The Con Game

 

The rise of the Consultants. We have all seen it: governments and businesses are heavily relying on consultants for everything from policymaking to risk management, and this has become a global phenomenon. But more and more detailed information is also being revealed about how these consultants actually work (or don’t!).

Recently, Mariana Mazzucato, an economist at University College London, co-authored “The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies,” together with Rosie Collington. In the book, they make the provocative argument that consulting firms create the illusion of expertise; in essence, performing a confidence trick to wield power over hollowed-out and risk-averse governments.

The main issue that I have witnessed with consultants is the lack of accountability. Consultants don’t have to face a performance hurdle (similar to a Key Performance Indicator / KPI) or even include a clawback provision in their fees should their “advice” not yield results. So often, the consultants merely give management or the Board an exit clause when something goes wrong.

Meanwhile, for the latter, the narrative when something doesn’t do well or even fails miserably, is, ‘Well, this decision was made on the basis of XYZ consultancy’s advice’.

The part that sticks in the craw the most is the massive sums of money paid to the consultants. Consultants’ fees generally are a percentage of the size of the project – which means easily hundreds of thousands, and counting.

The word “consult” comes from the Latin word “consultare”, which means to counsel. But as we go through some of the issues involving consultants that have started to hit the media, let us not forget that, ironically, “consultant” also begins with the word “con”, which means to swindle.

Australia has had a recent expose in the media which revealed that a PwC partner had shared confidential government tax plans with colleagues. The consultancy then used the information to try to get business with clients. PwC has claimed that its corporate clients did not use the information to benefit financially.

But in an even more ludicrous twist of events, governments are now hiring consultants to advise on consultants.

According to a recent Washington Post article, the Australian government “has hired a consultant to consult on how best to deal with other consultants”. The federal Finance Department has hired an ethics consultant to advise them on how to handle the situation with PwC Australia and Scyne. And if you were wondering, the latter is an entity focused on government services that PwC Australia set up immediately after the scandal over the tax information leak.

More names and entities to muddy the waters?

The Washington Post has reported that the Finance Department has hired Simon Longstaff, chief executive of the non-profit Ethics Centre, in a contract worth AUD32,000 (or nearly US$21,000).

Longstaff’s “significant knowledge and expertise in the field of ethics appropriately places him to provide the Commonwealth with advice on the range of ethical issues that may arise while engaging with PwC and Scyne,” the department’s statement said.

But is this nothing more than bureaucratic bloat, diverting public monies to enrich consultancies? Consider this fact reported by The Washington Post: “The Australian government, then under conservative coalition rule, hired more than 50,000 “external labour” employees between July 2021 and June 2022, at a cost of more than US$13.5 billion.”

Meanwhile, all this sounds terribly familiar to us in Malaysia: bloated headcount, engaging consultants when management is being paid to do the job, paying exorbitant fees for advisory work. Why has this become the norm when management salary scales remain as a major cost of business?

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There has to be a move away from engaging consultants, which is increasing the cost of doing business and, worse, sending the money offshore and out of our ecosystem.

Instead, the answer is for companies and governments to hire management with the right expertise, and hold them accountable with KPIs. If a special skill set is required for the job, a cheaper alternative to consultants would be to set up a specialist committee, and have a true subject-matter expert sit on that committee. Generally speaking, this expert might be someone who has retired and is more interested in being involved in the success of a project or development of an area of expertise, than in receiving mega bucks as a consultant.

As Mazzucato and Collington write in their book ,“The Big Con”, “we must recalibrate the role of consultants and rebuild economies and governments that are fit for purpose.” This will require long-term investment in people and skills – and that’s where money is best spent. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.