`Big on fees, but small on solutions'

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The Independent Online
Any doubts that anybody has about the size - and power - of the management consulting industry should be knocked aside by a recently-published book. Dangerous Company (Nicholas Brealey, pounds 18), by two US journalists, James O'Shea and Charles Madigan, is not a hatchet job, but it does demonstrate the huge price that organisations can pay for advice from some of the biggest names in the business - and still not get out of trouble.

Take the US telecommunications company AT&T, for example. Between 1989 and 1994 it spent "by conservative estimate" nearly half a billion dollars on consultants. But as O'Shea and Madigan point out, the amazing thing is not so much the amount as the fact that the company seems as confused today as it was at the start.

"It has lurched and shifted from strategy to strategy, from consulting house to consulting house, all without landing on anything that seems to have provided much help with the challenge of finding a strategic resting place, a market position, a plan, that could give it some leadership and some stability during troubled times." When an outsider, John Walter, recently became chief executive, he concluded that it had become too dependent on outsiders.

As O'Shea and Madigan acknowledge, this point has been made before. A former McKinsey consultant, Eileen Shapiro, argues in her book Fad Surfing in the Boardroom that too many managers are flying away from their responsibilities by giving too much power to consultants. Accusing executives of wanting the perks and salaries of management, she says they want to outsource thinking to "a mantra or methodology like reengineering".

And, while the gurus tend to come up with ideas, it is the management consultants who package them and peddle them to clients.

Not afraid to name names, the authors explain how the Boston Consulting Group grew rapidly on the back of a simple device that became known as the "Boston matrix". The starting point was showing managers of conglomerates which parts of their organisations were were not performing. According to the book, "the idea got rave reviews" and led to such phrases as "cash cow" and "dog" showing up in every business person's vocabulary, despite research showing that it has been of limited help in improving performance. It also led to the consultant's continuing love of conceptualising just about everything into often meaningless diagrams.

But, though it tells a number of other damning stories - such as how firms have linked fees to the number of jobs saved - and feeds a few prejudices along the way, the book does give consultants some credit.

Notably, certain advisers emerge with dignity from the - thus far - successful battle to turn around the once-ailing US retailer Sears. But, all the same, O'Shea and Madigan leave the reader in little doubt that they believe a fundamental factor there was the decision to seek the advice of insiders - managers and other employees - on what needed to be done. For all the current enthusiasm for empowerment, that is still sufficiently unusual to be noteworthy.