The World's Newest Profession: Management Consulting in the Twentieth Century (Cambridge Studies in the Emergence of Global Enterprise)Christopher D. McKenna | 2006-06-30 00:00:00 | Cambridge University Press | 392 | Consulting
In The World's Newest Profession, Christopher McKenna offers a history of management consulting in the twentieth century. While management consulting may not yet be a recognized profession, the leading consulting firms have been advising and reshaping the largest organizations in the world since the 1920s. This groundbreaking study details how the elite consulting firms, including McKinsey and Booz Allen, expanded after U.S. regulatory changes during the 1930s, how they changed giant corporations, nonprofits, and the state during the 1950s, and why consultants became so influential in the global economy after 1960. As they grew in numbers, consultants would introduce organizations to "corporate culture" and "decentralization" but they faced vilification for their role in the Enron crisis and for legitimating corporate blunders. Through detailed case studies based on unprecedented access to internal files and personal interviews, The World's Newest Profession explores how management consultants came to be so influential within our culture and explains exactly what consultants really do in the global economy.
Reviews This is the first thoughtful history of the management consulting that I have found. It is extremely readable and well documented: highly recommended for any consultant who craves an understanding of their profession's past.
Reviews Before reading this book one might understandably confuse Cresap, McCormick & Paget with a swanky new seafood restaurant - like McCormick and Schmick's - rather than one of the original "Big 3" consulting firms of the 20th century. Few books, if any, document the rise of the managing consulting industry in America over the past 125 years as well as author Chris McKenna does here. An extremely well-researched book - with 103 pages of notes - "The World's Newest Profession" won the coveted Hagley Prize in 2007 for best business history book. The perfect accoutrement to the "Vault Career Guide to Top Consulting Firms," McKenna's book is a must-read for any MBA aspiring to a consulting career.
One of the most fascinating achievements of the consulting industry is how it has maintained an aura of professionalism despite simultaneously eschewing the trappings that are traditionally found in most other professions (i.e. law, accounting, etc.). To understand this phenomenon we must first turn to its origins. The quasi profession of consulting began in the 1880's with men like Frederick Taylor who helped American industry reengineer their shop-floors to achieve greater efficiency. These "industrial engineers" applied "scientific management" principles primarily to problems of "worker psychology, workplace and tool design, wage systems, and cost accounting." Once such efficiencies were achieved, however, businesses sought new solutions to a changing regulatory environment, which Taylorism was ill-equipped to address.
If we view the evolution of management consulting on a timeline continuum then "Taylorism" was the "Australopethicus" of the consulting world - a loose and distant cousin of modern consulting. In contrast, the "management engineers" and "cost accountants" of the 1920s, such as James O. McKinsey, were much more akin to the consulting brands we are familiar with today. This shift coincided with a period of regulatory reform that would further solidify "consulting" as a business function separate from that which was taking place within professional service firms at the time. McKenna writes, "The rise of management consulting as a distinct professional field occurred as a direct result of Congressional passage of the Glass-Steagall Banking Act in 1933" (p. 17).
Armed with their "general surveys," the leading consulting firms were sought after by businesses for two primary reasons: to legitimize internal decision making processes, and to learn best business practices from competitors. This does not mean, however, that consultants were engaged for each and every pressing business concern. The decision to "make or buy" was ultimately determined by whether or not the nature of the problem was "brief, specialized, and nonrecurring." In these instances businesses found great value in hiring consulting firms, in some instances even paying up to 2% of company revenue on consulting expenditures.
Over time the consulting industry began to consolidate with a few firms developing specializations in terms of core areas of competence and clients served. For example, under the newly invigorated leadership of Marvin Bower in 1939, McKinsey developed a specialization in administrative reorganization. Meanwhile other firms established reputations in information technology, or corporate strategy. Some firms, most notably Booz Allen Hamilton, became the consultant of choice for government agencies while others focused on corporations or not-for-profits. McKenna observes, "Management consulting firms, from the 1970s onwards, would generally fall into two camps: those who provided advice on corporate strategy, like BCG, Bain, and McKinsey, and those who provided advice on information systems, like Anderson (subsequently Accenture) and later IBM (p. 77)."
Since its humble beginnings the number of consultants per a manager has increased over 4X to "one for every thirteen." With a current annual domestic market size of $100 billion the industry shows no signs of slowing down, McKenna concludes, "Whether in computer systems, strategic counsel, organizational design, or corporate acquisitions, management consulting firms have become, and continue to be, a crucial institutional solution to executives' ongoing need for outside information" (p. 78). The only question that remains is whether an industry that has existed for over 125 years will finally become the world's newest profession.
Reviews A discussion of the consulting industry from its early origins in the late 1800s is what makes this book unique. The commentary that McKenna offers is superb. And some readers may be interested in the substantial end notes provided for this history, something rarely seen in books of this genre. While management consulting is the focus, a limited discussion of technology consulting is also provided. The subject of this book is the answer to the question of "just how had the leading management consulting firms come to achieve such a dominant economic and cultural position?" As McKenna explains, "the historical explanation for the dominance of management consulting, as it turns out, was not to be found in the pragmatic choices of university graduates, but in a set of regulatory changes in America during the 1930s, the 1950s, and the 1980s that were bolstered by the strategic development of new markets by the leading management consulting firms. American antitrust regulation shielded early consultants from competition from rival professionals even as entrepreneurial firms created new lucrative practices by concentrating on particular market segments[.]" In fact, "this regulatory history helps to explain why most of the leading management consulting firms in the world are American in contrast to the other business professions, like law or accounting, where state regulation did not favor one geographic market over another. Remarkably, the regulatory history returned to haunt management consulting firms at the end of the twentieth century because corporate board members had come to rely so heavily on professionals to reduce their corporate liability. Throughout the twentieth century, state regulation, as much as international innovation, first shaped and then reshaped the evolutionary path of management consulting". Very timely reading, especially in light of the recent (January 2009) revelation that PricewaterhouseCoopers was the auditor of Satyam Computer's doctored accounts. McKenna discusses the seemingly similar (and familiar) case associated with Arthur Andersen and Enron, but not until the ninth chapter, and this is not the focus of the book (there have been other texts solely focused on the Enron case if that is what interests the reader). This book provides remarkable insight into the consulting industry, and is recommended reading for all consultants, those who are considering consulting as a profession, and all business professionals seeking better understanding of the consulting industry.
Reviews No responsible business leader today would make a move before having a management consultant vet his or her plans. Doing it differently would be unwise. Not only would such a failure undermine corporate strategizing, but it could also result in a ruinous stockholders' due-diligence liability suit. Nonprofit directors are equally dependent on management consultants. They're increasingly ubiquitous and involved with everything. American to the core, with their "can-do" attitudes and confident outlooks, management consulting firms have thoroughly remade both businesses and elements of society in their own sleek, corporate image. We highly recommend this comprehensively researched and annotated historical report. Read it to learn about a remarkable business phenomenon that has dramatically reshaped the world. You can't get sounder advice - not even from a management consultant.
Reviews I bought this book to read the section on Lukens Steel (about whom I am writing a book) but it was so good that I read the whole thing, just for pleasure. For me, it was a clear explanation of a world that I had glimpsed, but never entered. Now I know why Harvard MBAs make so much money.
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