Institutional Investor, January 1998
The Company They Keep
by Susan Webber
This reviewer belongs to a powerful cabal of management consulting firms,
having earned her stripes at McKinsey & Co. Her mission: To infiltrate
your organization, manipulate your thinking and empty your wallet. Talk
to her only if you're desperate.
If you're intrigued by that disclaimer, you will love "Dangerous Company:
The Consulting Powerhouses and the Businesses They Save and Ruin." This
book purports to be an insider's guide to the slippery business practices
of the consulting elite. Instead, it is rife with tired tales, and its
most explosive charges rest on skimpy documentation.
Tribune" editor James O'Shea and senior writer Charles Madigan mutter
darkly and frequently about the industry's pervasive arrogance
and its "drop-the-report, send-the-bill, run!" mentality,
as well as the consultant's natural impulse to overstep his authority.
But with this the authors merely parrot old complaints. When they do
present interesting research, they draw pedestrian conclusions. A comprehensive
study of consultant compensation, for example, leads to this lesson:
deploying junior staff maximizes profits.
O'Shea and Madigan fail to reconcile their dim view of consulting with
the successes they also describe (Gemini Consulting at Cigna Property
and Casualty Insurance Co., Bain & Co. at National Intergroup, Andersen
Consulting at Harley Davidson). Indeed, the portraits of the firms that
fill the book's pages often read like public relations handouts. As
a result, "Dangerous Company" seems schizophrenic, as it lurches from
stinging pejoratives to sweeping praise. O'Shea and Madigan cavil about
consultants' seizing control of a client's business but still want to
hold them accountable for results; they call for consulting firms to
share in their clients' risk and reward yet criticize Andersen for an
agreement that did just that, because fees were linked to personnel
The authors seem to have spoken to relatively few high-profile consultants.
This is surprising, since there is no shortage of big-firm veterans
who have moved on to smaller pastures and would be happy to cite chapter
and verse about former colleagues and bosses. Though the authors are
journalists themselves, they rely on the work of their brethren in the
business press. Inherently, then, this leads them to negative stories;
the saga of a productive consulting project makes for dull reading.
And so we hear at length about Figgie International, which nearly went
bankrupt as the result of a misguided modernization structured by consulting
firms. Led by a tight fisted tyrant who fired any employee who ever
had an original idea, Figgie was a disaster waiting to happen. O'Shea
and Madigan also focus undue attention on the industry's lawsuits, whether
they are familiar (Bain's role in the Guinness affair) or minor (McKinsey
& Co.'s sole sex discrimination suit).
In some cases, the book's factual errors seem to reflect the authors'
naiveté. They assert, for instance, that McKinsey teams cost
an average of $250,000 per month. But this "average" is an
impossibility. Teams at McKinsey vary greatly in size and seniority,
and their fees naturally reflect those differences.
To even the most casual observer, the leading consulting firms harbor
several serious flaws, but O'Shea and Madigan barely acknowledge them.
The industry's most pervasive problem is its high fees. The pressure
to land big-ticket projects is no mystery: major firms must support
large overheads, and revenues remain uncertain. Even consulting firms
a tier below the top ones will not accept assignments paying less than
$500,000. Consulting firms hope that last year's clients will keep coming
back for more, but management turnover or the mere absence of pressing
business problems means that new clients are always in demand. The constant
pressure to pull in revenues often leads consulting firms to work with
such corporate dinosaurs as AT&T Corp., whose executives may simply
not be up to the challenges facing them. In other cases, consulting
firms accept assignments that are poorly conceived or only perfunctorily
endorsed by senior management.
At the end of the day, the consulting firm's rent must be paid. The
sobering fact is that smart, capable CEOs make for less-lucrative clients
than their more lackluster peers. The real, and as yet unwritten, critique
of this industry would focus on the often compromised relationship between
consultant and client. Consultants frequently water down their advice
because, to paraphrase T.S. Eliot, bosses cannot bear very much reality.
This incestuous relationship sadly serves both parties