Consulting is the ultimate business. Negligible start-up costs, healthy profit margins, and no real requirement of expertise; the industry is bereft of substance, and, as the authors of "The Big Con" posit, is built upon a series of contradictions. Despite this, consultancies have only grown in power and prestige with the neoliberal policies of the last 40 years. Combined with the rise of the managerial class and the ideological takeover of nigh-on all fields by hyper-rational empiricism (what some might call professionalisation), it is little wonder that the likes of McKinsey, Bain, and BCG have enjoyed such enduring growth.
While calling the entire industry a 'confidence trick' is somewhat reductive, it's not wholly inaccurate. Speaking from personal experience,1 there is a disconnect between what consultancies sell and what is delivered. Mazzucato and Collington bring up several high-profile examples, including disastrous advice doled out to Puerto Rico by McKinsey, various COVID measures outsourced by central governments, and the corporate vapourware delivered to the French public sector. Clients are promised expertise, but more often than not are receiving fresh-faced graduates whose main claim to fame is that they have access to the McKinsey intranet. It is little wonder that many of these projects fail to deliver on their lofty promises.
EY Wellington. Photo by Liam Coley.
The thrust of the book is that the actually-existing consulting industry is, at best, an ineffective and parasitic rent-seeker. At worst, it destroys capability, siphons value, and leaves the client organisation a broken mess.
If you give a man a fish, you feed him for a day, but if you teach a man to fish, you've lost a customer.
James O. McKinsey, probably.
These issues with the consulting industry are somewhat intractable, because they are consequences of the very incentive structure upon which consulting is built. More specifically, consultancies are a twist on the Agency Problem.2 The majority of the problems Mazzucato and Collington list (ineffectiveness, the selling of unnecessary projects, the faux-academic rationalisation of recommendations) all arise as a consequence of the simple fact that consultancies are profit-seeking entities, operating under capitalism.
The one criticism "The Big Con" makes that doesn't quite fall out of this incentive analysis is regarding organisational knowledge. The authors argue that, by using consultants, the firm loses out on the potential development of organisational knowledge which, over the long term, results in a loss of capability, continued reliance on consultants, and a lack of ability to maintain a sustainable competitive advantage in the market. While merely a negative side-effect to using consultants, if you take a dynamic capabilities view of the firm3 (as the authors appear to do), it becomes clear that this is a serious issue, and is at the heart of further criticisms the authors make towards the industry (namely the infantilisation of businesses, and the slow decay of the public sector). This is also a great example of the shortcomings of the hyper-rational empiricism that has infected the business world; there is incalculable value in a business implementing its own transformation; or designing its own strategy. But this is value that cannot be quantified (unlike a consultant's price tag). For a board, a known quantity is always going to be preferable to the unknown.
In actuality, however, cultivating and storing institutional knowledge is notoriously difficult. Mechanical step-by-step processes are simple enough to capture (though even then it's not a sure thing4), but not all knowledge is easily codifiable (so-called tacit knowledge), and not all codifiable knowledge is written down.5 Moreover, knowledge isn't knowledge unless it's in someone's head. In short, utilising consultants may inhibit the development of dynamic capabilities, but the creation and successful utilisation of organisational knowledge is not a certainty without consultants.
Mazzucato and Collington have pieced together a pretty scathing critique of the industry, but I struggle to place much blame for all of this at the feet of the consultancies. After all, they are simply doing what every firm is incentivised to do under capitalism - increase profits, reduce losses, and fly under the radar of regulators.
Despite the industry's track record, I'm convinced that there is a place for the consulting industry in the wider market. Sometimes things are complex, and the advice a consultant provides can be invaluable. Sometimes a project doesn't warrant the addition of temporary full-time staff. Sometimes the C-suite just need a scapegoat (or a justification for what they wanted to do anyway). Consultants can fulfil these needs. What's needed, particularly in the public sector, is a greater understanding of the trade-offs, more clarity on outcomes, and a deeper appreciation for what consultants can and can't do. They're not a silver bullet, but nor are they a foot gun.
References
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Hutchinson, L. (2013, April 15). How NASA brought the monstrous F-1 "moon rocket" engine back to life. Ars Technica. https://arstechnica.com/science/2013/04/how-nasa-brought-the-monstrous-f-1-moon-rocket-back-to-life/
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533. https://doi.org/10.1002/(SICI)1097-0266(199708)18:7<509::AID-SMJ882>3.0.CO;2-Z
Footnotes
Almost my entire working life has been in consulting, including an internship at EY in their technology consulting division and as the first employee at a niche Amazon consultancy ↩
The agency problem arises from agency theory, and simply states that the incentives for the principal (in our case, a client organisation) differ from those of the agent (the consultant). Where those incentives are opposed we get the agency problem. ↩
The dynamic capabilities view of the firm is often contrasted with Barney's (1991) Resource-Based View of the firm. Barney sees competitive advantage as arising from the unique mix of resources within a firm (where those resources that are valuable, rare, inimitable, and utilised by the organisation provide the firm with a sustainable competitive advantage). Teece et al. (1997) instead see sustainable competitive advantage as arising from a firm's ability to "create, extend, or modify" its resource base, such that short-term competitive advantages can be leveraged over time into longer-term competitive advantage. ↩
One particularly famous example is that of NASA 'forgetting' how to build the engine that powered the Saturn V (Hutchinson, 2013). ↩
Although easily codified, 'shadow' organisational structures are rarely put into writing, this kind of knowledge transfer instead relies on peer-to-peer transference. Organisational culture as-it-actually-is is another example (eg. lip service may be given to valuing work-life balance, but the expectation is actually that one must work late nights and weekends). ↩