Archive for August, 2010

The bullshit about consultancy

25th August 2010

Yesterday, the pithy and pertinent Rick posted a piece on Flip Chart Fairly Tales which has engendered a discussion over the role and value of management consultancy. I thought I’d join in.

NDA-Skills-and-Capability-Strategy-November-2008Rick’s blue touch paper was lit by an irritatingly daft article in the Independent which argues that consultancy is all about using bright young things at exorbitant day rates and produces nothing of any value anyway. Clearly, I need to confess to having earned my living as a consultant before I yawn in the face of this crowd-pleasing gurning and add my two pennyworth. The consultancy industry is not just about Accenture which features in the comments on Rick’s piece, or any of the other large firms. As an industry, consultancy is at least three-tiered with the big firms being followed by some small businesses occupying a particular niche (e.g. recruitment or occupational psychology) and a whole host of one man bands operating out of back bedrooms and garden sheds. Bright young things are charged at high day rates in the big firms but you are more likely to find seasoned professionals in tiers two and three. What each tier of consultancies offer to their clients is different but the unifying characteristic is that they all do something that the organisation cannot do by itself. To use Edgar Schein’s taxonomy: either consultants offer an expertise that is not available internally, or their externality allows them to offer a diagnosis for what the organisations feels is a problem, or they offer a process by which the client’s management can learn new skills. The Independent piece was a response to the news that NHS Trusts spent £313.9m on consultancy in 2009 but in my experience, large amounts of this spending was likely to be an efficient use of cash in areas where internal capability didn’t exist: the Architect, Surveyor and Lawyer engaged in the re-location of a GP Practice; the psychologist and recruitment firm commissioned to find a new Chief Executive for a failing Trust; the HR consultant designing and implementing a shared HR Service in pursuit of £5m savings.  To argue that these consultancy services were either irrelevant or ineffectual or should have been delivered in-house is a ridiculous piece of self-delusion. 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.”

And I agree. If the number of management consultants is growing its at least partly because the amount of internal capability in organisations is shrinking.  That’s true in NHS Trusts and its true in general.  As long ago as 1984, academics were spotting a trend in the increased use of contingent labour and the HR profession, in particular, are riding that trend beyond the non-core activities of the firm and into its functions. The CIPD report that 1/3rd of its self-employed membership became so on the back of a redundancy and most earn between £20,000 and £50,000 per annum – a far cry from the £1,500 day rates quoted by the rabid Independent.

Since I’ve mentioned them again, let’s go back to those bright young things and their high day rates. Yes, they exist and yes, those rates are high. They also deliver something which the business cannot deliver for itself at a cost which is likely to be efficient for the firm.  Show me the business with bright young things of this calibre sitting around waiting in three continents for the CEO’s call and I’ll show you an unhappy CFO and grumpy shareholders. As to the model of using these clever twenty-somethings, I’ve argued elsewhere that success is often more about doing things well than it is about deciding on the right thing to do.  In the same way that your solicitor and accountant will deploy bright young things under the direction of someone with greyer hair, there is efficiency and effectiveness in the model for client and consultant alike.

Management consultancy takes some deserved kickings; its just the undeserved ones that I object to. My shoulders are broad and I can take it on behalf of my former occupation but I think a slightly more informed view from the Independent and other members of the press would be nice sometimes. As Rick says, is that not what journalists are meant to do?