Do the big names in the consultancy industry only stand for big scandals?
The consulting industry is once again the focus of criticism.
KPMG settled the 1.3 billion misconduct lawsuit in the Carillion audit. During the opioid crisis in the USA, McKinsey settled for half a billion in out-of-court compensation. Deloitte paid over £900,000 following misconduct concerning the audit of SIG. Bain Consulting has been banned in the UK for several years and cannot participate in any public tender due to Bain’s conduct in the South African corruption scandal. Looking at the history of Accenture or Andersen Consulting and their activities in destroying investigative material for the SEC in the Enron scandal, one question quickly arises: how can such scandals be prevented, and what can your organisation learn from this?
One rule must always be considered: generalisations do not help. Many people in these advisory organisations are intelligent and deliver excellent work. In addition, the most important mandates always carry the highest risk. It is, therefore, necessary to deal with the matter in a differentiated way.
However, some aspects still need to be improved when looking at big consulting firms.
1) Non-diversity. The consultancy business is white. As bitter as this sounds, the reality is unambiguously clear. Even though more efforts are being made to present a different image and become more diverse, especially in externally visible positions, the data shows that the majority is white and from privileged academic family backgrounds. Non-diverse teams make poor or worse decisions.
2) Toxic work culture. Working hours are still beyond any average comprehensible amount of hours. Do you want to receive advice from people who cannot make a clear decision anyway due to lack of sleep and, therefore, mainly present you with standard solutions that were previously sold to other clients? The principle of long working hours and the approach to present this as positive behaviour is a long-standing problem.
3) Use of staff without experience. People are still being sent directly from the training institution, usually a college or university, into the consulting world. How this is remotely possible cannot be explained. Those who do not have real-world work experience and the corresponding practice cannot tell other people which actions to take. The resistance that often exists in organisations is understandable. Replacing substantial knowledge and experience with self-confidence is just as ineffective as it will fail.
In addition, there are aspects such as so-called “political mandates”, a kind of pseudo-consultation in which the client clearly outlines the desired outcome of the consultation (practical examples and more here in this week’s podcast; see link below).
To solve the problems mentioned, comprehensive steps are required, which are challenging to implement. Especially on the client side, however, it is crucial to ensure that these aspects are fulfilled. Otherwise, there is a high risk of not receiving an optimal consulting result.
Make sure that at least the following essential aspects are fulfilled:
1) Consider educational biographies. Not all people start with the same background, opportunities, and possibilities. A person who worked their way from a precarious milieu to a Bachelor’s degree achieved more than those from a privileged background who earned a Master’s degree in their early or mid-twenties. Moreover, achievements are possible in many ways. It is not without reason that, e.g. in Germany, specific entrepreneurial craftsmanship qualifications are not considered equal to a bachelor’s degree. One aspect is obvious: nice-sounding labels say more about social upbringing than about someone’s skills. As the author of these lines, I hold Harvard, Yale, and MIT qualifications. Nevertheless, recognising educational biographies is the better choice.
2) Sustainable work culture. Make it clear that you work in a goal- and results-oriented way. If you believe that the usually high daily rates of consultancies must necessarily be associated with extremely long working hours, you become part of the problem. Define goals clearly, and equally pay attention to measurable (KPIs, Key Performance Indicators) and soft factors (CSFs, Critical Success Factors).
3) Real-world experience is essential. Consultancy cannot be based purely on theory. Even if a quite large amount of knowledge can be applied across industry sectors (this is where the interdisciplinary exchange in the professional environment happens), real-world practical experience in the working environment cannot be replaced by theoretical training. Ideally, you should seek advice from people who are not only familiar with other countries not only through short-term assignments but have also gained international experience through relocation and social integration there. The person's diverse background or curriculum vitae is crucial for delivering high-quality consultancy.
Considering these aspects, you can assume you will not be part of a big disappointment with a high bill. One principle always applies: Diversity and practical experience combined with an excellent level of knowledge are the keys to an outstanding, valuable and highly implementable advisory service.
More on the topic of excellent consulting and leadership in this week’s podcast: Apple Podcasts / Spotify.
Do you care about the topic of excellent consultancy and leadership?
Let’s talk: NB@NB-Networks.com.
Feel free to network: Niels Brabandt on LinkedIn.