Has consulting changed over the years? Certainly the business model behind them has, big time. I really do wonder where it is all going inside the business organization. Consulting has become a huge business dealing with our global and local organizations and governments.
Just take a peek around the board room doors, just who are all those strange faces, bulging muscles, huddled in meetings with the boss? Ready to take on the world.
Following on from my recent post on “the value of the visiting consultative fireman” this further post explores the external reliance on the consultant our organizations have become accustomed too. It got a little long, my apologies for that.
‘We’ seemingly can’t live without consultants.
They are now competing constantly for those semi-permanent, year-in, year-out relationships with companies willing enough to pay millions of annual fees for help and advice.
It is all about the repeating the consulting / client engagement across the entire business in as many different ways as possible.
Consultants are necessary or so it seems for any big decision in our global business organizations as the employment of consultants helps ‘sit behind’ the recommendations made, the often billions about to be spent, for them to validate, investigate, recommend and then rubber stamp your decision. Who will fire you for bringing in a respected global brand like McKinsey, a few perhaps but not many?
You wonder if the executive within our large corporations would be allowed to sneeze without the consultant stepping up with the handy handkerchief or latest prescribed medicine to easy his/her discomfort.
Consultants seem to underpin decisions everywhere and today are equally asked to execute on these, as the resources within our business organizations or government departments are ‘far too thin on the ground and busy just keeping what we have going”. Consultants are not just recommending the changes but being highly paid to make it happen.
Scale, scope and size are needed today to be a global consulting player
In the words of McKinsey on their website: “We strive for world-shaping client impact” where they then claim their “scale, scope and knowledge allows us to address problems that no one else can.”
They suggest “we bring out the capabilities of clients to fully participate in the process and lead the ongoing work”. Really I’m not sold on that one. At McKinsey they claim to “hire as many MDs, PhDs, MAs and JDs as MBAs” and well that just must be why business organizations fail without them isn’t it? Yawn.
The ever-growing big numbers of ‘boots on the ground’ to deliver solutions on client’s needs.
So much of McKinsey’s ability to ‘land’ work and secure ongoing work is due to McKinsey’s famous alumni network where more than 20,000 former colleagues connect with each other and with our firm.
It is a juggernaut in consulting support ‘within’ our organizations, highly interconnected into the very heart of our business organizations, to secure acceptance and validation of choice.
Of course, they still have to deliver otherwise next time it might get harder.
Today McKinsey has 17,000 employees and 9,000 of these are consultants. Others offering ‘pure’ consulting equally are sizeable organizations. BCG has 9,700 employees and 6,200 consultants, Bain & Co 6,000. A T Kerney have 3,200 with 2,300 consultants, PA Consulting with 2,150, Bearing Point with 3,350, Roland Berger with 2,700 consultants, Monitor Deliottes with 1,500 and the emergence from the combining of PwC’s consulting with Booz & Co into Strategy& with around 3,000 employees makes for a formidable array of business consultants to call upon, when in need. Let alone the countless smaller, more specialised ones below these global players.
Then you briefly look at the jaw-dropping numbers employed at PwC of 184,000 due to their tax and advisory services, Deloitte 203,000 employees, Ernst & Young have around 175,000 and making up the big four is KPMG with 155,000. These make up the ‘muscle’ within the International management consulting firms. Then as we move into technology we get Accenture with 280,000, CapGemini with 131,000 and we have IBM, Hitachi Consulting. It goes on and on.
Consulting is a huge, big business utterly dependent on generating repeating revenue
We knew that, didn’t we? The combination of Credentials, Reputation and Size cultivated around the consulting brand has become intoxicating for business organizations.
They seem to simply not live without the consultant being ever-present. They can’t let go, surveys seem to be recently indicating the need to bring more consultants in to solve their problems.Consulting is an integrated big business, designed to extract the numbers, be indispensable.
Spending on consulting can rise (and fall) dramatically. For the large consultants their constant focus on communicating the value they add and differentiating themselves from competitors is vital.
While there is this ongoing pressure among businesses to keep head count low it is stimulating growth for consulting firms, the ones constantly providing the research of global volatility, uncertainty and the need for constant vigilance. The very consultants that argue for a lean approach to be flexible and ‘reactive’, ready to seize opportunities, with the consultants help.
No wonder head counts are kept low with the very ‘solution masters’ whispering in your ear all the possible doom and gloom from their latest research and global surveys. Even if businesses did relax the head-count restrictions it seems all the brightest, not necessary the best, are locked up in the consulting company, happily moving from one different challenge to another. Why would they join one firm and become part of the permanent furniture?
Moving down and across the consulting food chain is essential today for all involved.
To feed these large ‘fee guzzling consulting beasts’ the larger management consultant firm not just search for the ‘big whale’ projects that might have $20 million and upwards in price tags to complete post-merger activities, they often bring them to the board room table. With the recent merger frenzy re-entering the Pharmaceutical scene these fee’s if you land the ‘whale’ become huge.
The shift to combining strategy and technology, the challenge to redesign total system structures is requiring each consulting firm to make their own ever-increasing bets on where to focus. The growing shift is to more operational work, the move away from ‘pure’ strategy work, is redesigning the consultants into more ‘one-stop’ solution providers.
The lower end of fees, below half a million dollars for a piece of work is nothing today, this is becoming table stakes to play at the big consultants table. Consultants are charging $2+ million for a stand-alone study, constantly looking to turn this into the $15 to $20 million total system redesign. This requires having the infrastructure available internally for these more broadly based assignments. Fee’s are clearly on the rise as mega-mergers and risky projects drive the numbers up even more.
The ‘rub’ of repeating money
The ‘rub is’ that these designs have to be repeated and repeated, to earn the profit margins expected from the investment in those initial up front solutions designed for one customer. ‘Suddenly’ these are turned into global solutions that meet the ’emerging’ shifts in trends to make this a global movement of the many seeking the latest practice.
The solutions suddenly become the large ‘big tent templates’ for repeating revenue as many more clients are needed to be found where this ‘trending’ redesign will help meet this new business imperatives outlined by, oh yes, the same consultants as a must have.
The profit comes from as much as you can ‘repeat’ to ensure you don’t keep reoccurring those dreaded origination costs. The consulting business model requires this repeating even more today than in the past. It simply has too, with all the employees on the books made up of all those very bright “MDs, PhDs, MAs and JDs and countless MBAs” all expecting their bonus to be better than previous years.
I wonder if we are having the conflicts of vested interest in consulting as we have been witnessing in banking with the ‘dual’ chase for big bonuses driving our decisions?
The huge consulting bandwagon rolls on and on
Without doubt consulting companies are working exceptionally hard on their overall reputation, culling the consultants that don’t perform to prescribed formats and time lines, seeking to accelerate those that do constantly perform.
To support this consultant firms are investing in deepening experiences and exposures into different clients to wring out more projects and ‘drive’ the revenue they need.
They are working really hard on improving their tools/techniques, adding in thought leadership and innovative thinking, improving their reports/presentations into more visual feasts.
They are certainly highly conscious about the results they are delivering as just standing outside the door is the alternative consulting company, just itching to be let in.
Is hiring the outside consultant totally addictive?
I think the use of outside consultants is for ever growing. Consultants are operating up and down our business organizations today. As Organizations have shrunk their resources right down and are still certainly very reluctant to employ new people this will continue.
The pay-off is for whom? Call in the six-pack abs-solution man
Consultants have a great advantage over their clients; they can provide their solutions with new understanding, they are the feeders of “best practice” that magical potion waved over you providing you engage me to ‘reveal all’. They are constantly working out to keep ‘in shape’ to help.
They have the equivalent of the six-pack abs as the good looking solutions.
Also they are not only ‘solution fit’ but they are provide the surgeons, doctors to nurse you back to health using their solutions for you to keep your body stable as long as you don’t go off their life support system. This allows you still the opportunity to be able to take on the physical challenges of everyday life in your stride focusing on the efficiencies and improving the effectiveness, moving the flab around, leaving the consultants with the real challenges, the heavy lifting as they bring in the ability to deliver on this.
The consultant offers the solutions to keep you lean and lacking in in-house resource
They provide the solutions to make sure any spare resource (or fat) is quickly eliminated so you can continue to gaze at the solution abs pack of the consultants, simply because you never had the time or real determination to get into the shape to manage these challenges yourself.
The leaner you are, the more dependent on the consulting supplements to keep you going. We are back to the semi-permanent dependence we crave for as ‘we’ simply don’t have the talent or resources to call upon whereas the consultant has plus the ‘revolving door’ experiences.
When the consultant leaves the building (if ever)
With this prevalent “leave it to others” more often than not when their solution abs consultant leaves the premises, all you are left with is the left over pizza’s and flat cokes from all those late night burns the consultant put in to complete the required data crunches and show to you, their perfect solution.
Thank heavens they are only one phone-call away or is it simply one floor below-away, working on different problems you always seem to have, to adapt the business to the global forces at work?
Don’t tell me it can also be different- not possible
Sorry Mr Faithful employee, just get back to your everyday work. Innovation, oh forget that. We have no time for that; we are plotting the next big thing alongside our consultants. No, look, I mean there are no merger drama’s, complex wheeling and dealings, it is based on too many intangibles, innovation always seems to have long development processes or complex testing procedures, ending up with mixed results. It is best you stick to the incremental stuff and leave me and the big consultant to manage growth, we know best.
“We will simply buy in innovation success” Oh yeah really!
Talking of different innovation that can take place within their organizations (disruptive, radical, reverse engineered etc) makes many of those sitting at the top of our organizations have an uncomfortable feeling simply because the big consultants don’t also seem to have the answers to this innovation stuff. Surely if they don’t we can’t possibly!
Understanding the ability to field genuine experts that can be highly valued and focused, well there must be a catch in that surely?
Thankfully today that genuine expert still offers the ‘sweet spot’ for innovation. It is a place for the small, independent, highly focused consulting person or specialized teams that connect the many necessary ‘dots’. Yet getting top management’s attention or sign off is getting harder to achieve, when the big consultant likes to show his growing muscle mass, attempting to cover off the innovation bases as well.
Presently many of the bigger consultants still seem to have little true understanding of the underlying dynamics needed for internally generated innovation, those solutions than can equally lead the growth, if only they were given the same amount of attention at the top. Equally the time line for this can be long, solutions are often unique and much is often not repeatable, this goes against the business model mostly found in bigger consultants.
Thankfully innovation is one of those last frontiers that still mostly come from within, when it is given the chance and the limited external resource that can help facilitate this.