Home Bookend - Where reading meets review The Big Con: How The Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies – Mariana Mazzucato & Rosie Collington  

The Big Con: How The Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies – Mariana Mazzucato & Rosie Collington  

by Venky

(Image Credit: sevenoaksbookshop.co.uk)

The Australian affiliate of Pricewaterhouse Coopers (PwC), one of the storied “Big 4 Audit, Accounting and Consultancy firms (Deloitte, Ernst & Young and KPMG making up the remaining), found itself in the docks, courtesy a trust-breaching scandal that came to light in mid-2023. In 2015, Peter Collins, the international tax chief at PwC, Australia was busy assisting the Australian Government in promulgating tougher multinational laws in response to incredibly opaque tax structures that were enabling base erosion and profit shifting form the shores of Australia. However, unbeknownst to his client, and in brazen contravention of a slew of non-disclosure agreements signed with them, Collins, gleefully exchanged confidential information on the proposed strengthening of the laws to PwC clients spanning geographies. Pre-warned entities (mostly in the US) were successfully able to pre-emptively restructure existing business arrangements thereby saving significant outflow of taxes.

Famed economist Mariana Mazzucato and a PhD candidate at the UCL Institute of Innovation and Public Policy, Rosie Collington, in a hard-hitting polemic pull no punches in describing the opportunistic practices employed by the consulting industry, practices that perilously come close to pushing the envelope in terms of ethics and integrity. Relying on academic studies, and interviews conducted with the protagonists, or antagonists, rather, Mazzucato & Collington provide ample empirical evidence on how an excessive reliance on consultants has hazardously “hollowed out” the internal expertise within Government entities, thereby resulting in the consultants becoming indispensable.

For example, Deloitte was appointed by the UK government as part of the Covid management response team. A procession of Deloitte employees whizzed in, out and around the corridors of Government offices, looking and acting like absolute zombies. In the words of a government employee “But they often didn’t even know what they were asking for…It just seemed like every project had loads of wandering Deloitte people. And it strikes me that the sheer volume of them that were around created the situation of these zombie emails just arriving all the time asking really basic questions … taking our attention away from actual work.”

As the authors inform their readers, the outsourcing of business to consultants first reared its head during the 1980s when ‘Reaganomics’ and ‘Thatcherism’ became firmly entrenched in the Milton Friedman way of conducting business. The Big 3 Consulting firms (McKinsey, Bain & BCG) were uncomplaining beneficiaries of such an outsourcing frenzy. That trend continues till today.

Puerto Rico commenced bankruptcy proceedings in 2016. McKinsey was appointed to oversee the process and to advise a federally appointed oversight board. The assignment’s senior full-time consultant was a 31-year-old Harvard graduate. The arduous task of financial calculations and recommending job cuts went to a fresh graduate from Columbia, while the important portfolio of hurricane damage assessment went to a green Yale graduate. McKinsey’s final advises included inter alia privatising public enterprises and removing labour protections.

A partner from KPMG openly took pride in one of his firm’s undisguised policies, that can only be termed ludicrous. KPMG’s strategy when advising Governments was to either low ball hard on the bidding contracts or to offer pro-bono services. The logic: an initial ‘investment’ in the Government business would lead to a continued flow of business that would more than amply make up for the initial loss on account of investing in the business. Some market penetration strategy indeed! “The more governments and businesses outsource, the less they know how to do, causing organizations to become hollowed out, stuck in time and unable to evolve.”

The authors also lay blame equally on the leaders of conglomerates and Governments. Manya time, these corporate chieftains turn to consultants not because of any genuine reasons of policy or principles, but only to obtain a ‘rubber stamp’ for pre-determined and controversial actions. For example, in embarking on a rightsizing (a terrible but perfectly acceptable euphemism for job cuts), an added corroboration by a consultant in the form of a sombre looking power point accompanied by a tome of a memo would not just lend legitimacy to an otherwise pernicious exercise, but also accommodatingly shift the onus and cause on the consultants.

However, Mazzucato and Collington end their attack on consultants on a positive note. They provide some perfectly implementable recommendations to reign in the excess dependence upon consultants and to empower employees in-house. The suggestions include investing in internal capacity and capability creation, embedding learning and promoting transparency in contracting and tendering processes, and emulating the vision of Government organisations such as Defense Advanced Research Project Agency (DARPA), which at one point was a hot bed of critical technological breakthroughs, like the internet and GPS.

The Big Con – a rude albeit essential and timely wake up call for governments and businesses to commence putting their houses in order.

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