Boutique Practices And Businesses

Yesterday I shared Drucker's distinction between a practice and a business - the former is focused on flexibility and fun, while the latter is on building wealth and maximizing impact in the world.

This is, of course, a spectrum with most consultancies somewhere in between those extremes. You want to make money, support your preferred lifestyle, and enjoy the work you do. It is only when you are forced to make difficult decisions and trade-offs, however, that you notice which set of values has a preference over the other for you.

This primary set of collective values that you and any partners of your firm carry determines whether your boutique consulting firm is practice-centered or business-centered.

The different positions (practice-centered versus business-centered) will lead to very different choices in terms of how you structure and manage the consultancy. Here are some high-level observations I've confirmed by working with both types of consulting firms:

• Organizational structure and decision-making: Practice-centered firms tend to prefer partnership structures, and decision-making is often by consensus. Business-centered ones work well in corporate models, with a clear hierarchy of roles and decision-making by a chain of command.
• Recruitment: Practice-centered firms usually look for professionals who share similar values and/or have a sense of "loyalty" to founders and partners. Business-centered ones hire people who are comfortable with structured work - following standard procedures or respecting a clear workload.
• Type of clients: Practice-centered firms' best clients are those who expect partners to be actively involved in projects - if not by delivering it, at least by leading communication or reporting status. Business-centered firms' clients, on the other hand, naturally expect partners to delegate execution of the project to an internal team after the sales process.

Of course, these differences will also depend on how the firm does the job - using Drucker's categories, whether they are brains, grey-hair, and procedure firms.

As an example, look at how those practice-centered firms recruit differently:

• Procedure: Hire people who are committed to getting the job done efficiently. Due to limited job security, the firm is forced to pay above-average salaries.
• Grey-hair: Hire people with a strong sense of commitment to client. Often balance a below-average salary with good benefits to retain experience.
• Brains: Hire young and bright people who are attracted to the firm to be associated with an influential partner. Firms tend to pay below-average salaries and benefits as people leave after a couple of years.

As you can see, those two key drivers - the personal goals and motivation of those who lead the business, and how they decide to do the job - will largely influence the way your consultancy should be structured.

If they're not clear to you yet, it's worth investing time to clarify your vision.