Doubling the value of a consulting firm

All of a sudden, the Chairman and CEO of a management consulting firm had a host of issues. Consultants burnt out, a talented partner quit, and business unexpectedly slowed down while the market was on the rise. As he considered selling the firm, he knew he could do so only for half the annual revenue, a pity given the solid ebit of 10 percent of revenue.

Yet pointing out what was the key problem – let alone what might be a solution – proved elusive. For sure, there was something wrong with the culture. The firm was the result of a merger a couple of years ago and many consultants and partners from one side blamed those from the other side. But did that mean that the merger was an outright failure? And in any case, what could the Chairman-CEO do?

We were called to help for our double lens, leadership and strategy. But we first focused on culture. We examined the corporate beliefs based on Hofstede’s* cultural dimensions to determine whether the differences outweighed the commonalities. We assessed leadership at all levels based on Authentic leadership theory*. We used various instruments – including Porter’s* five forces – to check on the relevance of the strategy.

We found that a strong common culture was a basis for a redefinition of the firm’ strategy. We recommended a number of changes in the organization and the leadership style – including that of the Chairman-CEO. The firm found a new momentum. For potential buyers, the firm changed categories. It is now priced 10 times Ebit. In a matter of a few months, the value of the firm has doubled.

 

  • References

Hofstede, 2011: Dimensionalizing cultures: The Hofstede model in context
Avolio & Gardner, 2005: Authentic leadership development: Getting to the root of positive forms of leadership
Porter, 1988: The five competitive forces that shape strategy.