As a recovering consultant, I feel I am well within my right to write this post. While recent events at work have triggered the need to pen this post, the thoughts have been lingering for a while. I will also use this opportunity to also comment on a management theory I have. You’ll see, it will make sense.
There are 3 types of consultants..
- Strategic and Management consultants. These are the McKinsey types that work at the most senior levels of an organization. Despite charging a fortune, I think these guys make sense. The CEO and other C level roles can be a bit lonely and it is hard to get unbiased thoughts and opinions, so looking to outside help is reasonable. I know someone in this space, and this is how he operates.
- Technical Consultants. This is what I used to do at SIG. When you buy a software package, it is hard to know how it works and how it will affect business processes, so having experts to work through these scenarios is good. I was not great at this work, but more because I always felt frustrated that our mandate was linked to junior level staff: How can I recommend a streamlined business process to a clerk or low level manager without them having VP level signoff? It never worked. But it can. And I have seen engagements and I was part of some that did.
- We-Need-You-To-Justify-Our-No-Brainer-Decision Consultants. These guys make me nuts. They are like lawyers, necessary but only because we create a societal or organizational ‘need’ for them, that is often both wasteful and counter-intuitive. Let me explain.
I know I have seen this before so I am hopeful that readers will add anecdotes to the comments section below. Sometimes a business decision is fundamentally obvious to people in an organization. But they tend to be more junior associates (manager or director) and because they are not empowered with decision making authority, their recommendations are viewed with skepticism by senior management (VP). This often happens in cross-functionall teams, but can happen in a silo as well.
Because the VP level doubters are both not close enough to the ground to form their own decision, and don’t trust their designees, they seem to flounder and decisions are not made. This in turn will frustrate C level managers and so a consulting firm is brought in to deliver an external perspective and recommendation. Step 1, they interview the junior associates and get tons of free documents. Step 2 they interview the VP’s and step 3 they deliver a report. I always get a kick out of statements of work (SOWs) that detail the length of the PowerPoint deck that you receive as a product. It reminds me of those idiots in high school that used to ask how many pages a book report had to be, “is that double spaced or single?” Losers. If you have a good idea, who cares if it is 1 slide or 200. The second that you have to quantify the length of the deck, you are admitting that you know this work is a waste and you try to justify it by including enough slides that someone else can reuse one or more in another presentation.
So why do we need these idiots and how do we keep them from destroying the fabric of American capitalism (yes that is hyperbole). In my example, there are 2 possibilities. A) You have a VP who can’t make a decision on his/her own within their silo. Fire that person. If you have to pay a consultant to do their job, hire the consultant. B) Most times the situation arises in a cross functional team where 2 or more VPs need to agree on a course of action (they often form a steering committee) but because they sit in different silo’s their goals do not align. Thus while the decision that benefits the firm is obvious, when you report back up through your own chain of command, you have a different objective, one that is tangentially related to the goals of the firm. That VP’s persepective from their own silo on what is best for the firm is not what the consolodated opinion would be.
While I don’t have empirical evidence, I would bet that most of these situations arise in G&A, E&A or other support (non-line) divisions. How often have we delayed a decision to retire a legacy system, because the Pricing business unit still needs to do some TPS report. The Pricing VP, Technology VP and the Marketing VP can’t agree on a strategy to retire the system, because their goals conflict. Marketing needs the TPS report, Pricing needs the data to produce the report and technology says they need a lot of money to make sure there is zero down time in the report creation and with all legacy data needing to port across to the new solution, it will cost a lot.
In come the consultants marching two-by-two to save the day (hurra- hurra!).
So how do we fix this?
Make non-line departments have full P&Ls with a sr exec responsible for specific margin based goals. I would argue that the problem is that non-line positions act as service providers and not as entrepreneurs. If you deliver reporting solutions, negotiate a price with your ‘customer’. That becomes your direct revenue and your staff are your costs. If you can sell the same solution to multiple customers you create economies of scale and produce the product for less cost. If a new line VP asks for their own custom report, no prob, but it will cost them more. Eventually it becomes obvious that some BUs are paying more for certain types of G&A expense. You create a profit based incentive to be smarter. Your unbiased opinion is generated by the numbers, data driven.
Sure there will continue to be VPs that are incapable of saving money because they refuse to collaborate cross-channel. That won’t go away, but at the very least you will start to see those statistical anomalies in the financial results and you can address them appropriately. Consultants will never stop sucking profit out of the economy, but we should be able to label it when it crops up.