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Here’s why the management consulting business model is broken

November 16, 2015 Robin Camarote

Bloomberg Government regularly publishes insights, opinion and best practices from our community of senior leaders and decision-makers. This column is written by consultant Robin Camarote, part of her series exploring changes to the management consulting business model.

Disruption is coming to the world of management consulting. Recently, I documented the many disruptive forces at work on the consulting business model. Cracks in the façade are showing, revealing a business model more fragile than agile.

Many federal management consulting firms do, if fact, have a track record for responding to change — when things are good. But even with sequestration and budget cuts in recent years, things have still been pretty good. But change is coming.

Our business model is fragile. Two factors contribute to its fragility. First, there is a subtle but important disconnect today between what consultants are selling and what clients are buying. Second, as consultants gain experience, they aspire to spend less time with their federal clients—not more.

Factor 1: Services Bought vs. Services Delivered

Federal clients buy two basic things — (1) people and (2) focused attention on a given problem. These are two things they cannot reliably get within their agency (otherwise, they would).

Federal management consultants sell two basic things — (1) people and (2) process. These are two things that they’ve practiced providing for years and continue to perfect.

So we’ve got one match, right? Well, maybe.

Federal clients want specific people. If they don’t have a named individual in mind (and they often do), there is a niche skill or experience set that they’re looking for. The expectation is that you show up with the “know how” needed and are ready to go. Consulting firms sell people, to be sure—but they may or may not be the ones clients had in mind (see “Factor 2” below).

Consulting firms have not yet been able to crack the code on how to reliably ensure access to the talent clients are seeking to buy—and it’s a hard problem. Firms exist on billable hours. An idle hour is a loss for the firm, so firms are obviously interested in optimizing billable time.

Having the right person available at the right time with little to no “time on the bench” (or unbillable downtime between clients) is hard. Between all the smart algorithms, trend analysis, planning spreadsheets and hand-wringing, federal consulting leaders seem to have given up. That’s why consulting firms also push process.

There is no simpler way to put this: Federal clients do not care about processes. The SmartArt and flowcharts we’re so fond of are meaningless to clients because, hate to break it to you, they’re virtually all the same. Your firm’s patented “approach” almost always lacks agency context, and can distract teams from focusing on the problem that’s right in front of them.

Federal clients are frustrated with the people part and annoyed with distracting, superfluous processes. In the meantime, they are not seeing the results they want. Many cite past failings as reasons to avoid or minimize use of consultants now. That pent up frustration means that when they have another choice, they’ll take it.

And there are plenty of other choices emerging. Look no further than the federal government’s current outreach to Silicon Valley for a glimpse of the future. In a recent speech at Stanford, Defense Secretary Ash Carter cited Silicon Valley startups as being on the leading edge of innovation, and part of the solution for the Defense Department.

Factor 2: Experienced Consultants Don’t Get (or Want) to Spend Time with Clients

Federal management consultants—and the hierarchies they serve — are obsessed with, well, management. The volume of internal coordination, planning, touch-base, quick check, status briefings and resource calls fill up the calendars quickly. This doesn’t even count the number of color team meetings that happen before and during any proposal effort — and there are a lot of those within a business intent on growing at all costs.

The more senior you go, the more management happens. The graphic below shows the inverse relationship between years of experience and percentage of time focused on client work.

The issue with all of this internal management is that it takes time away from clients. It also takes away from the consultants themselves and any efforts they might undertake to hone their skills and contribute to industry-wide conversations on their craft.

Sadly, firms hire in sharp experts but they dull over time. After years of orientation, acculturation and “getting to know the firm,” people who used to know something about something have lost it (not their minds, generally, but that happens too). This happens simply because they don’t have time to do the reading, writing, presenting, engaging and speaking that they used to do and these areas of expertise are dynamic. If you’re not actively engaged in the broader industry discussion, you’re out of date.

Firms are also great at hiring in smart, ambitious people right out of undergraduate or graduate school. These people are hungry for experience and exposure, and they work hard. They too have little time to explore their chosen field, follow interesting trails or research emerging solutions. They’re so damn busy. These are the heart and soul of many of the big and medium size consulting firms — younger staffers willing to put in the hours for the client during the day and build the business through proposals at night, all in the hopes of being recognized by internal leadership and advancing their career.

In the end, federal clients get the most amount of time with people who know the least, and little to no time with those folks that have the expertise to solve problems.

All of this begs the question: Now what? Our business model is broken, the federal government is looking elsewhere for solutions and we’re still trying to make a living. So what are we to do?

It’s time to change the model. More on that next time…

What to read next:

Part 1 – Management consultants, prepare yourself for disruption

Part 2 – Here’s why the management consulting business model is broken

Part 3 – Management consulting isn’t working. Here are 6 ways to do it better.

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