Man on a Mission
1 September 2006 Dr Ralph W Shrader
Booz Allen Hamilton is experiencing a period of record sales, exciting growth and expansion into new markets. CEO Ralph Shrader leads this expansion by finding the best brains in the business and giving them the freedom to develop the career they're looking for.
Between 2003 and 2005, Booz Allen Hamilton, one of the world's top ten management consulting firms, increased its revenues from around $2.5bn to $3.7bn. Far from growing complacent at this success, at the beginning of 2006 the firm announced plans for a strategic reorganisation, creating a new tier of management at a global level and improving its client service capabilities. Leading the firm's relentless drive for excellence is chairman and CEO Ralph Shrader.
So what lies behind the US-headquartered firm's current success story in what is a highly competitive market? One key factor, explains Shrader, is Booz Allen's consulting philosophy.
"Some management consultancies deliver a strategy, hand it over to the client and allow them to go off and do with it what they will, but that has never been our approach," says Shrader. "Our business is about working with clients, being part of the solution team, and helping them to deliver results. We take our clients all the way through to execution, leaving them with a permanent implementation of change within the organisation."
On a visit by a previous Booz Allen CEO to a defence industry client, an army general turned to the CEO and said: "The thing that we find most satisfying about your work is that your people have taken our mission and made it your mission." "That has become a sort of catchphrase for us," says Shrader
Booz Allen is currently undergoing a period of restructuring in order to tie its public and private sector business together. The firm is renowned for the strength of its public sector business, which brings in about two-thirds of the firm's global revenues, and has grown at about 20% per annum since the late 1990s.
"We are one of the few management consulting firms with a strong presence in both the public and private sector," says Shrader. "In the past we have treated those businesses on a largely separate basis, with a separate set of business objectives and systems serving each."
In the last five to ten years, however, Booz Allen has seen an increase in public sector clients wanting access to the knowledge and capabilities that exist in its private sector business, and vice versa.
"We have a broad set of functional capabilities in our firm," explains Shrader. "Rather than using them in just one market we have now created an organisation that allows us to deploy those functional capabilities globally across all our markets, to deal with client problems and issues more effectively."
At a recent meeting of Booz Allen's leadership team, the firm's significant investment in China was high up the agenda. "We discussed moving new partners and capabilities into China, as well as transferring existing partners and capabilities there," outlines Shrader.
"Right now, China is a supply-constrained rather than demand-constrained market. If we can get qualified, competent, capable people there, then there is enough demand for us to serve."
Japan is also a key growth region. Booz Allen acquired Gemini Consulting Japan in 2003, doubling the size of its Tokyo operation. That acquisition is now paying off and the Japanese business is one of Booz Allen's strongest performers. Its business in the Middle East is also growing rapidly and is a continued target for investment.
BLENDING GLOBAL AND LOCAL KNOWLEDGE
Expansion into new countries and regions presents significant challenges, but Shrader is confident the firm can deal with these.
"One secret to successful management consulting is having strong local knowledge: local knowledge of clients, of the environment, of buying behaviour, local knowledge of expectations about what the client wants," he explains, "and, at the same time, having the ability to bring in global expertise that is not limited to the client's geography, but takes advantage of best practices from around the world and brings that capability to bear on the local client. This combination of local knowledge with global expertise is essential."
Another avenue of growth for Booz Allen is the public sector / private sector collaboration, building cross-functional skills and deploying them globally. Functional capabilities like those in strategy, and operations, organisational change, and economic and business analysis, for example. Hence the recent restructuring and reorganisation to focus on this growth opportunity.
On the issue of growth, Shrader is clear about one thing. "I never look for growth for growth's sake. I want quality growth, not just extra revenue. To do things that actually build our firm's reputation and expertise," he says.
"I am not looking to grow at the same rapid rate as the last dozen years, but I do think double-digit growth is quite possible, feasible and reasonable, given the breadth and depth of our enterprise."
THE TALENT CHALLENGE
The focus on growth gives rise to a key challenge for the consulting industry: the competition for talent.
In a firm that is founded on the talents of individuals, some 18,000 of them, dispersed across the globe, Shrader must be sure that those people are the very best and that they are committed and knowledgeable enough to serve their clients well.
It is not possible to grow faster than the firm's ability to put talented people on the ground.
Part of the talent challenge is down to a change in career expectations. "There are lots of bright people out there. But many of the best and the brightest are looking for alternatives to the challenging and demanding lifestyle of the management consulting business," says Shrader.
In the past, the prevailing attitude has been a willingness to make the sacrifice in terms of commitment in return for the significant financial and experiential rewards on offer. But this is changing.
It may not be the 'will work for equity' sentiment of the dot.com MBA generation, but there is certainly a sense that potential recruits want more from their career than financial reward. They want a family, a life, they want to look after their personal well-being. They search for a more complete and balanced experience.
And Shrader sees Booz Allen moving with the times, assessing how it can make sure that the employee experience it offers merits some of the personal challenges.
"Yes we look for very smart people, with excitement and a passion for client service," he says. "At the same time we are conscious of the fact that we don't want to simply focus on work. We also want to focus on the broader aspects of life, and we can do things like provide childcare, training and development opportunities, the opportunity for people to work in closer proximity to their home; so that there is a better opportunity to balance their lifestyle with their work."
Shrader is also insistent that Booz Allen takes the issue of corporate responsibility very seriously. "We think that it makes for a better firm, for a better corporate citizen," he says.
"As a company, we give our people the time to give back to the community, and support them with funds. I believe this is something that resonates with our people."
CEOS UNDER PRESSURE
Competition to find talent may be one major issue for CEOs, but there are many more. Asked what he thinks the top-of-mind issues are for CEOs, Shrader lists three. One is offshoring / outsourcing; how far do you take it, why do you do it? Another is working in markets around the globe and the challenge of dealing with a global economy.
The third is the issue of legacy costs, particularly in terms of healthcare and pensions in the US, for example. In the US automobile industry, and in other areas, the old social system has created a set of costs that are no longer sustainable or compatible with remaining competitive in a global economy.
If worries about survival in a global economy weighed down by healthcare and pension costs are not enough for CEOs, there is always Booz Allen's annual survey of CEO turnover to raise anxiety levels.
The results from recent years do not paint an encouraging picture for aspiring or incumbent CEOs, revealing ever shorter tenure coupled with a growing burden of expectation. In 2005, CEO turnover was up 4.4% on 2004. One in seven of the world's leading companies changed leader. Four times as many CEOs were forced out as in 1995. Could it be that we expect too much from CEOs?
"The CEO needs to be an effective manager and leader of the business, and the resources of the business, including the people in the business, and the clients of the business," says Shrader. "It's a tough job."
STOCK MARKET PRESSURE
From his perspective as head of a private firm, Shrader is sympathetic to the pressures faced by CEOs of public companies. He points out that the demands of financial markets on CEOs can be unrealistic. As well as the day-to-day pressures of running a business, public-company CEOs are caught up in the expectations of Wall Street and the concerns of the next quarterly earnings report, a pressure that they really do not need.
But there is no easy solution. "The reality is we don't have an effective way to separate out the financial performance from the other aspects of performance, in terms of what is that corporation giving back to the community or doing for the world," says Shrader.
"It's all measured on that financial yardstick. Getting a better balance would be beneficial, not only for the companies and the CEOs, but also for the public. Corporations should do more than generate profits; they ought to do good too. We have to find more effective ways to measure and then reward that."
Now that really is a consulting challenge to tax the best and brightest business minds.