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Consultants - The Changing Role
The management consulting industry is in an interesting position - 'interesting' in the slightly ominous Chinese interpretation of the word. For all the emboldened optimism among sector analysts there is also a fair portion of sceptical caution. At the very least, it is difficult to completely fathom just quite how the current sector zeitgeist has come to exist when such a myriad of dipolar forces are in play. By Lynda Purser of IBC and Dominic Moorhouse of Moorhouse.
The US and UK economies appear to be booming, confounding many who continue to highlight the rather shaky economic fundamentals. Was it really only last summer that people speculated on the rather gloomy prognosis of mixing together an edgy stock market, rising oil prices and increasingly fragile governments in the US and UK?
Similarly, investments in management consulting, IT consulting, outsourcing and off-shoring services are all on a continued rise despite this delicate economy; the lack of the current 'big thing'; and the growing proclivity of organisations, at least in lip-service, towards developing internal 'change agents and capabilities'.
As always, many other factors further befog this analysis. Increasing regulation in the financial and public sectors, 'flat world' technologies, heated merger and acquisition activity, and good 'old-fashioned' efficiency drives continue to fuel the demand for professional advisory services.
In the UK, the public services reform agenda, coupled with the effort, spawned by the Gershon Review, to simultaneously find £25 billion of civil service savings by 2008, has ensured that the public sector remains a dominant demand factor. Such ambitious objectives, especially when they include such radical down-sizing targets, invariably draw heavily on finite specialist business management skills and capabilities. While a focus on consulting value is the taxpayers' imperative here, coupling bland desires for aggregated consulting input with concurrent cries for slashing its cost are a little naive.
The supply of management consulting services remains a highly consolidated market. As illustration, the top 14 revenue-earning management consulting firms in the UK capture approximately 75-80% of the entire market. At the other end of the spectrum is a proliferation of smaller 'niche' players. Many of these gestated in the fledgling market upturn of 2003 - which has continued apace until the current date. The contrast between the 'Big Firms' and the upwardly-mobile, specialists makes for an intriguing dynamic.
As the founder of Moorhouse, Dominic Moorhouse, notes, his practice, an example of the specialist category, is a case in point. Focusing on advisory services in programme and project management, Moorhouse recruits solely among experienced consultants formerly with 'Big Firms' and is able to undercut their commercial offerings. Phil Carr, a Moorhouse consultant, says that 'We are increasingly observing a client nervous of the Big Firms; maybe they have been bruised by a “land and expand” experience or are just very conscious of the price premium demanded. In the case of global transformation, you are necessarily constrained to these firms, but at a national level, where the vast majority of consulting procurement takes place, better value can undoubtedly be derived from smaller firms.'
This sentiment appears to be matched by buyers, more of whom are increasingly sceptical of the 'one stop shop' offering and seek, rather, to develop 'ecosystems' of advisory support, with client staff at the centre and carefully selected specialists placed around them – working in collaborative programmes. These are especially powerful set-ups when run as carefully structured, controlled and assured change programmes, aligned closely to corporate objectives. By dint of size, smaller firms will typically be more agile and receptive in such arrangements.
Dominic Moorhouse's view is that it is important not to get too carried away by this train of logic. Many of these 'Super Firms' are likely to get even bigger, fuelled by avaricious global accountancy practices and the recent demise of a number of key non-compete arrangements – for example, Ernst & Young's clean departure from Cap Gemini.
Some commentators speculate as to the impact this will have on the industry; if the outlook remains strong, there will no doubt be an increasing spate of niche firm acquisition. Smaller firms that grow into the perilously empty middle ground of the sector, retaining strong brand, niche and cultural identity, will be either admirably value-centric or will be in danger of the same level of hubris for which they often criticise their 'Big Firm' brethren. Time will tell.
For CEOs of firms with the potential requirement for such services, the good news is that there now appears to be a legitimate and broadening choice of advisory firms – with scale only being a predominant factor in a minority of instances. Client 'savviness' in relation to the use of consultants has definitely improved of late, partly because of the rise of the procurement professional and a greater focus on harnessing framework contracts to deliver value. This is all commendable, though the movement warrants some counter-balance; in some organisations, the focus on input 'cost' has totally displaced the evaluation of outcomes and benefits.
Essentially practices well suited to rationalising contracts for water cooler refill are applied zealously to advisory service provision. Moorhouse believes that if anyone ever thinks they 'have won' in terms of overly aggressive price negotiation in this area, they are deceiving themselves. Some of the recent large-scale IT contract negotiations in the UK public sector are a case in point.
It is fair to say, however, that there is still a lack of sophistication in relation to the selection and management of consultants and measuring their value – all resulting in tactical, short-term engagements. In the worst cases, this can extend to management consultants being 'body-shopped' into interim roles. Bob Hendicott, a director at Moorhouse, believes that 'neither client nor consulting firm benefits in such an arrangement. Genuine consulting continues to be about supporting a client through a sustainable business change. The old days of the standard “cookie cutter” approach are over. Today the focus is on gaining a greater understanding of the client's unique circumstances in order to develop solutions that meet the specific nature of their challenges – demonstrably drawing on best practice.'
Daniel Muzio and his co-worker Elena Antonacopoulou, leading the Cabinet Office research into the relationship between consultancy and competitiveness, have recognised that given the number of consultancy projects which fail to live up to expectation, procurement will increasingly attract attention. They believe that professional credentials are only part of the answer to poor procurement outcomes. They believe it is also crucial for clients to engage more effectively with consultants throughout the project, and to develop more sophisticated procurement techniques and processes.
This would imply, for instance, further emphasis on the co-production of knowledge and on being able to demonstrate the link between consultancy interventions and value generation. IMC is addressing the need to improve the way consultants manage clients through a new service that will be launched very soon.
IBC is the professional organisation for professional consultants. It believes that there is an urgent need to establish professional limits and to maintain these through independent objective endorsement of professional standards, both in ways of working and in competence to do the job. Lynda Purser, its Director, believes IBC can only provide the necessary framework if it is robust and suitable for the profession's needs – 'It is then up to the profession to drive its application in protecting the profession's position with its clients and with the public'.
Lynda Purser is Director of IBC.
Dominic Moorhouse is Managing Director of Moorhouse.
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