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The Great Consultancy Rip Off

Consultants – Adding value or cost?

The big question to answer about management and IT systems consultancy is whether clients actually get, and believe they get, value for the billions they pay to their consultants. There has only been limited research into success levels of management and IT systems consulting, but the figures are worrying. Indications are that around 30% of management consulting is successful – for IT systems consulting, the success rate is well below 20%.

There are many very talented management consultants who are dedicated to providing the best possible results for their clients. Yet too often they are prevented from delivering value and are even put in ethically questionable situations by the way the consultancy industry works. I have found that there are about six main reasons why so many organisations get disappointing results from their consultants:

1. Utilisation targets
In many consultancies, executives’ bonuses depend on them reaching certain ‘utilisation’ targets – usually about 70%. This means that 70% of their consultants’ time must be sold to clients, whether clients have problems to be solved or not. Failure to achieve the utilisation target can result in a consultancy director losing several hundred thousand pounds bonus. So consultancy directors are under tremendous pressure to sell their people’s time whether clients have problems to be solved or not. Thus many consultants find their talents wasted by being put to work on projects that are just lucrative “billing slots” sold to keep utilisation levels up but with little practical value for their clients.

2. “Warm bodies”
Many consultancies have just a few experienced experts in each of their areas of work, while most of their employees are what we called “warm bodies” or “billing fodder”. The consultancy’s profitability depends on being able to sell teams mostly made up of lower-paid “warm bodies” with their more highly paid experts working on several projects at the same time and only visiting each project occasionally. Of course, with proper direction from the experts, the “warm bodies” can provide good work. Though sometimes, the warm bodies may be of dubious quality. As a consultant at the world’s largest consultancy wrote on meeting the latest intake of recruits (green beans), “The green beans have arrived and oh my god I suggest you start shorting your stock – these 2005 new hires are absolute monkeys. These new people are absolutely stupid. What the hell was HR thinking?” Normally clients would get much greater value if their consulting teams were mostly made up of more experts and less billing fodder. investigation

3. Product sales
Quite a few consultancies are “product-focused” rather than “solution-focused”. This means that they are interested in selling you their “product” – the services that they know how to deliver. This focus on selling their product can prevent them actually trying to find the right solution for your particular organisational issues. Moreover, if your consultants are part of an IT systems supplier, they will probably be under huge internal pressure to sell you IT systems or outsourcing even if you don’t really need it. So good salesmanship can often lead to clients implementing organizational changes and new computer systems or even outsourcing key activities, that give them relatively little value and are not what they ought to have bought.

4. Wrong issue
One problem facing organisations that buy consultancy is often a lack of capability in the top management team. However, there are few top management teams that will be honest enough to admit that they are not up to the job. So, when faced with difficulties, they will tend to blame other factors like their employees, their computer systems, their organisation structure and so on. Clearly in such situations, if a consultancy takes millions for providing new organisation structures, new IT systems or employee training without solving the weaknesses at top management level, their interventions will be of limited value.

 

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