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August 17, 2017

Founding SVA Consulting

Four of the key players behind Australia’s first dedicated non-profit consulting business for the social sector tell the story of setting up and shepherding SVA Consulting through its initial years.

To celebrate SVA Consulting’s 10th anniversary, Olivia Hilton, SVA Consulting Executive Director talks with Michael Traill, founding CEO of SVA; Greg Hutchinson, former Managing Partner at Bain who joined the SVA Consulting Advisory Group when it was set up; Rob McLean, then SVA’s Chair; and Duncan Peppercorn who headed up the new consulting business when it launched in 2007. [The article below is an abridged version of the interview transcript.]

Olivia Hilton: Firstly, Michael from your perspective, how did the idea for SVA Consulting come about?

Michael Traill
Michael Traill, then SVA CEO

Michael Traill: There’s really two parts to the story. One was that in the first couple of years of SVA, we were conscious that one of the deep needs in the sector – and for the organisations we were supporting – was greater clarity around performance metrics, around what was working, and around strategy. And as we worked and had access to some really good quality pro-bono resources, particularly from McKinsey via our founding Chair, Rob McLean, we realised that there was a lot of value in that work.

That was considerably assisted when Macquarie Group Foundation, I think in 2005, provided funding to support what was then called the SVA tool set. That work was around building the intellectual property, and in a lot of ways was really the precursor to SVA Consulting. The other part was that I spent some time at Stanford [University], and with Roberts Enterprise Development Fund [REDF] in 2002. They developed a lot of the original work around Social Return on Investment (SROI) through Jed Emerson. I remember coming back with a suitcase full of books and literature on SROI via a woman called Melinda Tuan, who then ran the REDF. That was important because we really liked the framework. We thought it was a bit over-engineered, but I think it also reflected the spirit of global thought leadership and sharing of intellectual property that we were able to tap into from the early days.

Those things are important as a background because we’d started thinking from the early days about diagnostics and tools that would be tailor-made for the sector. And it was something we should be doing more of.

Olivia Hilton: So that was the understanding of the market: there was a gap for tools that were customised for social sector organisations?

Michael Traill: What was generally emerging in that period was that it was increasingly understood and respected by people that we worked with, that these tools: the more hands-on work we did with McKinsey borrowed resources, and other mentors and consultants who came out of the ‘Bains’ and the ‘Accentures’ – people like Caroline Chernov, Seri Renkin, and the use of SROI framework. I’ve had people look at this and say, ‘Can you either provide that or do that?’ Often with funders it would be another organisation that they were supporting. And that was certainly influential in planting a seed. We only scratched the surface on an unmet need for better quality diagnostics and evaluation across not only the ventures we were supporting, but more broadly the sector.

This is where Greg Hutchinson and Robin Crawford entered the picture. Greg, [former] Managing Partner of Bain, was a close friend of Tom Tierney who founded Bridgespan [set up by Bain to provide consulting services to support philanthropic foundations and non-profit organisations in the US.] And I’d known Greg and Robin for a long time. So the three of us started a conversation around how and on what basis there was a case for setting up some sort of Australian version of Bridgespan.

Olivia Hilton: Greg, what do you remember of those initial conversations with Michael Traill and Robin Crawford?

Greg Hutchinson
Greg Hutchinson, former Managing Partner, Bain

Greg Hutchinson: I recall a number of conversations that occurred more than 10 years ago, and the assertion and the question was the same. The assertion was, Australia needs a Bridgespan. And the question that came out of that was, how can we bring Bridgespan to Australia?

Over an initial conversation with Tom Tierney, who was a friend of mine and who had founded Bridgespan, the answer was clearly no. The next conversation was a different question, which is, how could we create something like Bridgespan in Australia? We white boarded that one and again came to the conclusion it actually can’t be done.

The third time I was due to go to Boston – I remember it distinctly – I was sitting in the Bain office. If my recollection is correct, it was Robin [Crawford] and Michael Traill on the other side of the table. They said, ‘We know you’re going to Boston and we know you’re going to meet up with Tom Tierney. You’ve got to ask this question.’

They handed me a pencil and a blank sheet of paper and said, ‘Don’t come back without the answer.’

They caught me, literally as I opened my mouth, before any sound came out, because they knew that I was about to provide a compelling answer as to why Bridgespan won’t come to Australia and why we can’t create Bridgespan in Australia.

They said, ‘Before you say anything, you’re trying to answer the wrong question. Go to Boston, sit down with Tom and figure out, how we can create something like Bridgespan in Australia. Not why we can’t do it, but how we’re going to do it. To help you, here is something that will be really worthwhile as you go into that discussion.’

And they handed me a pencil and a blank sheet of paper and said, ‘Don’t come back without the answer.’ I went to Boston and, I can remember distinctly, I sat opposite Tom and said, ‘A couple of people who I respect immensely, that’s Michael Traill and Robin Crawford, have given us the following task. Tom, that’s you and me.’

We brainstormed for a couple of hours and came up with a couple of threads in a plan on the page. I then dutifully came home, sat down with Robin and Michael, and that’s really how it all started. I’ve lost the piece of paper long since. There were just a couple of components that sounded right then and were actually proven to be right to this day.

Olivia Hilton: Rob, you were SVA’s Chair at the time. What do you remember about the genesis of SVA Consulting and how the board viewed the idea?

Rob Mclean
Rob McLean, then SVA Chair

Rob McLean: Well, as you know, we had only been going for three years, when SVA Consulting was dreamed up. I really credit Robin Crawford, who served on the SVA Consulting advisory board, with bringing the idea of having a consulting arm to Michael and the board’s attention.

I certainly felt that it was an idea that had merit and one we should pursue. We had, what you would expect from the board, a good conversation. I do recall there was a question of whether this was mission creep, and that’s always a good phrase to get a board thinking about whether they’re staying on mission. And we convinced ourselves that this was a companion venture that would add to the strength of SVA and add to the strength of the ventures that we were supporting, through bringing a professional external perspective.

What made it easy, I think, for the board to support SVA Consulting being founded was Robin, not only came up or brought the idea to us, but he offered to make a significant financial underwriting. And we were able to get Julie White from Macquarie Bank to provide significant support as well. Not-for-profit boards, and we were no exception, just love something where a risky new venture is underwritten. And that’s what we had with the generous support of Robin and the Macquarie Foundation. That took us down the path of hiring a CEO and we looked at and talked to a number of people. Far and away, the most experienced and passionate candidate was Duncan Peppercorn, who I had hired at McKinsey and who Greg Hutchinson had worked with at Bain.

So, we knew his social sector interest, we knew his capability and we knew his style.

Olivia Hilton: What do you remember of taking Duncan on?

Michael Traill: There are obviously a lot of things that we were considering strategically around that. Most particularly, and we all agreed, that the only way to get this up and running was if we found a really high quality person to start it.

That’s where Duncan entered the picture. I remember vividly catching up with him. I had a kind of 40 or 50 page, not particularly well put together, cut and paste document called ‘Wire frame for SVA’. It was a bit of a dog’s breakfast of quotes and data around why what we were trying to do mattered. It was a head and heart pitch that I used when I was talking to people about how ‘You’ve done well, you’re smart, you’ve got a social conscience. Do you want to make a difference? And here’s what we’re trying to do. And here’s the way we think about the world and what matters.’

I remember leaving that with him, and I think it crystallised a response. Duncan had obviously done a huge amount of work in the arts sector. It was one of those serendipitous things where he came on board. And without that, it wouldn’t have happened.

Olivia Hilton: What was it that motivated you to start up and run SVA Consulting?

Duncan Peppercorn who led the newly formed consulting business

Duncan Peppercorn: I think I became very, very passionate about the change that I wanted to see happen.

I think there were a lot of consultants captured by the sector. In other words, rather than coming from the outside and saying ‘It’s not good enough,’ they were sitting within the sector going, ‘I can do what you do faster, neater, tidier’. But they weren’t doing it better. [Nor asking] the basic question that we ask ‘Where are you going? What are you going to achieve? What does success look like?’

I felt there were very big issues around strategy and around clarity of direction and KPIs, real goal-orientation and measurement of outcomes, all of that good stuff, which I felt increasingly frustrated about not being in the sector.

Olivia Hilton: Greg you spoke about the initial elements you devised with Tom. What were those elements?

Greg Hutchinson: The first was seed capital. He said, ‘You need capital. You need working capital and you need growth capital. From a moral and ethical standpoint, you can’t ask people to transition out of a career where they’re not only earning well and providing for their families, i.e. consulting, but also where they’re learning, and therefore becoming more valuable and important to society – unless you can give them some degree of certainty.’

In [Bridgespan’s] case, the capital was all philanthropic, personal, and corporate. I said government may also be an element here in Australia, but [otherwise] probably the same combination of essentially philanthropic funding and corporate funding, and of course, that proved to be exactly the case. The government funding generally is better in the last mile than the first mile.

The second element was to be really focused around what you can do and also what you can fund – thinking about where it is you can have the greatest impact, and also what is sustainable. Within the Bridgespan model, one aspect is the work that’s done with philanthropists to help them to be more strategic in their philanthropy, and the other with service delivery organisations – how to help them to become more strategic and also more impactful in an operational sense.

… it only works if you engage in the war for talent and both attract and retain really high-calibre people.

Bridgespan’s original concept was very simple: how can you repurpose a world-class strategic consulting [business] and apply it to the non-profit sector?

The operating model for Bridgespan also recognised that the two primary customer segments: philanthropists and service delivery organisations operate in fundamentally different ways. It’s different intellectual property, but more importantly, it’s a very different operating model. [Part of the model] was the knowledge management system. In order to make that world-class and open source, again, you need funding.

The third element was: it only works if you engage in the war for talent and both attract and retain really high-calibre people. Don’t get involved in complex societal issues unless you have the capacity to put really first-rate people against those issues. And the capacity to train them in what’s similar, and particularly what’s different, in operating with service delivery organisations.

We created a very strong link to Bain, and to McKinsey. That was very important for training. We opened up all of their training capability and curriculum to the SVA Consulting team early on.

Regarding funding. That was, as predicted, a mix of philanthropy and also service delivery organisations. That’s important from a behavioural standpoint, but also from a sustainability standpoint. We knew from Bridgespan’s experience that whatever you could sensibly and reasonably charge a service delivery organisation, it won’t cover your costs, even with people working at a fraction of what they could do in the commercial sector. That’s where philanthropy stepped in, and people like Robin [Crawford] and others were very important.

It also needed good governance help and guidance. Not just governance, but more importantly, through networks and bringing other capacity to bear that was needed by SVA Consulting in the early days – that’s where the advisory group was constructed.

Olivia Hilton: Duncan, what did you see as the need initially? Was it primarily strategy in the beginning? And how did you and Lisa George – who joined you – go about building the market initially?

Duncan Peppercorn: It was a very different place at SVA in those days. SVA had learning and leadership workshops which were the main way that we actually engaged with the sector, other than funding people through the venture philanthropy side.

I said, ‘Let’s stick into these a bit about what strategy is really about. Let’s see whether we can use that as the mechanism, by which we can get a few clients on board.’

But it took a long time to even begin to get a modicum of momentum, to be honest. During that period, I was really worried. I wasn’t sure whether or not we were actually going to get anywhere.

It was really getting some people outside of SVA to start saying that we knew what we were doing and what we were doing was good.

I went out and talked to the large funders and got sort of nowhere. I talked to the large non-profits and got nowhere other than of course the Benevolent Society, which I had already been doing quite significant amounts of work with, previous to that.

Of course the first organisation that really picked it up was Wayside Chapel who came to one of the workshops and said, ‘This is exactly what we need. We really could do with you guys.’ Lisa and I went in, we uncovered a lot of interesting stuff and they were fantastic to work with. Furthermore, they were a real for-purpose organisation, not a service delivery organisation, but something that was born out of passion and determination and therefore a fantastic feather to have in our cap.

If I think back on it, having people like Graham [Long] was critical, the Wayside Chapel, absolutely critical. He was prepared to stand up and say how great what we’d done was.

It was really getting some people outside of SVA to start saying that we knew what we were doing and what we were doing was good. I certainly felt, at times, as though we simply were not going to get the traction…. It was Michael and Rob continually saying, ‘No, no. It is hard. It’s going to take time. We’re doing the right things in the right order. We’re getting some traction.’

I don’t think it began really turning into a business until maybe year two or three. That was partly driven by the fact that I said, ‘Look, if we’re going to get traction, we’ve actually got to work. The obvious place for us to work is as part of what we offer through venture development, to the organisations that we support.’

That’s really where we started getting some traction. We did it through part of our offering through venture development. They didn’t actually have to make the purchase decision but we actually got to do good work. It was work that we could then put on a flag, run up the flagpole and say to people, ‘Look. We did this.’ It was different.

Olivia Hilton: Given your experience in the private sector consulting, did you see it as a challenge trying to get non-profit organisations to pay for really high quality strategic advice?

Rob McLean: Yes it was. We just didn’t and still don’t have enough foundations to fund consulting exercises. But that led to a business model. I used to say to Duncan that he was doing these one week assignments where we were charging probably about $1,500 per consulting day, and that meant that it fitted within the budget of non-profits, but it meant that we were doing an assignment a week and then going on another assignment. And I call that high velocity consulting.

But also it was my way of saying to Duncan, this is not going to be sustainable. You’re going to burn yourselves up, trying to write letters of proposal (LOPs) on a Friday and start an assignment on a Monday and then finish it on the following Friday.

That has clearly evolved with SVA’s reputation and the opportunities that they’ve created for longer assignments and for teams that have a mix of skills. Rather than being not much more than a one-man band at the beginning.

Olivia Hilton: Did the board have a view on what types of clients you thought that an advisory practise would be able to help change the most?

Rob McLean: My observation was [more] that the sector was underserved. The clients were too small for the large consulting firms and by and large it was, before the accounting firms had decided that this was an interesting area for them. It was wide open in my recollection at that time for a more professional organisation.

… there’s really nothing more important for an organisation than doing that.

Olivia Hilton: And what did you see as the main contribution that SVA Consulting could make?

Rob McLean: What I think SVA Consulting did so well… and does very, very well, is hold up a mirror to a client and say, ‘This is where you really are. Do you agree? And if that’s the case then with the look we’ve taken at you and what you’re trying to do, this seems to be the priorities that would make sense for you at this time.’

That’s a process of rigorous thinking and getting clarity about priorities; there’s really nothing more important for an organisation than doing that. That’s something that I think in this first 10 years that SVA Consulting has brought that’s really, very powerful.

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