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Consultants Under Fire to Perform
25-Feb-05 [ by Larry Chao ] 5109 Read and 4 Comment

A sagging economy and demanding clients are forcing big-time consultants to do some serious soul searching‚ including redefining their service offerings‚ writes Larry Chao

The global recession and the ongoing saga of corporate scandals have made life tough for management consultants. Strapped corporate clients have become more discriminating or have opted to upgrade in-house consulting capabilities. This has curtailed double-digit revenue growth that blue chip firms such as McKinsey & Company and Accenture enjoyed in the late 1990s. Today‚ management consultants must search for alternative means to preserve their competitiveness‚ as industry growth slows.

These developments have been especially tough on consulting firms that grew in leaps and bounds over the past decade‚ but now face the problem of too many consultants and not enough work. During the heydays‚ clients perceived consultants as an affordable luxury and used them almost indiscriminately. It seemed every time there was a contentious business issue‚ rather than mustering internal brainpower and thrashing out differences‚ management turned to consultants to do the thinking and arguing for them.

With deep pockets and limited experience‚ clients gave consultants room to define the scope of work and workload. Depending on the nature of the assignment‚ consulting projects often stretched several months‚ even years. In some cases such as Enron‚ management consultants were everywhere. Their project work proliferated and seemed to have no end. Soon‚ the distinction between their role as advisor and the role of line managers blurred. In the end‚ no one really knew who was running the show.

Clients perpetuated the overuse of consultants by not insisting on practical solutions that linked lofty strategies to what people were doing day-to-day. For example‚ how do you teach employees to act more like entrepreneurs? Step-by-step implementation was sorely missing. Regrettably‚ long drawn out projects become meaningless as fast-paced changes in the marketplace rendered dated recommendations moot.

But the corporate scandals - in many cases‚ under the watchful eyes of consultants and auditors - as well as pressures to manage resources more tightly have shaken clients from their complacency. Faced with the pressure to perform‚ clients have begun asking: What are the results of our consulting projects? Were they really worth it?

Consider the viewpoint of big consulting consumers in the 1990s such as Ford Motor Company. According to chief executive William Clay Ford Jr.‚ consultants were grossly overused. "If I never see one (consultant) again‚ it will be too soon‚" he recently said in the New York Times.

In response‚ consultants have been forced to rethink the value of their services‚ or at least consider doing the same amount of work in a shorter period of time‚ an unheard of practice until recently. While some believe this downtrend will eventually reverse itself‚ a full rebound might not be achievable. Clients today are better informed about how they use consultants. Enhanced by the oversupply of consultants‚ who have decided to jump ship and join their ranks‚ many clients now possess the capabilities to use consultants productively. In some cases‚ the need for external consultants has disappeared altogether‚ or at the very least‚ the nature of their work has changed.

In-house capabilities‚ for example‚ have contained the need for inordinate up front diagnosis‚ a characteristic of many consulting projects. This is typically where consultants make big fees by assigning junior consultants to collect data and map how the company currently operates. Clients can now expect a more streamlined approach where experts are involved deeply in problem solving and more weight is put on developing creative answers and driving change‚ rather than creating piles of useless documentation.

As the uncertain economy forces clients to play a more active role in managing consultants‚ they will demand greater value and accountability for workable solutions. But this is a healthy kind of response. Good consultants will raise the quality of their services and help rid the industry of extraneous analysis and dead-end recommendations.

The writer is managing director of Chao Group Limited‚ a strategic organization change and executive training firm (larry@chaogroup.com)


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