Responsible Management Consultancy

The Management Consultancy Challenge

There are certain times when a book comes along that puts into words an uncomfortable truth about businesses, industries, and markets. The Big Con, by Mariana Mazzucato and Rosie Collington, is one of those books. It describes the confidence trick the management consulting industry performs where clients stop investing in their own capabilities and capacity because of a fear of failure and an aversion to risk. This leaves space for the consulting industry to build those capabilities and, through experience and learning, create the capacity to resell their services to those very same clients and more using what become new consultancy models, tools and frameworks.

In the meantime, the client becomes even more dependent on the consultant - and so the pattern of reinforcement and dependency is repeated.

The client rarely has the opportunity to embed learning from the consultant. In fact, client-learning may not be in the consultant's best interest since if the capability and capacity are internalised within the client, there may be less opportunity for further consultancy assignments.

So, to survive, widely adopted approaches to management consultancy need to change - clients need responsible management consultancy.

Why should this be a concern to Management Consultants?

Consultants should always be seeking to add sustainable value - and sustainable value is created through action, change and outcomes that stick. Where an ongoing core business need is identified by an organisation, the capability to add value and deliver outcomes should be one that those organisations look to internalise - not outsource to consultants. Core business needs to remain core and creating corporate memories about successes and failures increases organisational learning - undertaking your own value chain analysis can help you understand your core business.

Management consultants making recommendations that cannot be acted upon, or where there is no realistic implementation plan, adds unnecessary direct costs and opportunity costs - time spent supporting the consultancy activity could be spent on something that creates more value.

In our own case, we define success as being able to complete an assignment that means the client does not require further support to deliver their core business so, if they choose, they can do it for themselves. True change involves delivering a 'change of state', leaving the client in a better position than when they started - as opposed to being left a long list of questions and a dependency on external consultants to act.

Consultants must take responsibility to deliver a positive legacy, not just a series of reports and recommendations that gather dust on the shelf or act as a justification for further work. Embedding learning within the client must be at the core of that legacy.

When to use a Management Consultant

All organisations need to have some internal capabilities to undertake core activities - market analysis, strategy development, business planning, managing change, programme management and internal audit are common examples. Frequent outsourcing of these activities in their entirety or in part with a high degree of dependency on a consultancy needs careful consideration. Many of them should be core business capabilities - client strategies and business plans evolve over time, change is continual, programmes need to be managed and business outcomes and performance audited.

Outsourcing due to internal leaders fear of failure or risk aversion should not undermine their accountability for sustainable organisational improvement. Responsible consultants should be looking to embed within their clients the capability and appetite to standalone without the need for ongoing consultancy support.

Nonetheless, there are naturally exceptions. One-off organisational change - which is typically finite in nature with a clear start and end point often requires consultancy expertise that is not part of a client's core business or capability. Given a one-off, rare, or infrequent event, this may require support from external consultants to facilitate and enable change. Some examples would be:

• Implementation of a new-to-the-organisation system, technology, or suite of processes.
• Mergers, acquisitions, and raising investment.
• Market research, industry updates, and horizon analysis.
• Implementing one-off changes in response to external factors such as technology disruption, regulatory events, market restructuring, and existential 'black swan' events.
• Independent audit, assessments, or surveys.
• Learning new capabilities.

The common factor for all the above is that in most organisations (other than consultancies themselves), these are not core business or essential core capabilities - so seeking external expertise is a natural response. But even in these situations, the consultant should be looking to embed ongoing learning within their client - even if nothing more than ensuring that future consultancy engagements deliver even more sustainable value.

Some examples where the reasons for appointing management consultants need to be looked at in detail, despite widespread practice, are:

• Programme or Project Management - for many businesses this should be a core capability. All businesses have projects so the question as to why you need external support needs to be answered. If the challenge is one of capacity (i.e. insufficient internal resources), this is a valid reason. But recognise this may need to change over the medium-term so take every opportunity to learn from the appointed consultant.
• People Development - this will always be core business. Leadership, management, and employee development are infinite journeys - there is no clear starting-point, and no clear endpoint. Outsourcing this capability is not one that is recommended - but seeking advice on how to create a 'change of state; to improve current practice can be a valid reason. But even in these circumstances, the opportunity to internalise the capability to create a 'change of state' should be a desired outcome.
• Culture Change - there are some truisms about culture change that can be found in what is one of the most fashionable management consultancy topics. There is already an extensive range of literature and research about purposeful leadership, leading by example, and behaving in line with organisational values - which are all essential ingredients for making positive culture change. These can be described as 'Culture Change 101' - every leader and manager must learn about the factors that affect culture. The decision on whether to appoint management consultants should prioritise embedding culture change as a core capability within the client - without the need for ongoing dependency on consultants. If culture change is a priority in your business, one of the simplest ways to internalise this capability is to hire staff with experience in this area - people that have themselves learned by doing. They will also know where they need outside expertise for activities such as employee engagement surveys, first-time implementation of culture-change initiatives. As with other core capabilities, a valid reason for looking to external consultants is one of capacity. Using external consultants can be matched to the ebb and flow of resource requirements.

Getting the right outcomes from Management Consultants

If you are looking for consultancy support, here are a few questions you may like to ask:

• Ask the question, why are you hiring the consultant? Is it because of a fear of failure or an aversion to risk? If it is, recognise it as such and ask - is there a better way?
• Is the consultant doing work that you would like to have as an internal capability? If it is core business, use the engagement as an opportunity for your people to learn how to do it themselves and make it an internal capability. Many consultants learn on the job so why should your team not do the same?
• If you have a capacity constraint or capability gap - recognise it as such and take action to address it. Make a conscious decision about whether it needs to be internalised and, if so, how?
• Test all consultant's advice and recommendations using a 'reality check'. Will what is recommended by the consultant work for you, in your situation, and can you do it? If not, ask the consultant why they are making the recommendation?
• Are there gates or review points where you can assess whether you are truly getting what you want. As the assignment progresses, check the answers to the same questions you asked at the outset before appointing the consultant.

To avoid the Consultancy Big Con, the challenge becomes one of choosing whether, and if so how, to embed learning from the consultant. Organisational learning is an area we have discussed in our earlier posts on Innovation Habits - Learning from Failure and Success.

Getting the most from Management Consultants

In our previous work we looked at how structured organisational learning happens, - so what are the tips for organisational learning from consultancy assignments:

• Prepare to learn as part of the assignment - as well as looking for the consultancy outputs, identify the learning outcomes you want for you and your team and add make sure they are included in the consultancy brief.
• As events happen that provide opportunities to learn, capture them by scheduling meetings and/or workshops with the consultants - as with all learning, bear in mind that people will have a combination of different learning styles so create an agenda and environment that engages everyone. On timing, don't leave it too long after the event - think in terms of days or one to two weeks.
• Identify what, if anything, you can collectively and individually do to make change - then do it, in collaboration with the consultant, as soon as is reasonably possible. Then repeat it - then repeat it again. Organisational learning by doing will become embedded in your organisation and shared action will increase the likelihood of retaining the learning in the corporate memory.
• Test the practicality of consultant's recommendations and proposals - are these directed at creating value in your business by increasing your capability and capacity to act, or are they are a proposal for further engagement. Neither is better than the other - but you need to be able to tell the difference and understand your options. Ask the question - so what?

The Future of Management Consultancy

Consultancy needs to add value, or it will eventually fall into disrepute. Our previous work, looking at The Impact of AI on Consultancy showed how susceptible the consultancy industry is to disruption. Advice is easy to source using AI systems and will help organisations learn fast. These conditions mean the replacement of consultancy services that can be delivered by client-owned AI is a significant threat to the services provided and the level of revenues in the management consultancy industry. 

As such, the priorities of consultants must change from one that solely provides advisory and analysis services to clients to one that helps clients identify and learn when and how they should internalise organisational capability, or just need more internal capacity.

Responsible management consultancy can help take on both challenges.

This approach will leave a positive legacy for clients - which then leads to the right type of repeat business. One where the consultant can continue to add sustainable value to their clients.

References

[1] The Big Con - Marianna Mazzucato and Rosie Collington, Allen Lane/Penguin (2023)