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ALIGNING THE STARS
HOW TO SUCCEED WHEN PROFESSIONALS DRIVE RESULTS
By Jay William Lorsch - Thomas J. Tierney

HARVARD BUSINESS SCHOOL PRESS

Copyright © 2002 Jay W. Lorsch and Bain & Company.
All rights reserved.
ISBN: 1-57851-513-0

Introduction

A Reader's Guide

                  Everyone knows the old adage, "those who can, do; those who can't, teach." But suppose a doer and a teacher got together around a shared passion. What would happen? We tried this experiment, and Aligning the Stars is the result.

    Tom is a practitioner who brings a "what do we do Monday morning" perspective to the management and leadership of professional firms. Jay is a Harvard Business School professor who has been studying and writing about organizational behavior for almost forty years. We first met in the context of the one-week Executive Education program, Leadership in Professional Service Firms, which Jay teaches at HBS. One of the cases focused on the challenges that Bain & Company, the management-consulting firm, faced in the late 1980s. As Bain's chief executive, Tom spoke at the session devoted to the case. Afterward we continued to meet and talk. Soon we found ourselves engaged in a joint project designed to help us understand why some professional service firms (PSFs) succeeded through the ups and downs of business cycles, while others?seemingly similar?drifted and fell behind.

    This book attempts to answer that question in a way that will be useful to professionals and their organizations. The lawyers who aggressively advocate their client's interests. The advertising agency executives who help build brands. The executive search firms who help place CEOs. The technology service providers and engineers who create and sustain information systems (and influence over 50 percent of capital expenditures in business today). The strategy consultants who help chart the future for their clients. The human resources experts who assist their clients with "change management" while managing the retirement programs for their clients' employees. The accountants who conduct audits and provide tax advice. The investment bankers who in 2000 facilitated a record $1.7 trillion of M&A transactions. The specialists who advise on decisions ranging from public relations and product design to real estate and product distribution.

    The book's title reveals our bottom line: Outstanding firms are consistently able to identify, attract, and retain star performers; to get stars committed to their firm's strategy; to manage stars across geographic distance, business lines, and generations; to govern and lead so that both the organization and its stars prosper and feel rewarded. These capabilities are what give great firms their competitive advantage. Together, they constitute the work of aligning the stars.

    In the pages that follow, you will see what this requires and how it can be accomplished. For now, two definitions are in order. First is what we mean by stars.

    As we use the term, stars are the men and women in critical jobs whose performance is crucial to their organization's success. In PSFs their ranks include younger professionals as well as seasoned executives; and their titles?such as managing director, vice president, and partner?are as various as their organizations. What stars have in common is not only a record of past accomplishments but also, and more important, the potential to continue contributing to their firm's success. This means that they are also the individuals who have the highest future value to their organization. How much of this value is realized?or whether it is realized at all?ultimately depends on the degree of alignment between the stars and their organization.

    Alignment means creating organizational practices and structures that simultaneously fit the strategic requirements of a business and the needs of its key employees. Academics and consultants have been familiar with the concept for decades, and field research (including ours) has demonstrated its contribution to organizational success many times over. Moreover, it is intuitively appealing: It makes sense that the more the people in a company are motivated to perform in ways that achieve the company's goals, the greater the likelihood that the company will succeed. Yet despite alignment's familiarity and common-sense appeal, for many businesspeople the concept remains just that, a concept. However useful and important alignment may appear, it just isn't something managers talk about?let alone explicitly "do"?on Monday morning.

    Yet great enduring firms are aligned. Their organization and strategy are mutually reinforcing; individuals work to advance the best interests of the firm. Aligned companies enjoy competitive success and financial strength; they become industry leaders. Although their managers may not discuss alignment, they do think alignment; the consequence of their cumulative decisions and behaviors is an aligned organization.

    Alignment is much easier to conceptualize, and to describe after the fact, than it is to create. Achieving alignment involves understanding that your organization is a system in which every decision influences?and is influenced by?every other decision, and then making choices that will reinforce its strategy and values. Sometimes the connections are simple and straightforward. A decision about what criteria to use as the basis for your firm's compensation plan, for example, will clearly affect how the professionals divide their time between serving existing clients and developing new ones. In such instances it's easy to see why and how one decision relates to?and must be integrated with?another (in this case, the firm's strategy).

    Often, however, the relationships are not so transparent or immediate. For example, we know of one firm, worried about employee retention, that penalized its partners financially for professional turnover. Turnover dropped to near zero?but so did the quality of the firm's work because mediocre performers were retained and even promoted. If alignment is to be created and maintained, unintended consequences like these also need to be considered and worked through. By and large, this is not a comfortable way for the human mind to work. Most of us prefer to think and discuss things in a linear fashion, and to link cause and effect one decision at a time. The fact that real-life decisions and choices usually present themselves not as pieces of an integrated whole but on a one-off basis only reinforces this preference.

    Alignment is also hard to achieve because the environment in which organizations compete and serve customers is constantly changing. New services and competitive approaches can require changes in organization. Furthermore, alignment often requires people to make changes that will advance the organization's well-being at their own expense. For these reasons, alignment is always a work in progress, with organizations slipping out of alignment as client needs, competitive activities, and leaders change, and as individual interests prevail.

    Nevertheless, alignment is essential?and never more so than in times of business turbulence like those PSFs are now experiencing. Even for the best and most long-lived professional firms, success in the decades...