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Can you use a consultant?

There are some 147 leading consultant firms widely used by industry for various tasks that can be divided into four categories-the firms that provide advice on strategic planning; those that deal with marketing; those that provide expertise on manufacturing and technological processes; and the ones that provide guidance on personnel problems related to union avoidance, strike avoidance, productivity improvement, and involvement programs.

The role of consultants goes back some 2000 years when Pu Yi, the boy ruler of China, depended heavily on a phalanx of eunuchs. With no outside emotional attachments, the eunuchs were supposed to be loyal only to the emperor, managing the palace and public affairs in a disinterested manner. Today, companies pay management consultants for the same service.

There are virtually no major companies that do without consultants. Why? Many of today's problems include the use of complicated technical systems; knowledge of demographic data; extensive familiarity with labor contracts, labor law, and union practices; deep understanding of the human side of productivity and quality problems; or corporate restructuring. Many companies simply are not equipped to deal with the intricacies of such problems.

10 floors of MBAS

For example, Carl Icahn, corporate raider and head of TWA, loves to ten of one encounter he had with his consultant. When Mr Icahn acquired a company several years ago, he found a staff of 200 MBA types occupying 10 floors in the company's New York headquarters. He paid a consultant a quarter of a million dollars to figure out what the MBA crew did.

Five weeks later, the consultant presented Mr Icahn with a massive report full of charts. He pushed the volume aside, saying, "here's a yellow piece of paper. Now, just write down what it is they do."

Replied the head of the consultant team: "We can't figure out what they do. It would be no loss to get rid of them." Icahn "retired" the employees.

Who's who

Who are the leading consultant firms? On top of the list is McKinsey & Co, New York, with some $620 million in billings in 1989, with specialties in strategic planning, information systems and marketing. Next would come Booz, Allen & Hamilton, New York, with some $500 million in billings, the bulk of which comes from strategic planning and other services to federal agencies and private corporations. Next follows Bain & Co, Boston, with billings of about $220 million, guiding implementation of marketing programs. Arthur D Little, Cambridge, MA, with some $200 million in revenues, consults on client research activities and technology.

Accounting firms are also into consulting. While they would like to provide every service to everyone, their main expertise lies in number crunching. The leader in that area is Andersen Consulting, Chicago, with some $1 billion in 1989 billings, mainly in information systems consulting (including considerable accounting work). Not far behind is Ernst & Young, New York, with some $740 million in billings, mainly among health care firms and manufacturers. Deloitte & Touche, Wilton, CT, comes next with some $590 million in revenues, concentrating on reorganizations, and in consulting with retail chains. KPMG Peat Marwick, New York, follows with $570 million in revenues, providing consulting on information technology. Coopers & Lybrand, New York, with $448 million in billings, concentrates on statistical quality controls and just-intime inventory consulting. Price Waterhouse, New York, with $385 million in revenues, provides consulting on technology, especially for financial services and utilities.

In the area of employee benefits-which has become a big specialty-we find William M Mercer, New York, with $525 million in revenues. It specializes in advising on employee benefit packages. Not too far behind is TPF&C, New York, with $385 million in revenues, concentrating on actuarial work in connection with employee benefits. The Wyatt Co, Washington, DC, with $333 million in billings, deals with flexible compensation, and the Hay Group, Philadelphia, with $210 million in billings, emphasizes salary administration.
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Title Annotation:Management Update
Author:Goodfellow, Matthew
Publication:Tooling & Production
Article Type:column
Date:Jul 1, 1990
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