Being able to answer the question as to whether being best in class better than best in breed is increasingly important in professional services. Bias is the reason why.
Bias is a bane of management. It is the inclination – which is heavily influenced by temperament and mood – to hold a view at the expense of (possibly equally valid) alternatives. Leaders and managers in PSFs, like everyone else, are subject to bias in respect of clients, measurement, people, competitors, trends in the industry and the like. Naturally, any perspective or basis for a decision that is biased is one-sided and therefore lacks a neutral, dispassionate point of view.
There are many forms of bias, but the one of greatest concern to leaders and managers is cognitive bias. Cognitive bias is the human tendency to make systematic decisions on factors other than hard evidence. Bias arises from various processes such as information-processing shortcuts (e.g. relying on available lag indicators when making decision about the future), motivational factors (e.g. putting excess weight on how will this affect me?) and social influences (e.g. placing too much store on how will heavy-hitter partner B react).
Of particular concern, as the professions continue to overlap with each other in the scramble a share of clients' wallets, is s being best in breed better than best in class? Simply being better than your closest competitor in revenue growth (league table focus) or the profit stakes (envy) or in performance on Beaton Benchmarks in how clients rate your firm (client focus) is no longer good enough.
There's a growing view that all firms should be aiming to be best in class. Best in breed means, as in dog shows, you're the best small law firm on reliability or the best large CE firm on value. Being best in breed is good, but no longer great.
Being best in class is better than being best in breed. Because that how clients will increasingly judge their professional advisers and consultants. For example, when a board of directors reflects on their choice of investment bank, strategy adviser and corporate lawyer they think about the critical nature of decisions that external advice will influence and value for money. Whilst the services of these types of adviser are not substitutes, the way their services are delivered and the value each creates are comparable.
And therefore best in these respects means being compared in class of 'board adviser' - not 'investment banker', 'strategy adviser' or 'corporate lawyer'.
This story from 2004 shows why some firms 'get' why being best in class is better than best in breed. And others don't. The then CEO of a Big4 firm asked Beaton Research + Consulting to make a presentation to his 400 strong partner gathering. His brief was to show how his firm compared in clients' eyes with the other Big 4 members AND the best three law firms in the country. When we told him he would come top of the Big 4 and a poor fifth when the top three law firms where added in, his answer was "GREAT".
Ever since then this firm has striven to the the best professional services firm in Australia. Not just the best of the Big 4. More than any other we know they rely on evidence, not anecdote. They work hard using evidence to avoid bias. Through successive CEOs they know the answer to the question "Is being best in class better than best in breed?" is yes.