A fascinating and somewhat alarming study of the role of consultancy firms in government and business. Having worked in government and with consultancy firms, I am sorry to say this is an accurate assessment. Interesting and worth a read. ( )

Consulting is an evil that is hollowing out government, dumbing down the civil service and profiting massively while enjoying corruption like conflict of interest and insider information. That is the essence of The Big Con, by Mariana Mazzucato and Rosie Collington. There is a clear way out, but the authors actually missed it.

First let me say I am a fan of Mariana Mazzucato. I am not going to repeat my praise of her work here, but readers are free to think I am prejudiced in favor of her writing. And that I will review anything of hers that comes my way. All true.

As for the consulting plague, it was hatched, as so many plagues have been, by the Thatcher-Reagan misunderstanding of how the world works. With government being the problem, anything it could do to outsource any research or new functionality, had automatically to be better than the civil service doing the work by itself. Between cutting back on civil servants and their budgets, and cutting them out of the very projects they’d been assigned, this has become a self-fulfilling prophecy. It has resulted in terribly botched projects (Think healthcare.gov), conflicts of interest, and of course massive transfers of tax money into the accounts of consultancies. Outsourcing, which is meant to save money, has mutated into costing far more than the institution would have spent to do the same job on its own. Globally, $900 billion is spent on consultants, the authors say.

Setting the pace, consultant fees increased 40 times during Thatcher’s time in office, as she slashed government services. She turned the government of the UK in a “consultocracy”. The Labour governments that followed expanded it even more. The French government today is going through a scandal of how incredibly, massively and even arrogantly President Macron farms out work to consultants, possibly even for personal/party use in his capacity as president.

The authors traipse through history, showing how management consultants started small, often growing out of accounting contractors. It wasn’t long before the accounting side was being offered for little or nothing, just to get a foot in the door and feed off the fat consulting contracts that kept popping up. Using a little insider information never hurt anyone. Everything is relationships, and when civil servants need to call on someone, they call whom they know, of course. So consulting firms make sure they are known, spending lavishly.

The result has been four massive, global consultancies raking in hundreds of billions. They use the old bait-and-switch. A senior partner, with all kinds of expertise, promises the world in personal meetings. But when the contract is signed, twenty-somethings fresh out of college show up to run the show. The authors give horrifying examples of the proposals they specified to implement, based on incomplete research, premature assumptions, and lack of experience in the subject matter.

Then there’s good old, garden-variety conflict of interest. Consultancies will knowingly work for both the fossil fuel industry and environment departments of government at the same time, for example. This can mean giving bad advice to government in order to smooth out the bumps for industry. It got to the point where the twenty-year-olds got together and protested at McKinsey, leading to the resignation of a senior partner who had to admit, yes, that’s what we do here. Meanwhile, at EY (Ernst & Young), the new climate-sensitive efforts resulted in the appointment of a chief sustainability officer. Almost naturally, he had been managing partner of the energy division, which served the fossil fuels producers. Similarly, McKinsey is right in there battling for net-zero carbon contracts, while at the same time advising “at least forty-three of the hundred biggest polluters” in the world, the authors say.

If that weren’t enough, some consultancies have investment funds that buy and sell based on their intimate knowledge of what is about to happen in industries affected by their work for government.

It is so profitable than one British consultancy collected contracts far and wide, then hired other consultancies to actually do the work. This saved it labor that it did not have, and really, much of any effort at all. It eventually blew up and went bankrupt, but clearly, someone else will try the same model.

A favored strategy is to look totally confident and slash through the corporate structure. James McKinsey himself handled the Marshall Field (Department Store chain) case, where he slashed payrolls by 1200, stopped all vertical integration in favor of outsourcing, and was promptly offered the positions of board chairman and CEO. He accepted. Today, job interviews at McKinsey focus on the same confidence and self-esteem, the authors say. Any wavering or uncertainty would weaken the whole firm in the eyes of the client. Arrogance is bred right into the culture.

Another nice perk is the lack of responsibility. When a project fails, the blame goes to government, not the consultancy that created and implemented it. There is so much money sloshing around that the major consultancies can afford to take the knocks when they screw up, the authors say. They have the marketing, communication, public relations and outside services to ward off any attack and just look to the next series of contracts. If anything is too big in this scenario, it is not government; it is the consultancies leaching from it. Risk is minimal; rewards are huge, the authors say.

And government knows it. After a scam wherein consultancy KPMG used its influence in tax changes to help its corporate clients avoid taxes, a British Labour MP, Margaret Hodge, said it was “tantamount to a scam,” “a ridiculous conflict of interest,” and “poacher turned gamekeeper turned poacher syndrome.” Which held some weight, as Hodge herself came to Parliament from Price Waterhouse, another giant consultancy. In many countries, it is perfectly legal for politicians to be in the pay of consultancies, even while in office. In the UK, the Labour Party itself was found to be enjoying accounting services from KPMG at no cost. The corruption is just plain blatant.

Among the latest consulting fads is ESG, which purports to show how enthusiastic and successful firms are in things like sustainability, diversity and governance. It is so subjective and arbitrary as to be useless: “a giant societal placebo where we think we’re making progress, even though we’re not,” according to Tariq Fancy, Blackrock’s former chief sustainability officer. Based on ESG numbers, investors make totally ill-informed decisions on what to buy and sell.

The whole business of climate change is rife with consultocracy. The authors say it provides a “veil of commitment without the mandate for action,” as nations make more and more promises they have literally no way of keeping. One has only to look at carbon production. Despite all the pledges, it continues to rise into record territory. Holding temperatures to a 1.5° increase is a global joke,

In conclusion, the authors posit four changes to ameliorate the situation. Things like better contracts that aren’t so one-sided in favor of the consultants. There’s sharing the risk and so on, but they don’t go nearly far enough. They don’t take the (to me) obvious step that would stop this completely.

Government should have its own internal, freestanding consultancy. It should have teams of consultants that could come in to define and help set up a project, all while keeping it confidential. They could store their findings, research and reports in a central place, so that all government departments and agencies could see what has been tried already, and analysts and other consultants could leverage that experience for the job at hand. Just like the big four consultancies. Government could rebuild its former expertise, while avoiding the whole blame game and risking leaks.

This would dramatically lower the cost of such efforts, and as the knowledge base grew, make it even more powerful than the proprietary ones the consultancies use today. This government consultancy would be open to all departments and agencies, maybe even at the state level. It would strengthen the knowledge and skills of civil servants and lead directly to measurable improvements in efforts, services and project completions internally. Institutional knowledge would have meaning again. And it would cost billions less than what they spend today. It’s an: “Ok, where do I sign?” solution.

Why they didn’t suggest this (if only just to tear it down), I do not know. But as NASA explained, it would be unthinkable for consultancies to come away with all the discoveries and knowledge, leaving the space agency with nothing of its own. NASA would have been “captured by brochuremanship,” as so many others have. This whole book is a vivid demonstration of this syndrome – taking away from government and enfeebling it. If government can have internal accounting, it can have an internal consultancy that would save taxpayers hundreds of billions.

That would have made this thorough and careful book into a blockbuster.

David Wineberg ( )