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Wednesday, July 28, 1999 Published at 16:23 GMT 17:23 UK

Business: The Company File

Who needs management consultants?

Consultancy has grown rapidly - but is it really necessary?

With John Prescott accused of wasting millions of pounds on consultants, BBC News Online asks why we apparently need to be told how to do our jobs.

Everyone knows the management consultants, don't they? Aren't they the ones walking around in smart suits with clipboards and stopwatches, who cost a fortune to tell you things you already know.

But this of course cannot possibly be the whole story as there are scores of firms of management consultants making billions of pounds, and this surely could not happen if they did not produce results.

The millions of pounds John Prescott is accused of wasting on management consultants could be more to do with the alleged organisational problems in the deputy prime minister's huge Department of the Environment, Transport and the Regions.

Mr Prescott himself has argued that he has spent a tiny fraction of the amount paid to consultants by the last Conservative government, and that the money was necessary to save much larger sums on various publicly funded projects.

Management culture

The BBC has taken as much criticism as anyone for its much-publicised use of consultants under John Birt's leadership.

It has been suggested that the new director general, Greg Dyke, will remove layers of management and put a stop to the claimed streams of consultants through the doors of Broadcasting House.

If this proves to be the case, no one will be expected to stand up for the poor management consultants. Why do they seem to be so unpopular among their clients' staff?

Is it because people resent having outsiders come in and tell them what to do, or perhaps because staff see them as proof that their managers don't know what they are doing?

Or maybe it's because they are constantly associated with the implementation of cutbacks, making life harder for the employees, while the consultants themselves walk away with a fat cheque.

What do they do?

The website of Bain & Company - one of the best-known firms - contains nuggets of information about what they believe makes their services indispensable. One of their consultants says: "We pressure-test the work, always asking, 'Is this going to be a practical and implementable solution for our client?'"

They describe their function thus: "Locally, regionally and globally, we design and implement tailor-made strategies that greatly improve our client's performance, increase market value and enhance organizational capability."

Another of the big names, McKinsey & Company, describes how it is set a specific problem by a client.

For example, how to improve the profitability of a minerals company, reorganise the head office of a major multinational, or improve the marketing effectiveness of a retailer of consumer goods.

It then allocates a team which analyses the client's position in the market and devises a strategy, taking into account practised management principles and the global picture.

Huge growth

This advisory role has clearly become much more sought-after in the past three decades as the growth in management consultancies has been dramatic.

McKinsey, for example, was founded in the US in 1926 but it was 1959 before it opened its first overseas office, in London. By 1997 it had 74 offices in 38 countries.

Another major firm, Andersen Consulting, has seen revenues grow from $1bn in 1989 to $6.6bn in 1997.

This spectacular growth reflects a fast-changing business environment and the emergence of the global economy. No single company's management can be expected to have the expertise it requires in every area from man-management to e-commerce.

The point of buying in advice is to combine the detailed knowledge of the firm possessed by the company's own managers with the consultant's knowledge of the global market, the latest team-building theories, or how to sell goods and services through the Internet.

Double-edged sword

That is when it can work well. The down side, of course, is the danger that consultants recommend variations of stock solutions which might work in some industries but not in others.

This can give rise to the widely held perception in, for example, creative industries that the "accountants" and "men in suits" care only about the "bottom line" and wreck the company's creative spark through a profound lack of understanding.

Whether this can be solved by bringing in more consultants or by banning them for good is a question yet to be answered.

One thing is certain: the business environment is becoming more complex and competitive by the month and when a bit of insight and information can so easily be the difference between success and failure, there is always going to be room for telling advice.

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