01 Oct 2000
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Q & A: Bain & Company's Thomas J. Tierney

Tackling a brave new world
Re: Jay Lorsch
by Peter K. Jacobs

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In January 2000, Thomas J. Tierney (MBA 1980) announced that he would step aside as worldwide managing director of Bain & Company, a position he had held since 1992, and become chairman of The Bridge Group, a new Bain affiliate. Tierney's brainchild, The Bridge Group is an independent consulting practice designed to "bridge" the gap between the seemingly disparate worlds of corporate management consulting and nonprofit organizations worldwide.

Tierney, who serves on the Board of Directors of the Associates at HBS, is also at work with HBS professor Jay W. Lorsch on a forthcoming book that will address the challenges facing organizations in attracting, developing, and retaining outstanding talent. He calls the approach required today "constellation leadership."

What impact has the Internet's rapid growth had on the way consulting firms assist their clients?

Perhaps a good way to answer that is to look at what has changed at Bain & Company in recent years. Increasingly, our clients are demanding strategic counsel in this critical area. At least two-thirds of them currently engage Bain's services on one or more Internet or technology-related projects. In addition, we have experienced a surge of staff interest in this area. To respond, Bain has undertaken several initiatives, each with a strong Internet component.

For example, last year we launched "bainlab," a global consulting team dedicated to incubating and accelerating Internet businesses. We also entered a joint venture called eVolution with venture capital firm Kleiner Perkins and buyout specialists Texas Pacific Group. This new partnership focuses on traditional corporations that are interested in spinning off new Internet businesses. And we've launched BainNet, an alliance of top-notch Internet service providers to give our clients immediate access to cutting-edge solutions and technologies in the field.

How must organizations change to remain competitive in the new economy?

Organizations need to transform themselves in several ways, and they need to start with their core asset -- managerial talent. Recruiting and retaining highly talented executives is a demanding task. Doing this effectively requires that we respect and channel two opposing forces that continually act on "star-quality" managers.

I call this "constellation leadership," because an organization's top management team can be viewed as a constellation of brilliant, talented individuals, each held in place by countervailing forces that both pull inward and push outward. Executive "stars" are attracted and held to an organization by their belief in its mission, their sense of affiliation, their intellectual engagement with its business objectives, and the idea that the organization has an important, higher purpose. Taken together, these allegiances generate a kind of strategic gravity that keeps top-quality executives engaged. The opposing force is the entrepreneurial push within each of us, those tendencies that lead us away from the center, to do new and better things with our talents and energy.

Great organizations recognize that these two powerful forces must be held in balance if they want to maintain a bright constellation of managers. They therefore build and sustain cultures and reputations that attract the best executives, and they nurture the needs of their star performers by creating entrepreneurial mandates and multiple opportunities for them to grow as individuals and professionals without having to leave their organizations. A number of companies have found success with this approach, including eBay, Apple Computer, and Charles Schwab.

What are some of the most important leadership challenges in nonprofit management?

There are many excellent executives in the nonprofit area, and our research shows that leading a nonprofit organization is, in many ways, more demanding and challenging than managing a for-profit. Not only must you confront most of the same issues faced by for-profits, but you must do so with more limited resources and in a more transparent environment.

Two important barriers have kept some high-caliber executives from entering the nonprofit arena. First, average compensation levels in the nonprofit sector have been well below those of the for-profit sector; and second, for-profit executives have undervalued the skills and achievements of their nonprofit counterparts, thereby making migration into the profit sector difficult for those who may want to spend only a portion of their careers in nonprofits.

We all have to work harder to eliminate these barriers. The nonprofit sector presents an outstanding opportunity for talented managers and consultants to put their skills to work for a wide range of worthy causes. Today, approximately $700 billion in capital is flowing into the nonprofit sector, and estimates of how much will be transferred over the next twenty years range from $10 to $40 trillion -- a colossal sum that stems from our booming economy. The challenge then will become how to manage these great resources for maximum effectiveness in a highly fragmented sector of over a million highly dissimilar organizations.

How do you begin to encourage for-profit business leaders to become more involved with the nonprofit sector?

To bring these elements together, we need to build a conduit that enables a two-way flow of knowledge, experience, and management talent, because there certainly is much to be learned on both sides. Different companies will need to approach this challenge in different ways, but let me explain how Bain responded.

We've established The Bridge Group, a nonprofit consulting practice, independent of Bain, where our top consultants can serve the needs of nonprofit clients while retaining the option of returning to Bain's for-profit practice at any time. The Bridge Group allows our premier consultants to fulfill their ambitions of making a meaningful contribution in the nonprofit arena -- and to simultaneously acquire new skills and experience -- without closing the door on the for-profit world. When fully established, The Bridge Group will serve a roster of twenty to thirty nonprofit clients a year for fees that are a fraction of those demanded by major-league consulting firms. Funding comes from Bain & Company, as well as from private foundations and other sources.

Because The Bridge Group will be able to serve only a very limited number of nonprofit organizations, we want to discover a means to disseminate much of the information we gather so that other nonprofits and those who advise them will benefit as well. To that end, we hope to find ways to collaborate with efforts such as the HBS Initiative on Social Enterprise and to contribute to the development of new nonprofit case studies at the School.

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