Why outsource the things that matter most?
It’s time to break the external advice addiction.
In boardrooms and air-conditioned offices the world over, the upper echelons of private and public organisations have a secret hidden in plain sight. They are hooked on the drug of external advice. The compulsion to outsource is prodigious, and the dependency on outsiders runs deep.
For some organisations, this has become a class-A addiction. Management Consulting is a multi-billion dollar industry (an estimated $20bn market in Australia alone), with big organisations spending eye-watering sums of money as they invite the likes of McKinsey, Bain, Deloitte and Accenture to take up long-term residence.
Call the consultants
When faced with uncertainty, it’s understandable that business leaders seek out experts in the hunt for answers. Whether navigating waves of change, seas of complexity or uncharted waters, many execs are quick to place bets on external advisors over internal teams. In reality, the urge to ‘call the consultants’ is not simply a case of low confidence in internal capabilities, but an impetus to see fast results, a precaution against disruptions to the ‘business-as-usual’ machine, and a belief that external consultants have uniquely valuable perspectives by virtue of being outsiders. The value placed on consultants — perceived or otherwise — is high.
Accordingly, as businesses and governments navigate cycles of prosperity and austerity, they call upon external experts for help with every facet of organisation management; from root-cause analysis and growth strategy, to scenario planning, restructuring and digital transformation. When the consultants are brought in they provide a steady stream of insights, strategies and solutions which quickly become the lifeblood of an organisation — and an unhealthy dependency if left unchecked.
This is not new news. It’s well over a century in the making. However, a flurry of investigative journalism in recent years suggests the hidden costs of consultant involvement can often outweigh the lauded benefits of contracting their expertise. Incendiary books such as ‘The Smartest Guys in the Room’, ‘The Big Con’ and ‘When McKinsey Comes to Town’ have set out to expose the impact of destructive practices, conflicts of interest and short-termism that sits at the heart of some of the big consulting firms. The authors have put the industry’s self-serving model under the spotlight and raised the question: how do organisations break the addiction of external advice?
Nonsense! I hear you say. Getting the experts in and outsourcing wicked problems is just the way modern business is done. In fact, it’s just good practice, right? Consultancies are packed to the gunwales with highly specialised strategic, technical and creative folk: people with a breadth of perspective and a wealth of expertise that businesses just don’t have. Access to such talent and wisdom is worth its weight in gold. Granted, consultants can be impactful, I daresay essential in some contexts. Not least when organisations need to navigate specialised technical domains such as design and technology — especially when these are not central business activities. There’s no doubt that outsiders can also bring a big injection of objectivity and brain power. External experts with clear eyes, fresh perspectives and unencumbered thinking can smash through entrenched corporate myopia. But relying on consultants to solve fundamental business challenges over the long-term is very much like taking a drug — it’s addictive, and it can have serious side effects.
Fetishised problem solving
When it comes to matters of strategy, the MO of consultants has always been to dive in and solve the problem. Take the brief, take the challenge away from the client, mine the research, reference best practice, and make emphatic recommendations. The ability to wrestle with complexity and table the ‘perfect’ solution is part of the consultant’s DNA — problem solving prowess is worn like a badge of honour. But the ‘at-arms-length’ consulting model often fails to take into account the unique needs and culture of individual companies. Consultants lack the intimate knowledge of a company’s inner workings or contextual market nuances. As a result, recommendations that look great on paper frequently fall over at implementation. What’s more, when a handful of experts take the problem away in order to go all-in on the solution, there is a big opportunity cost. The value of the journey is lost. The organisation misses the chance to build tacit knowledge, to iteratively explore possibilities, to learn by doing, and gather invaluable experience along the way.
As Mariana Mazzucato stated in her books ‘ The Value of Everything’ and ‘The Big Con’, this dependency on Consultants is effectively ‘hollowing out’ private and public organisations. By assuming the role of de-facto problem solvers and taking over critical decision-making functions (e.g. strategy, management, and innovation), consultants take valuable knowledge with them when they leave, leading to a loss of expertise within the company and a reduced ability to compete in the future.
“The practice of ‘hollowing out’ businesses through excessive reliance on consultancies can undermine the ability of companies to create value over the long term.
— Mariana Mazzacato, The Value of Everything
A heavy reliance on consultants can not only create a divide between a business and its core challenges — arguably a symbiosis that’s encapsulates the very essence of being in business — but also risks squandering its biggest asset: its people. External experts can undoubtedly add value in many aspects of business, but organisations can put themselves in a precarious position if they rely entirely on consultants to provide answers to existential questions such as ‘how to stay relevant’ and ‘how to innovate’ — perennial challenges that businesses must continually wrestle with throughout their lifespan. So who else should be tackling such questions? Elementary, my dear Watson: it should be the people inside the business.
Building from the inside out
In his acclaimed book “The Lean Startup,” Eric Ries argues that building internal capability is the key to creating sustainable businesses. Ries writes that, “A startup that seeks to outsource core functions, like product development or sales, is like a farmer who hires someone else to sow and harvest his fields. It’s not a viable business model.” This same logic applies to established businesses and governments — if they’re outsourcing critical functions to consultants, they’re not building the internal capability they need to thrive in the long term.
“Sustainable growth is characterized not by knowing the future, but by being able to learn from what has already happened”
— Eric Ries, The Lean Start-up
To rely less on consultants, it’s vital that organisations foster a culture of innovation and change-making from within. This means enabling employees — individually and collectively — to take risks, experiment and be creative with their everyday tasks. Companies need to prioritise long-term success over short-term gains, and they need to be willing to take risks and pursue bold, game-changing innovations. It is only by doing so that they will be able to stay ahead of the competition and thrive in increasingly volatile marketplaces.
And the consultants?
It might sound somewhat contradictory, but it turns out consultancies can add the most value when they focus on increasing client independence, particularly when it comes to matters of strategy and innovation. To achieve this, consultants need to change their spots, and work in a way that works out better for client organisations over the long term.
It’s time for the outsiders to switch into a new mode and shape a new era of consulting. In this era businesses prioritise internal capability, giving ownership back to their workforces to think critically and creatively, and forge change themselves. For consultants, this means their value will not simply be in bringing an external view, but in stepping back, navigating, educating and coaching. Rather than delivering gigantic powerpoint decks after lengthy formal engagements, consultancies have an opportunity to collaborate hand-in-hand with their clients and build new capabilities as part of the process. They can help create the conditions for leaders and thinkers to come together. To inspire them to deconstruct the status quo, discover new opportunities, iterate from within and make bold decisions.
The good news is, change is already afoot. A groundswell of new players is emerging with radical new approaches, a new guard hell-bent on helping clients to help themselves. Their emergence will undoubtedly pave the way for more — acting as the catalyst that breaks the dependency cycle, reducing organisational reliance on traditional consultancy services. The practice of guiding teams to make their own breakthroughs is one that invariably leads to better outcomes. And for a consultancy — in our experience at least — the knowledge that you’re not only fixing things but fostering sustainable value creation beats the fleeting high of being lauded as a lone problem solver, hands down.
Thanks for reading.
