The Generative Cycle: Linking Knowledge and Relationships

How can firms ensure that they master the capabilities for collaboration and learning that are essential for their future competitive success? These authors advocate benchmarking professional service firms (PSFs) that already have those capabilities. PSFs, with their flat structure, service-oriented workforce, and participative decision making, are models for larger organizations that want to become leaner and more flexible.

The authors studied three successful firms in investment banking, law, and medicine to find similar ways in which all three had created a "generative cycle" of mutually reinforcing, self-sustaining employee and client development. Key to the cycle is how the firm enhances individual expertise through collaboration and how the firm leverages individual learning to create a capacity for collaborative learning.

The elements the authors found to be most important are:

1. Selecting the best. All three firms had clear criteria for identifying the "best" candidates and hiring employees carefully. They looked for people with analytic talent for technical work, human qualities for relationship work, and entrepreneurial talent to build the organization.

2. Developing individual competencies over time. The firms were committed to investing in each professional throughout his or her career. The firms developed individuals by having senior managers work closely with new staff, believed in learning at all levels, and provided continuous feedback.

3. Retaining top performers. Partners at the firms all had a sense of stewardship and felt committed to something meaningful. All the firms encouraged participative decision making and respect for others' opinions. The reward systems were also equitable and supported collaboration. The combination of these factors made the firms places where people wanted to stay.

4. Leveraging individual expertise to solve complex problems. The partners at all three firms felt that their advantages came from being able to handle complexity. It was not members' individual expertise but the collective wisdom of all members that helped the firms to excel.

5. Generating new ideas. Through collaboration at all levels, the firms developed more innovative and more integrated solutions. The infusion of new talent and examination of processes also enhanced learning.

6. Providing superior value to clients. Through their broad expertise, which resulted from a capability for learning and collaboration, the firms developed better relationships with clients.

7. Attaining and retaining the best clients. The culmination of the generative cycle is a firm's ability to provide superior results to clients and, eventually, to attract the clients with the most complex problems. Those clients can push a firm to achieve new levels of expertise.

Liedtka et al. see a business organization as a community that is held together by a shared concern for both the outcomes it achieves for clients and its members' personal development and learning. The generative cycle is essential to a firm that is committed to developing people and creating value for clients.