Steve Jobs had a point! For not being a fan of consultants. He was a visionary, a revolutionary and an absolute brilliance. It’s hard to move on from his words without pondering over them. His words continue to resonate more than 3 decades later! He was that sort of a genius!
Instead of taking his words from the 1992 MIT lecture, verbatim let’s break these down:
- Consultants have no ownership beyond the issuance of their recommendations. By the time the recommendations materialize, they have already left.
- Consultants assume zero responsibility and thus accountability of the actions taken on their recommendations, because the actions to be taken are management’s responsibility.
- Consultants lack the all-important “scar tissue” (making mistakes and learning from these).
- Consultants are surface floaters. They have a wider coverage in and across industries but lack the depth and breadth of the same.
Fancy a sum it all up phrase? Consultants only sit on one side of the table! The side that’s closer to the exit! They don’t sit on the other side, where management sits and initiates, executes and operationalizes the strategies they developed or simply chosen to implement. And so, they are never concerned about what happens at the other side of the table.
Now this hits closer to home. Internal Auditors are part consultants, consulting being one of the service methodology. But as a whole without a regulatory mandate to have it, internal audit services are considered consulting. And that’s good for us because auditors for consulting are perceived to be better than auditors for assurance.
But being on the side that earns negative accolades of a visionary is not a comforting place to be! Especially when internal auditing aspires to be a foresight! It is the Governance, Risk Management and Controls (GRC) excellence-aimed interventionalist support system no entity can choose to ignore.
But yes, it’s still mostly within the consulting realm!
Still, it’s internal auditing guiding the way out of the tainted side of the consulting showing how entities and consultants can take measures to the exceptions Jobs took.
Lack of ownership!
The entities looking for consultancy services can have the consultants with the desired skillset on board and on their own payroll. Though this way they would hardly remain consultants and would instead assume responsibility for operations! But this way they would be taking ownership. And they won’t be taking off right after issuing a consulting report but will be sticking around. And the entity can always have employee bonuses linked to KPIs for bottom-line accomplishments of their ideas and recommendations.
Like I have always maintained, internal auditing is better in-house than outsourced as in a consulting services provider style. Even with an in-house arrangement however, the consulting argument would still be there. But internal auditors sell findings, management is always free to choose if it intends to agree with auditors’ recommendations for their resolution or not. They just have to address the causation and that’s it!
Lack of sense of responsibility, accountability and scar tissue!
The advent and widespread deployment of AI in consulting has already solved concerns 2 and somewhat 3 as well. This has in fact entirely altered the rules of the game. The revenue model on which the consulting firms used to invoice their clients is no longer relevant as a true reflection of the efforts undertaken and clients have started moving to either cheaper consulting alternates or having the AI tools and skillset on board.
The effects have been so disruptive that the established old names in the consulting industry are preparing to face new competition from tech companies! Yes! Tech companies, especially those developing AI tools, are establishing their own consulting divisions and this has led to accelerated adoption of AI by the old guard.
Unfortunately, however, the old guard’s adoption of the AI has been controversial partly because of the revenue model problems and partly because of the lack of governance around AI use. The extreme want for governance was laid bare by the consulting’s use of AI without disclosures on the extent of usage, exposing privileged client data to AI tools, no human in the loop problems and others.
The revenue model problems stemmed from the fact that consulting has always been utilizing the time charging (man-hours) based client billings. This changed drastically with AI as hours spent by humans reduced tremendously. AI analyzes, reviews, summaries, models, produces and generates at unimaginable speeds! So, this was bound to change.
An alternate costing method available is the use of AI Tokens since the use of AI tools is becoming more and more expensive. However, the chatter now is around outcome-based pricing! Consulting engagements priced according to the outcomes they aim to achieve!
Whilst the outcome-based pricing looks very promising it has practicability issues owing to the following:
- Quantification of benefits in the form of potential future inflows / economic benefits at the outset of an engagement.
- Accurate and complete quantification of benefits even after the completion of the engagement.
- Lack of clarity on all potential benefits.
- Quantification of potential downside risks to be mitigated.
- Scope creep.
- Inability to fulfill certain milestones owing to consulting service providers issues.
- Deviation from the consulting advice by adding to, substituting or not following certain components.
- Not being able to achieve the outcomes owing to factors beyond control (though this can be mitigated against for the effort).
- Outcome-based pricing is unviable for the consulting service.
It can be argued though that many of these issues can be resolved through built-in provisions in the agreements, for instance, progress payments on reviews, performance obligations / milestones-based component pricing, penalties, etc.
The internal audit has led and continues to lead the way here too! It is us who objectively rate our findings through quantified heat maps. It’s us who determine exposures and potential exposures in our findings. It’s us who quantify potential costs of downside risks and potential returns from upside risks. It’s us who quantify costs of controls and weigh these against benefits of those controls.
Irrespective of whichever pricing model is adapted by the consulting industry, clients need to understand that it ought to be viable and sustainable for the service provider. And there will always be inherent wisdom in cost plus pricing backing it all up. So, let’s not discard those timesheets, overhead cost drivers, absorption rates, and required rate of return workings!
Maybe a combination pricing methodology of man hours plus outcomes is the way forward?
Surface floaters
The widely yet thinly spread experience and exposure is one argument for which there’s no remedy beyond the professional aptitude and appetite of the consultant! If the consultant has never learnt to dive or only yearns to float, the depth of the waters and the treasures hidden underneath will remain elusive!
Resultantly the consultant’s advice can be anything but competent!
And thus, a surface floater might be a consultant but not an internal auditor!
Virtues of consulting? A one stop shop for multiple services, sectoral and cross sectoral knowledge, knowledge repositories, wider exposures (if depth is not being questioned!), long term payroll considerations with hiring consultants versus hiring a services provider!
Though the virtues still have their fair share of cons! For consultants’ one size fits all approach to every service or similar clients erodes the peculiarity demanded by its clients!
It all comes down to my favorite / go-to subject; governance (lack of!) And governance depends on how much weight we put behind ethical considerations!
Ethical considerations in refusing work when we lack the competence and skillset for it, when we have conflicts of interest, when there are potential threats to integrity, when remaining unbiased or objective could become difficult, when independence could be compromised….
Also when we are paid for deploying our own mental faculties, instead, we prefer deploying AI tools and then not even disclose it, ethics take a backseat!
And when ethics take a backseat, consultants are not advising, they’re just conning!