As the consulting industry matures, its future is being shaped by concerns about standards of professionalism. Mark Law challenges clients, consultants and management scholars to work together to strengthen it.
Consulting can and, in many cases, does deliver great value to clients, their customers and the economy. Certain types of operational-improvement consulting often deliver return on investments exceeding 1,000 per cent (10 times the investment). Indeed, it could be argued that we owe a significant part of our standard of living to the success of investigative studies carried out for clients across the economy.
However, research indicates that fewer than 20 per cent of corporate acquisitions (which often result from corporate strategy consulting studies) increase shareholder value. There have also been spectacular failures in IT outsourcing in spite of its many successes. It is clear that the value added by consulting is patchy and that clients are sometimes disappointed.
This variability in delivering client value springs directly from the fact that consulting has yet to evolve into a mainstream profession. Failures in client governance and a lack of commitment to established professional standards by major industry players are allowing this to continue. This makes consulting an interesting and exciting place to be in the 21st century but, like the “Wild West”, a potentially dangerous one for participants and innocent bystanders alike. A slightly tamed consulting profession would be more rewarding for consultants and clients and would result in an improved reputation.
What is management consulting?
Every organization with a stake in the consulting profession has a different definition of it. A useful definition of management consulting might be the following: the creation of value for organizations, through the application of knowledge, techniques and assets to improve performance. This is achieved through the rendering of objective advice and/or the implementation of business solutions.
This is the only definition by a major stakeholder in the profession (the Management Consultancies’ Association) that simultaneously mentions client value; is relevant to private, public and not-for-profit sectors; and is independent of practice size and ownership or whether the activity is being carried out by internal or external consultants.
The history and structure of the consulting industry has been extensively documented elsewhere. Those interested will find The World’s Newest Profession informative and Consulting Demons fun – in a scandalous sort of way.
In a nutshell, since 1886 when Arthur D. Little founded his eponymous practice in Cambridge, Massachusetts, consulting has grown into about a £140 billion per year global industry (about £10 billion in the UK). The work of consultants can be found in most significant organizations, and it has an impact on the economy far greater than its size might suggest. Consulting is a major industry that has a profound influence on most aspects of modern life.
An independent observer may think that the consulting industry and profession are entirely dominated by the elite consultancies and the large diversified firms. Although both are influential, nothing could be further from the truth. The consulting industry is amazingly rich in its diversity and highly fragmented. Single-person practices compete alongside the multinational firms offering clients dozens of different services. Internal consultancies have become major players; there are large numbers of managers who are, in fact, working as consultants (that is, tackling value-added investigative studies on behalf of an internal client) without even realizing it. Although accurate figures do not exist, a quick and dirty analysis indicates that there are some 100,000 full-time-equivalent management consultants active in the UK, roughly equally split between the larger professional practices, internal consultants and sole practitioners. This diverse picture is typical for most major economies.
The independent observer may also think that there is no ubiquitous professional structure available within the industry and that standards are mainly set by the elite consultancies, the large diversified firms and their trade associations. Again, this is not true. At an international level, the International Council of Management Consulting Institutes (ICMCI) regulates the Certified Management Consultant (CMC) qualification. The CMC is the top-level qualification for management consultants and is recognized and supported by each of the 45 country member institutes of the ICMCI. Despite the best efforts of those trying to develop the consulting profession and institutes, around the world fewer than 10 per cent of consultants are members of consulting institutes and fewer than two per cent are CMCs. Neither of these figures has changed greatly in recent years.
Consulting as a profession is stuck in an emerging state, and the majority of practitioners do not support its status as a profession. It is unusual for a major profession to be stuck in a semi-developed state. If you want to practice as a professional accountant, physician or lawyer, you need the appropriate registrations, and all practitioners are required to obtain them. Few employers would take the risk of employing a non-certified engineer in a safety critical role. So what is going on in consulting?
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