Wrong envelope? Wrong argument

By Edward Haigh.

“PwC, an accountancy firm with revenues of $35bn last year, couldn’t deliver accurate figures on the 5,700 votes for the Oscars when it really mattered,” quipped The Guardian in an editorial piece on Monday, following that up with the straight-faced assertion that what happened was: “Enough to make anyone wonder about the role of expertise in the world today.” 

That bears spelling out a little more forcefully: Someone giving someone else the wrong envelope appears to have been enough to satisfy The Guardian--the very opiate of the liberal elite, and a staunch defender of science and reason--that the conditions had been met upon which the role of expertise in the world ought to be called into question. 

Of course using the Oscars cock-up was actually just a cheap way into broader discussion about management consultants, at the heart of which was an accusation that: “These big companies and the legions of highly paid experts are supposed to be delivering measurable results, yet it seems most of what they touch runs worse than before.” And that seems, to me, to merit some further analysis. 

Results, as anyone who works in the consulting industry knows only too well, can be painfully difficult to measure. In fact when consultants are used to performing the sort of tasks on which The Guardian focuses its ire--slashing a workforce--they’re about as easy to measure as they can be, and to hold consultants accountable for them is to do exactly what The Guardian accuses company leaders themselves of doing: shifting the blame. 

Elsewhere results can be much more tricky to measure. If a firm helps a board to devise strategy, over what time period should the results be judged? And what proportion of the success or failure of the strategy should be attributed to the consulting firm? What about when consultants are used to help change the culture of an organisation? How do you measure that? 

Perhaps some data can help us here. Having spent many years researching the consulting industry, we’ve found that there’s a simple way to ask the clients of consulting firms about the value those firms deliver: Does Firm X deliver value that’s worth less than, about the same as, or more than the fees it charges? It’s not a perfect question about what is, after all, a complex subject, but what it lacks in sophistication it makes up for in being simple enough that clients can answer it.

We had 1320 responses to our latest client survey in the UK, which ran in December 2016. Respondents came from most parts of the private sector, but also from public sector organisations. Across them all, 12% said they they thought the consulting firm they chose to tell us about (and they could tell us about any firm they liked) delivered less in value than it charged in fees. 48% said they thought value was roughly equal to the fees charged, and the remaining 40% said they thought that value was greater than the fees charged. Of those who said value was greater than the fees charged, the majority (about two-thirds) said they thought it was worth twice what they paid, and the remainder (about one-third) thought it was equivalent to at least five times what they paid. Incidentally, views about PwC were above average: 45% of clients said the value it delivered was greater than the fees it charged.

It’s hardly a ringing endorsement of the industry, but neither does it seem to provide quite enough evidence to suggest that consultants are responsible for calling into question the role of expertise in the world. And to address the more specific accusation that: “This evasion of responsibility may well be worth a great deal more to the managers concerned, if not to the other stakeholders of the enterprise,” we should point out that clients were asked about all types of consulting projects, from (yes) cost-cutting, to strategy, HR and change, financial management, and things like digital transformation. So these aren’t just managers who got away with firing everybody without taking the blame for it, and who are feeling delighted with the role of the fall guys as a result.

But there is one more thing in here that merits our attention, and that’s the glaringly large 48% who said that value was about the same as the fees charged. It seems fair to assume that those may well be dissatisfied customers, but our analysis of the reasons clients use consultants consistently reveals that in about half of all cases it’s to provide capacity rather than capability. In other words, it’s likely that those 48% weren’t really expecting the consultants they used to generate much of a return on their investment anyway. The consultants were there to park their capable backsides in a seat and be told what to do. And that’s both a role, and and a business model, with which most consulting firms are distinctly uncomfortable, particularly as armies of robots start to fill the horizon. They’d love to get back to being experts.  

So, it seems to us that when consultants are actually asked to deliver expertise, they tend to do so to fairly positive effect. Despite the accusation, PwC did, in fact, deliver accurate figures on the votes for the Oscars when it really mattered. It’s when they’re not being asked to deliver expertise that things seem more likely to go awry. And with that in mind, until we’ve had the chance to do some more research into it, we’d suggest steering well clear of getting PwC in if you need any envelopes passing from one person to another, just in case all hell breaks loose.