PART 1: CONSULTANTS - CON ARTISTS OR VIRTUOUS PARTNERS
William Thompson was the world’s first confidence man or, as it became known, conman.
Little is known about Thompson. A photo shows a well-dressed man with dark flowing hair and bountiful moustache. His time in the limelight occurred in 1840s New York. It was a period of rapid growth and burgeoning wealth.
Thompson engaged with wealthy strangers on the street as if old friends. After a brief conversation he would ask “Have you confidence in me to trust me with your watch until tomorrow?” New York in the 19th century must have been a more trusting place and time, because many did.
When finally arrested in 1849, Thompson was sent to The Tombs – a New York prison designed in Egyptian revivalist style. As prisons go, it must have been quite something.
To be honest, Thompson’s modest fame is somewhat undeserved. Conmen (and women) had long existed. They were just called other things - diddlers for example. The term confidence man was actually coined in a newspaper article about Thompson’s arrest.
Two features of the conman’s art stand out. One is the creation of trust. The other is malign intent. Trust is intentionally abused, harming the victim and benefiting the perpetrator.
The Big Con
It is fair to say that Rosie Collington and Mariana Mazzucato don’t trust consultants. Their recent book - The Big Con - likens today’s management consulting industry to the conmen of America’s gilded age. The warning is simple: consulting is a big con which “imperils us all”.
Collington and Mazzucato stop short of suggesting the consulting industry has malign intent. They also think it “foolish” to blame consultants for “all” of the problems advanced capitalism has created. But they argue that the industry has shaped capitalism to its own advantage and ridden its waves to create huge unjustified rents. Addressing the big con, requires big change.
Disentangling Collington and Mazzucato’s concerns about consultants from their concerns about the state of capitalism is challenging. Mazzucato, in particular, has long argued for major changes to modern capitalism. Collington clearly agrees. Consultants are both symptom and cause of a deeper malaise.
A wave of other people are also expressing concern about the consulting industry. In Australia, this has focussed most on the role consultants have played in supporting government. Failures, like the current PwC scandal, add ballast to the view that consulting is a ‘con’.
What is management consulting?
David Shaw takes a different approach, examining consultants through the lens of Aristotle’s Nicomachean Ethics. I mean, don’t we all. He defines consultants as intelligent practical partners who advise and assist clients to achieve an objective where the client is uncertain about how to act.
Four elements of Shaw’s definition are important. First, clients determine the objective. Second, clients are uncertain how best to achieve that objective. Third, consultants have intelligent practical knowledge which can help the client. Finally, clients and consultants operate as partners, rather than master and servant.
Shaw’s definition provides a useful way to think about consulting and embodies a clear potential value proposition. Whether it reflects lived reality is less clear. Collington and Mazzucato argue that consulting firms often step beyond the advisory role outlined by Shaw. They also question whether advice, when provided, is as intelligent and practical as Shaw expects.
Consultants project themselves as, and are generally accepted to be, professionals. Yet they are a rarity in our increasingly credentialised world. While consultants are often highly qualified, there is no degree in consulting for them to take and no professional body to oversight their work. Anyone can be a consultant, even me.
According to Shaw, management consultants differ from other professionals (eg doctors) in not using a widely available and externally verified stock of knowledge. Instead, professional knowledge is built from practical experience, including with past clients. The expertise and ‘method’ that springs from this is proprietary and unique to each firm.
These features - vagueness of role, lack of consistent professional standards, and idiosyncratic knowledge base – contribute to a feeling that consultants operate in a sort of corporate wild west. They also add to the challenge of rigorously assessing the value consultants bring. Hiring consultants is, as a consequence, a game of trust. To be worthy of that trust (here comes Aristotle) consultants must demonstrate moral virtue.
Consulting virtues
For Aristotle, virtue lies in pursuing a middle path between two extremes – excess and deficiency. This middle path is known as the golden mean. It recognises that virtue is not absolute and is shaped by context.
Using Aristotle as a base, Shaw suggests that management consultants should demonstrate six virtues:
Prudence: using their experience and skill diligently towards achieving the client’s objective
Justice: fulfilling promises made to clients and acting in the client’s interest
Liberality: never giving priority to their own interests over those of their client
Courage: being willing to take ‘considered’ risks to their interests in pursuit of client objectives
Friendliness: understanding and responding actively to each client’s specific needs and uncertainties
Truthfulness: explaining their limitations and taking work only where they bring relevant knowledge and experience
For each virtue, consultants need to avoid both deficiency and excess. The virtue of liberality, for example, requires consultants to avoid being grasping (a deficiency) or uncommercial (an excess). Instead, they need to be ‘business-like’. Shaw argues that this means forgoing work that will not benefit their client and not overcharging (earning unfair returns) for work done.
Shaw sets a high bar, which is appropriate given the trusting relationships consultants seek to foster. But is it too high? Some economists, for example, would not expect consultants to voluntarily forgo high returns, arguing that moderating returns should be a function of competition or regulation. Collington and Mazzucato think not and argue for an additional ‘virtue’ – acting in the public interest.
Are consultants virtuous?
Shaw’s framework provides a way of thinking about consulting that differs from analyses focussed on value alone. Virtuous consultants create both value and trust. The question is: are consultants virtuous?
For many the answer is a clear no. Collington and Mazzucato argue that big global consulting firms are always grasping, often untruthful and regularly place their own interests above their clients. They make a fair case. Global evidence of consultants acting without virtue is easy to find. Aristotle would be appalled.
Flemming Poufelt is more circumspect. He argues that consultants have to operate in circumstances that are ambiguous, uncertain and sensitive. This gives rise to conflicts which are hard for consultants to avoid and difficult from them to resolve alone. Poufelt suggests more attention should be given to the ‘dual ethics’ of client and consultant.
Poufelt has a point. Clients are often portrayed as hapless victims seduced by artful consultants into believing they add value, when they do not. This happens, but laying the blame entirely at the feet of consultants is unreasonable. Consultants are not imposed on clients, they are invited. Clients should expect consultants to act (at least somewhat) virtuously. But clients also have a responsibility to protect their own interests by using consultants judiciously.
Being a judicious client
In 1603, the legal concept of caveat emptor (buyer beware) emerged. The case itself involved the sale of a bezoar stone which purportedly had magical healing powers. Turns out, it did not and may not have been a bezoar at all. The buyer sued but was rebuffed in court. Over time courts have found that ‘buyers’ need to look after their own interests, at least to some degree.
Caveat emptor is the minimum responsibility a judicious client needs to meet.
Shaw’s virtues and Poufelt’s insights suggest some other responsibilities. First, clients should have a clear idea of the objective being achieved. Second, they should work actively with consultants to identify their detailed needs. Third, they should be a good partner, working collaboratively to address ambiguities, uncertainties and sensitivities as they arise. All this happens less often than you might think.
An important responsibility comes from Collington and Mazzucato – to ensure that the use of consultants does not ‘infantilise’ the client’s organisation by creating unhealthy dependencies and eroding critical internal capabilities. It is a responsibility that the Australian Public Service arguably has failed to meet.
A sort of conclusion – time for recalibration
Concerns about the consulting industry are reasonable. Egregious behaviour is too common to ignore and consulting needs to lift its moral game. But seeing the consulting industry as a big con which “imperils us all” is unfair.
Perhaps there is another potential explanation for what we see. One that does not rely so heavily on abused trust or malign intent.
Widespread use of management consultants emerged in the 1980s and 1990s as part of a new economic paradigm. Within government, New Public Management theory arguably reinforced the trend. Modern consulting is, in short, an innovation.
New innovations often go through a cycle described by the Gartner curve. Initial excitement creates unrealistic expectations and (in this case) overuse, which leads to disappointment and ultimately recalibration. Done well, this recalibration unlocks the true value of the original innovation.
If true, the task ahead is to get the recalibration right. Consultants still have a potentially valuable role to play, just one that is smaller and better defined than today. More virtuous consultants and more judicious clients need to be part of the change.
By the way, for those interested, bezoar stones come from the intestines of goats – ick. Bezoar is derived from the ancient Persian word for antidote and bezoar stones appear in Harry Potter as a ‘cure for most poisons’. Wonder if they could also be used on unethical consultants …..
First Published in The Mandarin.