Are management consultants dated?

DD: Offering a counterpoint, I'm joined by Simon George, Director of Finance and Operations at Ealing Studios, to discuss where Management Consultants (MCs) fit into today's organisation. Contemporary sentiment sees management consultants cynically, residents of the leper colonies that financial centres and its bankers have become. Their credibility is undermined by humour, which parodies them for charging astronomical fees for information already known.

MCs popped into existence at the end of the 19th century, but it was only after the Second World War that proliferation began in earnest, mirroring the growing proportion of private entities supporting governments in military endeavours believing that there were better ways to provide goods and services. The management consultant served those organisations willing to invest in strategic development, combining both world class academic and practically experienced persons.

Like the airline industry, once a luxury method of travel, low-cost operators have entered the market and devalued its caché. But this is somewhat illusionary as the gilded flights did not end, the market merely developed and matured. The BCGs and McKinseys are still selling their services to those customers who demand a premium product. It is lighter weighted offerings, demand driven by those who coveted the value add that have fashioned fukuwarai figures of the profession.

 

 

DD: I fear you are ignoring the objectivity that an MC brings to the table, akin to dismissing the usefulness of Non-Executive Directors (NED) to a business. Both are strategic in outlook but their differing virtuosity is time related. NEDs are a source of industry and regulatory connections, broad board experience and a guiding hand to the tiller. They are also part time for lengthy periods, the opposite of MCs.

MCs help develop strategy or stress test and validate strategic concepts being considered. Middle and lower-ranking personnel would engage with contractors or externally provided internal audit in much the same way with regard to tactical and operational planning. A cynic might also point out that all outsiders become the insiders "get of jail free card" when things go awry.

 

 

DD: Since you mention deliverables let's address that. Many MCs having stepped out of academia, return and utilising that experience have given the world many of the generic frameworks we take for granted today. BCG's boston box, developed in the 1960s, is still valid and used today. McKinsey's 7S model equally so. Each firm reaches out to Clients sharing thoughts on a variety of topics, making these resources highly valued alongside such pure academic publications such as the HBR.

The MC does not seek applause for its client's success, that limelight belonging to the beneficiary. We are all happy to share the orchard of sour fruit while, as S?n Wùk?ng, coveting that which is long lasting. Having paid for it, why share it?

 

DD: Thank you Simon. My final thoughts are so. Blame is only useful if there are learnings and these are acted upon. I believe in the value MCs add to strategic thought. To remain competitive and relevant they must be a nexus of innovative approach driven by their diversity of available skills, working experience and academic links.(David Daly)

 

SG: It is always easy to blame the negative perceptions of a profession or activity on a few bad apples or rogue operators. But cut price airlines make money hand over fist, and passenger numbers suggest they are serving their market. If full service airlines are going to survive they had better learn why, rather than whinge about the competition. Similarly MCs come in all shapes and sizes, but the problems of management consultancy lie deeper than an overcrowded market.

Kill all the lawyers! While most of us at some point have had a twinge of sympathy with Shakespeare's sentiment, we all know that lawyers do a fundamental and value added job. We can all think back to when our lawyer or their lawyer was worth real money to us.

The same cannot so easily be said of MCs. Their benefit is always somehow more nebulous, even when a project goes well and there is always that nagging doubt. Could we have done that better ourselves?

Whilst the law requires years of training and experience to master, the MCs have no unique training, nor professional status to differentiate themselves from their client.

Indeed, they start at an enormous disadvantage to a business's management who usually has vastly more knowledge of their business than any consultant. The MC is in other words you, but without the experience you have. So why hire expensive MCs who know less about your business than you do?

 

 

SG: The cases are not alike. An NED is as likely to be there for the benefit of shareholders or regulators. Often they provide more assurance to outsiders than advice to the executive members of the board.

There is a difference between technical consultants, providing occasionally needed specialist knowledge, and MCs who opine on strategy, then leave without having to see it through. A bit like a staff general who knows more about war theory than war fighting.

MCs can blame management for failing to implement their brilliant plan properly. Management can blame MCs for a useless plan. It can be mutually convenient I agree. That suggests shareholders are unlikely to see added value when managements can all too easily hide behind MCs rather than having to work for a living.

 

 

SG: MC are not shy about advertising their genius. I don't recall meeting an MC who said 'Well, I could tell you about our work, but the real heroes are our clients'. Of course, it would be simplistic to argue that all MCs and the work they do is somehow substandard or invalid just because it is done by a MC. What I am arguing for, is that when management reach for the MCs, shareholders should in this activist age, take a hard look at the reasons why MCs are being called upon.

If they are being used to bring unique, focused, budgeted and defined resources, skills and techniques that don't make economic sense to be sourced another way, then all well and good. But all too often the MC is a crutch for weak management.

The poor image of the MC has more to say about the clients that hire them than the MC industry. Bashing MCs is a bit like blaming fast food sellers for obesity. No one makes you eat their product, so who really is to blame?

 

- David Daly is CFO of the Sifico Group. The views expressed are the panelists' own

(Simon George)