Discussing ethics and consultancies with a friend (it’s perfectly acceptable for you to decide right now you’re never inviting us to a dinner party), specifically the big names that monopolise the market, we shifted our thinking from believing their only business model was “do work but ensure it leads to a commission for more work” to a recognition that it’s more complicated than that.
“Management consulting’s fundamental business model has not changed in more than 100 years. It has always involved sending smart outsiders into organizations for a finite period of time and asking them to recommend solutions for the most difficult problems confronting their clients. Some experienced consultants we interviewed scoffed at the suggestion of disruption in their industry, noting that (life and change being what they are) clients will always face new challenges. Their reaction is understandable, because two factors—opacity and agility—have long made consulting immune to disruption.
Like most other professional services, consulting is highly opaque compared with manufacturing-based companies. The most prestigious firms have evolved into “solution shops” whose recommendations are created in the black box of the team room. It’s incredibly difficult for clients to judge a consultancy’s performance in advance, because they are usually hiring the firm for specialized knowledge and capability that they themselves lack. It’s even hard to judge after a project has been completed, because so many external factors, including quality of execution, management transition, and the passage of time, influence the outcome of the consultants’ recommendations. As a result, a critical mechanism of disruption is disabled.” Clayton M. Christensen, Dina Wang, Derek van Bever. 2013. Consulting on the Cusp of Disruption. Harvard Business Review.
On one hand, I think it’s perfectly okay to charge a fee for providing knowledge and skills that an organisation doesn’t have. Supporting that organisation have a more effective operating model, better leaders, more fulfilling and engaging work for their staff – it’s all great stuff. Similarly, there’s nothing wrong with a business model where you offer some services for free (freemium), recognising that this will help also attract and entice paying customers. But how do we feel about shrouding mystery around topics. Or making things seem harder than they actually are. Such practices can stop organisations building their own capability to develop a sustainable operating and business model. And create dependence. In complex systems, it’s perhaps inevitable that symbiotic relationships will form. But what if those relationships become parasitic? Especially if the host organisations are in the public sector, is it right for the relationship to be parasitic or strengthen the dependence? Is this ethical practice?
As an internal consultant, I’ve partnered with external consultancies and been asked to assure their work. I’ve worked with some great people – lots of them worked in the public sector and got tired of bureaucracy and thought they would be able to make more of a difference working as an external consultant. Some of them have been able to do so and have been highly effective. I’ve also come across consultants that spout dogma without a strong evidence base. For example, I offered some challenge on whether introducing a model to improve smarter and more inclusive working (based on standards created in 2014) would still be fit for purpose in 2020, after Covid-19, #MeToo and Black Lives Matter. They spouted phrases like “inclusion will be a golden thread through this work” and a number of other phrases that sounded reassuring. But those phrases lack real commitment to action. There are some consultants that are all about the blue suit and confidence but that lack offering any tailored solution to the client’s complex needsClaydon, Richard. 2017. Do you want dirty or clean consulting? Linkedin Pulse.. They don’t like me very much because I just don’t accept what they say on face value or that they can possibly have a panacea to intrinsically wicked and complex problems that most organisations have.
McKinsey is the consultancy in the news at the moment because of a $573 million fine for their role in the opioid crisis across the pondhttps://www.bbc.co.uk/news/business-55939224 and an ousting of their CEO. Forbes explained “The vote came as McKinsey struggles to reconcile its lucrative business model with a series of ethical lapses that have been widely reported in the press, litigated in the courts, and questioned by some of the firm’s next generation of leaders.”Forbes. 2021. McKinsey Rejects its Leader. Now will it really change? and the Economist wrote an article explaining how if they think just changing CEO will solve their problems, that its partners are suffering from collective self-delusionEconomist. 2021. McKinsey’s partners suffer from collective self-delusion. The Economist goes on to say “McKinsey has sought to portray itself as a genteel professional-services company, not a grubby business. Unlike say a profit-hungry Goldman Sachs banker…a McKinsey consultant expects his halo to be noticed.”
In my view, if leaders of other consultancies are thinking “phew, that’s not us” then I’d say they’re also delusional – in a digital age, skeletons can pop out of virtual closets at any time. I also think Forbes “ethical lapses” description is rather kinder than my questioning whether or not some consultancies could be compared to parasites. My lack of empathy towards these large consultancies comes not just from these most recent scandals. It’s decades of the same “ethical lapses”. They even made a ‘hit’ musical about Enron and Arthur Andersen’s role in that scandal. I’m also angered by how they are both talent and idea ‘vampires’: sucking up talented smaller companies and movements, and putting them behind the opaque shroud that lets them capitalise on ideas and knowledge and maintain their monopoly. Google purpose led business and all the big consultancies will be top of the hit list on Google for this approach to running more ethical businesses that meet both shareholder needs while also serving society. Yet, most progress in development of this approach to business came from not-for-profits and rebel leaders who thought there must be a better way.
There are many ways that consultancies can serve society. Their model of getting clever people together to work out how to solve big problems is great, if they do help solve those problems and not just create a whole set of new ones and inequality in society. They can also share knowledge and insight that helps everyone (PwCs megatrends is a fantastically informative resource, as is Bain’s straightforward explanation of operating models). Organisations need a safe way to learn from one another, consultancies can offer space for collaboration, benchmarking and idea sharing (balancing competition and collaboration in industries). Organisations will often need new thinking, flexibility of resource to deliver a complex project – many of the things the consultancies offer.
I hope the next generation of leaders ponder whether there’s a better way. One with fewer ethical lapses, one that’s less parasitic and vampiric, one that serve’s society better.
References and notes
|1||Clayton M. Christensen, Dina Wang, Derek van Bever. 2013. Consulting on the Cusp of Disruption. Harvard Business Review.|
|2||Claydon, Richard. 2017. Do you want dirty or clean consulting? Linkedin Pulse.|
|4||Forbes. 2021. McKinsey Rejects its Leader. Now will it really change?|
|5||Economist. 2021. McKinsey’s partners suffer from collective self-delusion|