Consulting the Stars
Just after World War I,
General Motors asked a team of industrial engineers from outside the company to
survey its business and recommend strategies for the future. After careful
study, these pioneer management consultants advised GM to rid itself of
Chevrolet because it "could not hope to compete in its field." GM executives
somehow saw their way clear to disregarding this counsel and, 15 years later,
the Chevy was the country's most popular car.
This is a
good story. So too is the one about consulting firm Booz Allen & Hamilton's
recommendation in the 1960s that gasoline companies not sell food in their
stations for fear of annoying local restaurant owners. In fact, the history of
consulting is full of tales like these, showcasing the hubris,
shortsightedness, and one-size-fits-all attitude of firms like McKinsey,
Deloitte & Touche, and Andersen. If, like James O'Shea and Charles Madigan,
writers at the Chicago Tribune and authors of Dangerous Company ,
you feel "a growing sense of unease" about the authority consultants enjoy in
today's business world, finding evidence to feed your anxiety won't be a
problem. The Deloitte & Touche advisers who promised to turn a company into
"a world-class manufacturer in 10 to 12 weeks" while remaining unable to
explain what "world-class" meant; the Andersen consultants whose fee was set by
how many jobs they eliminated; the Bain consultant who got himself appointed
controller of the company he was counseling--they're all here, and they're all
preposterous.
The history of management consulting, though, is more
complex than these horror stories would suggest. The profession originated in
the early years of this century with the application of the principles of
scientific management to production lines. The first consulting firms sprang up
after World War I, when consultants were regarded primarily as "efficiency
experts." In the late 1950s, consulting came into its own. The corporate need
to understand the burgeoning consumer market, a more general faith in the value
of expert advice, and the demands of an unprecedentedly strong economy created
a market for firms like Booz Allen and McKinsey. In the last two decades,
consultants have benefited from anxieties about profitability and foreign
competition. Corporations looking to reinvent and downsize themselves have made
consulting the new hot profession.
Unfortunately, little of this history makes its way into Dangerous
Company , which is the first real study of consulting since business
journalist Hal Higdon's 1969 work The Business Healers . Instead, the
book is constructed--unintentionally or not--as a series of case studies that
echo the teaching methods of Harvard Business School, prime consultant training
ground. Each chapter is meant to illuminate a larger truth about consulting in
general. The chapter on Deloitte & Touche shows how willing consultants are
to assume absolute power, the chapter on Andersen how readily they chop heads,
and the chapter on Gemini how successful consulting firms are at selling
themselves. In , O'Shea and Madigan paint a bleak picture of corporations
dazzled by snake-oil salesmen operating with "a blind and sometimes fatal
certainty," and of long-term financial health sacrificed to short-term
thinking. But while the picture is bleak, it isn't sharp or convincing. Instead
of a serious analysis of the evolution of consulting or a discussion of the
differences and similarities between consulting and traditional corporate
management, we get argument by anecdote.
O'Shea and Madigan take this approach,
ultimately, because they have no thesis to offer. To be sure, they want to
persuade us that the work consultants do is too often not in the best interests
of their clients, and they do reveal how often hubris and open checkbooks have
been recipes for disaster in the past. But they have remarkably little to say
about why they think consultants--as opposed to any other managers with
power--are particularly dangerous. Nor do they explain why consulting firms
continue to enjoy the authority they do in the business world. For the
underlying tenets of consulting--faith in the value of a disinterested
rationality, the idea that what works in one place will work in another--have
given way since the 1980s to the idea that people with vested interests in a
company are the best-equipped to run it. (That's why stock options, for
example, have become a preferred form of executive compensation.) So why have
consultants, who are asked to help companies in which they have no financial
stake, survived?
These are
serious questions, and answering them would tell us important things about the
transformation of the U.S. economy in the postwar period and specifically in
the last two decades. Instead, Dangerous Company often reads like a
self-help book for executives who just can't stop picking up the phone to call
Arthur Andersen or James O. McKinsey. The last chapter even ends with a
10-point checklist of things to keep in mind when dealing with consultants.
"Never give up control," we're told. "Value your employees," and, "Beware of
glib talkers with books."
In a way, though, the sheer banality of this advice points
up the lockhold that consultants have over the corporate mind. After all, no
one would need to be told to "never give up control" unless there were
executives all too willing to cede authority in a crisis. Nor would "value your
employees" be necessary counsel unless companies were routinely putting more
stock in outsiders' analyses than in the intelligence of their own people. One
thing Dangerous Company does show convincingly is how quick companies
are to look outside for solutions, especially when these come with the
imprimatur of a major consulting firm.
And yet, looking outside
isn't necessarily a mistake. Executives are often too close to problems or too
hidebound in their thinking to produce new solutions. American business, in
fact, has a long history of bringing in outsiders to transform companies,
though these outsiders haven't always been called consultants. Taylorization,
for example, shaped the auto industry assembly line even though Frederick
Winslow Taylor developed his theories by studying carters. Later in the
century, Ford was saved by the so-called Whiz Kids, a group of managers
(including Robert McNamara) who came to Detroit after World War II from the
Army. More recently, outside CEOs like Harvey Golub at American Express and Lou
Gerstner at IBM--both McKinsey alums--have forced fundamental changes on
corporations seemingly stuck in long-term ruts. As many corporations have
fallen apart listening only to those inside as have collapsed from bad advice
from those outside.
Besides, blaming consultants
for companies' failures seems, in the end, to be beside the point. No one
forced AT&T to pay $450 million in consulting fees over the course of five
years. That doesn't mean AT&T was stupid to do so, but it does suggest that
Ma Bell is the one responsible for its woes. It also suggests that the real
riddle--and one that O'Shea and Madigan don't thoroughly investigate--is why
companies call in management consultants to begin with. The answer probably has
something to do with the needs of corporate America today--the need to pass off
responsibility, the need to appear to be on the cutting edge, the need to
believe that every problem has a ready-made solution. Dangerous Company
levies a powerful indictment against management consulting, but in doing so it
confuses a symptom with the disease. Consultants aren't the real problem. The
needs they're asked to fulfill almost certainly are.
