How best to govern management consultancy in the 21st century?
Is there a case for the regulation of consultancy? Or is consultancy too difficult to pin down? Should the industry rely on professionalism and professional bodies or does the market sort out the good from bad? Andrew Sturdy, Professor of Management and Organisation at the University of Bristol, sets out some issues to feed a debate on building the sector’s reputation through improved governance.
Compared to many occupations and certainly the professions, consultancy is weakly regulated. Anyone can become a consultant (in name at least). But historically, the industry actually emerged out of regulation – the regulation of others such as banks and (like now) accountants which freed up spaces for consulting to operate.
By contrast, consulting, it is often argued, is too difficult to regulate. The knowledge involved, its dynamism, commercial value and co-produced nature make it hard to assess. Politically too, very few, including clients, seem interested in regulation and are even antagonistic towards it.
Of course, there are various forms of governance, especially around purchasing processes and firm and professional codes of conduct (although there is little evidence of anyone ever being sanctioned). In the public sector too, every few years, reports are written and guidance given to clients to improve their commissioning through monitoring, planning and contracting. While the latter issue has long been controversial with all sides and loopholes abound, changes have occurred. Governance can happen.
Technology
More too, may be possible with the growth in use of internet-based platforms and forms of interaction. It is not hard to imagine a ‘ratemyconsultancy.com’ site or similar internal alternatives or to have pitches and contract discussions recorded on Zoom ‘for future reference’. Both might benefit all parties.
In short, notwithstanding claims of commercial confidentiality, new technology might help the market better govern quality. Of course, this will bring new challenges. We only need to see the use of comparison sites in other sectors, such as tourism to identify these, but why not try?
The key challenge is not about ‘bad apples’ or occasional bad practice, but systemic problems – ‘bad cellars’ – such as the partnership model and, in particular, reward systems. One longstanding approach has been to promote variations of payment by results for clients. Limited progress here is perhaps unsurprising, in that most consultancy is hard, if not impossible, to measure effectively or without conflicting views.
Probably the greatest impediment to good consultancy is the pressure to sell to new and, especially, existing clients. This lies at the heart of the consulting model, from the sole practitioner trying to make a living to the large consulting firms and their reward systems, including promotion. Reform here is urgent and would imply significant culture change. Indeed, many would argue that this is too much to ask. However, an example of a similar initiative can be found in audit where overlapping debates are evident.
In a recent report sponsored by PwC, Professor Karthnik Ramanna of the Blavatnik School of Government, University of Oxford, talks of aligning staff rewards with ‘cultures of challenge’ rather than sales. Likewise, in consulting, and on the client side, there have long been calls for ‘serial purchasing’ which limits the period of engagement or projects with a single supplier.
Governing consulting firms
Such systems always generate rigidities and unintended consequences and so can only be part of a solution. What is needed is a debate among all parties, around different options. In one of the first systematic attempts to identify an agenda for improving the governance of management consulting in general, four initial policy themes have emerged in a recent research report – reinforce, review, reward and reject. These combine hard and soft governance.
The former would not only include reward system reform, but also reinforcing existing regulations and procedures (i.e. in some cases, simply implementing them). Soft governance options concern various forms of reviewing and assessing projects more openly, including through third-party or meta-consultants, as well as rejecting external consultancy in some instances, in favour of alternative suppliers such as internal resources, including internal consultancy.
These themes are merely a starting point for a conversation and further research. The academic team need to hear more from consultants, firms, users, non-users, regulators and the public. This may occur in different forums, such as around client sectors and different national contexts. The premise is that new opportunities for governance are emerging, just as many of the challenges to the industry’s reputation are familiar and longstanding.
Anyone can still become a consultant, but it is hard to be a good one.
