Carmine Di Sibio, the global chief executive of EY, recently announced his retirement following the unsuccessful attempt to split the accounting and consulting firm into two separate entities. In his statement, Di Sibio emphasized that their approach challenged the status quo, posed tough questions, and demonstrated bold ambition. However, it is clear that this endeavor can only be described as a fiasco.
Di Sibio’s efforts to separate EY’s significant consulting business from its accounting branch were met with resistance from the company’s rebellious US partners. This setback is just one example of the challenges faced by consulting firms. Major players like EY and Accenture are currently downsizing their workforce, and surveys indicate that only half of their corporate clients believe their services justify the hefty fees they charge.
Despite these obstacles, I am confident that consultants will ultimately prevail. Consulting is a rapidly expanding industry that is difficult to eradicate, much like the spread of Japanese knotweed. Accenture, for instance, is investing $3 billion in data and artificial intelligence, and is actively promoting “Total Enterprise Reinvention.” While they are also reducing their workforce by 19,000 employees, this is a minor setback considering their current size and market value.
In the past, management consulting was dominated by elite advisors from firms like McKinsey and Boston Consulting Group, who provided short-term guidance to clients and then departed with their substantial fees. However, the field has evolved to encompass a wide range of services, from reorganization efforts to software design and call center operations.
It remains somewhat of a mystery why consultants have become so integral to businesses and how companies would fare without their involvement. Two decades ago, management consulting was referred to as “the world’s newest profession,” and it has since matured and taken over various sectors.
One business leader I spoke with offered an insightful explanation for this phenomenon: “CEOs today are more stressed about their business models than ever before. Many institutions believe that their glory days are behind them.” Given the rapid changes in technology, supply chains, and the business environment, these leaders are desperately searching for solutions.
Consultants, with their promise of rapid and comprehensive change or reinvention, offer an appealing solution to these stressed CEOs. However, as authors Mariana Mazzucato and Rosie Collington argue in their book “The Big Con,” this can lead to an abusive relationship where consultants exploit their clients’ vulnerabilities to create an ongoing dependency and generate substantial fees.
While this may be true in some cases, it is important to remember that companies willingly engage the services of consultants, and they are ultimately responsible for their decisions. It would be a significant con job to fully explain the rise of consulting as we know it today. The more unsettling explanation is that many companies, both private and public, genuinely require consultants to infiltrate their operations and bring about necessary changes.
While some aspects of these changes could potentially be handled internally, the reality is that many companies struggle due to confusion, bureaucracy, and internal rivalries. As one consultant put it, “It is just extraordinary how incompetent a lot of companies are at this stuff. I did a strategy review for a client, and they insisted on implementing it themselves. When I returned six months later, it was a total shambles.” Consequently, consultants end up spending a significant amount of time guiding these larger businesses.
Additionally, there are certain changes that even well-managed companies cannot accomplish by themselves. These changes often involve technology, such as transitioning to cloud computing, designing apps, or adopting AI. Many companies find it challenging to quickly recruit skilled software engineers, prompting them to seek assistance from consulting firms that have a large talent pool.
As Fiona Czerniawska, CEO of the research firm Source Global, points out, “I hire plumbers to mend my boiler even though they charge a lot. I could learn to do it myself, but it would take a long time, and I would be cold.” The faster technology progresses, the more companies rely on external contractors who offer ready-made solutions.
Technology played a significant role in EY’s failed plan to split the company, as their consultants aimed to collaborate with cloud computing platforms like Google and Salesforce. However, conflicts arose due to EY’s existing audit clients, forcing them to find alternative solutions to ease tensions without sacrificing their consulting arm to compete with Accenture.
In conclusion, I would not underestimate the resilience of consultants in the long run. What was once a niche profession has grown into a massive industry, and disruptions only serve to fuel its expansion. The only way to curb this growth is for companies to become adept at managing their own operations.
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