The one-sentence summary

The consulting industry weakens our businesses, infantilizes our governments and warps our economies.

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WHAT THE BOOK SAYS

  • The relationship between the consulting industry and the way business and government are run must change. Our economies’ reliance on the big consulting firms stunts innovation, obfuscates accountability and creates the illusion of objective expertise to the detriment of the whole world.
  • The consultancy industry feeds off weaknesses in our economies, hollowing out clients in the process rather than helping them, and laying the ground for returning to do more work. This is a case of unlearning by not doing, in which companies and governments no longer gain or retain expertise to solve their own problems.
  • Accurately valuing the global market for consulting services is impossible because no one is mandated to document consulting spend but estimates range between $700-900 billion. Because the real value of consulting is very difficult to ascertain, the industry is mainly concerned with creating an impression of value.
  • The difference between the value they create and the wealth they take can be understood as economic rents. These rents don’t necessarily stem from the ownership of scarce valuable knowledge assets but from the means to create this impression of value. This has been referred to as consultology, in which the huge rents accrued by consultancies match neither the value of its overall contribution nor the distribution of the risks.
  • A common tactic is to offer a loss-leading product such as audit services, thereby allowing consultants to embark on opinion shopping – taking a view on how clients want accounting standards expressed and using the latitude accordingly.
  • In the 90s, a range of governments in developed economies such as the US and UK elected to outsource many services to the market – the so-called Third Way espoused in a 1992 book called Reinventing Government. This called for government that “steers more, rows less.” The policy has been a disaster. In fact what is needed is a government that rows so it can steer. An example of this is the Private Finance Initiative (PFI) which reduced current government spending in the short term but left all the liability with the government.
  • The absence of an incentive to guard against risk because an organization won’t be affected by its consequences is known in economics as moral hazard. Consultancies get away with this, but it doesn’t happen in normal areas of business. On top of this, consultancy is not a protected profession and there is no universal accreditation for people who use the title.
  • A side effect of the brutal employment approach in consultancies based on the survival of the fittest is that they have huge alumni networks that invariably provide a conduit for more business.
  • Tools such as the Boston Consulting Group Growth Share Matrix are almost simplistic, and yet they spread like wildfire in the 1970s and are still used today.

 WHAT’S GOOD ABOUT IT

  • Neoliberalism is a theory that views the market as the sole creator of value in society. The role of the state is reduced to ensuring that the right ‘conditions’ exist for the market to function properly.
  • Most consultancies cut and paste general slides from other work and thus do not pass on specific and deep knowledge. They recycle slides rather than impart real expertise.
  • They develop quasi-academic material by setting up academies, conducting research and putting out so-called thought leadership pieces.
  • Absorptive capacity is the degree to which an organization can gain expertise from advice that it is given. Many governments and companies have contracted so much out that they no longer have this ability, so they call the consultants again.
  • Consultancies are notorious for playing both sides. They often have staff performing roles for their clients. In the most controversial cases, they have funds that invest in their own clients – a clear conflict of interest that they usually get away with. These are often referred to as vulture funds.
  • A New York Times investigation revealed that McKinsey has advised over 43 of the world’s hundred biggest polluters. Perhaps astonishingly, consultants have used ESG frameworks to help clients to resist accountability. Whereas their purpose should be to encourage responsible approaches to environmental, social and governance issues, by flooding the market with hundreds of options, they create an impression of standards where there may be none. This is described as a veil of commitment without a mandate for action.
  • The authors offer four recommendations:
    1. A new vision, narrative and remit for the civil service which rebuilds capabilities in the public sector.
    2. Invest in internal capacity to attract competent and curious individuals.
    3. Embed learning and a clear endpoint into contract evaluations.
    4. Mandate transparency and disclosure of conflicting interests.

WHAT YOU HAVE TO WATCH

  • Not much. The three-way meaning of con isn’t completely evident – meaning variously a confidence trick, an abbreviation of one as a con, or an abbreviation of consultancy.