4 ms·
The problem are not MBA's. The problem is that the incentive of consulting companies are not aligned with the incentive of their clients. Take a big constructi
by IMTDb 6y ago
The problem are not MBA's. The problem is that the incentive of consulting companies are not aligned with the incentive of their clients.
Take a big construction project. In the like of the Berlin airport. What do you think is more profitable for the consulting companies :
a) A well thought project, done in budget and in time. Where the consulting company gets the whole contract + all the bonuses associated with it.
b) A poorly managed project, that gets refinanced multiple times and that ends up being pushed back decades.
It's actually B. Consulting companies love long projects, because this allows them to place consultant for extended periods of time. And any consultant working for a client is a profitable consultant event without bonuses. Consulting companies hate projects that end up shorter than expected, because any bonus they might get from that project ends up being spent on consultant that are waiting for their next assignment.
The main KPI of any consulting company is "the %age of time you consultant are spending 'on assignment' vs 'on the bench'". And long projects where consultant are busy for years are the best way to bring that KPI to 100%, even when the underlying project is a complete mess. The only thing they get from shorter and better managed projects is a better image, which is easier and less expensive to get using marketing technique and PR.
- alexpetralia 6y agoYes, and I agree with all the child comments. The principal-agent cost with consulting firms is enormous. In the most uncharitable light, their business model is a wealth transfer insofar as their profit derives directly from maximizing this cost.
- alisonkisk 6y agoYour complaints apply exactly as well to the internal employees.
- rvwaveren 6y agoYour point about incentives is exactly the structural problem here. I've been a consultant years ago and on a human level we loved projects that ran well. You feel good about yourself and your team for helping the client quickly and efficiently. However, zooming out, it's the incentive system that's completely broken: there is no skin in the game. Consulting firms are too detached from the consequences of their advice. Nassim Nicholas Taleb wrote a nice book about this phenomenon: https://en.wikipedia.org/wiki/Skin_in_the_Game_(book) https://en.wikipedia.org/wiki/Skin_in_the_Game_(book)
- Dwolb 6y agoI’m with ya hear. It’s actually one of the reasons I love start-ups. You get to recommend a better approach to an industry or technology and then go off and do it all while having equity in the company.
- jaredmosley 6y agoYet, a consulting company that constantly has overrun projects won’t get repeat business nearly as much as the company that comes in and gets things done. PR and marketing may help you land your first project with a client, but it’s only good work that will keep that client coming back to you. Otherwise they’ll replace you with different consultants.
- TuringNYC 6y agoThis is slightly different (SI/Mgmt consultants vs Strategy consultants) but my experience with SI consultancies was that mid/lower consultants were rewarded based on chaos and fixing chaos not on avoiding chaos. So if you oversaw the build-out of a system and everything went smoothly, good, but nothing to talk about during promotions. On the other hand, if there were difficult issues faced and you fire-fought, sent out late emails with decisions to clients, came up with memos documenting tricky situations, awesome! Promotion material! Of course, sharp consultants figured this out and the sharpest ones looked the other way when design documents had landmines -- just so they had known manageable issues to "manage" and "save the day" with. Bad incentives, bad outcomes.