The Problem With 'The Big Five'
Who are they?
The five biggest management consulting firms in the UK at least are:
KPMG, Deloitte, Accenture, PwC and McKinsey & Company
And worldwide these are usually the names that come to mind when thinking about management consulting.
Four of them started as arms of accounting firms; KPMG, Deloitte, Accenture, PwC
All five are stuffed to the gills with MBA’s from the top universities of the world.
This creates a problem.
The legacy of accounting permeates their DNA. Everything is about the numbers.
You only have to look at their litany of failures to see that.
“McKinsey got it all wrong when they told AT&T that cellphones would be a niche market in the year 2000 with only 900,000 subscribers. The firm’s estimations were off by 108 million.”
They also thought that the merger of AOL and Time Warner would be fantastic. I’m sure there are some younger readers who’ve never heard of either company, and there’s a good reason for that. It’s widely regarded as the worst merger in history, killed one company and almost killed them both.
When you only look at numbers both of those pieces of advice make sense.
The problem is they ignore both the human factors and trends in the markets. This isn't unique to these firms and is too common in management circles in general.
Let’s focus on the human factors
If you’ve worked for a company that brought one of the big five in to help management improve efficiency you’ll have seen the financial numbers centric efficiency drive up-close. It’s not pretty.
The focus on financials causes a relentless push to drive down costs. As if that’s the only way to improve profitability. Many companies have proved that’s simply not true. I think most people are familiar with Gravity Payments and their $70k minimum wage.
They showed that by treating people as people you can dramatically increase the profitability of your business.
And an increasing body of research shows that paying people more and treating them as a valued part of the business more than pays for itself.
I'm sure the big five have absorbed some of the lessons from that research, but it's hard to escape the impression that they still primarily focus on the numbers.
What does this have to do with efficiency?
People cost money. For most companies, they’re the biggest cost by a huge margin. When you view everything through a financial lens the only way you’ll see to improve efficiency is to have fewer of them.
This is, at best, a short-term strategy. There are numerous non-financial impacts that over the long-term will end up costing far more than you save.
Think about it: How much less productive will the remaining employees be? 5%, 10, 20%?
What would a 10% reduction in productivity cost your business?
Factor in the cost of replacing some disgruntled employees who leave and just from a financial perspective the medium and long-term costs will outweigh the short-term benefits.
Where are the efficiency gains?
They're in how you do what you do.
Let's start with some bad news.
Your operation isn’t perfect.
It has silos, roadblocks, friction points, outdated processes, poor visibility, meaningless KPIs, and a bunch of stressed and frustrated people. All of this causes a huge amount of inefficiency. The time needed to deal with all of this adds up to a large percentage of your productivity.
I have worse news - the people in your teams can see many of the problems that impact them. Why do you think they’re stressed and frustrated?
(Oh, as an aside: if you do a financed-based efficiency “improvement” in this situation, how valued do you think those people will feel? Hint: not much)
So, how do you improve efficiency?
Now, the good news. It's actually quite simple. As I mentioned above - there are people who already know what some of the problems are. They probably have some ideas on how to fix them.
The first step for efficiency gains is: listen to the team. Not talk to them, listen to them. Ask lots of open-ended questions, make notes on their answers, check you’ve understood them correctly.
Second: report back to everyone. Do a presentation. Acknowledge the issues, have a plan to fix at least some of them.
Third: Just do it. Pick one thing. Get one or two people who will be affected by the changes, or had an idea on how to fix it, to be part of the change team. Proceed iteratively, with feedback. Just be aware that changes can have unintended consequences.
Then just review and repeat.
I’d suggest starting with something that doesn’t have too many steps or stakeholders. There are probably at least a few things that are a very easy fix - start there. For the more complex problems keep the solution as simple as possible.
Good luck. Your more efficient future awaits.