It was open season (again) on management consultants this weekend after it was revealed that the NHS spent £313 million on them last year. The Independent’s Johann Hari climbed aboard the bandwaggon with this amusing polemic which seems to have been based on a few conversations he had with some disgruntled former management consultants. Or, perhaps more accurately, former management consultants who have decided to make a second career out of slagging off management consultants.
One such is David Craig, who explained to Johann how, after a degree in romantic poetry, he was hired by a prestigious management consultancy, given a few weeks training and then charged out at £7000 a week to major companies. He describes how junior consultants were given a formulaic toolkit which, with a bit of tweaking, they then applied to every client organisation. The consultants would gather some information, feed it into their models then produce a report and a set of recommendations which they had pretty much thought up before they arrived on the scene.
This training, take a pre-determined formula and apply it to every situation you come across, clearly worked for David Craig because he has used the same approach in his new career as a writer. The book Johann Hari referred to as a ‘brave memoir’ is Rip-Off! The Scandalous Inside Story of the Management Consulting Money Machine written in 2005. This was followed in 2006 by Plundering the Public Sector: How New Labour are letting consultants run off with £70 billion of our money. In 2008 came Squandered: How Gordon Brown is wasting over one trillion pounds of our money. Then in 2009 Fleeced!: How we’ve been betrayed by the politicians, bureaucrats and bankers – and how much they’ve cost us. (Notice that the bankers have been added to the list of baddies; gotta keep up with the zeitgeist y’know!) Finally, earlier this year, there was The Great European Rip-off: How the Corrupt, Wasteful EU is Taking Control of Our Lives. You’ve probably got the picture by now.
Johann Hari must really hate management consultants because, not only does he extensively quote David Craig, a prominent supporter of the Taxpayers’ Alliance, he also relies on a rant by Rod Liddle to back up some of his claims. Hari has said before that he is willing, quite literally, to get into bed with right-wingers if it furthers his aims. Perhaps that was the approach he took to this piece. He might be a leftie but if it helps his argument, quoting right-wing populists is just fine.
Management consultants are an easy target. As with bankers, bureaucrats, politicians, red-tape, civil servants, council workers and the EU, a generalised swipe at consultants, long on polemic and short on data, is guaranteed to get nods of agreement and a string of supportive echos in your comments thread.
Of course there is sharp practice in management consultancy just as there is in many other professions. However, management consultancy differs from most other professional services in one crucial way. Large organisations are forced, either by law, regulation, strong convention or external pressure, to employ certain types of professional advisor. It is almost impossible for all but the smallest companies to avoid using lawyers, auditors, investment bankers, accountants or health & safety advisors. But, with a few exceptions like the teams put into failing NHS trusts, no organisation is forced to use management consultants; it is entirely a matter of choice.
So why, after so many books and articles have been written purporting to lift the lid on the great management consultancy swindle, is the consultancy market so buoyant? It’s five years since David Craig wrote his book but few people seem to have listened to him. Since 2005, apart from a slight dip during the recession, consultancy revenues have continued to grow. Given that no-one is forced to use consultants, why should this be?
Perhaps the people who run organisations are dupes who are easily conned by smooth-talkers from the consultancies. Or maybe they are all rubbish at their jobs and hire consultants to cover up for them – and miraculously no-one has found them out yet. Or perhaps it is even more sinister – like a global conspiracy of management consultants who run an unseen protection racket, forcing companies to hand over millions of pounds each year. One day, someone might even discover some evidence of this and blow the whole scam apart. I can see it now – “The Protocols of the Learned Elders of Embankment Place.” A bestseller in the making.
Of course, there could be another reason why management consultants continue to exist and to prosper. It is just possible that some of them might actually help their clients and then get asked back to do more.
There is no compulsion on companies to use management consultants. If they really were as bad as Johann Hari, David Craig and others make out they would have ceased to exist years ago. Managers use consultancies for a variety of reasons, some rational, others not so rational, but they all do so from choice. If the consultants stop delivering people will stop using them but that clearly hasn’t happened yet.
Update: A number of people have waded into this debate, bringing their own experience of the consultancy game. Have a look at these posts by Kevin Ball, James Kwak (Hat Tip to Mumon for that one) and Jenny Sutton.
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Wise words, Rick. Catching up on my reading from holiday, I came across the ‘NHS spends £300m on consultancy’ item and was struck by the less headline-worthy statistic – £313.9m is less than ½ % of the total NHS expenditure. I’m sure that rooting around in the books could produce plenty of similar “Gotcha” headlines – ‘NHS spends £300m on (insert your scapegoat)’ wouldn’t be too hard. Nigel Edwards, Acting CEO of the NHS Confederation says:
“Any spending of taxpayers’ money has to be justified and the NHS has been asked by successive governments to perform tasks for which internal expertise was not present or needed to be developed. Dismissing all this spending as wasteful is unfounded.”
Like you, I can see nothing other than increased consultancy expenditure consequent on Lansley’s mad reforms because the expertise to manage commissioning doesn’t exist in the GP community and they’ll have to buy it from somewhere. Either all of those (failed) PCT managers will sell their services as contractors or the big firms will just suck it up. The smart ones will call it ‘outsourcing’ but it amounts to the same thing. Lets watch that £300m go up, shall we?
I haven’t read Craig, so I can’t comment on him personally. However I knew a lot of people who went into management consultancy after university (most of them still work there more years than I care to think of later) and they said similar things. Given that they liked the work, I’m inclined to believe them. My only other data point is from a relative in an executive position in the pharmaceuticals industry who refuses to use them as he says when he has they’ve been ignorant of the details of his particular industry, and their advice has been pretty generic (and useless).
I’m never terribly convinced by the argument that people continue to use somebody, therefore they must be doing something right. As far as I can work out Accenture do a really terribly job (contrast with IBM who five – ten years ago at least tended to do a pretty good job), and use extremely sharp practices. I’ve got lots of anecdotal data to back this up, plus I’ve witnessed this quite a few times. Yet they still get hired again and again. Nobody has to hire them, there’s lots of competition, yet they do.
One final point. Even if the management consultants were generally a good thing, there’s no evidence that the advice they’ve provided to the NHS has been remotely useful. The stuff that’s leaked out has been time/motion studies, or “efficiency” advice. There’s all kinds of useful research that could be done into a whole range of NHS procedures, ranging from the most efficient ways to handle geriatric care (in the home/hospital/supported care), cancer treatments, routine preventative care, etc, etc. Or how to streamline records management, operations procurement, etc, etc. For £300 million you could buy a lot of very high quality academic research. Instead we seem to have got boiler plate MBA stuff.
Cian – understand all your points and I’ve heard similar stories myself. PArt of the problem in the public sector is that managers don’t know how to use consultants – which is a skill in itself.
But I still come back to the general point – if management consultants really are useless why have they been around so long? Why do people keep using them? Why would executives collude with such abuse for so long?
I think that’s asking the wrong question, or starting from the wrong place (and assuming too much).
Why might executives use consultants?
1) Its a way of displacing blame if something goes wrong. We hired consultants to provide advice, and…
2) Because you want to displace blame for an unpopular decision (the consultant told us to fire X staff).
3) More simply, its a way of making risky decisions easier (its harder to make decisions where you have a personal investment in the outcome. See much of the cognitive psychology research of the last couple of decades). Can’t decide whether to do X, or Y. Why not hire somebody external…
4) Because you don’t know much about a particular area, have little in house expertise, and need somebody to provide it.
5) Because you do have inhouse expertise, but you don’t trust them (this is a common reason, I suspect, for hiring external IT consultants).
Secondly, there is the assumption that companies do the right, or rational, thing. But generally companies follow the herd. So for example IT outsourcing tends to follow fashion. In certain circumstances it can be a good idea, but much of the time its disastrous. And every generation of managers seems to find this out the hard way. Similarly the current vogue for outsourcing production has more to do with fashion/the beliefs (however inane) of investment bank analysts, then whether it makes particular sense for that company (sometimes it does, sometimes it doesn’t). This may be the same with management consultancy, a fear of being left behind/not following the herd.
Thirdly, it may correlate to the rise of the general manager. It used to be the case that managers came from within their industry, and this still holds for some companies. Now management is seen as a general skill that is industry neutral, gained through an MBA. Now personally I think there is no data to support this belief, and a fair bit pointing the other way. But regardless, the rise of management consultancy has risen in lockstep with the general manager with no particular expertise in his industry. So perhaps management consultants are comfort blankets. Or perhaps their success as purveyors of generalised advice fits the current management ideologies/orthodoxies.
So these are all possibilities, and I can think of others. And obviously its going to depend a lot on the particular case. I don’t have a problem with consultancy per se, indeed I think very narrow and specialised advice can only really be offered by consultants. But this kind of generalised advice seems very suspicious. Can the same management consultant really offer advice on logistics problems for retail, production solutions in pharmaceuticals, management of a floor of professionals and the delivery of complex multi-faceted healthcare? Does this sound even remotely plausible?
I agree that a lot of Johann Hari’s article could well be just talk, but there is an important thing that you have either neglected or refrained from commenting on, and that is just about the only meaningful number in the thing:
“The Cranfield School of Management studied 170 companies who had used management consultants, and it discovered just 36 per cent of them were happy with the outcome – while two thirds judged them to be useless or harmful.”
Bob, I couldn’t find the source for that. On Johann Hari’s blog the link just went straight back to David Craig’s book. I’d happily comment on it if I could see the research but an unsourced quote of a quote does not count as valid suppoting evidence for an argument.
It irritates me that ‘proper’ journalists think they can get away with this. The referencing on most blogs, especially business-related blogs, is much better than a lot of the stuff you get on the newspapers’ websites.
That said, I’d be happy to comment if you could point me in the direction of the original research.
“The referencing on most blogs, especially business-related blogs, is much better than a lot of the stuff you get on the newspapers’ websites.” . . . a great point, Rick. Which is why I am not inclined to pay for a subscription to a newspaper web site. Find some decent blogs and load up your RSS reader!!
The answer to your question is the same answer as why there are still hocus-pocus tarot card readers around since they’re so bad?
The answer is: they tell people what they want to hear.
The notion that people, even corporate executives, psychopathic or not, are rational beings is pretty much agnostic to basic human behavior.
Mumon – Are tarot card readers bad? They are clearly doing something for someone if they are still in business.
And management consultants often tell people what they don’t want to hear.
I didn’t say corporate executives were rational – anyone who has studied organisations for any length of time can see that many corporate decisions are not rational. But they wouldn’t be crazy enough to keep hiring the same people to do something that didn’t deliver time after time.
Rick:
I had inferred that you were presuming rationality on the part of executives by the expectation of an answer to a question posed, in effect, as “If…then…”
People getting told what they want to hear is a reason why someone would hire someone.
This is not to say that management consultants never tell execs what they don’t want to hear, but from what we’ve been able to see, it’s not clear that there’s been uniform benefit either way.
A fairly well balanced response to what I also considered to be a rant. And nobody wants companies to get more value out of consultants than I do – this is my job. Yes I believe that consultants can add value to companies – if they are hired for the right reasons and managed properly. Too often the blame for poor value is laid at the door of consultants (and yes they do take advantage of unsuspecting or naiive managers), but enterprises need to realise that managing consultants effectively is not a skill that managers are born with, nor is it taught at universities. They need to teach their people how to hire, control and fire consultants properly.
Perhaps the rant should have been directed at the NHS for hiring consultants without being qualified to do so! Organizations need to take the responsibility to actively make consultants deliver.
Management consultants are an integral part of any organization planning to be in business for the next few years. They are generally good, except for a couple of bad eggs.
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