I once worked for a large magazine company in the United States that was concerned about declining revenues and loss of readers amid what was then called the dot-com revolution. Corporate leaders decided to hire a major management consulting firm to analyze what needed to be done. After months of meetings and millions in fees, the verdict came. Apparently we just needed better story ideas. Needless to say, this sage advice saved neither the readers nor the product.
For this and other reasons, I have always been skeptical of management consulting. To begin with, the business approach of “if you can measure it, you can manage it” simply misses a lot of things. Certain things, such as input costs and stock price, can be accounted for discreetly. Others, such as culture, loyalty and creativity, cannot do so.
Then there’s the problem of passing the buck: Companies too often hire consultants so they can blame others if solutions to difficult problems go wrong. Add to this the fact that artificial intelligence can increasingly fill the lower tier of consulting work, and you have a profession that may well be in secular decline.
The signs are everywhere. Companies like Bain and McKinsey They are laying off workers and offering them financial incentives to leave. Deloitte and EY are cutting costs and reorganizing. Across the industry, there is a new sense of saving money where things were good before.
While the profession boomed during Covid, when businesses desperately sought help dealing with everything from supply chain issues to work-from-home shifts and the uncertain nature of the economic cycle, it is now slowing. According to Kennedy Consulting Industry Monitor, revenue growth halved to 5 percent last year.
Consulting firms are also coming under political pressure. A couple of weeks ago, a bill to ban McKinsey from working in the US government, introduced by Missouri Senator Josh Hawley, passed the Senate Homeland Security Committee. There are still multiple obstacles to it becoming law, but the idea is to prevent the Department of Defense and other federal agencies from contracting with companies that do business with the Chinese government.
But it’s not just populist politicians who are skeptical of consultants. Both academics and industry experts have become more critical in recent years. Economist Mariana Mazzucato and her colleague Rosie Collington published last year The Big Scam: How the Consulting Industry Undermines Our Companies, Infantilizes Our Governments, and Warps Our Economies.
The book argues that consulting has prospered thanks to the problems of modern capitalism, from financialization and corporate short-termism to risk aversion in a hungry public sector, obtaining undue economic rents and creating very little value. “While consulting is an ancient profession,” they write, “the Big Con grew from the 1980s and 1990s in the wake of reforms by both the ‘neoliberal’ right and ‘Third Way’ progressives, on both sides of the political spectrum.
In fact, the industry’s problems go back even further. One could argue that modern management consulting is the unfortunate child of early 20th century Taylorism – in which Frederick Winslow Taylor, a Philadelphia mechanical engineer, sought to reduce worker productivity to the second – and the ideas of the School of Chicago on “efficient efficiency.” ”markets, which gained strength from the 1960s.
Consultants have created a huge global market preaching the gospel of disruption. As Harvard professor Clayton Christensen argued in The innovator’s dilemma, in 1997, large companies always ran the risk of smaller companies taking their lunch. In order to get ahead of that, they needed to be changing all the time, internally.
But while that may have seemed true during the dot-com boom of the late 1990s, most sectors have become more concentrated, with large companies taking an increasing share of the economic pie.
Even so, it is difficult for the cult of disruption to disappear. As Ashley Goodall, a reformed consultant and Deloitte/Cisco veteran, writes in his new book The problem of change“while we were all busy disturbing ourselves here and there, we somehow lost sight of the fact that change and improvement are two different things.”
At first, he says, executives thought “we have to solve this problem; therefore, we need to change.” Now, she says, many believe that “we have to change, because then all the problems will be solved.”
Consulting itself will have to change, because today technology can do a lot at the lower end of the pay scale. AI can craft a good enough PowerPoint presentation or research paper, eliminating much of what novice consultants used to do. Meanwhile, there’s more competition at the top, with all sorts of boutique risk analysis firms and industry experts vying for a slice of the advisory business.
A recession is likely to breathe new life into the industry. Management consulting often makes money by asking companies to reduce staff. You can also temporarily replace them with technology or more consultants, without all those pesky full-time employment or benefits issues. But I suspect that, just as many redundant jobs at the lower end of the socioeconomic food chain have disappeared in recent decades, white-collar industries like consulting will also be disrupted.
Will the result be fewer slide presentations, mission statements, mandatory networking sessions, and corporate language? If so, I totally agree.