What is Consultancy?

The definition of management consultancy is no minor problem. The Management Consultancies Association (MCA) in the UK defines the role as:

“…the creation of value for organisations, through the application of knowledge, techniques and assets, to improve business performance. This is achieved through the rendering of objective advice and/or the implementation of business solutions.”

Yet, many consultancies would disagree with the latter four words in this definition and, indeed, some strategy consultancies have refused to join the association because they feel consultancies should only advise, but should not “do”. If effect, this distinction marks the difference between the strategy consultants (McKinsey, Bain, BCG et cetera) and the implementers (such as CapGemini, IBM and Accenture).

This distinction allows us to break-down a project lifecycle into four phases. This is illustrated by a food manufacturing company:

  1. Problem Identification – Profits have been declining for five years. An analysis of corporate finances shows that this is primarily down to increases in variable costs, especially in raw ingredients.
  2. Researching and recommending a solution – An analysis of the industry shows that this is a common problem, but that size (scale) is directly correlated to a reduction in costs. It is recommended that the company expands. After an analysis of the different options, North America is highlighted as a priority and a takeover of a local company is recommended as more cost effective than transplantation.
  3. Helping implement that solution – The consultancy uses their financial experts to help structure an attractive deal to the target’s shareholders and their legal experts to negotiate a suitable contract.

Now, a strategy consultancy, that would focus on steps 1 and 2, would argue that step three generates a conflict of interest. How can a client expect independent advice on a solution if they have a solution ready to sell? Yet, for many consultancies, the implementation phase is simply too lucrative to ignore.

What is Management Consultancy? from Joe O'Mahoney on Vimeo.

Thus far, we have focused on a very functional view of management consultancies. In the critical, academic literature, less charitable opinions regarding the core function of Management Consultancies. These include the charges that:

  • they are political agents, engineering discourses into institutionalised messages, aiding and abetting the political thrust of the day.
  • they are “fashionistas” who pander to management insecurities by selling security in the form of management fads.
  • they are conduits for spreading capitalism into the developing world, re-inforcing the ideology preferred by the major commercial powers.
  • Regardless, consultancies are an increasingly prevelant feature on the organisational landscape – for any future manager, understanding their purpose and role is vitally important.