Consultants have played an important role in the development of the modern business world. At crucial moments in the growth of any company there come requirements, say the takeover of a rival or the re-engineering of the corporate finances, which the management cannot meet from within their own ranks. So they call in the consultants, who had both the expertise and the proven systems, refined over countless deals to advise on the acquisition. Once upon a time, consultants were often freelancers. However, 20 years ago they began to form their own partnerships or be hired by accountancy firms. These latter had realized that they could add value to their traditional auditing functions by offering a wide range of additional services earning high fees.
However, it seemed common sense to wonder how a topflight international firm could work for one major company and then go on to perform pretty well the same service for a rival. In their defense, consultants spoke of “Chinese Walls”, an absurd notion that suggested no practitioner would let on to his colleagues what he had been doing for a company. Specific confidentiality was no doubt preserved, but consultants could often learn far more valuable things that a company’s secrets.
Given the free run of a firm from its boardroom to its shop floor, they could form a level of understanding about the strengths and weaknesses of that company, which was probably not even available to the management itself. That understanding would well inform the way they pitched for further deals from rival companies. Consultants, therefore, became, whatever they may have claimed to the contrary, Trojan horses within the corporate scene. Even if what they knew did not leave their own firm, information about fresh commercial opportunities clearly filtered through to other divisions which could then in their turn pitch for that business.
Therein indeed lay the fundamental weakness of the huge consultancies like Andersen, which has been laid bare most dramatically by the Enron scandal. There came a point where the need for different divisions within one of these big firms to have their own bite at the client cherry became so dominant that nobody was prepared to upset the client.
Unfortunately, it is not always the consultant’s job to tell the client what he wants to hear. A good consultant will sometimes need to have the courage of his convictions to say that such and such a course of action, to which the client is wedded, is plain wrong. And the place where things can be most wrong is in a company’s balance sheet, which the consultant’s auditing arm is responsible for examining. Yet consultants were reluctant to qualify tricky accounts, because it might have jeopardized their other more profitable relationships with the client.
The unique selling point for the giant global consultants was that they had the network, the reach and the spread of expertise to tackle anything, anywhere, quickly and competently. Maybe now the realization is dawning that this immense and expensive capacity was a liability rather than strength, because it demanded a constant rapacity for new business. In consultancy, as in many other fields, small was once beautiful. Maybe it is now becoming lovelier all over again.
