A symbiotic relationship: managers and consultants
Why do management consultants get so much money? Why do managers hire consultants? From my experience both as someone who did hire consultants and someone who was hired as a consultant, there are (beside lots of other reasons) three major reasons for hiring consultants. You hire consultants because
- you need people for a job (fast or temporary) but can’t hire them yourself (body leasing)
- you need special expertise (e.g. m&a) which you don’t have
- you outsource decision making and being responsible
The first and second are obvious, but the third one is the most interesting one I think and a major reason for the amount of money in the consulting business.
When your’re a manager, you have mostly two jobs: make decisions and take responsibility. Often you also have a budget. The best you can do now, is hire a consultant with your budget to make the decisions for you and also take the corresponding responsibility. What’s left for you to do? Nothing. Mission accomplished.
Say you’re an IT manager and want to buy a new CRM. You could either look into it, delegate due diligence and make a decision. After the CRM software fails you need to take the responsibility (if you can’t deflect it) and get fired.
Or you could take your budget, hire a consultant who decides for you what system to buy (or what product to build or what market to enter or which competitor to buy, it doesn’t stop with IT decisions). Then you tell everyone “Accenture told me to buy XYZ”. If the software fails, tell everyone “Bain told me so and they have the brightest people. How could I know better?”. This even works when you’re 15 years in the ABC business and the consultant is someone fresh from an ivy league school with no experience. Astonishing.
It also explains why the top consultancies hire the brightest people. Not because they need bright people for their projects. Most consultancies just resell their knowledge again and again, no bright people needed. But
- they have the money to hire the best
- their clients can fall back to the line “McKinsey has the best people. If they didn’t know XZY wasn’t right, noone could know!”
So this is a very profitable and symbiotic relationship between managers and consultants, which explains why manager outsource their core duties.
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Filed under: Consulting
What you say is true! I can’t tell you how often I’ve seen this happen in IT management. It’s the bane of my existence, the shrugging off of responsibility and decision-making. Look, when you hire a manager, you basically hire him to do one thing: exercise his judgment.
It’s as if people are content to fail just as long as it’s somebody else’s fault.
Not only that, but consultants are often corrupt. When you hire a consultant to pick your next CRM, chances are that he’s getting paid (not always in money) from a specific CRM vendor to push their product. I’ve seen this with IT managers as well. They get coddled by vendors, and rather than do what is most profitable for their company, they do whatever will keep the fringe benefits coming (and this is one of the main reasons why capping CEO salaries is a bad, bad idea). More often than not, the benefits they’re getting are something inconsequential and cheap anyway, like movie tickets and dinners at posh restaurants. But see, as long as they’re not buying it for themselves, they can’t be blamed for wasting money, can they?
The motivation behind that kind of thinking is like something straight out of Ayn Rand’s “Atlas Shrugged”. When the VP of Taggart Transcontinental suggests to her boss that they should get rails from a source that can actually deliver them, he replies:
“Orren Boyle will deliver that rail just as soon as it’s humanly possible. So long as he can’t deliver it, nobody can blame us.”
November 19th, 2008