Consultant-managers: something else to worry about

If you talk to consultants in Germany one of the post-recession trends they’re most likely to mention is the rise of in-house consulting units in multinational companies. Driven by a desire to build internal skills as much as cut the amount of money spent on consultants, these units pose a genuine threat to consulting firms there.

But there are several good reasons why the growth of internal consultancies is likely to be limited: their experience mostly comes from their own sector, but organisations often use consultants to help them look further afield; because they’re part of the organisation, they’re less able to be objective, especially where sensitive issues are concerned; typically relatively small, it’s hard for them to maintain the critical mass needed to nurture the specialist skills increasingly demanded. Some will survive, especially those which find a client base outside their own organisation, but others will be integrated back into their host organisations over time.

The rise of the consultant-manager, the former consultant now occupying what may be a very senior position in a client organisation, is a different matter altogether. We’re accustomed to seeing such people in procurement positions: poachers turned gamekeepers who use their inside knowledge of the consulting industry to negotiate more effectively with their erstwhile employees. But, as they become increasingly ubiquitous in senior management roles, they may re-shape the consulting industry.

But why should consultant-managers pose more of a threat than internal consulting units? You might think the latter, because they’re better-resourced, would cannibalise consulting revenues more. But consultant-managers won’t just need less help: they’ll need a different kind of help.

Internal consulting units are typically staffed with project and change managers, with subject-matter experts seconded in as and when required. While they may well reduce the amount of external assistance required in implementation, they still need the input of external experts, for example, when it comes to providing an objective or cross-industry perspective. By contrast, consultant-managers are often experienced subject-matter experts in their own right: what they need is generalist support. In other words, internal consulting units erode demand for consultants at all levels, but consultant-managers erode demand for senior people, effectively cutting off at the top of the pyramid. This will push the consulting firms affected further towards body-shopping, providing middle-ranking and junior staff to be supervised by the consultant-manager. If every client was a consultant-manager, we’d end up with a very different consulting industry.