Management Consultants: Good or Bad?

Did you hear the one about management consultants? They borrow your watch to tell you the time, then they keep the watch.

They operate in a multibillion-dollar industry, but the jury is still out on management consulting firms. Rather than trying to sway your judgement on the subject, we’re going to present some arguments for the prosecution, some evidence for the defense and let you make up your own mind.

Reasons to keep them out

PwC’s failure to spot banking fraud 

In January 2008, PwC was found to be negligent as it failed to perform adequate checks that could have uncovered a multibillion-dollar fraud spanning from 2002 to 2009 at Colonial Bank, Alabama, US. Colonial Bank went into bankruptcy in 2009 as the fraud was uncovered. Before the fraud was uncovered, Colonial had US$25bn in assets, making this collapse the sixth biggest bankruptcy in US history.

McKinsey & Company's biggest mistake

McKinsey got it all wrong when they told US multinational telecommunications company AT&T that cellphones would be a niche market in the year 2000, with only 900,000 subscribers. Back then, the firm’s estimate was off by 108 million – the statistics portal, Statista, have forecast that by 2019 the global number of mobile phone users will reach 4.68 billion.

A management consulting horror story

It was the 1990s and it seemed that, with 28 national airlines, the European aviation market was simply begging for one airline to come along and swallow it all up. Swissair seemed to be a likely contender: it didn’t have market leader status, it wasn’t a member of the EU, so what better way to enter the lucrative European market? To McKinsey, it was a consulting no-brainer: buy, buy, buy. What no-one had considered was that every one of the airlines on Swissair's shopping list had financial difficulties. Fast forward to 2002 and the depressing headline: 'Swissair Collapse'.

How they could help your business grow

 A major management consulting success story

In 2008, the US auto industry was steering fast off a very steep cliff. Chrysler, General Motors (GM), and Ford had requested a US$35bn bailout from the US government, in an effort to avert what they believed to be three million potential redundancies. Fortunately, The Boston Consulting Group were on hand to advise President Obama on how to restructure these auto giants. The result: 340,000 jobs were created and a vast amount of bailout money recovered.

The Boston Consulting Group revolutionize Nokia

The Boston Consulting Group developed a new approach to transformation and put it into practice with Nokia. Their medium-term plan saw them embed a new organizational structure, with a focus on delivering excellent operational results across its portfolio of three businesses. Nokia’s share price has steadily climbed, with its value growing 12-fold since bottoming out in July 2012. The company has returned billions of dollars of cash to its shareholders and was the most valuable company in Finland that year.

PwC’s approach saved £119m

In 2015, PwC saved the Aircraft Carrier Alliance (ACA) £119m. Set up to deliver two Queen Elizabeth Class Carriers to the Royal Navy in the UK, the initial price tag was a massive £6bn, and became the focus of intense political and public scrutiny. PwC implemented far-reaching procurement cost reductions, with the aim of saving the ACA £86m (US$111m). Using an approach based on a PwC methodology known as ‘Mission Control’, they began with an in-depth savings assessment phase – undertaking rigorous contract reviews, financial checks, interviews and workshops across all functions, companies and categories of addressable spend. The overall savings surpassed their target enormously.