- Email: [email protected]
Are you wasting your consultants?
A R E YOU W A S T I N G YOUR CONSULTANTS? O r g a n i z a t i o n a l health, not first aid
ROBERT WRIGHT
Mr. Wright is an associate professor of management, Arizona State University. Business has generally been using consultants to solve specific problems outside the range o f competency to be found inside the firm. The potential value o f this expensive assistance has not been reached because too often the outcome is a narrow analysis that is oriented to symptoms, not causes; a set o f recommendations generalized because the consultant lacked the opportunity to view the entire company; and recommendations that are not acceptable to management. The value o f consultants could be greatly improved if they were used as organizational physiologists, thereby allowing a comprehensive examination leading to preventive rather than curative measures.
Businessmen are not getting maximum value from the use of outside consultants. They could be deriving objective, comprehensive analyses of their company's capabilities and limitations as they relate to long-run growth and profits. Instead, they settle for biased, fragmented analyses of an anecdotal nature which frequently lead to imbalances, rigidity, and a resulting drain on corporate strength. It is ironic that the way top management uses consulting services causes management consultants to contribute well below their potential.
OCTOBER, 1969
Management consultants are commonly compared to medical doctors. Though a worn analogy, it continues to illustrate the traditional role played by consultants. They are usually retained to solve problems, that is to make an analysis of symptoms, which leads to a diagnosis of underlying causes, and to recommend remedial action. Playing the role of "organizational pathologist" can be of unquestionable value to management. Consultants can draw upon a wealth of experiences from many organizations. Most have developed a high degree of competency in a specific functional area of business activity; and they have the potential for objectivity not commonly available within the firm. Even greater value could be derived from the use of consultants, if they were allowed to make broader analyses. Consultants should also be used to anticipate potential weaknesses and to prescribe preventive actions rather than merely to give guidance designed to have a short-term remedial impact. If outside consultants could assume the role of "organizational physiologist," they would be freed to evaluate the processes and systems of corporate life in relationship to the firm's environment and its objectives. To serve as analysts in this more comprehensive manner, to attain this broader perspective, however, requires that management
75
ROBERT WRIGHT
adopt a new approach to the use of consultants. To understand the merits of this proposed approach, I will first explain how I became aware of the problem. Then the popular use of consultants' talents and the implications of such use will be discussed. Further, an approach will be introduced that has the potential of providing a more comprehensive analysis of a client company, leading to more practical counseling. And finally, the implications of this approach will be presented.
AN INNATE PROBLEM
76
In 1966, while working with a plastic engineering and manufacturing firm, I observed a latent problem in analyzing and correcting corporate deficiencies. The chief executive of the client firm defined the problem as a persistent sales lag below productive capacity. As such, he felt that promotional efforts should be exerted to bring sales volume up to production capabilities. An analysis revealed, however, that the "problem" was merely a symptom of misdirected marketing strategies. The analysis revealed that the company had been unsuccessful in defining its target markets and unconcerned with identifying the individuals who influenced buying decisions. While searching for the basic data upon which the marketing program could be developed, I considered the ultimate consequences of the consulting engagement. It became apparent that when the desired volume of sales was reached, the firm would experience equally pressing problems in other functional areas. Burdensome pressures would be felt in engineering, purchasing, physical distribution, administrative forces, and finance. The last was of critical import with this client. Organizational imbalance would occur. Though changes must occur if an organization is to survive, firms attempt to maintain "dynamic equilibrium"; 1 to run with their 1. Chester I. Barnard, The Function of the (Cambridge, Mass.: Harvard University Press, 1938).
Executive
various functional activities in balance. Recognizing that stability is conducive to efficiency, the client supported a proposal to conduct a comprehensive analysis of all areas affected by the impending change. The resulting recommendation derived from an overall analysis permitted the firm to expand its operations proportionately. Growth was facilitated, but stability sustained. It was fortunate that the client accepted an expanded analysis and the accompanying increase in consulting costs. If he had not, the assignment would have been lLrnited to the problem area and the recommendation that followed would have triggered a chain reaction of disturbances throughout the company for which various departments would not have been prepared. While an analysis in a specific area can resolve a given problem, it can also provoke adverse reactions in related activities. These reactions are usually felt in the long run. Authorities recognize the hazard of overcorrection and caution clients to carefully assess the widespread reactions to major changes in a seemingly isolated area. Wilson Seney explains that "it is clear that an engagement undertaken to solve a major problem almost certainly will involve more than one area of the company. ''2 J. R. Bingham cites the danger even more pointedly: A successful assignment is bound to impinge on the whole operations of your entire business . . . . If consultants come in and achieve good results in productivity in one section, this immediately reverberates through the entire organization.., it is essential that you (the client) must be prepared to move and bring the rest of your business back into balance with the improvement achieved in one section, a Management is being warned that if consultants are not placed in a position to understand the
2. Wilson Seney, Effective Use of Management Consultants (New York: Financial Executives Research Foundation, Inc., 1963), pp. 46-48. 3. J. R. Bingham, "A Managing Director's Experience of Consultants," Does Business Need the Management Consultant? (London: Institute of Directors, 1959).
BUSINESS HORIZONS
Are You Wasting Your Consultants?
total organization, together with the related impact of their recommendations, the client must then recognize and consider these logical reactions and make appropriate adjustments. Why is the problem of inappropriate r e c o m m e n d a t i o n s f r o m consultants so common, so flagrant? Why do so many apparently successful engagements end with unimplemented, perhaps unfeasible recommendations? Why are "experts" in organizational phenomena unable to formulate comprehensive recommendations, compatible with the unique character of the company in its environment? While probing for satisfactory answers to these primary questions, a number of other salient, though unanswered, questions arose: 1 Does the typical consulting assignment end with a narrowly fragmented diagnosis? 2 If so, do the conditions imposed by the client limit the consultant's ability to make comprehensive investigations? 3 What are the implications of such fractional evaluations? 4 If diagnosis leads to inappropriate recommendations, is there an alternative approach to the use of consultants so that recommendations to management are of more practical, long-run benefit? To fired answers to these questions, I conducted research into consulting activities. Senior consultants representing 220 years of experience from seventeen prominent consulting firms were interviewed in depth. The next section presents the findings from this study by considering the following issues: circumstances leading to the use of management consultants; demands imposed on consultants; and potential influences of these demands on the client firm.
CIRCUMSTANCES LEADING TO TIlE USE OF MANAGEMENT CONSULTANTS Historically, management has called upon outside consultants when difficulties can't be resolved internally. The business man requested assistance of outside staff when the company ~vas in trouble, "going downhill fast," experiencing unsatisfactory growth, or when certain OCTOBER, 1969
units of the company were not functioning as desired.4 Thus, consultants assumed the role of diagnostician-organizational pathologist. Today, circumstances leading to the use of consultants have not changed: a problem arises, internal management lacks the expertise, the time, or the objectivity to solve it; therefore, outside help is sought. The following statement of a senior consultant is typical: Basically, you're asked to come into a situation because something is not working right. That's our role in life. Someone has a problem and we're called in there to solve it. s
DEMANDS IMPOSED ON CONSULTANTS Faced with these conditions, consultants must respond by attempting to resolve a specific problem to the client's satisfaction. To do so, he proceeds in the following way. First, diagnose and defme the underlying causes of the problem; second, determine actions that will remedy the problem; third, select a course of remedial action that will both resolve the problem and receive support from management; and fourth, expedite all phases of the engagement. The typical, "problem-oriented" consulring engagement puts pressure on the consulrant to behave in a way that will mitigate these demands. As a consequence, the management consultant's work will be influenced as discussed below.
INFLUENCES OF IMPOSED DEMANDS Narrow Analysis The consultant's initial objective is to diagnose the cause of a problem. Tiffs cause is usually 4. J. D. Armsliong, "Getting Value From Management Consultants," The Manager, March, 1965, p. 27. 5. Robert Wright, An Approach to Understand the Atypology of Organizations: Integral and Differential Analysis (unpublished D.B.A. dissertation, Grad-
uate School of Business Administration, Universityof Southern California, 1967), p. 103.
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centered in a specific functional area (such as marketing, manufacturing, finance) or an organizational system of activity (such as communications, incentives, or authority relationships). As psychological theory tells us, a field of inquiry is organized and made meaningful by the resolution of a need. 6 In this case, the need of the consultant is the identification of the causes of the problem. Thus, the consultant concentrates on the area in which he believes the causes of the problem lie. Narrowing his attention to this area causes other related aspects of the operation to fade from his attentionfl The resulting recommendation is thereby a product of an analysis of only a fragment of a company's activities when, in fact, the functions and processes are interwoven into a mutually dependent system.
. . . the major recommendations are that the Church maintain depreciation reserves and delegate part of the Pope's authority to his staff and subordinates. 9 This illustrates inappropriate recommendations made without understanding the overall character of the organization.
Generalized Recommendations 78
alized models can work to the disadvantage of both consultant and client. The recommendations that result are frequently inappropriate when related to the firm's unique setting. Amitai Etzioni cautions against such efforts to bring the client's organization in line with a given model: "Since the general models as a rule include some specific statements which appear as universals, the consequences may be regrettable. ''s An example of the incongruencies that arise is the recommendation given to the Catholic Church by a nationally known management consultant firm:
Due to the fragmented nature of the diagnosis, corrective proposals must be general rather than tailored to the specific organization. This occurs because consultants do not have the advantage of a comprehensive understanding of the entire company. This comprehension is mandatory if particular recommendations are to be made. Generalized recommendations result from the conditions under which consultants are retained. Consultants are able to provide individualized consultations, but they must be based upon overall evaluations of the company/n context. In the absence of a situational analysis, consultants' observations of the firm are evaluated against preconceived normative or "universal" models. Universal models are those in widespread use by authorities on management" and on organization theory. The evaluation of observations in a given firm against such gener-
Acceptability Bias When a consultant has identified the cause of a problem in a given area and evaluated the remedial alternatives, he must determine which alternative will be acceptable to management. Only the acceptable alternative will be implemented. Selection requires evaluative capabilities of an extraordinarily high order. The consultant must determine both the receptivity and viability of the alternative to top management, if the recommendation is to be implemented and the problem resolved. Obviously, problems must be resolved if consultants are to gain management's support, and thus build a reputation. Consultants are aware that many times sound recommendations are not implemented. They contend that this is due largely to their own miscalculations concerning top management's philosophy, or propensity to accept
6. Arthur W. Combs and Donald Snygg,Individual Behavior: A Perceptual Approach to Behavior 8. Amitai Etzioni, A Comparative Analysis of Complex Organizations (New York: The Free Press of
(New York: Harper and Brothers, 1949), pp. 16-31. 7. The theory underlying this phenomenon is a generally accepted precept of Gestalt psychology.
Glencoe, 1961), p. 14.
Individual Behavior: A Perceptual Approach Behavior, pp. 23-24.
9. A Comparative Analysis o f Complex Organizations.
to
BUSINESS HORIZONS
Are You Wasting Your Consultants?
change. This is doubtless true. One of the dilemmas of problem solving, in Seney's judgment, is the "failure to take executives' attitudes into account" and this "may result in unsatisfactory experiences. ''10 Further, consultants have learned that assignments can fail if recommendations abruptly change a client's modus operandi, or if recommendations threaten individuals in sensitive positions. A senior consultant cited the acute importance of determining resistance to change in the following way.
services are quite expensive. And our services are entirely a function of time. So that we have got to make some judgment based upon a finite amount of d a t a . . , under the pressure of time. We don't often have ample time./2
You've done a real good piece of work and you think you've chosen the alternative solution acceptable to the people. And then you find tremendous resistance and a drawing together of people because you've become the enemy no matter how carefully you've tried to avoid this . . . . No matter how good a job you've done, they're out to prove you're wrong . . . . Therefore, you try to sense resistance to change.11
Problems of Using Consultants as ProblemSolvers
This need to be sensitive to the receptivity and viability of top management further limits the consultant's span of concentration. His concentration must be divided between the problem area and top management. There is yet another overriding condition of most consulting engagements. This is cost. Consultants are concerned with defining the problem, resolving the problem in a way acceptable to management, and costs. Though the statement that "time is money" is often loosely used, in consulting its validity is absolute. Per diem rates vary from approximately $120 for junior consultants to $500 for a partner in a consulting firm. A survey team of six consultants could cost from $1,200 to $1,800 a day. If the prospective client is to retain the consulting services, the problem must be framed quickly. As one principal consultant states the matter: One of the realities of the consulting business is that with the kinds of people we employ, our 10. Effective Use o f Management Consultants, pp. 39-47. 11. An Approach to Understand the Atypology o f Organizations: . . . . pp. 130-131.
OCTOBER, 1969
The pressures accompanying most consulting engagements dictate narrowing attention to the issue at hand, and the recommendations stemming from such myopic analyses can lead to impractical solutions.
Consider the problems connected with employing consultants as "organizational pathologists." Preoccupation with a single section or system in an organization can lead to imbalance because the interdependency of activities is overlooked. The reason for concern by authorities both in management and consulting is apparent. They are disturbed with the magnitude of the adjustments that may become necessary as a result of the remedial action recommended.
Concern with the attitudes of top management toward change and the acceptance of new ideas presuppose that which top management perceives as sound for the company is sound for the company. Though a prudent consideration, neither of these premises is necessarily valid. Presumably, management consultants can bring to their clients the benefit of objectivity, together with experience in dealing with similar problems in varied organizational settings. If this is accepted, it follows that one of their most valuable contributions can be made only if they are freed from the constraints of preconceived attitudes. Objectivity could be consultants' most valuable contribution to internal management. In a word, the true value of retaining outsiders, whether they be members of a board of directors or others, may be that management needs to view its organization as others see it. 12. An Approach to Understand the Atypology of Organizations: . . . . p. 150.
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80
There is another problem related to the overemphasis of attention by consultants to the attitudes and philosophy of top management. It may partially account for the frequency with which recommendations from consultants are not implemented. Consultants tend to assume that if a proposal is acceptable to top management, it will be assimilated by the organization. This is not true. It is based upon the assumption that the company is an accurate reflection of executive philosophy. Though this is an important influence, the behavior of a firm is also shaped by its tradition, industry customs, and other critical variables. Hence, recommendations based upon a diagnosis restricted to a problem area and upon a primary concern with the attitudes of top management can be improper, in the sense that the proposal may conflict with the culture of the organization. If the recommendation is inapt, it may requke an abrupt departure from the traditional modus operandi of the client. It will be, therefore, extremely difficult to implement since man attempts to maintain cultural continuity or a semblance of the status quo. In sum, the demands placed upon management consultants can throw a company into disequilibrium or imbalance, lead to recommendations of only short-run value, or produce recommendations that will not or can not be implemented. I would like to propose an approach to the use of consultants which may alleviate these weakfiesses.
THE MANAGEMENT CONSULTANT AS ORGANIZATIONAL PHYSIOLOGIST To avoid potential pitfalls, a new approach to the use of management consultants is required. A new approach is necessary because it is the conditions under which consultants are engaged that lead to biases, fragmented analysis, and the need for expediency of results. It is useful to return to the analogy between management consultants and medical doctors. The comparison between the two diagnosticians is generally appropriate. Each is
primarily concerned with symptoms that must be traced to problems. Each uses sequential reasoning to trace effects to causes. Each must consider the uniqueness of the organism under observation. And each is aware that the organization of a company, or the anatomy of a physical organ, is composed of a number of systems whose interaction and interdependence must be considered if he is to prescribe correct action. But in at least one significant respect, the simile between management consultants and medical doctors is inaccurate. Recognizing this
difference is the key to understanding the limitations ~mposed upon management consul. rants, by the clients. Medical analysts are often called upon as physiologists to confirm the overall health of the human organism. Organizational analysts are rarely called upon merely to make a routine examination, a check up which might result in prescribing preventive measures. Consultants deal with problems; a pathological approach is required. Consider the impact of these two approaches. The goal of the doctor conducting a thorough physical examination is to determine the patient's general physiology. To do so, he must examine the total organism in the context of the patient's age, ecology, heredity, medical history and accepted local standards of good health. This leads to an extensive examination of relevant systems. The results are related in turn to each other and to the entire organism. If the doctor is approached by a patient with specific symptoms of distress, however, he behaves in an entirely different way. For example, consider the diagnosis of a patient with an inflamed wound accompanied by fever and sharp pain. The symptoms of blood poisoning prompt the doctor to narrow his attention. His diagnosis is directed exclusively to the systems related to the patient's immediate problem. An examination of all of the major organic systems would be inappropriate. If his diagnosis confirms his initial inferences, he prescribes medication. If the severity of the infection requires immediate treatment antibiotics are administered. Though this action
BUSINESS HORIZONS
Are You Wasting Your Consultants?
Contrasting the Effects of Diagnostic Approach Observed vs. Diagnostic Approach Recommended Diagnostic Approach Observed
Diagnostic A pproach Recommended
Analysis of the Situation with Emphasis on Endogenous Aspects
Analysis of Both Endogenous and Exogenous Aspects
Management's Definition of the Problems and Receptivity to Solutions
Problems in a Functional Area or System of Activity
Generalized Recommendations Acceptable by Top Management Implementation of Recommendations
may cause an unfavorable reaction in the patient, and increase the incidence of other diseases over the long run, it is obviously to the immediate advantage of the patient. This behavior is common to the management consultant faced with a corporate problem. His field of inquiry narrows to make the diagnosis required by the situation. He then prescribes remedial action to quickly resolve the underlying problem. Though his behavior is appropriate to the demands of the engagement, his recommendations can leave the organization out of balance and exposed to other malfunctions in the future. The problems could be alleviated if the conditions of the consultant's employment permitted comprehensive investigations and encouraged recommendations for preventive measures. I feel that consultants should be engaged to conduct periodic "physical checkups" of organizational health, to act as organization physiologists. As such, their objective could be the analysis of overall systems, processes, and
OCTOBER, 1969
Comprehensive Understanding of the Unique Organization Problems in the Context of the Total Corporation in Its Environment J, Recommendations Designed to be Assimilable by the Unique Organization Because They Introduce Internal Consistency and Consonance with External Environment J, Implementation of Recommendations
functions as they relate to the ecology of the firm and to its long-run objectives. Preventive recommendations could in turn be provided to management based upon the logic of the situation. By studying the firm's internal capabilities in fight of its objectives and its environment, recommendations could be based upon the steps required to reach goals under the constraints imposed by internal and external factors. Recommendations would not be biased by management's immediate receptivity or viability, nor fragmented by an analysis designed to resolve a given problem. Instead, the physical checkup of the firm could result in invaluable recommendations for balanced long-run growth, for adjustments of a preventive nature, and for changes that are compatible to the unique character of the company. Though the assumptions made by internal management about the organization, its environment and objectives are basic and primary to the way managers act, a new observer and
ROBERT WRIGHT
interpreter of those assumptions can often bring them into more realistic focus. The effects of the problem-oriented approach as opposed to the consulting audit approach are graphically shown in the figure.
absence of specific detail may make the practical businessman uneasy, the roots o f its true value lie in the reasoned, objective advice derived from an analysis o f a general nature. Rarely are the relationships between capabilities, goals, and environmental forces brought into clear focus.
LIMITATION TO USE The use of outside analysts is usually justified either in anticipation of decreases in costs or increases in incomes. Hence, their use merely to determine the overall competitive strength of the company would get a dubious reception from many managers. This would be especially true if the investment in consulting services paid off merely in recommendations of a general nature, or reaffirmed the prudence of the plans and strategies akeady considered by m a n a g e m e n t . The organizational survey recommended could well end with precisely these types of recommendations. Though the 82
B
ontsof management a IlltillII approach to therouse
consultants. Its conditions would permit outside analysts to serve management with recommendations of enduring usefulness. To do so, consultants must be permitted to make comprehensive investigations, to consider alternatives objectively, and to recommend those alternatives that are compatible with the unique characteristics of the company. I hope that this article will stimulate consideration and discussion and result in the businessman deriving the fullest practical benefit from the use of management consultants.
It is worth repeating that the businessman is playing a game in many ways similar to poker. The first thing a poker player does when he looks at his cards is to estimate their competitive power. Does he hold a hopeful combination? On the strength of his appraisal he may decide to risk some chips on the hand, to bluff if he thinks the other players lack the confidence to call him, or to throw away the hand and await another deal. Whatever his decision, if he is a good player he bases it on the facts before him, not on wishes or fantasies. So, too, if an executive hopes to advance within his company he needs in the first instance to make a broad and realistic survey of the facts of his competitive situation, divorced from illusions and daydreams. A major element in that situation is bound to be the state of mind of his boss. Insight into the mental processes of the man to whom he reports and who has the power to fire him or to damage him can be immensely valuable. No matter what your level in the company hierarchy, whether you are assistant to the head of the maintenance department or president reporting to the chairman of the board, you need to sense the thinking of the dominant player at your table, if you are to play your cards wisely. -Albert Z. Carr Business as a Game
BUSINESS HORIZONS
ROBERT WRIGHT
Mr. Wright is an associate professor of management, Arizona State University. Business has generally been using consultants to solve specific problems outside the range o f competency to be found inside the firm. The potential value o f this expensive assistance has not been reached because too often the outcome is a narrow analysis that is oriented to symptoms, not causes; a set o f recommendations generalized because the consultant lacked the opportunity to view the entire company; and recommendations that are not acceptable to management. The value o f consultants could be greatly improved if they were used as organizational physiologists, thereby allowing a comprehensive examination leading to preventive rather than curative measures.
Businessmen are not getting maximum value from the use of outside consultants. They could be deriving objective, comprehensive analyses of their company's capabilities and limitations as they relate to long-run growth and profits. Instead, they settle for biased, fragmented analyses of an anecdotal nature which frequently lead to imbalances, rigidity, and a resulting drain on corporate strength. It is ironic that the way top management uses consulting services causes management consultants to contribute well below their potential.
OCTOBER, 1969
Management consultants are commonly compared to medical doctors. Though a worn analogy, it continues to illustrate the traditional role played by consultants. They are usually retained to solve problems, that is to make an analysis of symptoms, which leads to a diagnosis of underlying causes, and to recommend remedial action. Playing the role of "organizational pathologist" can be of unquestionable value to management. Consultants can draw upon a wealth of experiences from many organizations. Most have developed a high degree of competency in a specific functional area of business activity; and they have the potential for objectivity not commonly available within the firm. Even greater value could be derived from the use of consultants, if they were allowed to make broader analyses. Consultants should also be used to anticipate potential weaknesses and to prescribe preventive actions rather than merely to give guidance designed to have a short-term remedial impact. If outside consultants could assume the role of "organizational physiologist," they would be freed to evaluate the processes and systems of corporate life in relationship to the firm's environment and its objectives. To serve as analysts in this more comprehensive manner, to attain this broader perspective, however, requires that management
75
ROBERT WRIGHT
adopt a new approach to the use of consultants. To understand the merits of this proposed approach, I will first explain how I became aware of the problem. Then the popular use of consultants' talents and the implications of such use will be discussed. Further, an approach will be introduced that has the potential of providing a more comprehensive analysis of a client company, leading to more practical counseling. And finally, the implications of this approach will be presented.
AN INNATE PROBLEM
76
In 1966, while working with a plastic engineering and manufacturing firm, I observed a latent problem in analyzing and correcting corporate deficiencies. The chief executive of the client firm defined the problem as a persistent sales lag below productive capacity. As such, he felt that promotional efforts should be exerted to bring sales volume up to production capabilities. An analysis revealed, however, that the "problem" was merely a symptom of misdirected marketing strategies. The analysis revealed that the company had been unsuccessful in defining its target markets and unconcerned with identifying the individuals who influenced buying decisions. While searching for the basic data upon which the marketing program could be developed, I considered the ultimate consequences of the consulting engagement. It became apparent that when the desired volume of sales was reached, the firm would experience equally pressing problems in other functional areas. Burdensome pressures would be felt in engineering, purchasing, physical distribution, administrative forces, and finance. The last was of critical import with this client. Organizational imbalance would occur. Though changes must occur if an organization is to survive, firms attempt to maintain "dynamic equilibrium"; 1 to run with their 1. Chester I. Barnard, The Function of the (Cambridge, Mass.: Harvard University Press, 1938).
Executive
various functional activities in balance. Recognizing that stability is conducive to efficiency, the client supported a proposal to conduct a comprehensive analysis of all areas affected by the impending change. The resulting recommendation derived from an overall analysis permitted the firm to expand its operations proportionately. Growth was facilitated, but stability sustained. It was fortunate that the client accepted an expanded analysis and the accompanying increase in consulting costs. If he had not, the assignment would have been lLrnited to the problem area and the recommendation that followed would have triggered a chain reaction of disturbances throughout the company for which various departments would not have been prepared. While an analysis in a specific area can resolve a given problem, it can also provoke adverse reactions in related activities. These reactions are usually felt in the long run. Authorities recognize the hazard of overcorrection and caution clients to carefully assess the widespread reactions to major changes in a seemingly isolated area. Wilson Seney explains that "it is clear that an engagement undertaken to solve a major problem almost certainly will involve more than one area of the company. ''2 J. R. Bingham cites the danger even more pointedly: A successful assignment is bound to impinge on the whole operations of your entire business . . . . If consultants come in and achieve good results in productivity in one section, this immediately reverberates through the entire organization.., it is essential that you (the client) must be prepared to move and bring the rest of your business back into balance with the improvement achieved in one section, a Management is being warned that if consultants are not placed in a position to understand the
2. Wilson Seney, Effective Use of Management Consultants (New York: Financial Executives Research Foundation, Inc., 1963), pp. 46-48. 3. J. R. Bingham, "A Managing Director's Experience of Consultants," Does Business Need the Management Consultant? (London: Institute of Directors, 1959).
BUSINESS HORIZONS
Are You Wasting Your Consultants?
total organization, together with the related impact of their recommendations, the client must then recognize and consider these logical reactions and make appropriate adjustments. Why is the problem of inappropriate r e c o m m e n d a t i o n s f r o m consultants so common, so flagrant? Why do so many apparently successful engagements end with unimplemented, perhaps unfeasible recommendations? Why are "experts" in organizational phenomena unable to formulate comprehensive recommendations, compatible with the unique character of the company in its environment? While probing for satisfactory answers to these primary questions, a number of other salient, though unanswered, questions arose: 1 Does the typical consulting assignment end with a narrowly fragmented diagnosis? 2 If so, do the conditions imposed by the client limit the consultant's ability to make comprehensive investigations? 3 What are the implications of such fractional evaluations? 4 If diagnosis leads to inappropriate recommendations, is there an alternative approach to the use of consultants so that recommendations to management are of more practical, long-run benefit? To fired answers to these questions, I conducted research into consulting activities. Senior consultants representing 220 years of experience from seventeen prominent consulting firms were interviewed in depth. The next section presents the findings from this study by considering the following issues: circumstances leading to the use of management consultants; demands imposed on consultants; and potential influences of these demands on the client firm.
CIRCUMSTANCES LEADING TO TIlE USE OF MANAGEMENT CONSULTANTS Historically, management has called upon outside consultants when difficulties can't be resolved internally. The business man requested assistance of outside staff when the company ~vas in trouble, "going downhill fast," experiencing unsatisfactory growth, or when certain OCTOBER, 1969
units of the company were not functioning as desired.4 Thus, consultants assumed the role of diagnostician-organizational pathologist. Today, circumstances leading to the use of consultants have not changed: a problem arises, internal management lacks the expertise, the time, or the objectivity to solve it; therefore, outside help is sought. The following statement of a senior consultant is typical: Basically, you're asked to come into a situation because something is not working right. That's our role in life. Someone has a problem and we're called in there to solve it. s
DEMANDS IMPOSED ON CONSULTANTS Faced with these conditions, consultants must respond by attempting to resolve a specific problem to the client's satisfaction. To do so, he proceeds in the following way. First, diagnose and defme the underlying causes of the problem; second, determine actions that will remedy the problem; third, select a course of remedial action that will both resolve the problem and receive support from management; and fourth, expedite all phases of the engagement. The typical, "problem-oriented" consulring engagement puts pressure on the consulrant to behave in a way that will mitigate these demands. As a consequence, the management consultant's work will be influenced as discussed below.
INFLUENCES OF IMPOSED DEMANDS Narrow Analysis The consultant's initial objective is to diagnose the cause of a problem. Tiffs cause is usually 4. J. D. Armsliong, "Getting Value From Management Consultants," The Manager, March, 1965, p. 27. 5. Robert Wright, An Approach to Understand the Atypology of Organizations: Integral and Differential Analysis (unpublished D.B.A. dissertation, Grad-
uate School of Business Administration, Universityof Southern California, 1967), p. 103.
77
ROBERT WRIGHT
centered in a specific functional area (such as marketing, manufacturing, finance) or an organizational system of activity (such as communications, incentives, or authority relationships). As psychological theory tells us, a field of inquiry is organized and made meaningful by the resolution of a need. 6 In this case, the need of the consultant is the identification of the causes of the problem. Thus, the consultant concentrates on the area in which he believes the causes of the problem lie. Narrowing his attention to this area causes other related aspects of the operation to fade from his attentionfl The resulting recommendation is thereby a product of an analysis of only a fragment of a company's activities when, in fact, the functions and processes are interwoven into a mutually dependent system.
. . . the major recommendations are that the Church maintain depreciation reserves and delegate part of the Pope's authority to his staff and subordinates. 9 This illustrates inappropriate recommendations made without understanding the overall character of the organization.
Generalized Recommendations 78
alized models can work to the disadvantage of both consultant and client. The recommendations that result are frequently inappropriate when related to the firm's unique setting. Amitai Etzioni cautions against such efforts to bring the client's organization in line with a given model: "Since the general models as a rule include some specific statements which appear as universals, the consequences may be regrettable. ''s An example of the incongruencies that arise is the recommendation given to the Catholic Church by a nationally known management consultant firm:
Due to the fragmented nature of the diagnosis, corrective proposals must be general rather than tailored to the specific organization. This occurs because consultants do not have the advantage of a comprehensive understanding of the entire company. This comprehension is mandatory if particular recommendations are to be made. Generalized recommendations result from the conditions under which consultants are retained. Consultants are able to provide individualized consultations, but they must be based upon overall evaluations of the company/n context. In the absence of a situational analysis, consultants' observations of the firm are evaluated against preconceived normative or "universal" models. Universal models are those in widespread use by authorities on management" and on organization theory. The evaluation of observations in a given firm against such gener-
Acceptability Bias When a consultant has identified the cause of a problem in a given area and evaluated the remedial alternatives, he must determine which alternative will be acceptable to management. Only the acceptable alternative will be implemented. Selection requires evaluative capabilities of an extraordinarily high order. The consultant must determine both the receptivity and viability of the alternative to top management, if the recommendation is to be implemented and the problem resolved. Obviously, problems must be resolved if consultants are to gain management's support, and thus build a reputation. Consultants are aware that many times sound recommendations are not implemented. They contend that this is due largely to their own miscalculations concerning top management's philosophy, or propensity to accept
6. Arthur W. Combs and Donald Snygg,Individual Behavior: A Perceptual Approach to Behavior 8. Amitai Etzioni, A Comparative Analysis of Complex Organizations (New York: The Free Press of
(New York: Harper and Brothers, 1949), pp. 16-31. 7. The theory underlying this phenomenon is a generally accepted precept of Gestalt psychology.
Glencoe, 1961), p. 14.
Individual Behavior: A Perceptual Approach Behavior, pp. 23-24.
9. A Comparative Analysis o f Complex Organizations.
to
BUSINESS HORIZONS
Are You Wasting Your Consultants?
change. This is doubtless true. One of the dilemmas of problem solving, in Seney's judgment, is the "failure to take executives' attitudes into account" and this "may result in unsatisfactory experiences. ''10 Further, consultants have learned that assignments can fail if recommendations abruptly change a client's modus operandi, or if recommendations threaten individuals in sensitive positions. A senior consultant cited the acute importance of determining resistance to change in the following way.
services are quite expensive. And our services are entirely a function of time. So that we have got to make some judgment based upon a finite amount of d a t a . . , under the pressure of time. We don't often have ample time./2
You've done a real good piece of work and you think you've chosen the alternative solution acceptable to the people. And then you find tremendous resistance and a drawing together of people because you've become the enemy no matter how carefully you've tried to avoid this . . . . No matter how good a job you've done, they're out to prove you're wrong . . . . Therefore, you try to sense resistance to change.11
Problems of Using Consultants as ProblemSolvers
This need to be sensitive to the receptivity and viability of top management further limits the consultant's span of concentration. His concentration must be divided between the problem area and top management. There is yet another overriding condition of most consulting engagements. This is cost. Consultants are concerned with defining the problem, resolving the problem in a way acceptable to management, and costs. Though the statement that "time is money" is often loosely used, in consulting its validity is absolute. Per diem rates vary from approximately $120 for junior consultants to $500 for a partner in a consulting firm. A survey team of six consultants could cost from $1,200 to $1,800 a day. If the prospective client is to retain the consulting services, the problem must be framed quickly. As one principal consultant states the matter: One of the realities of the consulting business is that with the kinds of people we employ, our 10. Effective Use o f Management Consultants, pp. 39-47. 11. An Approach to Understand the Atypology o f Organizations: . . . . pp. 130-131.
OCTOBER, 1969
The pressures accompanying most consulting engagements dictate narrowing attention to the issue at hand, and the recommendations stemming from such myopic analyses can lead to impractical solutions.
Consider the problems connected with employing consultants as "organizational pathologists." Preoccupation with a single section or system in an organization can lead to imbalance because the interdependency of activities is overlooked. The reason for concern by authorities both in management and consulting is apparent. They are disturbed with the magnitude of the adjustments that may become necessary as a result of the remedial action recommended.
Concern with the attitudes of top management toward change and the acceptance of new ideas presuppose that which top management perceives as sound for the company is sound for the company. Though a prudent consideration, neither of these premises is necessarily valid. Presumably, management consultants can bring to their clients the benefit of objectivity, together with experience in dealing with similar problems in varied organizational settings. If this is accepted, it follows that one of their most valuable contributions can be made only if they are freed from the constraints of preconceived attitudes. Objectivity could be consultants' most valuable contribution to internal management. In a word, the true value of retaining outsiders, whether they be members of a board of directors or others, may be that management needs to view its organization as others see it. 12. An Approach to Understand the Atypology of Organizations: . . . . p. 150.
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There is another problem related to the overemphasis of attention by consultants to the attitudes and philosophy of top management. It may partially account for the frequency with which recommendations from consultants are not implemented. Consultants tend to assume that if a proposal is acceptable to top management, it will be assimilated by the organization. This is not true. It is based upon the assumption that the company is an accurate reflection of executive philosophy. Though this is an important influence, the behavior of a firm is also shaped by its tradition, industry customs, and other critical variables. Hence, recommendations based upon a diagnosis restricted to a problem area and upon a primary concern with the attitudes of top management can be improper, in the sense that the proposal may conflict with the culture of the organization. If the recommendation is inapt, it may requke an abrupt departure from the traditional modus operandi of the client. It will be, therefore, extremely difficult to implement since man attempts to maintain cultural continuity or a semblance of the status quo. In sum, the demands placed upon management consultants can throw a company into disequilibrium or imbalance, lead to recommendations of only short-run value, or produce recommendations that will not or can not be implemented. I would like to propose an approach to the use of consultants which may alleviate these weakfiesses.
THE MANAGEMENT CONSULTANT AS ORGANIZATIONAL PHYSIOLOGIST To avoid potential pitfalls, a new approach to the use of management consultants is required. A new approach is necessary because it is the conditions under which consultants are engaged that lead to biases, fragmented analysis, and the need for expediency of results. It is useful to return to the analogy between management consultants and medical doctors. The comparison between the two diagnosticians is generally appropriate. Each is
primarily concerned with symptoms that must be traced to problems. Each uses sequential reasoning to trace effects to causes. Each must consider the uniqueness of the organism under observation. And each is aware that the organization of a company, or the anatomy of a physical organ, is composed of a number of systems whose interaction and interdependence must be considered if he is to prescribe correct action. But in at least one significant respect, the simile between management consultants and medical doctors is inaccurate. Recognizing this
difference is the key to understanding the limitations ~mposed upon management consul. rants, by the clients. Medical analysts are often called upon as physiologists to confirm the overall health of the human organism. Organizational analysts are rarely called upon merely to make a routine examination, a check up which might result in prescribing preventive measures. Consultants deal with problems; a pathological approach is required. Consider the impact of these two approaches. The goal of the doctor conducting a thorough physical examination is to determine the patient's general physiology. To do so, he must examine the total organism in the context of the patient's age, ecology, heredity, medical history and accepted local standards of good health. This leads to an extensive examination of relevant systems. The results are related in turn to each other and to the entire organism. If the doctor is approached by a patient with specific symptoms of distress, however, he behaves in an entirely different way. For example, consider the diagnosis of a patient with an inflamed wound accompanied by fever and sharp pain. The symptoms of blood poisoning prompt the doctor to narrow his attention. His diagnosis is directed exclusively to the systems related to the patient's immediate problem. An examination of all of the major organic systems would be inappropriate. If his diagnosis confirms his initial inferences, he prescribes medication. If the severity of the infection requires immediate treatment antibiotics are administered. Though this action
BUSINESS HORIZONS
Are You Wasting Your Consultants?
Contrasting the Effects of Diagnostic Approach Observed vs. Diagnostic Approach Recommended Diagnostic Approach Observed
Diagnostic A pproach Recommended
Analysis of the Situation with Emphasis on Endogenous Aspects
Analysis of Both Endogenous and Exogenous Aspects
Management's Definition of the Problems and Receptivity to Solutions
Problems in a Functional Area or System of Activity
Generalized Recommendations Acceptable by Top Management Implementation of Recommendations
may cause an unfavorable reaction in the patient, and increase the incidence of other diseases over the long run, it is obviously to the immediate advantage of the patient. This behavior is common to the management consultant faced with a corporate problem. His field of inquiry narrows to make the diagnosis required by the situation. He then prescribes remedial action to quickly resolve the underlying problem. Though his behavior is appropriate to the demands of the engagement, his recommendations can leave the organization out of balance and exposed to other malfunctions in the future. The problems could be alleviated if the conditions of the consultant's employment permitted comprehensive investigations and encouraged recommendations for preventive measures. I feel that consultants should be engaged to conduct periodic "physical checkups" of organizational health, to act as organization physiologists. As such, their objective could be the analysis of overall systems, processes, and
OCTOBER, 1969
Comprehensive Understanding of the Unique Organization Problems in the Context of the Total Corporation in Its Environment J, Recommendations Designed to be Assimilable by the Unique Organization Because They Introduce Internal Consistency and Consonance with External Environment J, Implementation of Recommendations
functions as they relate to the ecology of the firm and to its long-run objectives. Preventive recommendations could in turn be provided to management based upon the logic of the situation. By studying the firm's internal capabilities in fight of its objectives and its environment, recommendations could be based upon the steps required to reach goals under the constraints imposed by internal and external factors. Recommendations would not be biased by management's immediate receptivity or viability, nor fragmented by an analysis designed to resolve a given problem. Instead, the physical checkup of the firm could result in invaluable recommendations for balanced long-run growth, for adjustments of a preventive nature, and for changes that are compatible to the unique character of the company. Though the assumptions made by internal management about the organization, its environment and objectives are basic and primary to the way managers act, a new observer and
ROBERT WRIGHT
interpreter of those assumptions can often bring them into more realistic focus. The effects of the problem-oriented approach as opposed to the consulting audit approach are graphically shown in the figure.
absence of specific detail may make the practical businessman uneasy, the roots o f its true value lie in the reasoned, objective advice derived from an analysis o f a general nature. Rarely are the relationships between capabilities, goals, and environmental forces brought into clear focus.
LIMITATION TO USE The use of outside analysts is usually justified either in anticipation of decreases in costs or increases in incomes. Hence, their use merely to determine the overall competitive strength of the company would get a dubious reception from many managers. This would be especially true if the investment in consulting services paid off merely in recommendations of a general nature, or reaffirmed the prudence of the plans and strategies akeady considered by m a n a g e m e n t . The organizational survey recommended could well end with precisely these types of recommendations. Though the 82
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ontsof management a IlltillII approach to therouse
consultants. Its conditions would permit outside analysts to serve management with recommendations of enduring usefulness. To do so, consultants must be permitted to make comprehensive investigations, to consider alternatives objectively, and to recommend those alternatives that are compatible with the unique characteristics of the company. I hope that this article will stimulate consideration and discussion and result in the businessman deriving the fullest practical benefit from the use of management consultants.
It is worth repeating that the businessman is playing a game in many ways similar to poker. The first thing a poker player does when he looks at his cards is to estimate their competitive power. Does he hold a hopeful combination? On the strength of his appraisal he may decide to risk some chips on the hand, to bluff if he thinks the other players lack the confidence to call him, or to throw away the hand and await another deal. Whatever his decision, if he is a good player he bases it on the facts before him, not on wishes or fantasies. So, too, if an executive hopes to advance within his company he needs in the first instance to make a broad and realistic survey of the facts of his competitive situation, divorced from illusions and daydreams. A major element in that situation is bound to be the state of mind of his boss. Insight into the mental processes of the man to whom he reports and who has the power to fire him or to damage him can be immensely valuable. No matter what your level in the company hierarchy, whether you are assistant to the head of the maintenance department or president reporting to the chairman of the board, you need to sense the thinking of the dominant player at your table, if you are to play your cards wisely. -Albert Z. Carr Business as a Game
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