Why management consultants are under increasing pressure to deliver

Scandals and blunders threaten to leave charred remains of the multi-billion world of professional services. Can consultants get customers to keep the faith - and keep billing?
Why management consultants are under increasing pressure to deliver
The world of professional services – management consultants, advisors, chartered accountants and especially auditors – is under silent siege.
By Shayan Shakeel
Mon 14 Jan 2019 09:06 AM

You wouldn’t be able to tell at first glance, but the world of professional services – management consultants, advisors, chartered accountants and especially auditors – is under silent siege.

All it takes is Googling the right things to see: a management consultancy apologising to the people of South Africa for alleged graft and being unable to fix rolling blackouts in the country; another facing inquiries into nearly $33m in billings for a hospital in Sweden two years overdue and plagued with operational failures; an audit firm curiously placed amid the wreckage in Dubai of the largest private equity fund in the developing world; another that bungled the envelopes so badly that the wrong movie was announced ‘Best Picture’ at the Oscars.

That last one in 2017 might have been an honest (and embarrassing) mistake, possibly not in the same vein as the others. But it’s hard to ignore it when considering the long line of costly controversies that have been cropping up in the news lately.

Trust is the only commodity you can really own with a client and it takes decades to build

In it together

One of the world’s four most important professional services firms, KPMG hasn’t been immune to controversy.

From the United States to the Arabian Gulf, its audit function has missed high profile collapses, including Carillion in the UK and Abraaj in Dubai, drawing the ire of regulators questioning why, to echo the words of Britain’s Financial Reporting Council, the quality of its audits have registered an “unacceptable deterioration.”

KPMG is the smallest of the major accounting firms, but shares a common denominator with them in that it too offers management consultancy - aka advisory services.

By internal standards that KPMG adheres to, the company’s head of advisory in Dubai, Vikas Papriwal, says its management consultants are restricted “from taking on any management responsibility or do anything that might impact” any work that the firm might be doing with a client of its audit services. “I look after consultancy,” he says, “and we’re very proud that we follow those strictly.”

However, the impact of scrutiny isn’t lost on the 27 year veteran of the game. “The industry is under severe scrutiny on the audit side of the business,” acknowledges Papriwal. “[But] when things like these happen, they impact the brand, regardless of which side they happen on.”

The way the word ‘transformation’ has been bandied about, I think trust has been lost with some management consultancies

Time is money

Compounding the trust deficit facing consultants is another issue, according to PA Consulting’s Adam Hughes: “I think some of our competitors have taken a lot of money and not delivered the results.”

London-headquartered PA Consulting employs 2,600 professionals around the world. In 2008, the firm had to face the prolonged ramifications of its own blunder – a consultant accidentally lost a USB containing data on some 84,000 of the UK’s worst criminal offenders.

Fortunately, and almost uniquely, the firm has spent the last decade relatively keeping trouble-free. It continues to be a partner of choice for the public sector, including the government in the UK as well as Saudi Arabia. In the Middle East, nearly 50 percent of the firm’s work in the region is for government clients.

Among the senior-most directors at the firm, Hughes has been in the business for nearly two and a half decades. It’s what allows him to be candid when he says that clients at some firms aren’t necessarily mistaken in feeling “fatigued” from employing consultants.

“People say that we’ll come in and increase your internal capabilities and knowledge transfer but none of it materialises,” he says.

We wouldn’t do a piece of work for two months and then give it to client to figure out what to do about it

It also doesn’t help “when a lot of consultants overstay their mark, keep billing and building on. It may have worked in some places but in others there’s been a lot of failure,” he says. “The way the word ‘transformation’ has been bandied about, I think trust has been lost with some management consultancies.”

Papriwal isn’t unaware of the criticism either. “At KPMG we co-create the solutions with the client. We wouldn’t do a piece of work for two months and then give it to client to figure out what to do about it. So I imagine that’s where some of this perception is coming from.”

Brave new world

Industry 4.0 is going to be revolutionary. Management consultants, a professional class associated with suits crunching numbers, delivering powerpoint presentations and racking up airmiles, are now spending time hanging out with engineers.

Among the results of PA Consulting’s partnership with Cambrdige UK-based Skipping Rock Labs is a possible edible alternative to plastic packaging and the re-invented Kitchen Towel. The latter is called Ora and "is among the best-selling  products in it’s class in the UK,” says Hughes.

We cost a lot of money and people are not going to spend money to waste their time. You can’t build a firm on that basis

Similarly, KPMG has built 12 ‘Digital Villages’ around the world, including one in Abu Dhabi. They are places where businesses, entrepreneurs and technology developers can pilot prototyped digital solutions and test them outside closed environments.

Meanwhile, the company also advises clients in banking, financial services and aviation on how to adopt blockchain. “Fantastic,” is how Papriwal describes the technology. “It is here to stay.”

Besides geopolitics and market conditions, consultants are working hand in hand with engineers to understand and control the impact technology can have on business results. It helps illustrate an answer to a pertinent question: Why do businesses need management consultants?

“There is clearly a requirement,” says Papriwal. “Companies are facing high levels of complexity... and they might not have all the skills in-house that they need to navigate those complexities.”

Cost concern

In a complex world where companies like Google and Amazon are challenging other businesses to think differently about metrics, and new players haven’t found processes calcified by legacy, tying a tangible business result to a cost could help set an equation between increasingly demanding customers and margin-hungry consultancies.

An increasingly prevalent practice, it’s called outcome-based pricing, and found in service lines such as mergers and acquisitions, where a successful buy or sell triggers a cost, “thus tying the consultants fate to the company’s success,” says Papriwal.

I think some of our competitors have taken a lot of money and not delivered the results

Yet while it could alleviate some of the cost concerns around hiring consultants, it’s hard to tangibly measure the result of some work that consultants do, “such as compliance, risk and reputation management,” says Papriwal, “where the outcomes aren’t always measurable in dollars.”

Business is personal

There’s a long-standing joke about consultants: A consultant is someone who borrows your watch to tell you the time, and then keeps your watch. The joke is so old that according to the BBC, even after hearing it countless times, McKinsey’s now managing partner Emeritus, Dominic Barton, still gets riled by it.

“We cost a lot of money and people are not going to spend money to waste their time. You can’t build a firm on that basis,” he roared in an interview in 2016.

But while hiring a consultancy can bring tremendous financial results, Hughes and Papriwal, both multi-decade veterans of the industry agree that it’s relationship and trust that get a firm hired.

“Over 25 years, a lot of my business, and therefore PA’s business, is through referrals. So a lot of repeat business,” he says. And when giving advice, Hughes employs what he calls “the red face test.”

“If I give someone a piece of advice I’d like to be able to look myself in the mirror and not be embarrassed,” he says, half in jest, the rest in earnest. “That puts the onus on us as consultants, to showing real capabilities, such as pace, agility, and ingenuity, and leave when the job is done.”

Building trust

“There is a perception that consulting firms can be expensive. But if you step back and look at the value  well-executed projects can bring, they are enormous to the costs they incur,” says Papriwal.

However, key to his firm’s business in the region, and globally will be assuaging new customer concerns while continuing to build trust, slowly and steadily.

“Trust is the only commodity you can really own with a client and it takes decades to build. And these are not things that are happening for the first time. They might not even be the last time,” he says referring to the issues the company is currently facing.

“But it’s upon us, as KPMG and how we respond to it to restore that trust with our actions. And that’s the journey we’re on.”

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