Rocket Science? Meet the Management Consultants!BY PAUL FITZPATRICK
Calvino loved the term consultant. Men with vague titles were drawn to zone life. Every grifter in S.E. ASsia was some kind of consultant’. Christopher Moore , Comfort Zone, 1995.
Organizations employ consultants to do things that they can’t do themselves. Or things that they, either haven’t got the time or inclination to do themselves. Consultancy covers a wide range of activities. But for the purpose of this article, let me confine it to management consultancy. The origins of management consultancy are originally Anglo-American. Even today the term ‘management consultant’ remains synonymous with these two countries.
In the Beginning.
The first management consultants emerged during the 1890s in the US. Their role was to help manufacturing companies raise productivity. However, in those days, they were not called management consultants but industrial engineers.
Early pioneers included FW Taylor and Lillian Gilbreth and also Arthur Little and Edward Booz, While Taylor and Gilbreth developed some famous management theories that are still been taught in business schools today, Little and Booz created two famous companies Arthur D Little and Booz-Allen and Hamilton. By the 1920s two other companies had started up- Arthur Anderson and McKinsey.
During the 20th century the activities of management consultancies evolved away from work study services towards marketing, personnel and training. Today IT is the fastest growing activity undertaken by most consultancy companies. Other growth areas include change management and advising organizations how to respond to HR related issues arising from downsizing.
Yet it was during the 1980s that management consultancy really took off in a big way. With the world’s major economies switching from manufacturing to services, companies found themselves trying to build a completive advantage through peripheral features such as image, presentation and customer service. ‘Creating value out of nothing’ or in this case, ‘intangibility’ became the central focus of management consultancies worldwide.
Today management consultancy is big business. The top thirty global management consultancies are estimated to have a collective turnover of $(US) 29 billion. Yet, as has been shown, the phenomenon is relatively recent. It has been fueled in many countries such as the UK by privatization and by other Government initiatives designed to infuse new thinking. A survey conducted in 1996 revealed that 97% of the Times 200 top companies were using consultants.
The price of advice?
Good advice is priceless. Bad advice is highly detrimental. But what does a company get when it hires the services of a consultant. And how do they know if they are getting value for money?
Unlike, for example legal services, there isn’t necessarily a definitive result. Rather a list of recommendations in report form. Added to this are a whole set of environmental factors that can completely change how the problem is framed. So, often the consultant can never really be accused of giving the wrong advice.
In recent years there has been some talk about ‘value-added’ billing. In other words, the fee is determined by the economic benefits derived by the organization as a result of taking a consultant’s advice. Problematic to say the least, value-added billing never caught on.
Project billing is the norm or sometimes, hourly billing. So how can a client be sure that they are getting good advice? The simple answer is that they don’t.
The Theory Industry.
Theory is the cornerstone of the management consultancy industry. McKinsley spends about $100 million (US) on research. Theory is the glue that keeps the profession together. And it’s self perpetuating. The more of it there is the more that gets created.
Also management theory, it seems, is recession proof. In fact it thrives on economic uncertainty. With the seemingly relentless appetite for new ideas and theories the industry drives the theory rather than the other way round.
Witch Doctors Thriving on Anxiety?
Businesses are more fearful of their futures that they have ever been before. Today we are confronted by momentous changes in the global economy. Stock market volatility, technology advancing at an unprecedented speed, the end of organizational structures and of careers as we know them.
911 proved to be the icing on the cake in terms of fanning the flames of uncertainly! Yet, consultants offer reassurance. Do it our way and everything will be alright.
‘Seamless’ and ‘integration’ are two of the buzzwords today among management consultants. So is ‘global’. As the world shrinks management consultants try to offer compact solutions. So suddenly we are presented with global vision, global competence, global reach, global support and, of course, an essential prerequisite for all management consultancies, global leadership!
Another ‘in term’ is ‘empowerment’. Everyone thinks that they know what it means yet not two definitions are alike. Empowerment has the right associations however and this makes it virtually impossible for clients to argue against it. And of course there’s ‘value-added’.
‘Value-added’ was the fad expression during the 1990s. It popped up in virtually any context. First it was applied to products, then services and now it being used by schools, hospitals and law enforcement agencies. So why are these terms so well received. Because, to put it simply, they make you sound clever. And it’s a way of dressing up the obvious to give it a pseudo-scientific aura.
The Emperor’s New Clothes? Meet Mr Tom Peters.
Top gun among the management consultants has to be Tom Peters, as in ‘Peters and Waterman’. By training an engineer, before he hit the big time Peters was a consultant with McKinsley. It was at McKinsley that Tom Peters was described as ‘having a consultants instinct to inveigle his way into hundreds of companies and an engineer’s curiosity to find out how things actually worked’.
‘In Search of Excellence’, the book that Tom Peters and Robert Waterman produced while they were at McKinsley, sold over a million copies on its first publication in 1982. The reason it was so successful? A good sense of timing. An ability to articulate the mood of the moment. The skill to dispense advice that seemed practical and astute marketing.
‘In Search of Excellence’ was also perfectly timed to appeal to an America that was worried about its declining competitiveness. And it tapped into an underlying sentiment that American managers were largely to blame. Yet the solution was still in their hands. In other words they didn’t have to look to the Japanese for inspiration.
All the essential features of a good consultancy strategy were there. A good sales pitch, synchronicity achieved through matching the target audience with the prevailing mood and most of all, Peters had the solutions! And there you have it, successful consultancy in a nutshell!
Yet, according to Peters’s own admission, the book was flawed. For a start, almost all the companies mentioned are American companies and its findings tended to be based upon short-term rather than sustained growth. But it was the way it was dressed that was the selling factor, rather than the actual substance.
An Overall Assessment.
In recent years, consultants have become associated with unpopular initiatives such as responding to the HR implications of downsizing. By many labor unions, consultants are seen as the ‘boss’s men’. Also it’s a profession that has never entirely been able to justify its existence.
In theory anyone can call themselves an ‘management consultant. Unlike doctors and lawyers, for example, there is no qualifying hurdle. Yet the consultancy industry represents a veritable reservoir of knowledge and expertise.
Frequently a good working knowledge of different industries means that consultants can offer an outsider’s perspective and they have the added advantage of not being part of the fabric of the organization.
And What of the Future?
It’s change that drives the consultancy industry. The worst scenario would be if we were to enter a period of protracted stasis. For the time being, whether boom or recession – clients will always need expert advice to manage their growth or to restructure their business in a declining market.
IT has the potential to reshape most industries. This will create new consulting needs both in terms of strategy formulation and also in terms of change management. Likewise an increasingly diverse business environment will create a need for specialization that will be beyond the internal expertise of most organizations thus creating the need to outsource.
As a consequence companies are likely to rely more and more on the services of consultants. This will contribute to an increasing demand for consultancy services, especially in niche areas. The focus will be upon developing ongoing customer contractual relationships. The bigger consultancy companies will continue to service all consultancy needs and will make takeover bids for smaller companies offering specialist services.
There is likely to be a shift from simply advising clients to implementation and also risk sharing. Payment structures are likely to shift from hourly fees to flexible, return related payments or even equity stakes.
‘Virtual’ teams will allow consultants to work together from different locations on the same project or on different projects simultaneously. Likewise video conferencing will mean that consultants won’t have to meet clients.
Growth regions are likely to include India and China. As they continue to undergo economic development, eventually these regions will themselves become providers of consultancy services.
As far as the foreseeable future is concerned management consultancy will continue to thrive. Creating simplicity out of complexity and reassurance in times of crisis.
Paul FitzPatrick is a Singaporean PR, a free lance journalist with News International, published author and conducts business presentations under the pseudonym 'Ziggy Stardust'. email@example.com