True Tales of Consulting’s Birth

Paid advice

* “The World’s Newest Profession: Management Consulting in the Twentieth Century”

* by Christopher D. McKenna

* Cambridge University Press, $30, 352 pages

Source: Publisher

*

Chutzpah can get you just about anywhere.

In 1932, James O. McKinsey and Co. changed its letterhead from “certified public accountants” to “accountants and engineers,” even though the firm did not actually employ any licensed engineers.

What McKinsey understood was that there was a growing appetite in the U.S. business community for a more rigorous and “engineered” approach to financial and business advice.

Management consulting was emerging as a quasi-professional discipline that would come to influence the economic development of the world in the following decades.

This and many other intriguing revelations are contained in Christopher McKenna’s important new book, “The World’s Newest Profession: Management Consulting in the Twentieth Century.”

His timing is perfect. Consulting is only now beginning to regain some of its former confidence after the shattering blows of the dot-com bust and later convictions in the wake of corporate scandals.

Unfairly or not, management consultants came to be seen as the hubristic champions of some of the worst business excesses of the late 1990s. One of the industry’s stars, Enron’s ex-McKinsey man Jeffrey Skilling, is waiting to learn his fate after his conviction last month.

Though McKenna, a lecturer in management studies at Oxford University, seems to have picked the right moment to publish his book, this is not a rushed work. It is an exhaustive account of the history of management consulting that has been several years in the making.

Although academic thoroughness is one of its chief merits, the book remains readable and entertaining throughout. McKenna’s serious and not unsympathetic approach allows him to debunk certain myths about consulting without falling into the trap of becoming an unthinking critic.

He also manages to correct misconceptions about the origins of management consulting.

It has been convenient, for example, to draw a straight line from Frederick Taylor’s “Principles of Scientific Management” in 1911 to the development of firms such as Booz Allen and McKinsey.

Convenient, but wrong. As McKenna shows, the consulting firms that grew to prominence in the prewar period owed their origins to cost accounting rather than the “one best way” approach of Taylorism. The numbers people, he writes, “simply shifted their professional jurisdiction from monitoring costs as accountants to lowering costs as consultants.”

This transformation matters because it reveals how flexibility and adaptability have been key characteristics of successful consulting firms from the start.

Another crucial difference between Taylorists and the new wave was that while the former looked primarily at the shop-floor and the production line, management consultants focused exclusively on senior executives -- largely for the same reason that Willie Sutton gave for robbing banks: “That’s where the money is.”

Echoes of the past, as unearthed by the author, provide a useful context for today. As consulting firms wrestle with the implications for their work of the Sarbanes-Oxley law, McKenna points out that it was another piece of legislation, the Glass-Steagall Banking Act of 1933, that gave a huge boost to management consulting.

As well as bringing about the famous separation between commercial and investment banking, Glass-Steagall made it impossible for other professional groups, such as lawyers, engineers and accountants, to offer formal business advice to clients. Management consultants rushed in to fill the vacuum.

McKenna shows how, by a combination of disciplined professionalism and savvy marketing, management consultants grabbed their place at the center of business life.

Marvin Bower, the driving force behind the rise of McKinsey, adopted the approach of the successful law firms he had known in his early career.

He recruited from Harvard Business School, offering attractive salaries and boosting the credibility of the MBA in the process.

He imported McKinsey’s “up or out” principle -- you either make it at the firm or, in the most civilized way possible, leave -- and made sure the network of former McKinsey men maintained their mutually beneficial network.

McKenna describes this and more in a brisk narrative of 352 pages. It is a sober and truthful antidote to all the glossy consulting marketing brochures that promise “strategic solutions” and “value added” analysis.

Stefan Stern is a columnist for the Financial Times, where this review first appeared.