Carmine Di Sibio, global chief executive of EY, announced his retirement this week after the failure of his effort to split the accounting and consulting firm in two. “We challenged the status quo, we asked tough questions and we were bold in our ambitions,” he declared. That’s one way of putting it; another is that it was a fiasco.
Di Sibio’s attempt to free EY’s enormous consulting business from being lashed to accounting was blocked by its rebellious US partners. It is not the only recent setback for consultants. Big firms including EY and Accenture are cutting jobs, and surveys have found that only half of their corporate clients think that their work is worth the enormous sums that they charge.
Somehow, I’m confident that consultants will have the last laugh. Despite scandals involving firms such as McKinsey & Co, and the resentful mutterings of companies that believe they could do more themselves if they had the time and the people, consulting is a spectacular growth business. It spreads faster than Japanese knotweed and is equally hard to eradicate.
Consider Accenture, the consulting firm that is now investing $3bn in data and artificial intelligence, and is busy flogging “Total Enterprise Reinvention”. It is also cutting 19,000 jobs but that is a trifle in the sweep of history. It employs 738,000 people (nearly three times the figure of a decade ago) and has a market value of about $200bn.
Management consulting (or “management engineering”) was once dominated by elite advisers from partnerships such as McKinsey and Boston Consulting Group, who examined clients for a few weeks, told them how to refocus, and then departed with their fees. These days, it spans everything from reshuffling management to designing software and running call centres.
It remains a bit of a mystery why consultants have become so integral to business and how many companies might simply collapse if the outsiders left and took their stuff with them. What was dubbed “the world’s newest profession” two decades ago has not only matured but taken over.
A business leader with whom I spoke this week offered one reason: “I’ve never seen so many CEOs stressed by their business models. I’ve never known a time of so many institutions thinking, ‘The glory days are behind us’.” When everything, from technology to supply chains and the environment changes so fast, they grasp for solutions.
That makes them ripe targets for consultants promising to help them change (or “totally reinvent”) themselves rapidly. Mariana Mazzucato and Rosie Collington argue in their book The Big Con that this leads to abuse: consultants are like therapists using patients’ vulnerability to “create a dependency and an ever greater flow of fees”.
That is no doubt true in some cases, but companies are run by consenting adults and it would have to be the world’s greatest con trick to explain fully the rise of consulting. The more unsettling explanation is that many companies (and public sector bodies) really do need consultants to infiltrate their operations from top to bottom.
They ought to be able to do some of it themselves. Even firms such as McKinsey, which has grown to 45,000 employees, shifted long ago from purely giving strategy advice to helping businesses put it into practice. You would have thought this was unnecessary, but such is the confusion, bureaucracy and internal rivalry at many companies that they have to be led.
“It is just extraordinary how incompetent a lot of companies are at this stuff,” says one consultant. “I did a strategy review for a client, who said they would implement it themselves. I came back six months later to see how it was going and it was a total shambles.” The result is that consultants spend a lot of time hand-holding big businesses.
But there are other changes that companies, no matter how well run, have little hope of pulling off alone. Many involve technology, from moving to cloud computing to designing apps, and now adopting AI. They find it impossible to recruit skilled software engineers fast, and are forced to turn to consulting firms that employ thousands.
“I hire plumbers to mend my boiler even though they charge a lot,” says Fiona Czerniawska, chief executive of the research firm Source Global. “I could learn to do it myself, but it would take a long time and I would be cold.” The faster technology changes, the more reliant companies become on contractors offering ready solutions.
Technology was at the heart of the plan to divide EY: its consultants wanted to work alongside cloud computing platforms such as Google and Salesforce, but were barred by conflicts since many are EY audit clients. The firm’s new leader will have to find another way to ease the tensions, short of setting loose its consulting arm to chase Accenture.
I would not bet against the consultants winning eventually. What used to be a small profession has become a very large one and the more disruption there is, the more its prospects expand. The only way to stop it is for companies to learn how to run themselves.