In amongst the witch doctors
A new TV series will examine the far-reaching influence of consultancies in modern life, writes Roger Trapp
Sunday 15 August 1999
Award-winning documentary maker Roger Graef was drawn to the subject after realising how management consultancy is a booming business, particularly within the public sector. The NHS spent pounds 200m on consultants in a single year, and the BBC spends about pounds 20m a year on advice. That's equivalent to 200,000 licence fees.
This affects us all, yet we take it for granted without asking questions about who these consultants are and what they do. "I have always thought there must be more to it," Mr Graef says. His work has previously examined the closed worlds of the police and the government: "I have made a career out of looking at things everyone takes for granted."
The first film in the series, which took two years to make, shows how the management consultancy has risen from humble beginnings to become a $40bn worldwide business. In the UK alone it produced fees of about pounds 5.5bn last year.
It's an incredible success story, after an unlikely start as a slightly shameful profession: early pioneers in the 1920s were sent into factories to measure efficiency using stop watches - and told to be discreet to avoid the unwelcome attention of the unions.
Nelson Mitten, now aged 90, was an early consultant working for one of the founding fathers of management consultancy, Charles Bedaux: "If somebody asked you what you were, you'd say `Well, my mother thinks I am a pianist at the local brothel, but actually I work for Bedaux.' That was the sort of humour that went at the beginning. It was a racket."
The programme will also reveal how Bedaux became associated with the Nazis. Bedaux, a French-born American citizen, organised King Edward VIII's trip to Nazi Germany and worked with the Vichy government in France. He was eventually arrested and charged with treason but killed himself before his trial in the US.
By the 1990s, consultants had become a part of the establishment. Last year, 90 per cent of Britain's top 300 companies used outside consultants to help them build better business practices.
Masters of the Universe also highlights the work of consultants in the public sector. The much-criticised enthusiasm for consultants at the BBC has delivered obvious changes: almost all the corporation's radio and TV journalists now work together at White City, while the former radio studios at Broadcasting House have been turned into plush (you guessed it) management offices. But the BBC's love affair with consultants stretches way back before the arrival of Sir John Birt as director-general.
McKinsey & Co, the top-flight strategy firm that deliberately seeks to avoid publicity, had the corporation as one of its first clients when it arrived from the United States in the Sixties. For most of the last decade McKinsey has staffed its own office at the BBC.
McKinsey's powerful reach seems to stretch into every corner of influence in British society. William Hague, the Conservative Party leader, and Archie Norman, the head of Asda and the party's chairman, both worked for the organisation known as "the firm". Outgoing CBI chief Adair Turner and Howard Davies, chairman of the new super-regulator, the Financial Services Authority (FSA), are also former McKinseyites.
So far, so influential. But this is a profession with no set of rules, no governing body and no need to publicise what it is that management consultants actually do.
To the increasing numbers of ordinary people affected by consultants' activities it is not always clear what organisations get for their (large amounts of) money. Tom Peters, the most famous management consultant of all, kick-started the consultancy boom of the last decade when he co-wrote the best-selling book In Search of Excellence. Yet most of the companies lauded for their management practices in that book soon failed - and Mr Peters himself freely admitted he had got it wrong. He went on to be the first of the mass-market gurus, commanding fees of tens of thousands of dollars to speak at seminars in the inspirational manner of an old- fashioned tent preacher.
Another devastatingly successful "preaching" guru, Michael Hammer, is shown in tonight's film giving one of his seminars - which are charged at $70,000 a time.
He's credited with inventing the theory held responsible for millions of job losses around the world. He describes his theory, called "re-engineering", as "the radical redesign of business processes for dramatic improvement". It's basically about reducing bureaucracy and getting rid of layers of unnecessary management. This may sound like common sense, but Mr Hammer believes his work is responsible for the turnaround in the US economy in recent years.
He dismisses critics by saying that re-engineering has made improvements to people's lives:
"The man in the street may still have a job because of re-engineering; his or her standard of living is likely to be higher than it was because of re-engineering, and they may also have made money on the stock market as a result."
Mr Hammer's original theory was outlined in a 1990 book, and by 1994 a staggering two-thirds of top companies in Britain and the US had set out on a re-engineering project.
Not all top managers believe in the magic powers of consultants. Gerry Robinson, chief executive of Granada, believes a slice of the pounds 100m in extra profits he generated in the first year after taking over the Forte group was achieved by sacking the heavily used management consultants. He tells the programme: "In the end it was a company that was not well run and the result of our own management of it without consultants has been certainly more effective than it was before."
Alan Sugar, chairman of Amstrad, is another doubter, who describes consultants as "opportunists".
Eileen Shapiro, a former McKinsey's consultant in the US, now runs her own consultancy. She is scathing about managers' over-use of consultants - "managerial Prozac" - and of some of the claims made by the professional gurus: "We are now raising a generation of managers who don't know how to take risks and make decisions, and I can't think of anything that is more scary for business in a capitalist society."
The irony is that the global trend to sack in-house staff on the say- so of management consultants has meant organisations are "lean and mean". They have little spare in-house capacity for complex problem solving - so they call in the consultants.
Management consultancy is growing by around 16 per cent a year. Consultancies are the most prestigious places for ambitious young graduates to work. The big international consultancies such as Bain &Co, Andersen Consulting and McKinsey, receive millions of applications from around the world for jobs that carry high starting salaries and benefits packages. Those who survive the rigorous 80-hour weeks and constant travel can hope to become partners and so millionaires.
The consultancies make no apology for attracting "the best and the brightest", says Michael Freedman, head of the strategy practice at New Jersey-based Kepner Tregoe. He says people would become even more critical of the firms if they employed second-rate people.
Only a few big companies can offer graduates jobs to rival the power and riches of consulting. The rest are losing out in the battle for young talent. Which means they are becoming more reliant on consultants.
As a commentator puts it in one of the films: "It would be better to have the smartest people as the managers, rather than as their consultants."
`Masters of the Universe' starts on Channel 4 at 8pm tonight.
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