DANGEROUS COMPANY:
The Consulting Powerhouses and the Businesses They Save and Ruin
By James O’Shea and Charles Madigan
Times Business,
355 pages, $27.50
Exposing the inner workings of corporate America is among the most difficult tasks that a journalist can take on. Yet that’s what James O’Shea ad Charles Madigan set out to do in their new book, “Dangerous Company: The Consulting Powerhouses and the Businesses They Save and Ruin,” a dogged examination of the highly influential, little known, $50 billion management-consulting industry.
Drawing on lawsuits and interviews with clients and former and current employees, the writers expose some juicy stories of behind-the-scenes corporate decision-making by detailing a series of case studies of big-name consulting firms–among them Andersen Consulting, Boston Consulting Group and McKinsey & Co.–and their relationships with corporate clients. Some partnerships were great successes; others came at great cost to the companies, including the loss of key customers and managers, in addition to millions of dollars in consulting fees.
O’Shea and Madigan, a Chicago Tribune deputy managing editor and senior writer, respectively, focus on the “secretive and elite army of management consultants . . . at work deep inside corporations everywhere, from the giants of the Fortune 500 to middle-sized and smaller companies,” but we learn just as much about the flaws and gifts of the people who hire them. A key lesson: Consultants are best used by people who understand and manage their strengths and weaknesses. Sears CEO Arthur Martinez, one of the wisest employers of consultants described in the book, admonishes: “The bad thing about consultants is, they think they have all of the answers. The good thing is, sometimes they have some of the answers.”
The appeal of this book may not be as wide as that of “The Daisy Chain,” O’Shea’s previous book, a recounting of the savings-and-loan debacle, a subject fraught with more compelling scandals. Because the writers frequently address advice to corporate executives and business owners who hire consultants, “Dangerous Company” sometimes reads like a cross between an investigative study and a how-to book. But it may also hold interest for the growing ranks of independent consultants who want insight into how much the big firms charge and how they operate. And local readers will enjoy the numerous references to Chicago business leaders, among them a recap of Sears’ history, as well as the descriptions of the operations of Andersen Consulting and McKinsey & Co., including its founder’s role in the history of Marshall Field & Co.
The most compelling “consultant gone crazy” story is that of two consulting firms charging up to $1,300 an hour as they contributed to the spectacular downfall of Figgie International, an Ohio-based conglomerate that was involved in everything from hockey sticks to missile parts. Harry Figgie Jr., the company’s founder, had spent three decades assembling a $1 billion company by acquiring poorly run companies and installing efficiencies.
Figgie’s grip on the company was so tight that he often cut short the careers of his division presidents, whose average tenure was less than three years. His astonishing behavior at “Hard Core”–annual review sessions in which managers were supposed to present him with their five-year plans–is vividly described:
“Sometimes, midway through the presentation, Figgie would finger his tie clasp and click on the music box attached to it. A light melody would resonate through the boardroom like a requiem as Harry’s staff sat silently looking at the executive. The `tie music’ meant Harry didn’t like the plan. If he was lucky, the division manager would be sent back with a deadline for a new plan. Harry decided to sack more than one executive on the spot.”
Figgie’s firm hold on the fortunes of the company suddenly gave way in the late 1980s when he installed his son, Harry III, an orthopedic surgeon, to a new position, vice chairman for technology and strategic planning. In charge of a massive modernization drive, Harry III hired Deloitte & Touche, a big accounting firm with a consulting arm, and gave it too free a rein. The Figgies racked up bills of almost $50 million over four years in an effort to pursue “world-class manufacturing,” a term that was never precisely defined. Instead they wound up with new machining centers installed by an army of consultants who rarely talked to the employees and managers who would be using them. The result: They took too long to program, or lowered the quality of their output, or simply didn’t make the required parts. Such major missteps cost both Figgies their posts and nearly resulted in the company’s bankruptcy.
A contrasting tale is that of Martinez, whose very controlled use of consultants is part of his remarkable turnaround of Sears. Martinez hired consultants from Chicago-based A.T. Kearney only after he had new managers in place and a direction set. He picked the firm based on recommendations and its track record in the carefully defined areas in which he needed help. Unlike the Figgies, be did not give it the run of the place nor abandon his internal talent.
At the end of the book, the hip Massachusetts-based PTG, with a relaxed attitude and dress code and more reasonable billing structure, is offered up as the antidote to the big consulting firm. PTG offers its expertise largely through Lotus Notes, which allows consultation via computer, cutting costs almost in half while providing more constant and collaborative advice. Without more insight into the exploits of these far-more-numerous upstart firms, the portrait of this burgeoning industry remains incomplete.
“Dangerous Company” closes with the ultimate how-to-book tool: the checklist. Even readers who are not expecting to hire a consultant to turn around their businesses will find it useful for establishing relationships with any type of professional. It includes things like clearly defining your goal before you hire, avoiding open-ended arrangements and vague promises, and never giving up control. While this advice seems to be common sense, as these corporate tales illustrate, it can be difficult to follow.
