Scam I am?

About a week ago I received an E-mail concerning a Saloon article (Scam I am, by Farhad Manjoo) about a book criticizing “Management Consulting”. This article is very critical on the industry and culture surrounding it. Its conclusion is that Management Consulting is a luxury that business executives purchase because it boosts their collective egos. The writer goes on to portray the industry as unfocused, unspecialized, and unable to obtain any real value adding results for their fortune 500 companies. He criticizes not only the consultants but the companies that hire these firms. Saying that corporate America is not the rational place that is put described in most business books (this much I will not dispute!). The books title is "House of Lies," and it author Martin Kihn uses his personal experiences at a top rated consulting firm (in the league of McKinsey & co) as the basis for his book.

“Management consulting is a giant fraud! OK, we knew that. But what Martin Kihn reveals in his entertaining new book is just what miserable lives these know-nothing "experts" lead. “ - Scam I Am

Now first I must mention I have not read the book, but simply a review of the book. I have purchased it and will be reading it as soon as I am finished with class. So my critique is going to be about the criticisms put forward in the article no necessarily what is in the book. Second I am not a consultant, at least not yet, I will start in a couple of months. However I did do a fair amount of research before accepting the job, and have spent literally hours reading about the industry and interviewing people in it. Finally I will be a technical consultant not a full blown management consulting, but my research into the career I think has given me a good view into the industry. I will revisit this issue late after I have read the book and worked on a project or two and see if my counter arguments hold water or not.

My first critique about this view of management consulting is the view that consultants don’t know what they are doing, and could never know their customers business as well as those in that industry. How can a consultant know anything about book binding and publishing that a publishing doesn’t know. Knowledge of specific industries is not why management consultants are hired. They are hired for skill sets that are lacking in the customers company, for their knowledge bases of best general business practices, and for their research capabilities. While a consultant may know nothing about how to mount and balance a tire in a tire shop they do know how to integrate supply chains and change inventory times from 180 days to 15 days. They know how to create controls, procedures, and policies to standardize business practices. This means that if they work with their clients they can design company processes that cut down on waste, increase efficiencies, or help control general business costs.

This is accomplished by tailoring best business practices that have been research across industries for the consulting firm’s large company base to a particular clients needs. It is done by a team consisting of consultants and employees from the client. So leverage the consultants bring comes from two different areas. Their knowledge and skill base they have accumulated from research and broad experience and also from being outsiders. Many firms hire consultants to battle what is known as ‘Group Think’. A problem that results from a strong corporate culture, ‘Group Think’ is the inability of employees of a corporation to be able to see alternative ways of doing tasks outside their current operational model. They become unwilling and virtually unable to change, and in business the lack of change will be detrimental. Consultants on the other hand come in not knowing the specifics of operations and are there to drive change.

The second critique I will make is about the view of the consultants themselves. Kihn/Manjoo use the fact that consultants are unable to specify what they do as an attack against them. They state that it is due to the directionless of their work, and that it is because they are not accomplishing anything. The truth is that no consultant can say specifically what they do because every project they work on requires them to do something different. A management consultant may analyze financial policies at one client, and then supply chain partners at the next. This doesn’t make the consultants job irrelevant but rather ever changing. Part of a consultant’s job is to continue learning they are required to participate in more training than most professionals and their job descriptions change from customer to customer. A consultant must apply the collective knowledge of their firm to solve their customer’s problems this takes a lot of flexible thinking and is almost impossible to specify to a single job definition.

This brings me to final critique. While many corporations can be irrational, and they make very strange and counter productive business decisions based on ego and bolstering. Hiring consulting firms is not always a refection of this as the article and book imply. Corporation normally buy services from consulting firms based on a current need. They have a specific problem, do not believe for what ever reason that they can not address it and need outside help. This could be because they do not have the skill sets in house, they can not spare the man power from daily operations (very common), or they want to emulate a similar solution that was provided to another corporations. There are very large corporate players that credit consulting firms for great improvements made to their businesses some even credit consultants for saving the company.

A strong example of how management consulting can affect major company saving changes would be the case of Accenture (formally Anderson Consulting) changing Best Buy’s entire business modal. In the mid 1990’s Best Buy had over expanded – though they were only a fraction of their current size – and alienated the general consuming public. They had inventory problems and were losing money across all of their product lines. Accenture is credited with completely changing their supply chain, their product placement/merchandising, and sales mentality. The first two actions kept inventory level lows and allowed Best Buy to cycle newer products in and saved them the great costs of discounting out of date merchandise. They also brought great operations savings.

The big changes came however from redesigning the sales culture with in Best Buy. It was Accenture that changed Best Buy to a non-commission based sales environment. This gave Best Buy a huge advantage over their super-high pressure commission sales of their competitors. Accenture also focused the sales force on attaching accessories, services, and warranties onto purchases. By adding low cost but high margin accessories to each sale Best Buy brought their profitability on each sale up. This is a brief description but managers that have been with Best Buy for a long time credit these changes to Best Buy’s success over the last 10 years. These changes came from the management consultants at Accenture not from Best Buys executives. This is only one case but there many more and they illustrate that real benefits can and do come from hiring management consultants.

I will revisit this post in the future after I have worked on a project or two as a consultant, and of course after I have read the book. I just wonder if the author is critiquing the industry correctly or if he was just an ineffective consultant himself and projects his failures on the industry.

If you would like to read the article yourself here is the link:
http://www.salon.com/books/review/2005/04/12/kihn/index.html

Cog In Training ..... What the?

So I don’t really have anything related to the purpose of this blog to write, but I want to get into the habit….. So here is some semi-related information.

I thought I would briefly describe why this blog is called “CogInTraining”. It’s really not that good of a name but naming things has always been a week point of mine. This name comes from an inside joke between myself and a coworker at my student jobs. We spent quite a lot of time discussing the characteristics of the students at the business school (FYI we at one time or another interacted with almost every student at this school). While working we would over hear their conversations. Most of the conversations revolved around getting into a corporate settings and working for large companies. We started to think of these people as training to become interchangeable parts within corporate machines. Later we decided that they weren’t just any parts but cogs.

Now it’s not that we have any real disdain for anyone. It’s more that we saw a lack of reasoning behind why people were as focused on some goals and why so many had such similar – even in some cases identical – attitudes about becoming successful in corporate America. It’s amusing because when you go to any of the other colleges on campus most people (even though they should be more concerned) don’t generally look for jobs or know what exactly what they want to do. There are exceptions, people who go on to be lawyers, engineer, doctors, or other professionals know what they want to do but generally are as singularly minded as the business students we encountered.

One item that I should note is that I am talking about my classmates here, and I was sometimes guilty of similar thinking. During job hunting season (always in the fall, that’s right a year ahead of time) I was as guilty as anyone about talking about this interview, that company, or who could help me talk to the right people. I also spent a lot of time going to info sessions for companies, sending e-mails, and looking at job postings. So I would have to say that I am guilty of some of the same behavior that we like to joke about. But that’s ok, I’ll admit the hypocrisy. So now I joke that I am just one of those who is in training to be a Cog.

Now for my personal disclaimer: I do think that my attitude overall was different, at least different from the worst offenders in the school. One of the reasons I took Political Science as ½ of my degree was to get some perspective. I got this in volume from these classes. I also carried a Union card for more than three years, if anyone can put some non-business ideas into your head it’s a Union! LOL. Finally as a returning student I was generally 3-6 years older than my classmates, this will make a difference in your outlook (trust me when your 26/27 there is a bit of a difference). I was/am able to see more sides to any situation than just the profit or margin. My goals aren’t just to make money and move up the corporate ladder – I will do this along the way – but to have some adventures and unique experiences. I think I’m lucky to have gotten a job in consulting and think it will let me do this.

Anyway here is my own joke about being a Business/PoliSci major

Gradfest

I went to Grandfest in the grand ballroom of the student union today. It was kind of surreal buying my cap & gown, a frame for my degree, and graduation announcements. That all went smoothly, surprisingly. I also had to do an exit interview because I took out student loans. I don't know why you have to listen to a 40 min presentation just because you took out a school loan, but if you don't they won't send you your Diploma. Hey after almost a decade enrolled in the school I stopped asking crazy questions like why?

So, the exit interview was actually the University’s financial department giving me a printout of all of loans I’ve taken out in pursuit of higher education, then making me sit through two 20 minute presentations. Good thing they did too, because the letters I get from the bank every month left me with questions over whether or not I owed anything (can you hear the sarcasm?). I mean, we’re all college grads – tentatively anyway – so after studying accounting and finance we obviously need our loans explained to us… I have to admit I was a little offended by the whole idea.

<> The first presentation taught me how to live on a budget based on a salary of $25,000 dollars a year at after taxes of 24%. It kind of makes me sad that this is what they think most people expect to be making coming out of college. That’s less than my student loan totals. A college degree used to be worth more than that on average. So the interview taught me very valuable skills. I’ll share two of them with you. The first is to bring pop to work with you – Yes she used the word pop this is the Midwest – because it can save you $200 dollars a month. I don’t know about you but I don’t buy 6 cokes out of vending machines everyday! The second item was to grocery shop with a list and not to do it with an empty stomach, because you’ll spend more. HA. I’m glad it took 20 minutes explain these things to me.<>

The second presentation was just as good. I have to admit it had some good information about protecting your credit and identity. But it was hard to listen after the speaker, with a straight face, turned to us and said Your student LOANs are real loans and you do have to pay them back, or you’ll get in trouble. Thank you for that. So all in all it was kind of a waste of my time. But At least I got to spend $280 in the book store one last time!! To tell the truth though, it was still kind of exciting because it is one step closer to finally being finished. 41 days to go!!