What The Big Con really tells usMariana Mazzucato and Rosie Collington’s new book highlights the importance of good governance—for professional service firms and clients alike.
Researching for a book some years ago, I interviewed a senior executive who’d been on the board of a company that went bankrupt, partly based on the advice given by a consulting firm. Having just read The Big Con, I’ve been reflecting on two things he said at the time.
The first is that he’d never work with that firm again. The partner involved, who also sat on the company’s board, had realised that their strategy of inorganic growth, combined with huge operational restructuring, was destroying the business. The problem, my interviewee said, was not that a wrong decision had been made—even with best research and analysis in the world, people get things wrong—but that the partner hadn’t done enough to persuade the board to change course. Yes, he spent time trying to influence things behind the scenes, but he wasn’t prepared to stand up in a board meeting, admit the mistake, and force a re-think.
But the other thing my interviewee said was that working with the consulting firm had been one of the most positive and rewarding experiences of his professional life, from which he learned a huge amount.
Despite its unfortunately sensationalist title and cover, The Big Con is no Rip-Off. It’s meticulously well-researched and brings together a huge amount of data about the role of consultants, especially in the public sector, to highlight important and longstanding questions around the economic value of consulting.
For example: Does it make financial sense for some of the brightest in business to spend time going from organisation to organisation, never staying long enough to understand the impact of their advice? Wouldn’t these people be better employed working with one organisation for a sustained period of time? Additionally, my interviewee’s experience is a graphic illustration of the way in which prolonged exposure to consulting support can drain senior executives of their decision-making abilities—not to mention provide them with a convenient way to absolve themselves of their responsibilities.
However, we also need to take into account that business is changing.
“Client organisations are starting to look more like consulting ones.”
Client organisations are more focused on project-based work: Research we carried out last year suggests that 76% of senior executives say they’re involved in more project work than they were pre-pandemic. Rather than doing the same job year in, year out, employees spend more time working on short-term activities with specific deadlines and outcomes. Large organisations move people around to expose them to different parts of the organisation. This allows them to accelerate their learning and development, for example in fast-stream graduate programmes. In other words, client organisations are starting to look more like consulting ones.
Some organisations, especially in continental Europe, have formalised the shift by setting up their own internal consulting teams. But the impact of these, at least anecdotally, is mixed: People joining the internal team become quasi-outsiders to their colleagues, part of the same organisation but not part of the team. Another past interviewee described this problem as being like getting water in a sugar pot: The damp sugar becomes lumpy, and however hard you mash it with a spoon it never turns back into the perfectly free-flowing sugar it once was. To get things done, it makes sense to have discrete projects, focused on the task at hand—but that creates barriers with the rest of the organisation.
The other issue internal consulting teams face is the depletion of new ideas and experience: When external consultants are hired into the team, their outside-in perspective is rapidly lost, and their knowledge attenuates. Objectivity and up-to-date experience and expertise are key reasons why organisations continue to turn to consultants.
Converging business models
But there’s an even bigger change going on here. Just as client organisations are starting to look like consulting firms, so consulting firms are starting to look like clients. Since the 1980s, when clients first started to complain that consultants turned up, delivered a report, and never got involved in the dirty work of implementation, consulting firms have been getting more involved in the “doing”.
The biggest driver behind this, apart from client sentiment, has been technology. In a world in which virtually any major business change depends to some degree on technology change, there simply aren’t enough of the skills needed to go round. Four out of the five most important skills organisations say they need are technology related. How are those skills to be distributed? Does it make sense to employ a world-class cybersecurity expert on a permanent basis in one client company? That company will have to pay a very high salary to keep the expert, to prevent other clients trying to poach them.
In the consulting model, the expert stays with the firm because the latter can pay their very high salary and then recoup it by selling their expertise to multiple organisations, each of which pays only a small part of what they would have paid had the expert been an employee, and all of whom benefit from the fact that the expert’s skills are kept up-to-date by working across multiple organisations.
I don’t think anyone would dispute the value of the business model described above. The advent of large-scale business technology in the 1980s and 1990s took what were then “advisory” firms into a very different market, effectively taking over and automating large swathes of work that had been traditionally done by client organisations themselves.
This was part of a more general move, in which organisations became less vertically integrated and more focused on what they deemed to be their core business. That thinking persists today, but organisations are more likely to use external third parties even in areas they think of as being core (technology, aspects of customer experience, etc.). On the supply side, consulting and outsourcing used to be very different activities, but the line between the two has blurred and many firms do both.
This means that we need to think differently about what organisations are, where their boundaries start and finish, who is responsible for what, and whether it all works (in every sense). The value of The Big Con is that it highlights the urgent need to understand what good governance looks like in this context. But that’s not something that just the leaders of consulting firms should be thinking about—we should also be asking ourselves whether we have the management structures and training in place to cope with a very different operating environment.