Yves here. A new book, The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies, Mariana Mazzucato and Rosie Collington, proves a thesis I have long believed but didn’t have enough evidence to argue: that management consultants set out to create client dependence, which results in them becoming less rather than more capable. I joked back when I was at McKinsey that the business model was to invade at the fingertip and go for the brain.
At least as this post describes the book, most of the examples come from disastrous assignments for governments. That makes sense because they are far more visible than private sector train wrecks created or made worse by big consultants. For instance, how many know that one of the most disastrous mergers of all time, Time Warner buying AOL, was not just a brain child of McKinsey, and the firm was so eager to see it get done that it pushed the board to approve it on five separate occasions? As you might infer, the board managed to say “no” only four times.
Although I can’t prove it, I also hold big management consulting firms, particularly McKinsey, responsible for the spread and ultimately pervasive use of slide presentations, which dumb down thinking and analysis. When I came from Wall Street, the professional firm content Goldman consumed were memos, sometimes legal opinions, and of course deal documents from law firms, all in text for avoidance of doubt. I was shocked that McKinsey could get away with a slide deck as a finished client product, when it was inherently incomplete (additional discussion was inevitably necessary) and no one would be sure what it said in six months. I soon realized that was the point.
By Ong Kar Jin and Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
Greater government reliance on consulting companies has greatly enriched them while also undermining state capacities, capabilities, national economies, progress, governance and legitimacy.
The Big Con
Over recent decades, policy consultancy has gradually gained more public attention. With the COVID-19 pandemic, consultancies were paid billions, with meagre results, leaving even less for millions of others desperately struggling to cope.
In The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies, Mariana Mazzucato and Rosie Collington explain how consultancies persuade governments and corporations to use their services, with problematic consequences.
Many argue that governments and corporations need such expertise as they cannot be expected to be good at everything, let alone familiar with the latest trends and challenges. Others argue consultancies provide much-needed second opinions, especially when organisations have lost their capacities and capabilities.
The Big Con argues their clients rarely get what they most need. Heavy dependence on consultancies also compromises accountability and retards needed innovation. Consequently, governments allow their capacities and capabilities to deteriorate, with consultancy firms profitably filling the gap.
‘Voluntary’ Dependency
The Big Con provides many examples of problems arising from becoming “overly reliant on expensive contracts”. These include McKinsey’s role in France’s bungled vaccine programme, and Deloitte’s in the UK’s botched Test and Trace programme.
Consultancy firms have taken over many public services in France. The trend began in 2007 when Nicolas Sarkozy became president, promising to “make the French state cost-efficient”. His government gave 250 million euros ($269m) in contracts to management consultancies like McKinsey, Deloitte and the Boston Consultancy Group (BCG).
Under Emmanuel Macron, consultancy firms received 2.4 billion euros ($2.6bn) in government contracts in 2018. They have become involved in various public services, including France’s COVID-19 vaccine rollout and controversial pension reforms.
The UK spends more on consultants than all countries other than the US. Rather than have its National Health Service involved in its test-and-trace programme, ministers and civil servants turned to consultancies. At one point, over £1m was spent on consultants daily, with some ‘senior’ advisers billing over £6,000 per diem!
One consultant confessed, “It just seemed like every project had loads of wandering Deloitte people … the sheer volume of them that were around created the situation of these zombie emails just arriving all the time … taking our attention away from actual work.”
As its bankruptcy proceedings started in 2016, Puerto Rico hired McKinsey to advise a US federal oversight board. The team, led by recent US Ivy League graduates, was to prepare an ‘aspirational vision’ for the US island territory. Its recommendations included privatising state-owned enterprises, ‘rightsizing’ job cuts, and reducing social, especially labour protection.
While consultancies are often touted as involving experienced experts, most client governments, especially from developing countries, often host young graduates of reputable institutions, mainly adept at using the latest jargon and making impressive presentations.
Losing Capacities and Capabilities
Most governments have not tried hard to enhance their capacities and capabilities, e.g., to develop their public information and communications (ICT) or digital technology expertise. Instead, they ‘outsource’, depending on consultancies, even for sensitive strategic policy matters.
A book review suggests, “One also cannot help but gain the impression of the big consultancies as vultures, feasting on calamitous challenges like Covid-19, Brexit and climate change. Meanwhile, they pose as disinterested and expert helping hands.”
Management consultants are increasingly widely used by both governments and corporations, giving the impression of expert authority for mooted reforms. As a British minister noted, governments have been ‘infantilised’ by relying on management consultants.
The Big Con notes, “The more governments and businesses outsource, the less they know how to do.” Consultancies have eroded government and business capacities and capabilities. The presumption seems to be that clever young consultants, coming from abroad, know much better than experienced employees, and “knowledge can be purchased, as if off a shelf”.
So why have governments accepted all this? As the book’s title implies, successful consulting requires gaining customers’ confidence, e.g., persuading them that consultants have the answers, regardless of whether this is true.
Some decision-makers also simply want to be able to pass on responsibility for policy solutions, as it is generally politically easier to blame an external party, e.g., consultants, than to take responsibility. This is especially useful if policy recommendations are likely to be unpopular, e.g., involving downsizing or cuts.
Growing Con
The Big Con notes that a con gains momentum with seeming success. The authors argue the bigger the consultancies and their scope of work, the weaker governments become. As governments lose confidence in their own abilities, consultancies become the default solution.
Some governments have become so taken with consulting that they have set up ‘internal’ consultancy arms, e.g., Malaysia set up PEMANDU, PADU and other entities for this purpose. This is part of a wider trend of increasing corporatisation of public institutions to pursue ‘efficiency’.
Perhaps urged by major donors, the United Nations Development Programme (UNDP) has championed ‘entrepreneurship’, ‘impact investing’ and ‘accelerating social enterprises’ in recent years. It now has labs, team leads, and strategic innovation units, all spouting corporate buzzwords.
This turn reflects growing faith in what Daniel Greene terms the ‘access doctrine’, i.e., the belief that poverty and other social problems can be simply overcome by new technologies and technical skills, regardless of their complexities. Policymakers increasingly embrace and proselytise such technical fixes, ensuring consultants’ status as the cult’s new high priests.
Threatened by fiscal austerity and criticisms of being obsolete, public institutions increasingly embrace the access doctrine. They shift resources to foster ‘startups’ or ‘accelerating innovation’ to retrieve legitimacy and secure much-needed resources as public spending is threatened by fiscal austerity.
By redefining poverty as a problem of technology access, consultants reframe problems as seemingly more manageable for staff, politicians, other decision-makers, donors and others. The technological fix fetish has provided a powerful rationale for cutting social protections, replacing them with upskilling programmes and entrepreneurship ‘boot camps’.
Neoliberal Consultancies
With the counter-revolution against Keynesian macroeconomics and development economics, policymakers embraced ostensibly market and private solutions from the 1980s.
As state-owned enterprises were privatised, the public sector was expected to function like businesses. Governments embraced ‘performance-related pay’ and cost-benefit analyses to promote private sector values in the public realm.
After Margaret Thatcher became UK prime minister in 1979, her party chairman declared: “The management ethos must run right through our national life – private and public companies, civil service, nationalised industries, local government, the National Health Service.”
Such policies were mimicked in many developing countries, either for access to concessional finance or voluntarily, as the Washington Consensus gained hegemony in policymaking circles. The consultancy cult’s osmosis into public institutions in recent decades as well as its more novel recent iterations are their consequences.
The book ends with a call to change the role of consultancies, arguing they have caused the public sector to become less capable and innovative. Investing in public sector expertise will be necessary to retrieve the space ‘voluntarily’ ceded to ‘the big con’.