Dusseldorf It is a professional group that fascinates: the consultants. According to the industry association BDU, there are just 173,000 consultants in Germany. That’s not even half a percent of the labor force. With a business volume of almost 44 billion euros in 2022, their contribution to economic output is, in relative terms, much greater – and their image is dazzling. The Advisors are a small group with great influence.
So it is not surprising that now – after the scandal collection “Black Book McKinsey” at the end of last year – two books are appearing that are taking on the industry. One, with an international, more fundamental approach, was written by none other than star economist Mariana Mazzucato, together with her doctoral student Rosie Collington. The other, with a national, more user-centric approach, comes from management expert Thomas Deelmann. What they have in common is that they are harsh on the industry.
As the subtitle “How the consulting industry weakens our companies, subverts the state and monopolizes the economy” of Mazzucato’s “The Great Consulting Show” already suggests, her book is a very critical examination, perhaps even reckoning with the industry.
In more than 300 pages, Mazzucato and Collington paint a bleak picture of the current situation: “The volume of contracts with consulting companies – as advisors, legitimizers of controversial decisions and in taking on outsourced tasks – weakens our companies, infantilizes our governments and distorts our economic fabric”.
Based on numerous critical deployments of consultants in the USA, France, Great Britain and also Germany, the authors conclude that “the cumulative deployment of large consulting firms” “inhibits innovation and capacity development”, “undermines democratic accountability” and “the Consequences of political and entrepreneurial action obscured”.
Mariana Mazzucato, Rosie Collington: The Great Consulting Show
Campus Publisher
Frankfurt 2023
328 pages
26 euros
Translation: Ursel Schäfer, Enrico Heinemann
Thomas Deelmann provides a no less critical, but user-oriented analysis of the consulting profession. The 45-year-old is a professor of management and organization at the University of Applied Sciences for Police and Public Administration in Bonn and has worked in the consulting industry for many years. Before starting his scientific career, he was responsible for purchasing consulting services at Deutsche Telekom in the 2000s, among other things as a manager.
In his book “Dieberater-Republik”, which will be published on April 18, he describes how consultants in Germany in particular have managed to earn billions of euros from the state and companies over the past few decades. His striking question: whether the consultants are “heroes, helpers or scoundrels”.
His calculation: The turnover of consultants with their customers in Germany amounted to around 40 billion euros in 2021. According to analysts, the average profit margin – which varies depending on the size and internationality of the consulting firm – is between ten and 25 percent. Even with the conservative view of ten percent, this is four billion euros. At 20 percent, it would be eight billion euros in profits per year for the industry.
Deelmann describes in a very clear and entertaining way how this was supposed to be successful. He explains how in the public sector a “search for consultants” became “addiction to consultants”, breaks down the business model of the consulting firms into the three Cs “Competence , Customer, Compensation” and the reasons for hiring consultants down to the three Bs “Brain, Body, Brand”. Accordingly, consultants are afforded to get ideas, manpower and argumentation aids.
Both books hit the industry at a difficult time. The business of consultants has grown significantly in recent years – after the Corona shock. In particular, the three leading international strategy consultancies McKinsey, Boston Consulting and Bain grew strongly in 2021 and 2022 and each hired thousands of new consultants and employees.
According to industry analysts such as consulting professor Dietmar Fink from the Scientific Society for Management and Consulting (WGMB) in Bonn, they even earned “stupidly and stupidly” with margins of up to 60 percent.
The books hit the industry to the core
This boom now appears to be coming to an end. The latest business figures are good, but no longer record-breaking. The Boston Consulting Group recently only increased internationally by eleven percent to 11.7 billion euros, and the world’s number one, McKinsey, is currently reviewing its own business model and is not ruling out layoffs for the first time.
Against this background, the two books should hit the core of the industry, which is actually so proud and self-confident, and provide its critics with new arguments – especially since both Mazzucato’s words and Deelmann’s assessments carry weight.
Deelmann is an insider of the industry, especially when it comes to consulting engagements with the public sector in Germany. And the 54-year-old Italian-American economist Mazzucato has received numerous awards for her books, including the 2018 Leontief Prize, the 2019 Alternative Nobel Prize and the 2021 Adam Smith Prize for Free-Market Environmental Policy.
In October 2022, Pope Francis appointed her a full member of the Pontifical Academy for Life. She is also Chair of the Economic Council on Health for All of the World Health Organization.
The words of Mazzucato and her co-author Collington are correspondingly clear: the big consulting show is “not about criminal acts”, but about “convention”. There is the so-called “trust trick” that consultants would use to get “business from hollowed out and fearful state institutions” and “from companies that only have the maximization of shareholder value in mind”.
Thomas Deelmann: The consultant republic
Financial Book Publisher
Munich 2023
256 pages
22 euros
In his book, Deelmann not only describes the cases that have come under criticism, such as the consultant affair in the Federal Ministry of Defense, he also shows typical mechanisms. This includes, for example, the so-called “chain assignment”. These are orders that almost necessarily follow on from a previous or ongoing order. Follow-up orders like this would be “a consultant’s sales dream,” writes Deelmann.
Initial orders would therefore often like to be priced lower, or the consultants would initially do so-called studies without payment in advance in order to get a foot in the door.
In view of such practices, Deelmann sees “the serious danger that the Berlin Republic will change even more clearly into an advisory republic”. Even if the recourse to external support is not bad or reprehensible per se, it must be done with the necessary competence on the part of the customer.
Correspondingly, Deelmann demands that the competence for a meaningful and measured use of consultants in the ministries and administrations must increase. It will depend on whether “the ‘fifth power’ will take on an even more influential role without being controlled” or whether it will be used as a carefully and sensitively managed service provider for state actors.
Based on the realization that it is no longer possible without consultants and that civil servants and consultants would probably have taken too much liking to each other, Deelmann recommends proceeding with a kind of checklist: “Only hire consultants if the necessity and economic viability of the assignment can be proven and none dependency is built up; Make commissioning and use comprehensible and transparent; Publish the results of individual consulting projects as far as possible, disclose and communicate the effects and results of the consulting management.”
More about consultants:
As clear as Mazzucato and Collington’s analysis of what they call the “Consulting Show” is, they unfortunately fail to provide their readers with appropriate solutions. They admit it themselves at the end of their book.
There they sum up that “in the current situation, little can be achieved with criticism alone”. They demand – and this is to be understood in a self-critical manner: “We must also develop alternatives to the status quo.” They are confident that “we can do it”, that “governments, companies and civil society can promote collective intelligence”. However, they do not write how this can be achieved.
Because, as Deelmann sees it too: “The consultants are a mirror of our society. We have the advisors whom we, i.e. our elites in politics, business and society, have trusted over the past few years and whom we have “committed”. And that’s why the following ultimately applies: “The role of hero, helper or scoundrel always takes two. Or to put it another way: In the consultant republic, every customer gets the consultant he deserves.”
More: McKinsey’s “Questionable Practices”: The Black Book on the World’s Leading Consulting Firm