Consultancy firms are widely employed in many businesses, usually providing yardstick comparisons for companies wanting to measure their performance and expand their portfolios into new growth areas. Sometimes, they provide professional services that smooth the integration process in mergers and acquisitions.
For consultancy firms to work, companies and their C-suite leaders usually endeavour to provide a comprehensive picture on how business is doing- thinking consultants need that information to generate effective strategy. But in the largely self- regulated industry of business consultancy, could consultancy firms possibly use that information to profiteer?
“In 2014 the average hedge fund returned about 4 per cent. That year, the MIO Partners’ main fund, which manages the fortunes of McKinsey’s partners, made nearly 14 per cent.”
Very recently, an exposé article appeared in the Financial Times, detailing the investment arm owned by a top-tier business consultancy firm, McKinsey. In the investigative report, journalists found that McKinsey had been managing a “secretive investment arm” for the past three decades. While McKinsey has responded that its investment arm, MIO Partners, operates in “blind trust” mode to its consultancy work, MIO Partners has had an enviable performance record. To put things into perspective, the report found that, “In 2014 the average hedge fund returned about 4 per cent. That year, the MIO Partners’ main fund, which manages the fortunes of McKinsey’s partners, made nearly 14 per cent.” In the competitive world of investment, these results are astounding.
The truth is this, there is no absolute litmus test to prove or disprove that consultancy firms dispense advice and strategies that are wholesomely independent, unbiased and untainted by self-interest. It is the classic case of caveat emptor– the onus is on companies and their C-suite executives to understand and define how information exchange between consultancy firms should be handled.
Some companies have a clear direction on where to go but employ consultancy firms to convey it to stakeholders, allowing for quicker initiation of change management. Other companies seek consultancy from firms with a portfolio of their business competitors, hoping to gain some insight on their competitors’ strengths, weaknesses and strategies. At the heart of it, consultancy firms are information warehouses that strategize the use of information to generate profit.
An over-reliance on consultancy firms without strong leadership can prove to be dangerous in the long run. Each organization is different and, possesses unique challenges and opportunities. Investing in leadership with experience and an understanding of the company’s history can be a powerful strategic tool. Developing or refreshing C-suite leaders with an outreach and global mindset can also help to steer use of strategies provided by consultancy firms. The key however, is not to look at consultancy services as an elixir pill that will instantaneously provide the solutions to growth and vectors for success within the organization. Without this insight, it is like believing that sending your C-suite executives to consulting school guarantees them an education.
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