Consulting Dyslexia

November 29, 2001—McKinsey cuts roughly 7% of its workforce – primarily support staff – to achieve annual profitability benchmarks. Practically speaking, McKinsey partners want to make sure theres enough cash for year-end bonuses.

The news is a headline-grabber amongst consultancies. When the world’s best-known strategy firm wields the meat cleaver, people take notice. The story behind the story, though, reflects consulting’s often-dyslexic approach to business.

“Our people are our greatest asset” … “Our assets go down the elevator every night” … “Our people make us distinct.” Consultants constantly chant such mantras. Consulting recognizes the value of a brand because a firm’s core product —its people—is constantly on display to customers.

Yet faced with the practical implications of business, consultancies often resort to by-the-book layoffs that undercut such grandeur. McKinsey is just the latest. Support staff constitute the vast majority of all consulting layoffs this past year, announced and unannounced.

If client-facing professionals are the body of consultancies, then support staff form the backbone. Most back-office help in any large consultancy resides in marketing and research. These two functions collectively support brand-building and knowledge-sharing.

Thought leadership, a fleeting quality that separates the great from the mundane, doesn’t occur without such critical behind-the-scenes support. If a consultant thinks a great thought in the forest, will anyone hear it? Doubtful if you axe all the ghostwriters, analysts and mouthpieces.

Sure, consultants who are on the bench are doing some R&D nowadays. But the industry still promotes a two-tier caste; real consultants can’t afford to spend too much time on nonbillable work.

Consultancies have a terrible time following their own advice. Firms counsel clients to maintain R&D spending during tough times. Outside advisors to the industry make the same recommendations. But marketing and research within the consulting industry are whacked when business sours to meet partner/Wall Street expectations.

We believe consultancies should take a much harsher look at the billable side of the business when slashing expenses. Crippling the R&D backbone weakens the business pipeline.

With near-zero attrition rates at experienced levels combined, and utilization rates below 50%, many consultancies will find themselves accumulating dangerous amounts of deadwood by this time next year.

That’s not exactly what you need to fuel your R&D engine.

Reprinted with permission from Inside Consulting, November 29, 2001.

Inside Consulting is written by Tom Rodenhauser, president of Consulting Information Services, LLC, and a partner at the Hocquet Group, a recruiting firm serving the consulting industry. Past columns are archived at www.consultinginfo.com.

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