The business of consulting to business is booming.
Andersen Consulting is pulling in $9 billion a year; KPMG and
PricewaterhouseCoopers are each a measly billion or two behind. McKinsey is
closing in on $3 billion. While a good portion of those fees is for information
technology consulting, a lot of it is for good old strategic planning advice...
AKA snake oil. All told, the top ten consulting firms extracted $40 billion
dollars from clients in 1999.
That's a lot of Powerpoint presentations!
It's a good thing these firm's revenues are booming. They are going to
need the money. Some of the big boys are being hauled into court by their
clients. In 1999 Ernst and Young's consulting unit agreed to pay $185 million
because of allegedly shoddy work at Merry-Go-Round, a clothing fashion retailer.
According to Business Week, Merry-Go-Round says it took E&Y nearly a year to
come up with a plan for a measly $11 million in cost savings when the company
was losing 15 times that.
The folks at Merry-Go-Round should feel like
they have company. According to Business Week again, PricewaterhouseCoopers'
predecessor, Coopers and Lybrand, soaked up $8 million in fees from Sunbeam
Corp. "Sunbeam claims that Coopers' only attempt to analyze a key manufacturing
plant consisted of sending a junior staffer for a brief tour that lasted just a
few hours. And Sunbeam alleges that the plan assembled by Coopers... left the
company a mess - with factories lacking key parts, its financial reporting
systems in disarray, and the company unable to process all the resulting returns
Of course, most consulting firms' clients believe that
most of the work consulting firms do most of the time is solid, valuable and
reliable. If the market is any judge, the very growth of these firms is
testimony that consulting works.
But there may be something else at work
- and I think the Coopers and E&Y fights are just the tip of the iceberg.
Management is beginning to realize that just because they agree with their
consultants every step of the way doesn't mean they are getting the value they
In fact, it wouldn't be surprising in the E&Y and Coopers
cases, that if you really dug down into what really went on inside those
projects, you would probably find that management was on board every step of the
way. Every step down the garden path of wonderful intentions.
because consultants have long ago learned that to make change happen in a
company requires management's involvement, agreement and commitment. Thus
they've become experts in making management accomplices to what can sometimes be
described as nothing other than corporate murder. That's why I say that often
consultants drive the getaway cars to corporate failure.
Why does this
happen? Why does it happen even when the consultants provide advice that goes
against the expectations of top management! Yes, while many consultants are
brought in to sanitize, bless or confirm top management's gut instincts many
consultants do earn their fees by finding out and expressing what appear to be
unpalatable truths. Yet even here consultants are often driving those getaway
The reason is that ninety-one percent of strategic management
consulting advice simply replaces one set of prejudices for another. The second
set of prejudices - the ones from the consultants - may be based on more
research, more facts; it might be more orderly, better packaged, even better
thought - through. But it remains one-eyed prejudice because typically it simply
hasn't been tested.
After all, who is there to test it? Who watches the
watch-dogs? Long experience makes savvy management consultants bring their
clients along with them through their thought-processes. As the project wears
on, the consultants and the management team become more and more 'bought-in' to
the ideas they are uncovering. When there is conflict or something seems not
quite right - either in the facts or in some lowly director's opinion, is it
followed up on? Is the conflict heralded as the source of new insight? Far from
it! Rather it is explained away, or the opinion absorbed gently into a corner of
the final report. Very often this contradicting evidence is simply ignored as
the overwhelming evidence in favor of the consultant's (and now management's) is
sorted, documented and rendered into pretty Powerpoint charts.
leading management consultants have long promised to help make the practice of
management scientific, what I've just described is almost the exact opposite of
the way science works. Science progresses by making hypotheses and then testing
them - trying as best it can to break the hypothesis. Where science is vigorous
there are always competing theories - behind which are competing institutions,
reputations and careers. Suppose a scientific team at University X proposes to
explain A and B by invoking theory Z. You can be sure that over at University Y
there is a team burning the midnight oil to concoct an experiment - a test - to
prove those X guys are all wet. How different this is from the subtle co-option
which is the stock in trade of the best management consultants, where every
ambiguity is smoothed over, every contrary piece of evidence hidden or explained
Scientists on the hunt for powerful new theories glory in finding
the exceptions to the norm, the anomalies. For example, to find
better how HIV infection becomes AIDS, scientists sought out that one percent or
so of people in Africa who, though infected with HIV somehow never developed
AIDS. As another example, to understand how people control their emotions,
particularly anger, psychologists and neurologists look at how how behavior
changes in those with head injuries suffered on the job or in wartime. To
identify environments that are becoming too polluted, scientists don't target
the mainstream species in the area. No, they seek out the anomalies - the frog
embryos that are mutant, the bird's eggshells that are thin.
wouldn't have been discovered if Alexander Fleming hadn't noticed how
differently bacteria cultures grew (or failed to grow) after a garden - variety
laboratory mistake - leaving the cover off a Petri dish where he'd been growing
some bacteria for other purposes. Today's typical management consult would have
pooh-poohed the evidence as the result of some incompetent housekeeping, ignored
the whole thing - and counseled you to do the same.
Then too, there's
the fact that you've paid these consultants beaucoup bucks to come up with the
right answer. So they feel obligated to do just that, and look good in the
process. Is it any wonder that they buy into the advice their giving? It's just
human nature. After two or three months and $50,000 or $500,000 or $5,000,000 it
just doesn't seem seemly to tell a client that their most promising ideas about
how to save the company are
just not standing up to the most rigorous tests.
They are not going to spend time trying to find out why your new retail
store concept surprisingly scored low in a market research survey with one
specific group when it scored high with all the others. No, they are going to
spend time telling you how much evidence is that their bright idea of retail
concept will attract scads of customers. And you will find overwhelming
evidence to agree with them. And you'll implement their recommendations. And
you'll be disappointed, very often, when the customers don't show up. Because
probing that one low - scoring group would have told you something! It would
have warned you away from a blunder you (and your consultants) just didn't see
But in the meantime, you have a thick study; you're convinced;
you've had some fine dinners with the director of the consulting team and you
know he's convinced. Money is about to change hands. You don't see that he's
just pulled the getaway car to the curb.
Later in this series I'll
explore with you just how to get the consultants out from behind the wheel of
the getaway car and get you on the right road. For now, be wary that if you're
being completely swayed by a consultant's presentation, it's high time to take a