I’m Sorry I Broke Your Company – Another Problem with Management Consulting

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“I’m Sorry” is not the traditional academic thesis based on years of “research” which characterize most management literature. The book is based on Karen’s personal experience, her common sense and some secondary source research. The book has several illustrative examples from Karen’s own praxis and also refers to other cases which have reached the public domain.

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Karen Phelan’s new book: “I’m Sorry I Broke Your Company – When Management Consultants are the Problem. Not the Solution,” is a must read for all management consultants and for all companies that engage management consultants.

Karen Phelan was working  as a management consultant for Deloitte in the 1980’s and for Gemini Consulting in the 1990’s before taking a seat at the other side of the table with Pfizer and Johnson & Johnson. In 2008 she returned to the ranks of management consultants.

The “I’m Sorry” book is operating in the same universe as “The Trouble with Strategy: The brutal reality of why business strategy doesn’t work and what to do about it” by Kim Warren. It accuses the big management consulting companies of many of the atrocities experienced in the corporate world lately. Enron and Swissair being some of the prime victims.

The book touches on three areas where management consultants flourish:

• Strategy Definition
• Supply Chain Management
• Human Resources

Strategy Definition

You cannot predict the future. And neither can management consultants. Believing that there is a scientific approach to predicting the future and thus an option of formulating and applying a strategy to take advantage of that future is an illusion. An illusion that serves a very profitable platform for management consultants and an illusion that can cause tremendous damage for most companies.

Businesses don’t succeed by predicting the future and dictating the marketplace; they succeed  by recognizing good opportunities and pursuing them, especially when no one else does.

Karen claims that this process cannot be delegated to external management consultants who fly in, interview, do market research and discuss the options with a few executives. You need to involve your own people in this process, not just those who never talk to neither customers nor to suppliers.

Supply Chain Management/Process Reengineering

Karen explains how Gemini’s “brown paper” approach enabled everyone involved in a problem to see the big picture and discuss how the entire process could be improved. Large rolls of brown butcher paper was used to draw the processes and allowed for adding yellow stickers and applying notes. The approach was “low tech” and really just a facilitation tool. It required consultants who were domain experienced to participate otherwise they couldn’t facilitate the discussion and make provocations.

But it worked and generated positive results.

As Gemini started to hire consultants straight out of the universities, the “brown paper” approach was shelved and replaced by more sophisticated frameworks and “best practice” approaches including software based supporting systems.  That was when the trouble began.

Any tool, method, program, or initiative that promises to solve your business problems without involving everyone involved in your business problem will fail.

Human Resource Management

The book claims that management consultants do more damage than good when they promote and implement frameworks, with the objective of suppressing or eliminating the irrational impact of the human element in organizational performance.

Karen is especially critical to all the initiatives taken in the “human resource” domain. Leadership development programs, rank stacking, performance appraisals and other “scientific” approaches dividing people into pre-defines categories and make them fit a normal distribution curve have a disastrous impact on motivation and behavior. She is also very critical of the way incentive programs reward sub-optimization and work against the common interest of the company.

People manage the measures! Sometimes they even manipulate the measures!

A metrics scorecard acts like a car’s dashboard. If you watch it instead of the road, you will crash!

Our verdict

“I’m Sorry” is not the traditional academic thesis based on years of “research” which characterize most management literature. The book is based on Karen’s personal experience, her common sense and some secondary source research. The book has several illustrative examples from Karen’s own praxis and also refers to other cases which have reached the public domain.

Karen is a talented author. The narrative is excellent and a great joy to read. I also tend to agree with most of her observations. I admit to have a crush on people who go up against the mainstream. Hans Christian Andersen wrote “The Emperor’s New Clothes” in 1837 and it hasn’t lost any relevance over 175 years. We need people like the little boy and Karen may be one of them helping us to challenge conventional wisdom.

Out of five stars I will award all five.*****

From my own world

I have been involved in several projects on the client side where some of the big management consulting companies did their “magic”.

I especially remember the merger of Damgaard and Navision in year 2000 (acquired by Microsoft in 2002). I was promoted from my position as Geschäftsführer in charge of Damgaards operation in Germany, Austria and Switzerland to become vice president Central Europe responsible for Belgium, The Netherlands, Germany, Austria, Switzerland, Poland, Russia, the Czech Republic and Slovenia. No one ever asked me if I wanted that position and what the position was supposed to do was never defined until I was finally “released”.

For 9 months I was involved in tons of meetings where one of the big management consulting companies facilitated the definition of the new organizational structure. That was a frustrating experience. It is not fair to assign all the blame on the management consulting company. A merger is a difficult situation where people are fighting for their lives and exercising political games under the radar to secure their positions and power bases. The management consulting company took advantage of the situation and didn’t help cutting through the crap and stabilize the situation fast. Instead they tried to accommodate everyone with complicated organizational structures and matrix reporting frameworks. Their bills kept increasing until management decided to dismiss them and carry on on their own.

I started as a management consultant in 2003. I have had successful and not so successful assignments. Retrospectively I came to the same conclusion as Karen. Succesful management consulting is basically the ability to facilitate a discussion between the people involved in a problem and helping them finding a solution. The facilitation requires domain experience and business acumen more than anything else. You can use various frameworks such as Business Model Generation, NABC Customer Value Proposition and Balanced Scorecard Principles, but they only serve as structure for the discussions. As soon as the management consultant “takes over” the thinking and provides the conclusions, then it goes wrong. Then it just becomes reports on the shelve leaving no improvement behind. Writing reports doesn’t change behavior.

Post script

There is a large market for “report generation” for management consultants which are not really supposed to change anything.

Governments and large organizations will call on management consultants to “dig to the bottom” of a situation, providing explanations or place the responsibility. These “independent” reports are often aimed at winning time, blurring the causes of mishaps and protecting someone from the consequences of the blame.

Dealing with the future governments and large organizations call on management consultants to “predict the future” or at least draw up likely future scenarios. Government and Enterprise executives then discuss high level issues related to these scenarios. Seldom is any action taken, but the discussions are no doubt very interesting.