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North Highland: A Remarkable Consulting Firm Built on a Culture of Ownership
By Emily Meyertholen, Beyster Institute Staff
A career in consulting can be extremely rewarding. The projects are ever-changing, and your expertise helps companies flourish. It also usually means heavy travel, spending weeks at a time with far-flung clients. Many consultants eventually burn out as it becomes harder and harder to justify spending so much time away from the lives they have built at home with family and community.
Dave Peterson was one of those consultants. After spending about 15 years at two of the “final four” consulting firms – the “big eight” before all the mergers and buyouts – Dave was ready for a change. The straw that broke the camel’s back came in the form of a question from his young daughter. Upon his return from a long consulting assignment she asked, “Does dad still live here?”
Like many travel-weary consultants, in 1992 Dave and several colleagues struck out on their own, establishing a private consultancy – North Highland – and building a name for themselves in their home market. These experienced consultants found success working within Atlanta, which allowed them to build stronger client relationships and local respect for North Highland, starkly contrasting the large consulting firms’ lack of regional focus.
How could this successful consultancy expand when the whole concept was to serve the local market and allow consultants to lead fulfilling lives close to home? Dave came up with a novel idea: Why not structure a consultancy that allowed experienced, established consultants to work within their home regions, connected by shared principles and high standards? It was the perfect solution for veteran consultants. They had already proven their worth (today North Highland’s consultants average 15 years of experience); now they could focus on nurturing client relationships and providing even stronger service.
Dave knew that this new consultancy concept required a different approach to management and compensation. He decided North Highland would not limit company ownership to partners as the large firms do, leaving staff consultants feeling unappreciated and offering little motivation to succeed and to stay.
Dave decided to share company ownership with employees from the very beginning, although it was a 10-year journey before the company was fully owned by its employees. A formal employee ownership program began in 1998 in the form of a leveraged employee stock ownership plan (ESOP) consisting of 30 percent of the company. As employees left and the company bought their stock, the ESOP gained controlling interest in about 2001. In December of 2007, the ESOP purchased the remaining equity-holders’ shares, making the company 100 percent employee-owned. After meeting some initial requirements, new employees are eligible to begin participating in the ESOP, which has a six-year vesting program.
“Other exit strategy benefits would not have been enough on their own to make employee ownership worthwhile,” says Dave. “I saw the benefits for myself and other early owners, as well as future employees. Employees like the fact that the money put into the ESOP is via sweat equity. I hope Congress has the wisdom not to mess this up.”
“When we became 100 percent employee-owned, there wasn’t anything new as much as a recommitment and rededication to employee ownership,” says CFO Kirk Hancock. “We try to look out for our clients and our people, and the company is a net result of that. A sense of entrepreneurship is what we strive for. That’s always at the heart of employee ownership.”
The employee ownership strategy worked for North Highland. Today the company is comprised of more than 500 consultants in 14 offices all over the country. Service areas include supply chain management, strategy definition, business intelligence, IT management, process management, change management, customer interaction solutions and more. Although consultants primarily work within their home regions, North Highland also serves international clients – an important option to some consultants.
“Through employee ownership, we understand that the long-term health of the company is our responsibility,” says Kirk. “Employees are charged with wearing their employee hats and owner hats. There’s a complicated compensation structure at all levels of the organization, all tied to the quality delivery of their particular area. People are very well aligned to the success of their work. Their current compensation is tied to utilization, account growth and profit. Their long-term compensation is tied to the growth and success of the company. Those two aspects vary a lot. When times are tough they understand why we reduce our variable compensation. When times are good they know why they’re getting more. I love to see that healthy tension. It shows that we’re doing things right.”
“At first, employees are interested but skeptical,” says Dave. “Early on they see the unique culture. It takes a few years of getting annual statements before they see the benefits.” The results for the company are low turnover (less than 10 percent, half of which is voluntary), an alignment with clients, and taking risks to make sure consultants do a good job on every assignment.
In addition to implementing a compensation structure that encourages quality client results, North Highland has developed an ownership culture that instills the company’s client-focused vision and engages employees in the welfare of their company. They hold semi-annual meetings, communicate quarterly financial results, and involve employees in all levels of the company. Some of their allocated hours are even set aside each year for company improvement.
Conveying the company culture to consultants who are scattered all over the country is a lot of work, and it’s done very consciously. All new employees take a two-day course which Dave created during the economic downturn of 2001-2002 and continues to personally lead along with North Highland CEO and President Dan Reardon.
“It’s a cultural introduction which lays out our approach,” says Kirk. “It deprograms employees and encourages them to do things differently. They come to the company with a history of success. We want them to keep the best of the practices they’ve mastered, but kind of do things our way, which is a little different. One class doesn’t change 20 years of learned behavior, but it sets a baseline, and it starts the process. We now hire about 100 people a year, and it’s readily apparent if someone’s not a good cultural fit. Maybe one in 20 people go through the course and are very skeptical, and usually they move on to something else before long. We know it’s working because we don’t really have to micromanage it.”
The course lays out role-playing scenarios with clients, stressing the company’s values. Unlike most consultancies, North Highland guarantees its work.
“If you’re not happy, we’re not happy,” says Dave. “The subtlety is to make sure our consultants think not only like an owner of our company, but look out for their clients’ best interests. They really need to learn how to understand the nuances of each client’s needs. Every once in a while we have to invest a little more in a project to do it right. We can’t afford to make mistakes when we work locally. Word gets out. Other consultants will fly off to their next assignment shortly, but our consultants establish a reputation for North Highland in their own communities.”
Today Dave chairs North Highland’s board and spends much of his time conveying the company’s unique culture through visits to North Highland offices and with consulting teams and clients. He still bills time for occasional supply-chain consulting (his specialty).
He’s proud to report that Consulting Magazine recently named North Highland one of the top 10 international consulting firms to work for. They were not originally listed on the survey, but achieved that ranking through write-in votes and beat some top-named firms.
“It’s encouraging to see that sense of pride among employees,” says Dave. “I consider us one of the last best hopes for consultants. Ownership is doing the right thing for the client and thinking like an owner. Our business objectives become aligned with our clients’ objectives and their customers’ objectives, allowing people to do the right thing. Our consultants are self-managed, self-motivated, well-educated, experienced people. Our clients are some of the biggest public and private companies in the world. We want to add value on their terms. That adds value to our company.”
©2008 The Beyster Institute and its authors and their entities. All rights reserved.
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