Can someone explain to me how and why consulting works? If a man had no real skills except giving advice left and right, he would be considered a loser. Now make it a company, and corporations and governments queue up for their advice. Wouldn't your own employees be in a better position to give you advice than people who know nothing of your business and who's only skills are googling and making presentations?
Well, when you have a bad idea you want to implement but don't want to take responsibility for it, you keep on hiring consultants until you hear what you want to hear. Quality of the consulting is irrelevant and interns or AI will do just fine. When the project inevitably implodes, you blame the consultant. Your own employees will give you advice on what's best for the company, not necessary what's best for you so you stand on their neck until they quiet down and learn their place. By the time anyone figures out what happened you already moved on with outstanding resume bullet point.
Exactly. These are paid villains to craft masterplan for multiple layoff rounds. Because the good and loving CEO loves everybody in his kingdom and can’t hurt anyone. The paid consultants are the evil who laid those nice people off. The consultants are the part of modern faceless mega corporations to outsource decision making. The CEO is not liable for any decisions nowadays.
I'm the CEO and I don't really like it when the annoying guy down the hall tells me what to do, so I'm gonna spend $50,000 and have a team come in and interview everybody and then they'll tell me the same thing the annoying guy said, for years, but because they're outside consultants, I'll listen to them when they say it.
> they'll tell me the same thing the annoying guy said, for years, but because they're outside consultants, I'll listen to them when they say it
A tale as old as time:
> Jesus left there and went to his hometown, accompanied by his disciples. [...] Jesus said to them, "A prophet is not without honor except in his own town, among his relatives and in his own home." He could not do any miracles there, except lay his hands on a few sick people and heal them. He was amazed at their lack of faith. (Mark 6:1-6)
If your doctor suggests to take out your kidney would you seek a second option? There is a lot of B.S. but there are also cases where there has been value provided.
You would be surprised how many companies dont have the expertise in house. And of that set, you would be surprised how many make financial and technical decisions based on no expertise and get themselves into all sorts of trouble.
You may also be surprised how many companies have 1 guy in house who pretends to be an expert and does his damned best to prevent people getting hired who might out them.
Good consultants come in, tell you how it should be done, with evidence. Better consultants then provide those services if needed on a project basis. Usually "Good Consultants" in the IT industry are absolute heavy weights. Like we carry a bunch of different skillsets where there are few other people in our country with the same experience, and no one can afford to carry that expertise on an ongoing basis, but lots of people are willing to pay for a couple hours a month.
That ofc, does not reflect the sales channel for most consultancies. Sales is focused on finding anyone they can schmooze into paying for services. Generally where large consultancy firms are involved, the decision maker is treated like royalty. Usually it involves helping them cheat on their spouse or get access to drugs. Weeklong out of town trips, usually vegas, paid for by the consultancy, with a hefty petty cash card. Smaller decision makers might only get local strippers and beer.
One time, I was involved where a company we were consulting to on X, was concerned they were being lied to by consultants on Y project, and we stepped in and sounded them out in a meeting in front of the client making it evident they were just being told to justify Dynamics CRM and Sharepoint at all costs.
The thing is, the original problem is one that "the free market" would say should fail. That company, without the expertise required to do the job, should fail.
Having consultants do anything in this situation is antithetical to the ideal of a company. The company should fail, OR, the consultants should advise that the company should either fail or gain the expertise to no longer require consultants.
Obviously this isn't going to happen, and here we are.
There are so many different kinds of expertise, you can't have everything in house. The problem is that now you are going to have to hire someone for something that you are not qualified to do yourself, which almost automatically implies that you are not qualified to make that hire either. So everybody plays it safe and they hire the 'big names' because those have social proof, no matter how crap the actual interaction.
Yes, that's a more detailed way of saying what I mean, but without the snark against "the free market". The value provided by the big 4 is based on a universal acceptance of "play it safe, cover your ass" instead of "we provide quality advice". The big 4 have realised this, as near, captive market, and lowered their output accordingly.
>The thing is, the original problem is one that "the free market" would say should fail. That company, without the expertise required to do the job, should fail.
The free market doesnt say anything, the invisible hand is also silent. Have seen:
1. Additional round of investor funding to rescue the business based on doing it right this time.
2. Dip into family money to reorganise and rescue business
3. Uses us to correct their practices and then runs it themselves
4. Farm mortgage.
I dont see how its antithetical, its a service. Businesses use other businesses services all the time.
If they need the expertise only once every ten years? Then it makes no sense to have in house expertise. Or the company expands to a new market and they need new expertise. They can hire, but they don't know who to hire, so consultants come in to help them.
So there's some free market reasons for this to exist.
> antithetical to the ideal of a company. The company should fail, OR, the consultants should advise that the company should either fail or gain the expertise to no longer require consultants.
This is a super myopic. Company's don't operate in idyllic terms ("ideal of a company"). Company's exist to create customers. How they reach that is up to them, consultants or otherwise...there are no "rules" you have to follow to achieve it (other than obvious regulatory ones)
There is a risk in hiring expertise. What if the idea turns out to not work? What if the company decides to not pursue the idea any further? Now you already hired and trained a bunch of people that are now useless.
And what about companies that purchase materials necessary to their business from 3rd party vendors? Should all companies that aren't 100% vertically integrated die, or just the ones purchasing services?
If the company can usefully gain access to that expertise by paying a consultant, then why should that be a problem as far as the market is concerned? There's nothing in the idea of efficient markets that says anything about how the company or economic activity should be structured (in fact, there's an argument that having such activity be subject to market pressure could improve market efficiency).
The main issue, of course, is that a truly efficient market is a theoretical construct that can only be approximated. And in practice the approximation is often quite poor: successful companies are usually only doing one or two things right to make their success, then doing most other things in a mediocre fashion, and usually one or two things just short of catastrophically badly.
... Well, the "gang of 4" (of which Deloitte is one) - from my experience - doesn't have the good expertise in-house either - when needed, they subcontract or outsource to the specialists... (And I am speaking as someone who has worked alongside them, and also subcontracted with them - I generally warn my clients about the A/B/Z-team game and that they would be better off by contracting with smaller agencies or individuals who actually would "embed" better in their project/team/initiatives)
And apparently so much so that they feel they can even use AI-created reports/materials...
I once saw one of Deloittes competitors build up a really basic Dynamics CRM, and then sent in some of their junior analysts to convince the customer, that they should just change their business practices to conform to the CRM as presented. They charged ~15 million for the service.
Deloitte really falls into the "We wined and dined and whored the decision maker" tranche.
It's not only "giving advice". "Consulting" includes a range of things, down to implementing software.
The customers are big companies with huge budgets, and a lot of red tape. The guarantees they want the most are legal. If things don't go well in a project, or if a project isn't implemented on time, they want to have someone to sue. Someone that will not simply go bankrupt and disappear. "Quality" is almost a nice to have, compared to the legal guarantees.
Enter the Consultancy companies. They have a huge amount of workers, a lot of them fresh out of university. The quality of the work they produce might not be great, but when problems arise, they can always throw more people at the problem (or to make them work longer unpaid hours). They are sometimes called "meatfarms", because of this. They will not go bankrupt easily.
The way these companies develop software is by third parties, often overseas, sometimes, frequently via several intermediate companies, each one adding their cut.
I must stress out that it work. Boring, soul-crushing at times. But it is not easy. Just dealing with the red tape is a job on itself. The kind of contract that needed to be written before a medium-sized project has to be very detailed. It details things like what will happen when the project derails, what will be the penalty and who will pay what. It's a small book.
Source: I was one of those "fresh out of college" people when I joined Accenture. I once was asked to estimate how much would it cost to change one (static) website's scrollbar color from default to yellow. The quote for that change alone, perhaps 10 LOC change implemented by someone in India, was 3000 euros. This was around 2010. I was glad when they offered me a severance package.
> I once was asked to estimate how much would it cost to change one (static) website's scrollbar color from default to yellow. The quote for that change alone, perhaps 10 LOC change implemented by someone in India, was 3000 euros.
This is absolutely insane and, quite honestly, hard to believe.
If you ever dealt with any projects at bloated Fortune 500s, it's not really that hard to believe.
Take five people at $200 an hour and drag them into three meetings. There's 3000 bucks right there.
Or, take one consultant and buy them the last minute plane ticket, to write 10 lines of code, at a customer who insists that everything be done on-site.
There's a whole lot of ways that a bloated company can blow $3000 really quickly.
You need sign offs, and translations - wait but isn't it just the scroll bar color? Yes but the color needs to fit in with the corporate colorscheme, so now we have to pull in the design team, and they're in Poland.
In theory, there exist people who are exceptional at solving unique problems/challenges or managing things related to such endeavors. Some might specialize in certain classes of problems and gain experience solving variations for many companies. They might be both underutilized and underpaid in traditional companies for various reasons.
What if you built a company by recruiting such people and sold their expertise at a premium?
I also think assuming there's no real skill at any consulting company is probably a mistake. Or if anything, they're not just all "management consultants" and many of these places have tech consultancies as well. There are also tech companies that are basically specialized consultancies---compsec is probably a very visible area where it's a more common model and at least some firms get some respect for competence.
There's plenty of criticism for consulting firms and it can be very valid. You can probably even dig up stories of bad consulting experiences in the comments on HN.
But I've known people who worked at places where they didn't really have the talent to solve some unique problem, or their own people had caused the problems.
Good consultants will try to pick the brains of employees for insight that's been missed, ignored, or simply wasn't communicated well. They have have problem solving skills that overlap with a good software engineer, such as requirements gathering, communicating with managers, etc.
A couple of uses of consultants that I've seen at first hand:
- They helped our company to negotiate the minefield of government R&D tax credits, by interviewing all the developers and assessing how much was R&D compared to the guidelines (which are complicated). I think this was a good use of consultants: You get someone with specialized knowledge, and unless you're an enormous company, you couldn't afford to have someone with this knowledge on staff all the time.
- They ran a survey of our software development practices, which they also ran with many other software companies, and then compared our performance to the other companies. I think if you're a completely useless manager with no idea about software, then this could be good, as it might highlight obvious ways that you could improve your processes. For us, it was a waste of time and money.
The first of these I can see as valid, but it's an optimisation that is only needed because globally, taxation law is a deliberate mine-field deisgned to support consultants. The second is exactly as you read it.
1. Since tax prep is siloed away from development, you don’t know what you don’t know about your company’s tax and regulatory posture. You as a product owner don’t know how it compares with the industry. You don’t know the space of ways it can change.
2. But then, when they find that your development floor looks like everyone else, it’s less than profound. This analysis is most valuable to the outliers; maybe a company that’s merged and bought smaller ones and as a result needs to be told that they’re out of shape.
The trope you’ll often hear in circles like ours is that big 4 consultants exist to provide cover for unpopular decisions. That’s sometimes true. However…
Big corporations and governments aren’t startups in which everyone is encouraged to do as they please in service of the mission. Corporations and governments hire people for very specific roles with very specific responsibilities. Stepping outside of your responsibilities is discouraged. Employees inside big organizations have to think, “how fucked am I if I make this decision and it goes wrong?”. A startup can write off big losses without a second thought, a big corporate or government has to investigate.
If you need to make a big decision, you don’t let an intern take a shot at it, even if they are convinced they have the perfect idea, because if it goes wrong, it’s on your head — which idiot let an intern fuck it up?
You bring in consultants who are (ostensibly) experts so that your responsibility ends at having done the right thing and if anything goes wrong, it’s not on your head.
> The trope you’ll often hear in circles like ours is that big 4 consultants exist to provide cover for unpopular decisions. That’s sometimes true. However…
And then in the rest of your comment you outline exactly that "consultants exist to provide cover for unpopular decisions".
The trope is that an unpopular decision is made within the organization and then consultants are brought in to execute that unpopular decision and absorb the fallout as if it were the consultants decision.
The reality is that people within a large bureaucratic organization often need a decision to be made that has impacts which extend beyond their narrowly defined responsibilities. Consultants are brought in to make the decision instead, to put space between the employees and the decision. The decision might be unpopular or popular, that’s besides the point.
If you’re an employee with a role doing x, putting your head above the parapet and volunteering to do y, it’s a huge risk, for little reward. Best case, the big corporate you work for gives you a pat on the back and a gift card. Worst case, you’re the sacrificial lamb at the altar of accountability. Much easier to offload everything onto consultants to dodge any risk of being held accountable for a bad outcome.
So, yes, consultants protect employees, but not in the cynical way the trope suggests.
I disagree that your take can not be considered cynical. Consultants are used as accountability sinks either way which I have always taken to be the main point of why it's considered immoral to use them.
You just gave an explanation why it happens not that it is not immoral to do so.
Why do you have an accountant? Or a lawyer? It's the same thing. Corporations don't have all skills in house for a ton of things.
I was an IT consultant. A big energy company wanted to go to the AWS cloud. Their folks were too busy and had no experience. We (my consultancy company) already had the knowledge.
Consultants don't only give advice. In many cases, they also do the work. But advice is also a "product". If your in-house team does not have the knowledge or time, you hire a consultancy firm.
I think one part that gets easily overlooked is that they not in-house, and that's a feature.
That means even when an in-house team has the same expertise, they have to adhere by in-house processes and hierarchy.
If a CEO signs off a consultant contract, they dont play in the same arena, and can often side-step the hurdles an internal team would face, without anyone internally getting too upset (compared to an internal team side-stepping processes).
Taking responsibility so you can blame someone for your decisions and to find 'logical' Arguments for your decisions after you already made them but don't want to look stupid.
Leaders are usually insecure. They need validation. Management consultants give it, for money. In theory, they can take the blame if things go very wrong. But in practice, management consultants tell you to do what everyone else does, and that means both leaders and consultants are saved by the "nobody ever got fired for buying IBM" effect.
But there's more to it than that. Your investors don't trust you if you're not the sort to trust Deloitte. (Your investors probably also invest in Deloitte, by the way.)
The value of validation from a consultant normally doesn't have anything to do with insecurity. Most corporate leaders got where they are because they are quite secure, even to a fault. But, corporate politics is a mess at a lot of large organizations. Bringing in an external opinion, is a helpful defense to politically motivated decision-making.
Say you're some business, government agency, or whatever. You mainly focus on one or few core things (the product, or service you're providing).
Suddenly you face change, maybe the markets are changing, or tech has come a long way - but in any case, it is in something which is either outside your area of expertise, or you don't have the resources to do it yourself.
So instead of hiring N people to do that one thing, you pay external people to do it for you. This is especially attractive in agencies where you have budgets to consider, can't just hire workers on a whim, and where firing workers can be equally difficult.
That's where consulting firms come in. Most big consulting firms tend to be huge, and have expert networks all over the world - so there's a decent likelihood they'll have someone that have knowledge in the problem you're looking to get solved. And they hire smart enough people that will toil away.
In a good scenario the consultants will have interviewed you, taken a deep dive look into your organization, analyzed the data, and either answered out your problem, or laid out exactly what you need to solve that problem. Usually on the strategy side.
For the implementation itself, you can either go to step 1 and hire people to do it, or hire some other consulting agency to actually do the implementation work.
That's at least the ideal situation. Sometimes consultants are just hired to rubber stamp controversial leadership decisions, and to back up things that leadership can't get internal backing for.
I've seen it where a project needs to get done but the company can't hire anyone for it due to firm wide hiring freezes. So in come the consultants to bang out a sloppy version 1. In the meantime you wait it out until you can hire a real team and gradually transition them in to rewrite what the consultants did. At least the company will have learned something from the consultants trying to implement the project. When your domain is complicated and has many dependencies there's some value in having anyone trying to figure that stuff out.
Of course, when the project is inevitably a late, half functioning, buggy mess you get to blame the consultants.
I think that's not quite the way consulting should, and to some extent does, work.
The ideal goal of consultancies like Deloitte's is that they hire a small number of people with experience and combine them with a larger number of young bright people and have them come in to review and advise organizations. The people with experience (so who have worked in that field before) direct the engagement and the leg work is done by the juniors, producing a report for the customer.
As to why companies would choose to use consultancies, there's a variety of reasons, some good, some less than good.
- Outside perspective & experience. The consultancy has done engagements with other companies in your field and can provide that experience.
- Neutral point of view. The consultancy should be neutral to any internal politics within the organization.
- Appeal to authority. Many times organizations use consultancies to provide evidence to external stakeholders that the thing they want to do is the right thing.
Now that's not to say that it always (or even often) works out that way, but in theory at least, there are some not terrible reasons.
Ah, OK, so there are actually people with real industry experience there? What happens with the young bright people when they are not young any more though? Are they expected to leave the company to gather real world experience or are they just promoted to "experts" without seeing anything outside their consultancy?
The trick is they pay the young bright people peanuts relative to what they bill them out for, so then market forces rotate the majority of them out of the consulting org automatically, often into positions at the companies they consulted for or into their own businesses.
So why do the young bright people do it to begin with? They get to work with experienced people, broad learning experiences in diverse industries, networking (= future job prospects), etc.
Well they get some experience doing the consultancy work of course, and yep lots go off to industry after 2-3 years.
IME (Worked for E&Y some years back) about 80% of people who started as juniors would have left after 3-4 years with the other 20% staying to try and make partner.
I have a few acquaintances who grew in consulting to become partners who have never, ever, ever worked in the field they consult for. They've only done consulting, only looked through the lenses they were required to for the job they were asked to do with no real experience in the industry.
The only person I know who ended up at a high-ish position at McKinsey with proper industry experience had as their only job being the founder of a company they worked quite hard for 15 years to build, and sold it. Still, it's someone who only had a narrow experience in their industry which is now advising companies in very unrelated fields.
Aside from the thing where it's useful to have an outside (expensive) influence to help make your decisions sound more confident than they actually are, a genuinely useful side of consulting is as a form of knowledge laundering between companies.
Let's say you're a supermarket chain. You have lots of problems that only a small number of other companies - your competitors! - also need to solve.
If you hire a big enough consulting company, they will have a large amount of internalized knowledge relevant to those problems that they gained through previous projects working with your competitors.
Of course, they're never going to deliberately reveal other company's internal secrets, or directly assign people to work with you who worked last week with your competition... but industry expertise and "best practices" still flow through these channels.
Often times you're just paying a consultant to recommend what you don't want to accept responsibility for. You pay a slight premium to launder the responsibility onto a third party.
There's also asking for good advice for narrow problems from experts with decades of experience.
Both of these play major roles and they're often very easy to tell apart.
That's it. That's the reason you hire consultants. Your team either doesn't have the expertise or the bandwidth to do the work you require. Could you hire for expertise and bandwidth? Absolutely. Is it hard ($$) to do that? Yes, and in most cases it's arguably WAY harder, especially when the effort is episodic.
Many of the people hiring the "consultants" simply don't know any better. They are easily persuaded by stuffed shirts with AI generated slide decks yapping about cost savings, scale, and deep domain knowledge. Also, they want someone to blame when it all goes south.
While I've done more than enough Powerpoint presentations telling clients what they already knew but didn't want to say out loud, there are some circumstances where bringing in a consultancy is a very good option.
Some examples:
As a software/cloud/data/AI/cyber guy (I wore a few different hats over the years...), I regularly caught up with buddies working in legal, tax, audit, retail, space travel(!!) etc. for coffee chats. It's surprising how often those of us who specialise in one domain had breakthrough moments from offhand chats with specialists in other domains. Very few people get the opportunity to have these sorts of conversations, and it's amazing how often you learn something relevant for your own work situation over a quick coffee.
When I needed expertise in one of those domains into one of my projects, I could send a message and almost always get someone on a call within a few hours. Very few organisations could get e.g. a high-ranking ex-NASA official on a call quickly to pick their brains, but I could.
Lots of times organisations don't have the deep expertise and/or available people to deliver on their internal projects. When a major rail transport provider needs to work out how to going to deal with new government critical infrastructure regulations for their IT systems, it's consultancies who can pull all the right skills together to help them out.
When there's a critical shortage of available IT skills in the marketplace, companies use consultancies to top up their workforce. Here in Australia, there were nowhere near enough GCP experts to go around for the last 4-5 years, so companies could either try to hire the very few people around at exorbitant rates, or tap a consultancy for resources.
Big 4 consultancies in particular throw high-quality training at their technical staff like nowhere else I've seen. One reason: quality training = billable hours. I had people around me burn out from too much training, and I'm pretty sure regular companies don't have that problem. For all the pointless Powerpoint presentations we did, there's a sh1tload of technical expertise sitting in Big 4 consultancies, waiting to be tapped.
Companies are always struggling with how to use the latest IT shiny tools properly. Right now it's AI - how can I use it to save costs or increase productivity? What are the ethical and legal implications that come with AI, and how can we deal with them? How can we deploy AI solutions securely? Which of our business problems are the best fit for AI solutions? How do we train our ops staff to keep these AI solutions running? - the list goes on and on.
Now a lot of people here in HN know how to do these things, but how does a regular business tap into that expertise and filter out the bullshitters? The answer is they go to a consultancy that (they feel) they can hold accountable.
On that point, sometimes execs in a company simply need someone to shield them from blame for unpopular decisions like mass layoffs. It's pretty well know that consultancies do a lot of that type of work, and they (justifiably or otherwise) cop a lot of crap over it so some exec can say "I didn't do it".
I'm probably coming across as a huge fanboy of consultancies, but remember - I'm an ex Big 4 guy. I think their influence is too large, particularly in government policy making; I've encountered way more sociopaths in Big 4 leadership roles for it to be down to chance; by any measure staff turnover and burn out is very high, and I'm convinced that's by design.
