UK: Caveat on the consultants. (1 of 3)

UK: Caveat on the consultants. (1 of 3) - Calling in the management consultants can lead to a marriage of mutual convenience or a prolonged and costly divorce. Helen Kay looks at the pitfalls and profits of bringing in outside expertise.

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Last Updated: 31 Aug 2010

Calling in the management consultants can lead to a marriage of mutual convenience or a prolonged and costly divorce. Helen Kay looks at the pitfalls and profits of bringing in outside expertise.

There is a new version of an old joke going the rounds: "Those who can, do; those who can't, consult." For once it is not teachers but management consultants who are getting it in the neck.

It is not difficult to see why consultants charge high fees but never have the responsibilities of management. The confidential nature of their work means that it rarely incurs public scrutiny, and on the few occasions when it does they can always attribute any failures to an uncooperative or incompetent client. It is no wonder that management consultants have attracted their share of dislike.

Yet, for all that, the profession has been growing at a rate of knots. According to Clive Rassam and David Oates, authors of "Management Consultancy: The Inside Story", the European market for management consultancy was worth about $5 billion in 1990. Worldwide it amounted to as much as $25 billion.

Historically the consultancies have tended to fall into three categories: the prestigious strategy boutiques such as McKinsey and Bain; the general management consultancies like AT Kearney and PE-International; and, at the bottom of the pile in terms of their status, the accountancy-related firms such as Ernst and Young or Coopers and Lybrand Deloitte. In recent years a number of much smaller specialist consultancies have also sprung up. But, as the market matures and the recession takes its toll, those categories have begun to collapse.

Many of the bigger consultancies have merged with their erstwhile competitors to acquire critical mass. Some have bought in specialist expertise by acquiring niche operators, and almost all are trying to expand from their initial markets into the rest. The strategy consultancies are going "downmarket" into operations and information technology (IT) - witness the highbrow McKinsey's recent acquisition of an IT specialist; the IT and general management consultancies are trying to be strategists - hence Logica's brave but ill-fated attempt to move away from software and into strategy; and the accountancy-related consultancies are equally eager to expand their base.

But, in jostling for room at the top, consultants have earned the criticism that they aim to be all things to all men and claim to do everything equally well. Most will readily admit that they see selling on other services as part of their role. However, they insist that the advantages of a long-standing relationship between consultant and client are not, as cynics suggest, entirely one sided.

Gareth Stainer, with greying hair and 18 years in the business, is one of the more experienced partners at Coopers Deloitte. He explains: "We're not perpetually familiarising ourselves with unfamiliar clients and situations." Moreover, he adds, with studied precision: "We're able to read across from one area to another and thus to coordinate different projects." His colleague, the refreshingly forthright executive partner Malcolm Coster, makes the further point that these days "so many projects are multinational in scope and interdisciplinary in nature".

Nevertheless, for those on the other side of the fence the sales pitch frequently seems to ring hollow. Over the past few years Roger Empson, the UK general manager of telecoms connections manufacturer KRONE, has used three consultancies with varying degrees of satisfaction, the latest to "get their hooks into us" being PE-International. In his experience, "once (consultants) have spotted a likely opportunity they will pursue it, come hell or high water". This would be no cause for alarm, were it not that "they will also pursue things they may not be as expert in as they claim". You have "to keep them at bay", he concludes.

Mike Smith, acting managing director at Laura Ashley, shares his view. Deloitte Haskins and Sells was "called in by the banks as auditors in the late 1970s", he explains, "and as part of that bank pressure they were used to draw up a corporate strategy". Since then they "have never been far away from this company" and, indeed, a number of consultants have joined Laura Ashley's ranks. But the relationship has not always been happy, says Smith. "Companies like Coopers Deloitte offer a panacea" but it is "a bit like opening Pandora's box".

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