Thoughts on running a business: Larry Ferguson

Smart Business Los Angeles, Aug 2007 by Nank, John

LARRY FERGUSON

CEO, FIRST CONSULTING GROUP INC.

Business is simple; it's the people who make it hard, says Larry Ferguson, CEO of First Consulting Group Inc., a $264 million health care consultancy firm. Simply put, business is dealing with people to solve problems, something that Ferguson says has been both blessed and cursed by a growing reliance on e-mail and other less personal forms of communication. Ferguson says that while e-mail can be an effective tool to quickly deal with tactical issues, collaboration around strategy and vision is best done face to face. After all, he says, a breakdown in communication can equal a breakdown in your business. Smart Business spoke with Ferguson about building consensus, encouraging input and why the proper reward system is critical to achieving goals.

Build consensus to make well-informed decisions. I believe in the power of the network. CEOs, in general, are generalists. They take in lots of different data points about markets, technologies and the capabilities of their own organization, and then assimilate that and distill it in a general direction. They then work with their management team and other associates to work on that plan and challenge the thought process. It's leveraging the talent in the organization.

For example, in a senior management team, you normally have a financial person or two, a marketing person or two, a couple operating people, HR, legal, and they bring a different approach that one person doesn't have. I don't care what a CEO's makeup is, they usually come out of a specific domain, whether it be marketing, finance or whatever, and it's good to make sure that all the bases are covered. Just because there's a theory there, doesn't mean it's going to work; you have to back it up with the intellect of people who know their different domains.

Whether you have a management team or a board, customers or any organization, you have to bring people along and, as I'll call it, rationalize the database of their knowledge. You can come out of a room and have some strategic vision that people just can't get their arms around or understand how you got there.

Unless it's a purely autocratic organization, people would like to know the steps you took to build the thesis of where you want the business to go, and that takes time.

Groom future leaders. Some people don't like consensus, even the participants, because they prefer to have someone just tell them what to do. That way, they don't have the ownership. I've always found, especially with senior people, is that it's better to have the ownership there.

It's a training exercise. To me, any leader needs to groom the next generation. You need to have people going through these thought processes. Firstly, the leader needs the information because hopefully they've surrounded themselves with smart people, but you're also developing those folks for the next level.

Those folks need to understand that it's not just the input you're looking for; it's a training mechanism to allow them to advance in their careers. I have not had much difficulty getting people to give input once they understand what we're trying to do.

A lot of people like to be creative and like to have a say in where they're going. It may not be the final say, but in general, if they understand what the goal is and they understand that this is a way they can grow their careers, if they're the right people, they'll step up.

Make goals meaningful to employees. You have to build award mechanisms around what your goals are. People will do what you pay them to do, in a lot of cases, so you can't have a direction without the proper rewards system, whether it be promotions, compensation or acknowledgement. There are lots of different reward mechanisms, but they have to be in place to encourage people to want to do what the goal is.

You also have to take the big goals and strategy and break it down into somewhat digestible pieces, so people can have input, and they can see their input and their contribution to the smaller segments. How do they fit in to the bigger picture? It's taking the big picture and breaking it down into smaller pictures and letting people understand what their contribution is and what their payoff is for that contribution.

Lure talent with a strong vision. The most difficult challenge a business leader faces is recruiting, inspiring and keeping top talent. Business is matching capital and human talent. There is a lot of capital out there, so capital is not an issue these days for the most part. There is a lot of opportunity because every year, the world reinvents itself. So it comes down to the people. It's attracting the right people to put together with the capital and the opportunity. That's key.

I have this exercise I do. I ask people for the best company they've ever worked for or been associated with. You hear companies like Apple come up, Microsoft, Intel, Xerox in their earlier days, but what all those companies have in common is that they're companies with a broad vision. It's not just a job and going to work.