Joe Phelps

Wednesday, August 9, 2000, 1 p.m. EDT

What are new and innovative ways to manage your company? With the rapid growth of the Internet, corporate institutions and management styles are changing.

Meet Joe Phelps, CEO of The Phelps Group, a $50-million-a-year marketing communications agency located in Los Angeles. He will talk about abolishing traditional management structures and establishing new ways to benefit your organization by maximizing the employee's individual potential and overall potential of the company. His strategies mainly focus on clients' needs by abolishing all agency departments and organizing around the client in cross-functional teams.

Phelps is one of the pioneering innovators of integrated marketing communications. The Phelps Group, founded in 1981, is a 60-employee firm working closely with technology in a "full-feedback" creative environment. For 14 years, the firm has grown at a rate of 26 percent each year. The firm serves and produce websites for various clients including the Tahiti and Switzerland tourist boards, PETCO, Roland Corp. U.S., Western Dental Services Inc. and Eurovacations. Phelps' upcoming book, "Pyramids are Tombs" details how self-managed people can work in self-managed teams outside the traditional pyramid.

Here is a transcript of today's discussion.

Joe Phelps: Hello from Santa Monica:

They say that if you want to find the leaks in a boat -- take it out in a storm.

The time compression we're experiencing in today's business world is showing us exactly where traditional hierarchies aren't working. Top down decision-making and pyramid-type, linear approval channels aren't working as well anymore.

The solution? For professional service firms,like law, accounting, communications and insurance agencies, it starts with self-managed individual and moves to the self-managed team -- organized around the client.

What doubts do you have about this model?

Ellicott City, MD: Do you think a horizontal corporate culture can be effective for large companies?

Joe Phelps: To Ellicott City: Yes. In fact, the larger the company, the slower business will move unless the organization chart is flattened. The problem will be to get the "department and division" managers to give up control of their functions, and become true coaches. tx. jp

Bethesda, Md: I work in the finance department of a large telecom company. How would your principles of abolishing the traditional management structure impact a finance and accounting department? Or so your principles only impact the sales and marketing groups of a company? I shudder at the thought of someone in sales booking revenue and expenses!

Joe Phelps: I think you're right. The model for self-managed teams works best in a professional services firm, where we talking about clients as opposed to thousands of customers. tx. jp

Arlington VA: Thanks for taking questions. Why do you think that the new .com management structures are so different from old economy structures? Do you think the old model is dead/dying?

Joe Phelps: Speed is the key issue. Hierarchical structures with linear approval and top down decision-making just won't work in these time. tx. jp

Arlington, VA: Don't groups of working people need managers in their daily rituals? Can they be left on their own, working at their own pace, and still be efficient enough for the company?

Joe Phelps: The idea is to find great people, bathe them in feedback and trust they'll make the right decisions. Everyone lives and dies by their own sword, and most people want to live. tx. jp

Los Angeles, CA: What do you mean by the term "Pyramids Are Tombs?"

Joe Phelps: Pyramids represent traditional org structures. They house a "dead" concept for organizing people. One that won't work in the surge economy. tx. jp

DC: When will your book be coming out?

Joe Phelps: Late fall or early winter. It's basically done and we're talking to publishers now, but will not allow them to slow the process. We'll offer it online. So check back to phelpsgroup.com in November. tx. jp

Santa Monica, CA: Dear Mr. Phelps:
As an MBA student studying marketing, I am curious to know what your opinion is regarding starting off working on the client side, versus the agency side. I would like to pursue a career in marketing and advertising, and I have generally been told me that it is better to market on the client side first, become familiar with marketing from that perspective, and then move over to the agency side at a higher lever later in my career. Also, when will your book be available? Thank you.

Joe Phelps: If you're talking account management, I'd suggest starting on the client side to get a bigger picture. Packaged goods would be the best of all worlds. Careful not to stay there too long, though. tx. jp

Arlington, VA: What's after the Internet? How are people going to be working in the next few years?

Joe Phelps: We'll develop a really fat cable for the earth and plug it into the big computer. tx. jp

Brookfield, CT: What value or lessons does your approach have for a small growing company? We are in a service business, transportation brokerage, and we are thinking of expanding by hiring brokers/salespeople who can work from their homes. Being so small, 3 of our 4 "employees" (2 are principals) are totally cross-functional . Are you saying as we get bigger we should specialize not along functional lines (i.e. type of shipment) but along customers? So this employee group would handle ALL the needs of customer a, d and f; and this group or individual would handle ALL the needs of customer b, k, & z. If our business lent itself to geographical subdivision, employee #1 could handle east of MS, Employee #2 west of Mississippi River. Right?

Joe Phelps: Long question. I'll take the first part.

• Just go for the A's.
  
• Top clients
  
• Top people
  
• Aim high.
  
• Stay centered.

MD: As a young professional, I think sometimes that age is a factor in the hierarchy of most organization. Sometimes I feel like a victim of age discrimination. Do you think that seniority equals age?
What advice do you have? And how does your new style of management avoid that?

Joe Phelps: I love this subject. I love how email flattens things out. Doesn't make any difference how big you are, how old you are, who your daddy is...all that matters is your thinking and ability to work with people.

Let's not forget that age usually brings wisdom, but seniority -- is something of the past. I hate that word about as much as I do "departments." tx. jp

washingtonpost.com: Tell us a little about the work climate at your agency.

Joe Phelps: we highly value a "healthy working environment" the first tenant for this is open, timely communications. If we could really do this, we wouldn't mind working out of a cardboard box. That's not the case though -- we have lot's of natural light, and we're fortunate enough to be 9 blocks from the pacific. An open environment means that everyone's opinions count. PR people learn from advertising people who learn from direct specialists who learn from interactive people, etc. I could go on. Visit phelpsgroup.com to find out more. tx. jp

DC: What about experience? How does this roundtable idea work? Do you train everybody?

Joe Phelps: I don't know what industry you're in. Here's how we do it with integrated marketing communications: the team is stocked with players we can count on in each position. i.e. art directors, copywriters, media relations specialist, media planners/buyers.

If the account is large enough to support senior and junior positions in each discipline, then that's the perfect training situation. Otherwise the team is only as strong as its players and their ability to work together.

Regarding training: The full feedback environment, where you're constantly getting others opinions on your work is a great training ground.

Our coaches are responsible for recruiting, inspiring and educating our specialists, while leaving the responsibility on that person's team up to the team.

It's constant training. Keep up, or die.
tx. jp

Washington DC: Is this style of management realistic? I would think that top management is needed in order to take the brunt if something should go wrong. Also, isn't it the duty of top management to oversee their employees and how they handle their clients?

Joe Phelps: Love the question. Hate the word "oversee." If top management hires the right people, deploys them properly and give the team the proper support, they'll make just as good, or better, decisions.

In this model of self-managed teams in a full-feedback environment, the teams receive the best thinking of the more experienced associates. Yes, management must constantly monitor performance and client satisfaction levels. if the performance isn't there, associates either improve, self-select out, or get replaced. tx.jp

Washington, DC: I'm curious to know what your clients think about this. Do they look at it as a novelty or find inspiration from this structure?

Joe Phelps: Our clients love having all these other brains on their business. They're working directly with the people who are doing the work, and they know that our feedback mechanisms are supplying opinions of older, younger, male, female, etc -- as well as people who don't suffer from the myopia that may occur from being on that account day after day.

This method of organizing also results in faster answers. tx. jp

Bethesda, MD: What are some of the best ways to find quality associates/employees for a company and ways for keeping them for a long time?

Joe Phelps: We've found that most of our best people come through existing relationships -- with our associates, clients, suppliers, friends of the agency, etc.

To keep people for a long time, put yourself in their shoes and make a list of what you'd want if you were them. Then give it to them. tx. jp

Washington,DC: Mr.Phelps:
I work in a large govt. agency which is undergoing a major reorganization. I am concerned that so much of the agency's energy is being focused on making this change that other stay in business programs are paying the price. What should an organization be doing during transition to protect its core business? Someone likened our change to trying to rewire a 747 in flight.

Joe Phelps: My guess is that people are spending mega hours talking about what this means to their status. So the challenge is to keep people focussed on the customer's needs. During reorganization, the CEO needs to keep everyone up to speed on what's going on now, and what the plans are. Too often, top mgmt is afraid that employees will leave if they know the truth, or won't know how to process the truth.

Trust is key -- all around. Focus on the customer's needs -- not your "company's." tx. jp

Fairfax, VA: You talk about how this type of management helps your clients. But I'm wondering if there are any downfalls to your style of management... is it foolproof?

Joe Phelps: Great question. We don't know the answer. We're going where no agency has gone before (it, however, has worked for 14 years for us. good growth and happy clients and associates).

I think the theory is solid. Got a lot of it from ed deming. The most important parts of the process are in the beginning. Like -- find the right people. How perfect can that be? Bathe them in honest feedback. How long will it take for us to be perfect at that?

Nothing is foolproof, we make mistakes, and that's part of the building process, too. tx. jp

Virginia: What exactly is this new style of management structure?

Joe Phelps: in service orgs, there are basically 3 methods of organizing:

1. Departments
2. Departments with individuals assigned to client teams
3. Pure self-managed teams

Arlington, VA: Not a question, just a comment. I find your approach to management soooo refreshing. I think my company could learn a lot from your philosophy: Hire good people, regardless of age, and trust them to do their job.

Sigh...are you hiring?

Joe Phelps: We're always hiring. Or, at least, interviewing people to put on our "bench" so that when the next client comes in and we need more people, we know exactly where to find them.
Thanks for asking. Go to phelpsgroup.com tx. jp

Germantown, MD: Dear Mr. Phelps,
Do you think the dotcom industry will reshape the entire Corporate American and if so how long do you think it'll take?

Joe Phelps: Hmmmm...I think the term "dotcom industry" will be short-lived. Interesting question though, and I wonder... how long will it take for all your software to be one integrated program, and that will be integrated perfectly with your suppliers, and your clients, and your home life?
When that's done, we'll finally have something to plug our brains into. tx. jp

Joe Phelps: Thanks for your questions, and your concerns about whether this type of organization will work. So far, it's working well for us. And we are open to your ideas about where the pitfalls may lie, and ways we can deliver faster, better, cheaper and even more integrated services.

Visit us at phelpsgroup.com
Thanks,
Joe Phelps