Everyone's on the management consulting merry-go-round

Senior management outsource decision making when they don't have the guts to do it themselves - and it's a waste of time and money.

by Jay Vaananen
Last Updated: 23 Feb 2016

The first time I clocked eyes on them was when I walked past one of the large, glass-walled conference rooms one morning in our office building. There were about a dozen of them, hunched over their IBM laptops, tap, tap, tapping away at their Excel spreadsheets. They were all wearing suits and they must’ve been in their early twenties, but they looked more like a group of boarding school kids studying for their GCSEs.

‘What’s with the Junior Chamber of Commerce in the conference room?’ I asked my colleague as I came to my desk. ‘Read your email.’ He replied. So I did.

So began yet another exercise in corporate restructuring, which is the business version of redesigning the wheel. Senior management had decided that by changing around the team structures and who reports to whom, the business would begin working like a well-oiled machine. First, before deciding on how to go about it, they did what any well-paid senior executives do in a similar situation: Hire a team of management consultants.

Then, once the consultants have given their proposals, with great fanfare and much self-congratulation, management will begin to implement the proposed changes. The flaw in all such great plans is that the company gets absolutely no buy-in from the employees, you know, the ones who actually end up bearing the weight of the changes about to be implemented. While management is busy moving around the deckchairs on the Titanic, the employees are running around looking for a place on a lifeboat. In modern corporate speak that means updating your profile and surfing around on LinkedIn looking for a new job.

End result: A disgruntled, change-resistant and weakened work force, a management bitter towards their ‘lazy’ and ‘disloyal’ employees, an over burdened HR struggling to fill empty slots vacated by the most capable employees and as a cherry on top of the cake, a big hefty bill from a consultancy firm. Is that really money well spent?

Apparently it is, because you can bet your bottom dollar that a firm that operates in this way will go through exactly the same procedure as soon as it has a few changes in senior management and the new managers want to piddle on their new lamppost to mark their territory. Bring on the consultants!

One of the most egregious examples of this type of behaviour is the NHS, which spent £640m in 2014 on consulting fees for reorganising the health service, as opposed to £313m in 2010. Tell me you Brits, how’s that been working out for you?

This whole process, which one sees so often repeated, has always baffled me and it continues to baffle most employees in any firm. Why do senior executives have such a propensity to always hire a team of fresh college graduates without any actual corporate work experience, to punch numbers into spreadsheets, billed at several hundred quid an hour, so that at the end of the project these kiddies can tell the senior executives how the senior executives should do their jobs? It makes little sense. It’s a bit like asking your teenage children for advice on parenting.

Don’t misunderstand. There will always be a time, a place and a need for outside help. For example, when the firm is looking to sell off a subsidiary, outside counsel is a must to get a realistic idea of value. Or when venturing into a completely new area of business, getting knowledge from consultants with experience in the new area is an absolute must. That is what consultants are for and they absolutely can (and do) play an important role in many corporations. However, when the sole purpose of a consultant’s employment is to outsource to them (at great expense) the decision making process, by those who are paid to make decisions (at great expense), it becomes an exercise in wasting resources. It raises the very question: What is management for, if they do not understand the business they are running and they are incapable of making decisions for themselves?

And don’t pay a consultant to answer that for you.

Jay Vaananen writes Banker's Umbrella, the world's most popular private banking blog. Catch it on Twitter @BankersUmbrella. Jay is also the author of 'Dark Pools and High Frequency Trading for Dummies'.

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