hiring, which seems counter-intuitive, right? The reason is we wanted to build agility into the workforce. We wanted early-career consultants to be able to work across domains. We wanted to be able to pivot our workforce to where we saw the most demand. We didn’t overbuild or over hire, so we’re well positioned for the next several years. Also, we’re super-picky on hiring and it allowed us to maintain that standard on hiring. The temptation in boom times is to hire to meet demand and when you do that; inevitably, you can relax your standards without even realizing it.
Alston: Fit is extremely important for us and we’re always looking at capabilities and what we’re going to need consultants to do not only in 2019, but in 2020 and beyond.
Engan: I mentioned one of our focuses was trying to reduce attrition and we did that as I mentioned but one of the keys was getting on the ground as a leadership team to really understand what was going on, what drives them, what motivates them. As Lance mentioned, it’s not the money, it’s the culture you create, it’s the team they are part of, and it’s the collaboration. It’s being flexible; some people want to work in an office; others prefer to work out of their home, still others would rather be at a client site. So, it’s this flexibility, I think, that is so key.
Kornik: Are performance reviews still a thing?
Engan: No way. People want real-time, job-specific, performance-based feedback. Even big companies aren’t really doing traditional performance reviews anymore.
Turner: We probably do a hybrid. Particularly early-career employees, they really want that feedback of what the next three to seven years will look like for them. One a quarter, or even once a month, there are great opportunities to check-in with a mentor to see where you are at a given point.
Alston: Millennials do not want to wait 12 months to get feedback about performance; nor should they have to wait. So, we offer regular check-ins monthly. Twice a year, we offer career assessments, which are a little more formal and offer opportunities for career evaluation.
Evanson: I would agree that your capability assessment is happening real-time; it has to be. But then there are other quarterly, more formal assessments where employees are writing up goals, mission statements, measurements etc.
Kornik: That ties into the where we are going and that’s how millennials are using technology to work and how they are disrupting your firms and client firms and even traditional consulting models.
Evanson: The average age of a consultant at Simplus is 27. So, we’re young. A lot of them are technology consultants and figuring out how to use technology to enhance and improve their clients’ functions. So it fits, of course. So, we are heavily focused on technology and how those tools automate many of the day-to-day and manual functions of the firm. It has to be; they demand it. It’s amazing the way they look at you when you give them what they consider outdated systems or processes. We make a real concerted effort to not let that happen. Major factor to employee satisfaction and culture is to offer them the best and most advanced tech tools. And there’s some learning tools we can put on top of that to gain insights that becomes a huge advantage to being up to speed at all times.
Rhealt: Our folks are a little more seasoned but we’re trying to digitize everything. That’s one of the fun parts of this… I mean, our folks are moving faster than the training materials or learning curve should be. You put something in front of them and they figure it out. We actually have a Young Professionals group—and the idea is, how do you take advantage of all these ideas they have and how do you leverage what they know to impact the firm overall. It’s been great.
Turner: For us it’s showing up in our client delivery. A lot of our early-career consultants really want to do expert work. So, a lot of our focus has been on how do we take that expert work and de-mystify it. Make it accessible for someone who wants to grab it. It’s been a really interesting cultural journey for us. Imagine you’re a real Six Sigma expert and now we’re trying to have someone with far-less experience do some of that process work. We have to challenge ourselves from a technology standpoint, and then there’s the experienced person who we’re asking to shift from doing the process work to maybe training others how to do it with the aid of technology. It’s been really interesting to see that shift from the client engagement side to the talent development side for a lot of these folks. You just can’t go fast enough to create opportunities for some of these folks. It’s been an amazing adrenaline rush, especially for some of us who have been life-long consultants.
Alston: Some 50,000 tech jobs were created within the last 12 months and the average time they stay at one company is 27 months. So, it’s a fast-paced environment, for sure. What can we do to get those consultants to be life-long learners, to re-tool them to stay with us a little longer? Or even stay at our clients a little longer. We have to give them more tools, more technologies to do their jobs better. That’s the only way.
Engan: We use our own technology but we make sure we use real-time dash boarding because millennials really want to know how they compare in terms of engagement rates vs. bill rates vs. experience. So, as a result, we started to be totally transparent with our data in real time, which I know is a little bit different for a consulting firm. We share all of our project dashboards globally, and it’s funny, the older consultants aren’t all that interested, it seems, but the millennials really are. It creates a culture of healthy competition, particularly among some of those folks that have been with us a while and maybe need to up their game a little bit when they have these millennials coming after them.
Evanson: Same thing at Simplus. We have total visibility to all aspects of the company for any employee, other than certain financials. Wanting to know what others around the company are doing and how successful they are on their projects is really important to them. They were always asking for it so we decided to give it to them. And you’re right; it has created healthy competition. Not in the sense of I’m better than you, but how can my team be number one in this category or whatever.
Engan: Yes, and just sharing some of that data across projects is so important to the learning process. And transparency across the entire firm really has jump-started that conversation.
Joe Kornik is Publisher and Editor-in-Chief of Consulting® magazine. In this role, Joe oversees the editorial operations and overall execution of the publication and the Consulting brand. He is also responsible for the magazine’s Web site and all live and virtual events. Joe Kornik is Publisher and Editor-in-Chief of Consulting® magazine. In this role, Joe oversees the editorial operations and overall execution of the publication and the Consulting brand. He is also responsible for the magazine’s Web site and all live and virtual events.
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