Management consulting firms aren’t quite the intimidating, marble-atriumed fortresses of privilege they once were. The twin Big Bangs of the digital revolution and the rise of SMEs has meant that even the Deloittes, McKinseys and KPMGs of the world are now adopting more inclusive, flexible business models. So here are the $139bn questions worth knowing the answers to (that's the global cost of management consultants last year, by the way).
First off, what is management consulting?
The Guardian Jobs section puts it in a nutshell, “Management consultants help businesses improve their performance and grow by solving problems and finding new and better ways of doing things.” This could include anything from helping you respond to competitive threats, increasing your profit margins to re-structuring your business. Check out our Management Consultancy 101 guide to see what hiring a consultant usually entails.
It obviously doesn’t make sense to pay someone to solve problems that you could solve yourself. So before you get a management consulting firm on speed-dial, it’s worth making sure that you have your house in order. Are your finances in good shape? Are you happy with your board? Do you have all your key personnel in place? You want a consultant to bring something fresh to your enterprise rather than having to start by untangling your basic business issues.
The Big Three management consultancies (McKinsey, Bain & Company, and Boston Consulting Group) have been joined by the Big Four accountancy firms (PwC, EY, Deloitte, and KPMG) – these heavyweight number-crunchers now offer a wide range of business consulting services, putting them in competition with the traditional management consultancies. But the 'Big Seven' isn't the only game in town.
As the SME market has expanded, an array of smaller, more niche consultants have risen up to meet their needs. Plus, the sheer number of people who’ve passed through the hallowed halls of the Big Three means there's now a vast amount of brainpower to plug into if you want to take the more affordable independent adviser or internal consultant route. Even the biggest names are seeing the value of flexibility these days. McKinsey are now working with smaller businesses and taking a stake in their companies instead of charging a fee.
Bringing a management consultant into your business is a bit like handing over your baby to a stranger. So you have every right to be picky, fussy and downright interrogative. Here are some factors to bear in mind: The chemistry test. These are people who might be in your life for quite a while, so if you find yourself consulting your watch multiple times in the first meeting, it may be best to add them straight to the ‘No’ pile.
Check the track record. Has your consultant consistently made a difference to clients’ businesses? Can they demonstrate a direct role in their clients’ successes? Dig deep here. For instance, a firm like McKinsey could rightly claim to have helped the Dutch government facilitate a turnaround for Hoogovens, the world's largest steel company. But they might be more reluctant to talk about their involvement in the collapse of Swissair and Enron.
A question of courage. Does the company you’re talking to say the right things and seem like they won’t rock the boat? Or do they seem like the kind of people that have strong convictions that they’re ready to stand up and fight for? It’s not just a popularity contest, it’s about finding someone who might have to help you make some tough decisions down the line.
Experience counts. But not just any old experience. We’re talking about finding people who have direct experience working with businesses your size and understand the very specific challenges you face. Consultants throwing large, corporate-style teams at smaller businesses has proven to be a costly mistake in the past (described to us by one insider consultant as 'land and expand'), as small business champion Ron Tester found out: “I once hired a consulting firm dripping with MBAs. I figured these guys were masters of the universe. The problem was NONE of them had done enough consulting in businesses like mine to offer me real helpful advice.”
To understand this better, we’ve cherry-picked some key techniques directly from the consultants’ playbook:
Way back in 1906, an Italian thinker called Vilfredo Pareto observed that only 20% of his pea pods produced 80% of his peas. Years later, he might have been surprised to learn that findings had become a guiding business principle. Consultants now vigorously apply themselves to finding the 20% of their clients’ business that yields 80% of their profits.
Plain common sense really. Look at the most profitable parts of your business and see how you can replicate their success. Then look at the least profitable parts of your business and see how you can fix them.
A management buzz-phrase that sums up consultants’ approach to data analysis. Rather than crunching an enormous amount of data, consultants will focus on the data that proves or disproves their key insights into your business.
The disruptive power of tech has been a wake-up call for management consultants. Many startups and smaller businesses are using predictive technology and big data analytics to deliver insights and solutions faster than any consultant could. And as the influence of SMEs grows, consultants are having to think about smaller clients as well their more traditional, high-value clients. As Edward Haigh, a director at Source Global search puts it, “This is forcing consulting firms to think about how they can address both markets, which is necessary if they’re going to capture a share of the lucrative digital transformation market. This then leads to discussion about the consulting business model, pricing and brand architecture.”
Arrogant? Formulaic? Eye-wateringly expensive? There’s no escaping the fact that management consulting firms have an image problem. Something that even the top brass at some of the biggest firms are willing to acknowledge. Here’s Marco Amitrano, UK head of consulting at PwC: “We need to adopt that ‘fail fast’, agile mentality that is seen to work so well in small businesses. We can often have low acceptance of failure and end up valuing accuracy over creativity. It’s important to recognize this as a barrier to reinventing the way we operate, develop our people and, ultimately, provide our clients with greater value.”
Smaller businesses are still right to approach management consulting firms with a degree of caution. There’s simply too much history for that to be resolved overnight. But there’s no doubt that SMEs and consultants are now having more open (and equal) conversations than they’ve ever had before.
This leaves you with a choice to make. Do you bring in an external management consultant or find your own path to organizational success? To help you make the right decision, you need to read the right guide – 'Management consultancies: For and against' is all you need. You can read it here.