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Get a grip - consultants aren't evil!

 
#1 Get a grip - consultants aren't evil!
07/07/2008 16:50

Tony Restell (Top-Consultant.com)

Just seen a piece that appeared in the Observer this weekend, <a href=http://www.guardian.co.uk/business/2008/jul/06/financialadvisers>"The price of dubious advice - £100bn a year"</a>. I'm once again incensed by the reporting of our industry as one built on false promises and deception. Take a read of the article and do post your thoughts back here. For what it's worth, here's the reply I've sent to Simon - though not holding my breath to see it published...

-------------------------------------

<i>Simon

Congratulations on an interesting piece in the Observer this weekend. However consultant-bashing articles do tend to miss one key argument when pointing the finger of blame at consulting firms – and you have overlooked it too. The trade body (MCA) figures show that 66% of each consulting firm’s cost base is the cost of its staff. So allowing for some profit margin, it would still cost Britain plc at least 50% of the current spend on consulting services to just kill off the consulting industry and employ these people in the corporate and public sectors instead.

More often than not, cost over-runs and project failures result from senior management bringing in consultants on a flawed brief. The outcomes are not properly defined; key milestones not established (or constantly revised as the brief is allowed to evolve mid-way through a project); internal resources not dedicated to the project such that the consultants’ meters are ticking but the required access to client staff is being denied. All these management failings would be exacerbated considerably if the pain of a significant bill and ongoing public scrutiny were not ever-present to concentrate the mind.

The current NHS IT investments are a case in point. Richard Granger was able to negotiate with consulting firms a series of risk-reward contracts that saw the firms face severe financial penalties if key milestones and objectives were not met. These financial penalties have now been triggered and at least some of the spend on this ambitious project has now been recouped. Are we really to believe that thousands of extra employees hired by the NHS could have achieved a more favourable outcome than that achieved by the consulting firms? That if employed by the NHS these consultants would suddenly have developed project management skills and capabilities that they were lacking from years spent working in the private sector?

No – the project would have had none of the public scrutiny and been able to recoup not a penny of the costs incurred if the consultancy route had been avoided. The consultants just make a convenient scapegoat and the headline figures of monies spent are always portrayed as an expense that would otherwise not have been incurred.</i>

-------------------------------------

Thoughts?

Tony Restell

Top-Consultant.com

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#2 RE: Get a grip - consultants aren't evil!
08/07/2008 15:27

Bolingbroke to Tony Restell (Top-Consultant.com) (#1)

More prosaically, one has to ask how the consulting industry could possibly have grown so fast if the advice really is as worthless as is claimed.

In the absence of a grand conspiracy, it must surely be the case that - horror stories aside - consultants provide a very useful function.

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#3 RE: Get a grip - consultants aren't evil!
08/07/2008 15:53

Mars A Day to Tony Restell (Top-Consultant.com) (#1)

I work on both sides of the fence, both with consulting and industry clients, and often move candidates between them; what comes back frequently is that consultants are perceived to add value in most instances, and it remains a popular choice for experienced individuals who have already seen what consulting can do for their own organisations as clients. It would make no sense for senior industry candidates to want to move into consulting if - having seen the results a good team of consultants can achieve - they held the view that consultants provide dubious, flawed or inadequate advice.

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#4 RE: Get a grip - consultants aren't evil!
08/07/2008 16:10

Tony Restell (Top-Consultant.com) to Tony Restell (Top-Consultant.com) (#1)

To put things in context, BBC news reports that the total bonus pool paid to UK bankers last year was £7bn and £9bn the year before. In ball-park terms, that's equivalent to the entire spend on consulting services by both the private and public sector in each of those years!

Now ask yourself the question - who's benefitted the economy more:

A) the 40,000 (highly educated) consultants who've spent the year working in businesses and organisations furiously working 60+ hour weeks to identify ways to do business more effectively and increase the value of their clients' businesses

or

B) the bankers who've pocketed these bonuses, which in themselves are only a fraction of the fees the banks have skimmed off Britain plc.

Surely a no-brainer?!

Tony Restell

Top-Consultant.com

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#5 RE: Get a grip - consultants aren't evil!
08/07/2008 22:31

anon to Tony Restell (Top-Consultant.com) (#4)

Such simple and pretty flawed economic analysis....I hope you have never tried to charge clients for that level of "strategic insight"

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#6 RE: Get a grip - consultants aren't evil!
09/07/2008 15:03

Tony Restell (Top-Consultant.com) to anon (#5)

Try the piece from Mick James in that case - he's quite independently taken up the cause and puts a very good argument I think. See:

"<a href=http://news.top-consultant.com/UK/news_story.aspx?ID=4876 target=_blank>An unprovoked attack on the consultancy industry</a>"

Tony Restell

Top-Consultant.com

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#7 RE: Get a grip - consultants aren't evil!
09/07/2008 16:12

anon to Tony Restell (Top-Consultant.com) (#6)

Having now read that I fail to see how it justifies your arguement about banking vs. consulting and who benefits the economy more.

In a sense you have fallen in to the same trap as the original author, take a large headline figure (e.g. bankers bonuses, consulting industry spend) and respond in a very simplistic way (e.g. consulting adds no value, bankers add no value).

Where as the article and response demonstrates the need for more indepth analysis and understanding of the value added.

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#8 RE: Get a grip - consultants aren't evil!
09/07/2008 17:55

Tony Restell (Top-Consultant.com) to anon (#7)

Anon - it seems I wasn't clear enough, I flagged up Mick's piece as it built on the arguments I'd made in my opening post rather than as any kind of justification of the subsequent banking point I made. However as Mick's piece rightly captures, client confidentiality and the difficulties associated with quantifying a successful outcome mean that it's a non-starter to try and prove that consulting is value adding across the whole industry rather than on a case study by case study basis. The MCA have started quantifying the results of dozens of projects each year, but the positive results attract very little in the way of media attention because let's face it, who's that excited to read about a consulting project that's been a great success?

The original Observer piece though implied that the Directors of our top companies and public bodies are myopically and systematically guilty of wasting their shareholders' and taxpayers' money by commissioning billions of pounds of projects that are nothing but money down the drain.

Sure some projects are misguided or fail to deliver, but the blanket assumption that all consulting fails to generate any value is just populist journalism taking aim at an easy target. If true, it would imply that the Boards of most of our major companies should be facing instant dismissal for negligence! Whereas the (less newsworthy) reality is that they see value in the results that their consultants bring to the business and so choose to re-engage them again and again.

As for the banking analogy - my point here is that whenever the size of banking bonuses is challenged in the media or by politicians it's always taken as a given that we have to have a vibrant banking community and that this community is value-adding; so the argument always returns to the point that "this is the level we have to pay our bankers to remain internationally competitive".

So with banking there is a blanket assumption that money has been well spent and value has been created; whereas with consulting the assumption is that the money has been poorly spent and no value created. I think it's this generalisation that gets under the skin of anyone who's involved in consulting - and hence my reason for posting in the first place.

Tony Restell

Top-Consultant.com

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#9 RE: Get a grip - consultants aren't evil!
09/07/2008 19:53

anon to Tony Restell (Top-Consultant.com) (#8)

Good points, I do agree with you that these factors are difficult to analyse and that banking seems to get an easier ride than consulting.

It will be interesting to see how people react to bankers errors and over confidence which has led to a need for recapitalisation and erosion of shareholder value.

An interesting view is that whilst they have pocketed their bonuses it is the shareholders and UK PLC (e.g. banks are being bailed out by sovereign funds and private equity, not ordinary UK based shareholders) who are having to live with the consequences. I currently don't have enough information to support or quantify this argument though.

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#10 RE: Get a grip - consultants aren't evil!
10/07/2008 09:31

Nic to Tony Restell (Top-Consultant.com) (#8)

Tony, This is an interesting and important debate, because I think the consulting industry has 'all to win (or lose) onthis one'.

Consulting bashing is a popular 'dinner party' sport, and I think these occasional news articules only fuel this activity with a bit of lazy journalist effort; ie the cost of the consultancy industry = the cost of money wasted on consultants. Does this mean that the cost of the, say, dental industry is the cost of the UK's bad dental health, hardly.

I know the subject is very emotive, but I do feel there is a 'baiting' element to the articles - so the key IMHO would be not to rise to the bait.

I am staggered at how little the average 'consultant basher' knows about the industry, even respectable business people who indulge in this 'sport' often have never employed or worked with a consultant.

I think a dispassionate answer is called for, you have written previously on why people employ consultants, lack of in house resource/skill, external support to decision making ++; I would then add how successfully the industry has grown, provides much thought leadership for business, is governed by the MCA, and now covers much of its costs in benefits realised. I would then say that ultimately clients have the choice of whether to employ consultants or not - often with considerable internal scrutiny, and safe guards, particularly around delivery, and then finally point at the other industries (ie banking) where much of this governance is opaque, often leading to the mistrust over bonuses/remuneration that is recorded elsewhere...

Hope this makes sense, in haste. N

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#11 RE: Get a grip - consultants aren't evil!
10/07/2008 12:50

anon to Nic (#10)

I think a dispassionate answer is called for, you have written previously on why people employ bankers, lack of in house resource/skill, external support to decision making ++; I would then add how successfully the industry has grown, provides much thought leadership for business, is governed by the FSA, and now covers much of its costs in benefits realised. I would then say that ultimately clients have the choice of whether to employ bankers or not - often with considerable internal scrutiny, and safe guards, particularly around delivery, and then finally point at the other industries (ie consulting) where much of this governance is opaque, often leading to the mistrust over bonuses/remuneration that is recorded elsewhere...

Think this still makes sense

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#12 RE: Get a grip - consultants aren't evil!
10/07/2008 14:36

don to anon (#11)

The problem with some of the arguments here and the suggestion by Mick James supported evidently by Tony is that they do not seem to be made with an understanding of what the CMC is and how it fits into the structure of proper formal management qualifications.

The CMC was originated by the IMC and was essentially a programme to give those of its members who did not have any formal qualification a designation. It was never from the start an academically-rigorous programme; there has never been a requirement for any formal management qualification for entrance to the programme, and it has never had any formal proper examinations. It is thus in the proper sense of the term not a formal qualification, but more like a grade within the IBC.

Once the IMC had moved in with the CMI and then integrated with the Institute of Business Advisers, to form the Institute of Business Consulting, it subsequently has become effectively a group operating within the CMI. However very few of the members of this group are or would be eligible to be designated as Chartered Managers, due principally to their lack of formal Management qualifications.

To claim therefore that the CMC has any real significance insofar as providing any indication of competence in Management or Management Consulting demonstrates a lack of understanding of what professional Management advice really is.

Perhaps this is part of the problem as claimed to be observed by journalists in articles like that in the Observer, since the argument seems to be about perceived competence?

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#13 RE: Get a grip - consultants aren't evil!
10/07/2008 14:39

Nic to anon (#11)

Anon, Finding and replacing 'consultants' with 'bankers' in my suggestion neither makes the statements true or 'make sense' from my reading of the facts - I don't really see what point you are trying to make?

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#14 RE: Get a grip - consultants aren't evil!
10/07/2008 20:04

don to Nic (#13)

Hi Nic,

I was not disagreeing with your points, but attempting to place some perspective on the quantification of what is a good or bad Management consultant, and the perception of what defines this. The issue of the CMC had previously been claimed to be the bench mark of this, an argument with which I entirely disagree.

The perception of non-consultants as with everything is concerned entirely with what actually happens - success or failure and the best professional consultants will not claim that the reason for their non achievement is a fallacious brief or some other similar fatuous excuse. It is the role of the experienced, qualified professional consultant to ascertain and address the real problems, and to specify real appropriate solutions, which deliver success.

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#15 RE: Get a grip - consultants aren't evil!
10/07/2008 20:31

anon to Nic (#13)

As was pointing out that consultants moan when they get bad press and people claim they add no value, aren't accountable......"how unfair" comes the cry.

Then you and others proceed to hypocritically take exactly the same approach of being disparaging about other industries (e.g. bankers) citing the same issues raised against you.

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#16 RE: Get a grip - consultants aren't evil!
11/07/2008 00:06

Drea to Tony Restell (Top-Consultant.com) (#4)

I'm not in the industry myself, but find that consultants fulfill an essential function in any well-run economy. People running companies tend to get so enmeshed in their own operations that they lose the valuable perspective consultants provide. I just posted an interview with a Boston Consulting Group exec, and found that he provided a refreshing perspective on American power loss. While the media's screaming Depression and bloody murder, people like this consultant are working with real-life companies, gathering real-life impressions, and coming up with empowering solutions. There's some serious value in that.

Drea

BusinessPundit.com

Consultant interview: http://www.businesspundit.com/globalization-gone-wild/

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#17 RE: Get a grip - consultants aren't evil!
11/07/2008 08:46

Adam Smith to Drea (#16)

In a free market economy, the value one adds can be measured by the amount one is paid, no?

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#18 RE: Get a grip - consultants aren't evil!
11/07/2008 09:34

value adding to Adam Smith (#17)

over time maybe, but in reality a pay packet is indicative of the value one is expected to add.

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#19 RE: Get a grip - consultants aren't evil!
14/07/2008 14:11

Tony Restell (Top-Consultant.com) to Adam Smith (#17)

<i>"In a free market economy, the value one adds can be measured by the amount one is paid, no?"</i>

The reality is something of a twist on this I would say. My own take would be "In a free market economy, you get paid according to the value you can demonstrate you have been able to add."

--> thus a consulting Partner is able to secure remuneration that is ten times that of a mid-level consultant because they can demonstrate (through projects sold) the amount of business that the firm might lose if they are not paid enough to retain them.

--> but consulting in general generates lower fees than banking because the value created by consulting assignments is far less transparent and clients therefore feel far less beholden to engage a consulting firm as the downside of not working with them is far less visible.

Which of course brings us full circle in this debate - and means that the only way consulting can start to be paid something more akin to what banking enjoys is to shift to billing not by the hour but on a % of upside basis...

Tony Restell

Top-Consultant.com

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#20 RE: Get a grip - consultants aren't evil!
14/07/2008 14:58

Adam Smith to Tony Restell (Top-Consultant.com) (#19)

This is leading to a very interesting discussion indeed - one with real implications for the way we price our work. I have to admit I have always been envious of bankers that can demonstrate their impact in terms of cold, hard £££. I think this is leading to an interesting side discussion about how we as consultants can demonstrate in transparent, measurable, financial terms the value of the impact we have. This of course is easier said than done when you're working on an 18 month change management project where the client wants to do something like improve the quality of their products! Any thoughts on how we can get better at this, guys?

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#21 RE: Get a grip - consultants aren't evil!
15/07/2008 09:15

John Niland, Success 121 to Adam Smith (#20)

I agree with Adam: it has real implications for how we price our work. And even more importantly, for how we talk about the value of what we do. The risk-reward contracts that Tony mentions are a great example of consultants being genuinely committed to client-value. To make these contracts possible, we need to have "value-conversations" ... as opposed to "outcome conversations". This is the subject of a recent e-book called "Hidden Value", which I can email to anyone who might find it useful. (john@success121.com)

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#22 RE: Get a grip - consultants aren't evil!
16/07/2008 09:13

Tony Restell (Top-Consultant.com) to John Niland, Success 121 (#21)

Thanks for contributing John.

Just to endorse John's offer, his e-books are well worth a read for anyone interested in figuring out how to have value conversations rather than hourly billing rate conversations.

Tony Restell

Top-Consultant.com

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#23 RE: Get a grip - consultants aren't evil!
04/08/2008 03:04

Alan Campbell to Tony Restell (Top-Consultant.com) (#1)

I've been involved in plenty of companies where some consulting advice would have been useful prior to wasteful decisions being made. The consultant’s value is a direct result of the client’s openness and willingness to engage with the consultant. Simply paying a consultant never solved anything.

creativecapital.net.nz

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