Management consulting flexing its economic muscle

May 24 2006 by Nic Paton Print This Article

Management consulting has become a significant global economic force, creating revenues of $125bn around the world, and more than £10bn in the UK alone, a new study has suggested.

The research in a book from Oxford University's Said Business School found that, in the UK, consulting firms now employ more than 60,000 consultants.

Such firms are routinely retained by 90 per cent of the FTSE 100 and S&P 500 firms as well as throughout the state and non-profit sectors.

The book, The World's Newest Profession by Chris McKenna, has argued that in an era of tumultuous organisational transformations, giant cross-border M&As and decisive transitions in public and non-profit organisations management consultants have become the agents of organisational change and are now deeply embedded in all developed economies.

The book is based on unprecedented access to the archives of top accounting firms such as McKinsey and Co, Boston Consulting Group, Booz Allen & Hamilton and A T Kearney, as well as interviews with some of the key players.

In it, McKenna has explored the influence of management consultants on organisations as significant as NASA, the US Government, IBM and the Bank of England.

As consulting grew rapidly in the U.S because of federal regulation during the Great Depression, argued McKenna, consultants transformed the giant American corporations.

Not only did these new management consultants overhaul the world of business, but they also reconstructed the federal government to promote outsourcing and shaped the modern non-profit sector.

By the 1950s, consultants had assumed a critical influence over the design of the corporate economy, and the leading consulting firms had become the central conduits for the transfer of managerial innovations.

Consultants sold their own corporate culture, dominated by teams, knowledge management and professionalism, as the archetype for the modern firm, yet very few have asked why consulting should be the current model for many organisations, McKenna argued.

The book also explores the history behind the Enron/Anderson crisis and why the recent Congressional reforms will only deepen executives' reliance on management consultants.