The “Big Con”

Big Consulting Firms “telling you what you already know”

@DouglasBlackwell

Acclaimed professor Mariana Mazzucato, in her most recent book titled THE BIG CON — How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments, and Warps Our Economies; says that the overuse of consultants, both by private businesses and governments “stunts innovation, obfuscates corporate and political accountability, and impedes efforts to fight climate change.”

In a recent Fortune Magazine article titled: Some of the Big 4 consulting giants already think AI could trim years off the path to partner. The focus on AI by the big consulting firms is not on how AI can help their clients but on how AI can make more money for the firm. “Consulting giants are looking to artificial intelligence to speed up the time it takes junior staffers to make it to the prestigious partner level as the technology eliminates vast swaths of the repetitive, time-consuming tasks that typically filled up their first few years on the job,” says Fortune.

KPMG, for example, says fresh out-of-business-school graduates with no experience are now doing tax work previously reserved for staff with at least three years of experience. And over at PwC, junior staffers are spending more time pitching clients rather than the hours they used to be spending doing work for their clients.

AI of course can do some of that more mundane work but the consulting firms are not thinking about passing the “AI savings” along to their clients. Instead, the focus is on how can they use AI to do less but still charge the same, and how AI utilization can help shorten the timeline in making it to partner.

PricewaterhouseCoopers paid U.K. partners an average of £906,000 for the latest financial year, while such compensation at KPMG reached £717,000 in 2022, filings show.

“We are trying to take years off of the time it takes for somebody from when they’re hired to when they become a partner,” said Jeff Wong, who’s EY’s chief innovation officer. “We are specifically targeting certain accelerations and I know we have been successful along that pathway.” In other words, juniors who don’t learn anything and have no experience become partners sooner by letting AI do the work. Good gig if you can get it.

If a partner has no practical experience then what’s the value to the client? Would it not make sense for the client to simply invest in the same AI technologies/software instead of being suckers and paying ridiculous fees to humans who are not actually doing the work?

PWC, for example, on April 26, 2023, announced a $1 billion deal with Microsoft to expand and scale its artificial intelligence (AI) offerings “and help clients reimagine their businesses through the power of generative AI. Strengthening its ability to deliver human-led and tech-powered solutions and to build trust and drive sustained outcomes in line with its global strategy.” However, the real strategy for the big 4 is self-serving, to save time and money and achieve better compensation for themselves.

“KPMG executives now believe the company can save as much as 15 hours per worker every month with the help of AI, according to Stuart Tait, chief technology officer at the firm’s tax and legal arm in the UK.” So, for example, the firm has decided to put all the information they have on tax matters into one place and allow staffers to query the database using generative AI-powered technology, turning the first four hours of research into a task that now only takes minutes.

However, I do not have any quarrel with creating efficiencies, this is what technology is for, and if generative AI technology can help where that is concerned then that represents progress. However, KPMG and the rest of the “Big Con” firms are not focused on creating systems or offerings that can pass along those efficiencies and savings to their clients, instead, they are focused on shortening the time it takes to get to the big bucks of making partner.

“For many of us, we started our careers doing the necessary but often tedious work in support of senior professionals,” said Bret Greenstein, generative AI leader at PwC. “A lot of this work — writing drafts, taking meeting minutes, researching topics — is greatly aided by GenAI today. This allows junior employees to be more productive and impactful much quicker.”

These firms are charging clients big partner fees and doing the bait and switching with juniors. Who’s role in the firm, as described above, is being glorified assistants. And these same no-experience juniors go out and advise companies — producing PowerPoint presentations that they really don’t know what they are talking about, sort of like ChatGPT.

In an older article from Forbes, What Value Do Consulting Firms Like McKinsey, Bain, Et Al. Add To An Operation? Written by a former consultant, the long and short of the article says that consultants are essentially “telling you what you already know.”

The article points out these four things about the Big Con industry.

1. Political leverage: CEOs that want or need to make an unpopular decision often bring in a consulting firm to help. This provides ammunition to recommend an unpopular or risky decision to the board. If things go wrong, consultants are a handy scapegoat. The dirty secret is consultants pitch on that.
2. Pool knowledge across functions: Consultants are not part of the client’s culture, politics, or organizational culture. In the first month, as the firm builds a fact base, consultants usually interview people across functions. Cross-functional problem-solving rarely happens. Much of this function can be carried on internally via technology and internalized processes. Don’t need to pay high fees for a junior to go around wasting staff’s time taking notes, taking up staff productive time, and adding negative value
3. Pool knowledge across levels: Similarly, consultants interview, watch, and tag along with people down the organization’s structure, often starting with customers and moving through sales and line roles. Essentially, this is babysitting and going to Starbucks, which they expense back to you anyway.
4. Deep focus on one problem: The biggest value consultants promote is that they provide a dedicated team of pretty smart people who are “unbiased” and can focus deeply on one particular problem. But with big data, AI and all the related software on the market today, with a little effort and organizational leadership, firms can be their own consultants; at a fraction of the cost.

Although you can sum this up to consultants “telling you what you already know,” the unfortunate downside is that they produce no real value to your bottom line however you might measure it!

Furthermore, the bigger damage is the abdication of leadership going through the firm and the stifling of the entrepreneurial culture and mindset necessary to be a high-performing organization. And with the consultant “doing the work” why is the firm paying six-figure salaries to executives and managers?

What value does a consulting firm NOT provide?

1. Subject matter expertise: The people who are doing the bulk of the work are fresh out of college, from a range of majors, with no practical experience in a domain. And most likely they lived a privileged life and got this job because of a family/network connection — just to keep it real! They don’t know anything. Absolutely nothing coming in about your industry, company, or particular issue/problem. Moreover, the partner on the project is not a subject matter expert either. Her value is pattern recognition but AI and data analytics can do that astronomically better. So there is no way she can know more about the client’s industry, company, or problem better than the employees at all levels of the firm, who live it each day.
2. Executive coaching: The Big Con firms love to provide long-term, ongoing, ambiguous “coaching” for executives, on a nice retainer of course. If your CEO needs a friend then get him a dog or a therapist. The idea that a consultant is doing the actual thinking for the CEO or executive staff, and the firm is being billed for that is just upside down — but a nice gig if you can con your way to it.
3. Actual decisioning: Consultants are great at assembling information from the outside world and bringing in perspective from all functions and levels of your company. However, we have the technology now, and everyone has access to the same information; the more specific information relative to your company can be found with a little effort (or just doing your job) by finding out where to look. Nevertheless, “consultants can never actually make the tough decisions. No outsider can ever truly understand the needs of the various stakeholders. No outsider has as much at stake personally and professionally. It is so incredibly different to recommend layoffs for 10% of a plant (100 people) vs. actually firing a single person. I’ve done both, and the former does not have the emotional or cultural consequences of the latter.” Only the CEO or other leader at a company can actually pull the trigger; the consultant can at best show you how to hold the gun and maybe give you a few targets to aim at.

Therefore, if you want to be a value-creating and profitable firm in the new digital era, you have to develop an entrepreneurial do it do your-self-competitive culture — good leadership promotes cross-functional decision-making. With a flat or open organization structure, autonomy across roles; spending time with customers, and talking to folks on the front line; (and all the other stuff HBR publishes) can only be achieved if leadership comes from within.

Firing or staying away from Big Con consultants is a start and replacing them with the same technology they’ve been scamming you with is an intelligent move.

ap3 replaces the consultant — a single automated management tool that specifically focuses on the most important thing in business, strategy! According to an HBR survey of 10, 000 senior leaders, 97% said that strategy is the most important thing to their organization’s success. However, 96% said that they lack the time and the right tools to engage in winning strategy development within their organizations.

…ap3 is an Insight Engine for capacity and capabilities building to underwrite effective organizational strategy and risk management. The software fills the gap between the value functions available from big data and artificial intelligence, and the executive decisioning process leaders must engage in to build successful organizational strategies while aligning with social and environmental responsibilities.

ap3 provides the solution for winning!