Category: Industry analysis
Reviewed: Jul 2010
This book examines the use of management consultants in corporations. The content of the book is neatly segregated into several subtopics:
- the rise of Andersen Consulting (and their use of technology), as well as other large consulting firms such as Boston Consulting Group, Bain & Co., and McKinsey.
- a profile of James McKinsey.
- a glimpse of the early strategies and practices that would become common in modern management consulting.
- cases studies of companies that had negatively experiences with consultants (Figgie International and AT&T) and positively experiences with consultants (Sears).
- some of the new strategy-based ideas, like the "BCG matrix" and "experience curves".
- the organizational hierarchy at consulting firms (partners, project managers, and entry-level associates), including how much money each type of employee makes for the company and for themselves.
- the growth of the consulting industry into new markets, including: emerging markets, the government sector, and the health care sector.
- recommended guidelines on how to manage any consultants that work for you (hire them for a specific task and avoid carte blanche engagements, interview them personally, don't let them control you).
The book takes a mostly negative (but fair) view of the industry as a whole. It criticizes the industry on a few different fronts: the arrogance of the industry, the use of inexperienced MBAs to do a lot of the work, the aggressive marketing of some of the firms, and the vague benefits of using consultants. Here are a few interesting quotes and ideas from the book:
- "McKinsey is treated as though he were the Moses of modern business, with his management plan serving as the 10 Commandments."
- Consultants can help you solve problems which are major problems, but that don't necessarily help you get to where you need to go.
- Management consulting firms use "their great name as a Trojan Horse to get into a company...They anchor themselves into the stomach of the business. They forge a dependent relationship."
- Management consultants lack the experience of executives. Therefore, they are better at gathering data than knowing what to make of it.
- "Consulting is the most improbable business on earth. Can you think of anything less improbable than taking the world's most successful firms, leaders in their businesses, and hiring people just fresh out of school and telling them how to run their businesses and they are willing to pay millions of dollars for this advice?"
- "You can make a lot of money selling the experience you gain from one client to another eager to find out what you know."
- "The bad thing about consultants is, they think they have all the answers. The good thing is, sometimes they have some of the answers."
- "It is no secret that management consultants are sometimes called in to provide cover for executives who don't want to carry the weight of unsavory decisions....It is ass-covering. That is why these consultants are hired. You are afraid to stick your neck out in a big company like AT&T. You are punished if you're wrong, so you don't want to do that. You end up with consensus management. The net result of this is the fear of making a mistake. So bring in the consultants."
- "A chronic dependence on consultants is an implicit admission of ineptitude in management."
- "Consulting companies promise individualized versions of the bluest of skies when they are looking for contracts, but what most of them actually have to offer is frequently more earthbound and amounts to variations on commonly accepted business practice.... Imagine pitching a prospective client with the absolute truth: you could probably do this for yourself with some research because we aren't creating cold fusion here. It just sounds as though we are."
- "Consultants need to sell ideas. The problem is that what consulting has to sell isn't always new, and certainly isn't always fresh. It is an unusual industry because it builds its knowledgebase at the expense of its clients... Consulting companies make a lot of money collecting experience from their clients, which they turn around and sell in other forms, sometimes not very well disguised, to other clients."
This straight-forward and easy-to-read book serves as an adequate overview of its subject matter. It has satisfactory profiles of the industry, the companies within it, and some of the key people involved in shaping the trends within the industry. The book is written from a third-party, outsider's perspective and it doesn't dig too deep. To its credit, the book is well-researched, but this simply enhances the sense that this was not written from a hands-on point-of-view. Readers looking for something more substantial might want to look at "House of Lies", which is a witty account of the industry, or the more serious books, "Consulting Demons", or "The World's Newest Profession".