In the long fake boom of the Nineties and Noughties, we were sold a thousand scams. End government regulation of the financial system! Turn banks into casinos! Pay CEOs 500 times more than their staff! Bow, bow, bow before our mansion-dwelling overlords and the Total Efficiency they will bring! Yet from under the rubble left by these delusions, one of the greatest scams has skipped out unscathed, and it is now successfully selling itself as a solution to the fading of the boom-light. It is probably in your workplace now, or coming soon. Its name? Management consultancy.
There are now half a million management consultants in the world, and they all grumble that they face one question wherever they go: yes, but what is it that you actually do? They claim to be able to enter any organization, watch its workers for a short period, and then -- using graphs, algorithms, and a jargon that makes quantum physics look like Sesame Street -- render it dramatically more efficient, for a fee. They are everywhere: in the US, AT&T (to pluck a random company) spent $500m on them in just five years, while the British state will soon be spending more on management consultants than on upgrading its nuclear weapons.
Yet the process of management consultancy has always been shrouded in priestly secrecy. Over the past few years there has been a string of memoirs by highly successful former management consultants, finally pulling back the flow-charts.
David Craig gives a typical explanation of what the consultants Actually Do. After getting a degree specializing in romantic poetry, he was astonished to be hired by a prestigious management consultancy, given three weeks training, and then dropped into major corporations to tell them how to run their oil rigs, menswear stores, and factories, for tens of thousands of pounds a pop. In his brave memoir Rip Off! he explains: "We were proud of the way we used to make things up as we went along... It's like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7000 per week." It consisted, he says, of "lies, lies and even more lies."
He worked to a simple model, which is common in the industry. He had to watch how a workforce behaved for a week -- and then tell the company's bosses, every time, that they had 30 percent too many staff and only his consultancy could figure out who should be culled. If he calculated they actually had the right amount of staff, he was told by his bosses not to be so ridiculous and do his sums again: where was the money for them in a properly-staffed company? The company had to be POPed -- People Off Payroll.
Of course, this advice was often disastrous. His company was sent into a chain of 500 menswear shops. They advised them to cut staff by (surprise!) 30 percent, and to replace most full-time staff with part-timers. The result? The full-time employees had been highly motivated, because they wanted a career in the company; the part-timers only wanted a little extra cash. So motivation levels in the company collapsed, and with it the standard of service. The company was bankrupt within a few years.
Yes, you might say, but surely he was just a bad management consultant. The rest must get results. The evidence suggests not. The Cranfield School of Management studied 170 companies who had used management consultants, and it discovered just 36 percent of them were happy with the outcome - while two thirds judged them to be useless or harmful. A medicine with that failure-rate would be taken off the shelves.
Matthew Stewart, another former consultant, summarizes his high flying years in the industry by saying: "I felt like a snake oil salesmen without snake oil." When he was sent into a company, he was told to use complex formulae to analyze the productivity of its staff, but he soon realized that the results were "nearly random... Similar results could have been achieved by having four monkeys throw darts at a few matrices." Yet on this basis, he was taking a fortune in payments, and firing thousands of productive people.
The recession has given a fresh burst to this industry, as corporations beg to be told where to apply the leeches. The number of senior consultants has swollen by 10 percent in the past year, while the number employed by local government has grown by 11 percent.
But there is a growing body of academic research showing that the strategies pushed by these consultancies are in fact disastrous - and hasten the collapse of a company or service. Professor Wayne Cascio of the University of Colorado has studied the relative costs and benefits of POPing your workforce. Corporations and governments are receptive to the idea that the quickest, easiest way to save money is to fire workers. But Cascio has shown that, most of the time, the costs outweigh the gains. Obviously, you have to immediately find large amounts of redundancy and severance pay. But the costs don't stop there. Your workforce becomes very nervous - and a nervous workforce is dramatically less productive and less innovative. The best people leave. The service to the customer deteriorates - so they abandon you even more.
The facts backing this up are striking. The OECD has studied developed economies over a 20-year period, and it found labor productivity growth was much higher in the countries where it is hardest to fire people. The better you treat a workforce, the better they work. Professor Peter Cappelli studied 122 companies and found that lay-offs most often shrank their future profitability, instead of swelling it.
Yet this is the antithesis of the management consultancy mindset. Stewart says "consultants are the cattle prods of the modern corporation. The chief message to be communicated, in almost all situations, is that you will be expected to work much harder than you ever have before and your chances of losing your job are infinitely greater than you have ever imagined." It's a dark, dehumanized vision of workers as cogs in a machine -- and it's been there from the beginning. Frederick Taylor, the founder of management consultancy, compared workers to "an intelligent gorilla" and said "our scheme does not ask for any initiative in a man. We do not care for his initiative."
When challenged, the paltry evidence base of this industry soon becomes clear. Tom Peters, the author of management consultants' bible Excellence, snapped at an interviewer who asked about his way of analyzing businesses: "Of course, we all know this is to some extent phoney baloney."
David Craig suggests a simple way to call out this scam. Insist that, from now on, all management consultants are paid by their results. If they promise greater productivity or higher sales, fine: don't pay them until it comes through. Today, almost no management consultancy works on this basis. If they did, they'd all be bankrupt.
And yet, and yet... you almost have to admire the rancid chutzpah of it. As the management consultant Bruce Henderson once sniggered: "Can you think of anything more improbable than taking the world's most successful firms and hiring people just fresh out of school and telling them how to run their businesses -- and [getting them] to pay millions of pounds for this advice?" It's tempting to chuckle at the absurdity -- until you realize the cack-handed consultants' scythe could come for you.
em>Johann Hari is a writer for the Independent. To read more of his articles, click here or here.
You can follow Johann at www.twitter.com/johannhari101 or email him at j.hari [at] independent.co.uk
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Loading comments… 
The reason is very simple. Virtually all consultant
Instead, the consultant
If you want to fix a business, the only possible way to do it is fix the mindset of the leaders, starting with the top. If they don't want to change, all the new processes, systems, infrastruc
This is exactly why I work only with the business owner or CEO. If you want to fix a business, fix the leaders, not the followers.
However, there is a way that clients can ensure they get what they pay for, by requiring their consultant have the Certified Management Consultant
The CMC® is the Gold Standard that executives should take into account when hiring a management consultant
Earning a CMC® is not easy; it can be likened to an attorney passing the Bar, an accountant receiving their CPA, or an engineer obtaining their PE license.
The prospectiv
I feel badly for those who have had unsatisfac
There was a play and a movie:
"How to Succeed in Business Without Really Trying"
Hm.
BZ.
So be careful what you reward.
One of the most interestin
One of the things companies that lay people off in droves forget is that most companies have 'collectiv
I've seen many, many companies that would have been far more prosperous if they redirected the money they spent on consultant
Also, almost all management consultanc
The truth is, many companies have internal resources that are equally as capable, but don't get the money or time to do this work.
First, this phenomenon is attributla
Second, the belief that because you are paying top dollar for this 'talent' you are getting real geniuses. You are, in most cases, getting smart people but that does not mean wise and certainly doesn't mean experience
More to follow...
And then there were all of the "calling events" that managers and some customer service people have to conduct which is now daily. Where was the time for the customer? Where was the time for consistant business calls and results? Answer: There wasn't. The result? As the article states the result became low morale and decreased productivi
So let's sum up...who wins? The bosses. Who loses? The employee, the customer and ultimately the stock holder. By the way, the stockholde
BZ.
It turns out that the people in the company with the most direct contact with the people with money to spend
, have the best ideas about what is working and not working in the company and have good ideas on how to improve the situation.
As a consultant I have learned to dress like the peons in the company, wander around and talk with them over a beer or soda, then carefully wrap their ideas in current jargon and present it with great flair to upper management who give me a nice check. The senior management could do the exact same thing by taking off their suits, putting on a knit shirt and some blue jeans and walking around.
Bill and Dave at HP knew this from the start and built a great company. Their only real mistakes were taking it public and hiring MBAs to run it. The MBAs soon became elitist and focused on the next quarter instead of what the customers needed. This is how Carly was able to almost completely destroy something that Bill & Dave carefully built.
It has been my experience that private companies are much better focused on the long term business than public companies that are only looking for next week's dollar.