Inspired by a great post on why college students choose consulting I decided to re-post my series of posts on consulting, written in 2008 when I was considering a career in consulting. I was also looking to write a more focused series of blog posts so a blog on consulting was a good fit. Not knowing anything about consulting at the time, I also thought it would help me get a consulting job. Ultimately I decided not to do consulting and doing the blog was part of the reason why.
I looked at why people hire consultants, whether consultants actually have value, why it's a good decision for you personally. Here's the full list of posts:
Information transfers slowly; despite what economists say, firms aren't efficient and lots of times they can do things better. Consultants have expertise about how to improve management and become more efficient, and when this knowledge is shared/diffused to companies, everyone is better off.
The authors use evidence, and numerous case studies, to explain that financial incentive plans often don't work, developing a comprehensive long-term strategy isn't that important, most mergers only work under certain specific circumstances, and company culture can be more important than hiring the best workers. In each of these cases, studies have shown that the conventional wisdom is often wrong, and companies, schools or hospitals that implement evidence-based programs do better than those who don't.
I got the feeling that our clients were simply trying to mimic successful businesses, and that as consultants, our earnings came from having the luck of being included in an elaborate cargo-cult ritual.
A lot of your job as a consultant is selling your services and acting knowledgeable. Many people are stuck in Dilbert-like situations and will look at you as a knight in shining armor. For this you’re going to need to be friendly, personable, and high status; you’re going to need to sell yourself as an Answer Guy.
As Bob Sutton and Jeffrey Pfeffer point out, it’s a myth that the best companies are best because they have the best people. Usually the best companies have great systems that bring out the best in people.
A one standard-deviation increase in management correlates with a 38 percent increase in sales per employee...smaller firms with better management out-grow other small firms with bad management...better management is associated with improved health care outcomes, employee satisfaction, and energy efficiency...Managers are not well informed about how good their own management practices are and which areas need improvement.
Another experiment by the same group took a random group of textile firms in India and provided them with free management consulting. Not only did performance grow in the firms provided the consulting, but they also said the reason that they didn't implement the changes sooner was because they were not aware of good management practices.
I've often tried to help companies do experiments, and usually I fail spectacularly. I remember one company that was having trouble getting its bonuses right. I suggested they do some experiments, or at least a survey. The HR staff said no, it was a miserable time in the company. Everyone was unhappy, and management didn't want to add to the trouble by messing with people’s bonuses merely for the sake of learning.
There’s a selection bias at play...it’s likely that consultants provide firms with value in excess of the costs of hiring them. Smart firms realize this, and want to hire consultants. But because they’re smart firms, they’re probably ahead of the curve and consultants can only provide them with limited amounts of profitable advice. The firms that need consultants the most are unlikely to hire them.
Consulting firms can reliably signal authority and intelligence; bosses may hire consultants to confirm that they’re correct. To cite one recent example, the US Postal Service hired two consulting firms so that they could go to Congress and implement a restructuring plan.
I have seen some serious analytical firepower (maybe not always with quite the rigor of an academic paper but for sure at several orders of magnitude the pace those are developed at) being thrown at what originally seemed like simple problems – generally things turn out to be neither simple nor elegant in the end. The art of the trade is to come up with a coherent story in light of that.