Maister Class: Transform Morale Into Money

David Maister is the man the country's top advisors go to for advice: the consultant's consultant, the accountant's auditor, the PR person's press agent, the lawyer's internal litigator.

Maister's job (and, yes, he chose it of his own free will), is to tell those who are paid to advise others how to run their own shops. A former Harvard Business School professor and author of several highly regarded books, including The Trusted Advisor, Maister's built a thriving practice helping professional service firms improve their own business.

You would think that a guy who charges $15,000 a day counseling consultants and telling lawyers what to do would be a discreet, expensively tailored consigliere with a fondness for language larded with phrases like "value propositions" and "inflection points." You would be wrong. Maister is a loud, smart, egocentric Englishman who likes small words and real-life anecdotes. He looks as if he might flip the table over in our elegant Italian restaurant, just because he's so pumped up. He's not a subtle sort. " 'No one has a better life than Maister,' " he exults. "Write that down!"

Maister's current passion is a research project that he's completed for his upcoming book, Practice What You Preach: What Managers Must Do to Create a High Achievement Culture (Free Press, June 2001). In 1999, Maister surveyed 5,500 employees of a large advertising and media conglomerate who were dispersed among 139 offices in 15 countries. Maister wanted to know their feelings about their own office's culture. He used a questionnaire that combined an employee survey he'd used before with the values statement of Goldman Sachs -- a measure, if there ever was one, of a profitable company. Maister wanted to prove something that we all think is true but can't quantify: that the management in a particular office can make a difference in financial performance. "I decided that I needed more than anecdotes," he says. "I could feel clients' residual frustration."

Places with happier employees make more money? Any CEO worth his bonus check would tell you that it's all about the people. But just try to prove it.

Now, Maister has been able to show a real, causal relationship between employee satisfaction, the role of the manager, and pure, unadulterated profit. His study found that a company could boost its financial performance (measured by an index combining two-year percentage growth in revenues and profit, margin, and profit per employee) by as much as 42% by raising employee satisfaction by 20%. In his study, the top 20% of offices with the best financial performance most significantly outperformed the others when it came to ranking one statement: "Enthusiasm and morale are high." Says Maister: "It's like cooking a meal and saying, 'Which is the crucial ingredient?' It's the one that's missing. Net, net, net -- if you want employees to make money for you, you have to care about them."

But how do we know that it's not the money itself that boosts morale? To prove causality, Maister did a complex analysis called "structural equation modeling." Not surprisingly, the most direct relationship to profits was determined by a series of questions dealing with quality and client relationships. Happy clients pay more and do more business. Maister proved that offices where employees "agreed" that client service was a priority and a competitive strength had twice the financial performance of those where employees "somewhat agreed" that client service was a priority. Then he went one step further to see what drives the client relationship -- and was able to demonstrate two categories with direct links: employee satisfaction and high standards.

"The big 'aha' is this: If you want to give great client service, being good at energizing your people is essential," Maister booms. "There is a direct causal path. So even if you understand that serving clients well is the key to money, the key to serving clients well is getting better at energizing people. It's not just another item."

To round out his research, Maister interviewed both the employees and heads of nine of the best-performing offices to see why they thought they did so well. The answers can be summed up in one phrase, says Maister: "Have you met Alice yet?"

Who the heck is Alice? Alice is a euphemism for the boss -- the one person in every high-performing office who has courage, personality, skills, and high standards -- and who is the main reason for employees' success and happiness. Note that the main factor has everything to do with the local manager -- and little, if anything, to do with the corporate vision or the CEO of the entire company. Likewise, every "Alice" talks about how she (or he) likes her people, how she spends more time talking to them than to clients, and how she tries to hold herself to the same high standards as others. The company that Maister surveyed is so convinced of the merits of his survey that it's now beginning to evaluate its managers using his criteria.