How Bill Bain Transformed Consulting: Lessons for Ad Agencies

Bill transformed the management consulting business by insisting that the firm generate positive results for its clients, working in structured relationships that made this possible, rather than "carry out consulting studies for executives with consulting budgets."  Early in Bain's history, he established a high and difficult standard for Bain's partners: "We will work with a new client only after we have had a private three-hour meeting with the Chief Executive Officer to better understand his (her) ambitions and concerns, and where we can discuss Bain's particular capabilities. The CEO must agree to let us work on the most important problems, one after another, in a relationship that has no end provided that positive results are achieved.  We will agree not to work for the client's competitors, and the CEO must agree not to work with ours."

This policy seemed crazy and impossible at the time, creating headaches for those of us who developed new clients.  (I was a Bain partner and director from 1979-1990, working principally in Europe.)  It limited the number of clients that Bain worked with, but in the first decade-and-a-half of the company's existence, Bain grew at a 40% annual clip and became one of the most sought-after consulting firms by young graduates.

The focus on results carried through to Bain's intensive training programs for MBA and university graduates.  "Bainies" learned how to analyze business problems and figure out "how good a client could be" if certain steps were taken.  Bain carried out analyses to establish the starting point for improved performance and then worked in task forces and in other ways to help its clients implement performance-improving plans.

Prominent Bain alumni who cut their teeth in this regime include Mitt Romney, Meg Whitman (eBay and HP), Ken Chenault (American Express), Scott Cook (Intuit), Fred Reichheld ("The Loyalty Effect" and Net Promoter System) and too many others to list here.

Bain & Company is a very different firm today, and the client criteria imposed by Bill Bain were softened after his departure, but the firm's "results-oriented" DNA never changed, and it remains a powerhouse for companies who need improved results.

As described in the Performance Improvement section of Bain's website, "on average, Bain clients realize annual returns of 17 times Bain's fees."  The fees are considerable.  On the strength of improved results, Bain and other consulting firms have been able to maintain premium pricing levels for their services, routinely charging out their people at 5x salaries, and continuing to offer the best graduates of business schools and universities a package of eye-popping salaries and bonuses.

This stands in sharp contrast to advertising agencies, who are not growing and whose salaries and client relationships have deteriorated over the past several decades.  "We're creative and win awards" is not as economically persuasive to clients as "we deliver results."  Ad agencies do not negotiate the nature of their relationships or have much influence over the work they do.  Ad agencies are focused on short-term needs for income, and this sees them working in suboptimal relationships and carrying out marginal (but excessive) Scopes of Work that fall short of delivering improved results.

The new competitive battle between consultants and ad agencies will be a one-sided rout unless agency CEOs realize that the only route to long-term success and profitability is in delivering improved results.  This requires a change in mission, an upgrading of skills and a better understanding of how to solve the growth problems of their clients' stagnant brands.  In short, agencies need to dedicate themselves to fixing their clients' performance problems, modeling their mission on the successful blueprint of the consulting firms.

The focus on achieving results has served the consulting industry very well.  This is Bill Bain's enduring legacy, achieved in less than two decades after Bain & Company's founding and continuing today with admirable success.

Cartoon credit: Bruce Eric Kaplan, The New Yorker, The Cartoon Bank. With permission.

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