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Our management consultancy columnist Mick James delves inside the newly liberated consultancy A.T.Kearney to uncover the impact that its MBO has had on client wins, staff morale and recruitment.
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A.T.Kearney – the inside scoop on the consulting deal of 2006
Most consultants hope to celebrate Christmas with a nice bonus. For senior staff at A.T. Kearney, things were rather different this year. As the firm completed its buy-out from EDS, they were asked to dig into their pockets and invest in the firm to finance the deal.
That most did has clearly come as a surprise to many in the industry:
“I’ve been called by so many headhunters,” says Mark Page – a vice presdient in the UK firm and now one of A.T.Kearney's new 11-strong board of directors… “In fact I can’t think of any that haven’t, and all with the same cynical ploy. You can stay there and pay, or come to us and get a sign on bonus.”
Despite these inducements, 90 per cent of those that were invited to invest have done so:
“For some people it pushed their decision to retire or to do something else,” says Page. “We’ve had one or two special cases which we’re working through—we didn’t always know where people stood financially, and we’ve made arrangements for people to borrow money.”
Investment has proceeded at two levels: “partners” have acquired voting stock, while “principals” have also been able to invest in non-voting equity which will become the foundation of their equity when they become partners. In future everyone who becomes a partner will be asked to invest, but this will be a tapered process, starting from a mixture of investment and awards of equity while working at principal level.
For Kearney the deal represents a clearing of the decks which will allow the firm to focus wholeheartedly on its new life as an independent consultancy. The “new” firm consists of all of the former EDS subsidiary, minus it headhunting arm, which is being hived off separately, and a North American business focusing on maintenance and repair operation, which will remain with EDS.
“We still go out to the same clients each day,” says Page. “But there’s a wave of excitement, as well as symbolic things like the fact that we’re all now known as partners even if we’re not known as that legally.”
Page believes the deal now frees the firm to invest more in growth and adopt a more entrepreneurial culture—as well as stop talking about its relationship with EDS.
“There was one CEO where we always had to spend ten minutes out of every precious half-hour appointment talking about our MBO” he says. “He was fascinated by it.”
One area where A.T.Kearney will be making very visible headway post-deal is in recruitment:
“It wasn’t easy to recruit last year, particularly at senior levels,” he says. “Even people who were excited about the buyout preferred to wait and see.”
Now it’s full steam ahead: “Pretty nearly all of our offices have quite aggressive growth plans plus a bit of catch up. Last year it was difficult to plan so we’ll all have to work hard to recruit people”
Page believes that the buyout can only strengthen Kearney as a recruitment brand:
“We’ve always done very well out of recruitment from industry—we tend to have very high acceptance in client organisations because we bring in more experienced teams who get stuck in,” he says. “In business schools the noise about the MBO has cut both ways. Some have been interested and some have been looking for safer bets elsewhere.”
The firm has also received approaches from former staff:
“We do have a number of people who left us in the last few years at a senior level asking to come back,” says Page. “We stay on very good terms with our alumni, it’s a natural process to go through.”
The firm has also worked to ensure that its relationship with EDS survives the buy-out:
“Our colleagues in EDS are thrilled that we’ve done the deal,” says Page. “We still identify strongly with EDS.”
As well as continuing to work in (now non-exclusive partnership) with EDS in joint clients, EDS remains a major Kearney client. The companies will also work together to develop new intellectual capital in areas of common interest.
At the client level, Page believes that the brand is well-established in the minds of both current and former clients, but the push is now on to explain to the rest of the market exactly what AT Kearney is and what it stands for.
“We know what we want to do,” says Page. “Our biggest priority is to identify where we have pockets of strength and to make sure we’re piling our resources into those markets. We want to be working in areas of more generic performance improvement, more than just operations.”
Page clearly believes that the market is ready for what he describes as “really serious stuff” aimed at the CEO and CxO level.
“The market is very strong for that sort of work,” he says. “What it’s not is blue sky strategy—that has become a niche—clients don’t do the “where is our industry going” stuff anymore.”
Will the new incarnation of Kearney succeed? The emergence of an independent global consultancy firm which stands aside from implementation and outsourcing work will perhaps set the tone for the direction of the whole industry for 2006. For the moment both clients and candidates have an interesting new option to consider.
Related link: Consulting firms hiring staff in unprecedented numbers – click for the latest roles
All views expressed in this article are those of Mick James and do not necessarily reflect the views of Top-Consultant.com and Consultant-News.com.
Contact Mick with your views or suggestions at:
[email protected]
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