I. Before you read, answer the questions:

• Has your company or organisation ever employed a consultancy? Why (not)?

• If so, what kind of consultancy services were provided? Were the assignments successful? Why (not)?

II. Reading

Read this article and fulfill the tasks below.

ADVICE IS ONCE MORE IN DEMAND

1 Reports of the death of management consulting have been greatly exaggerated. The $200bn-a-year business advice industry survived the downturn and dot-com crash. After an extended period of recuperation, it has returned to growth. ‘We had a fabulous year last year strong double-digit growth after several flat years,’ says Sieve Gunby, head of the Americas region for Boston Consulting Group. – Bravado? Excluding information-technology consulting, which remains stagnant, the industry grew by 6.3 per cent last year according to Kennedy Information, the market researcher.

2 But the return to growth does not imply a return to business as usual. The rate of growth over the next few years is likely to be well below the double-digit levels achieved through the 1990s. The strength and pattern of the recovery varies by country, and some sectors remain depressed. Derek Smith, research director at Kennedy Information, points out that the information-technology consulting sector is likely to grow at an average compound rate of little more than 1 per cent. Excluding IT consulting, he expects the wider business advice industry to grow at an annual 7 percent.

3 The merger and acquisition wave among US public companies helps explain why North America is leading the way. Consultants are often called in to review potential deals and advise on post-merger integration. The return to growth also reflects a familial, cyclical pattern. The economic boom of the late 1990s led to very strong demand for business advice with which companies struggled to keep pace. Experienced consultants were leaving to work for ‘hot’ technology companies, and young recruits could not be trained fast enough to fill the gap. The result: raw recruits delivering work of questionable quality to increasingly disillusioned clients.

4 It has taken four years for buyers of business advice to turn again to external advisers. But these companies are wiser for the earlier experience. On average, projects are shorter and less valuable than during the boom years, making it easier for clients to keep track of expenses and objectives. Competitive bidding on engagements is much more frequent.

5 Even once an engagement has been signed, companies are increasingly likely to report to MBA-trained executives in client companies, many of them former consultants. To add value, they must bring to the table more than sharp minds and sharper suits. Experience and perspective are required. The combination of demanding clients and shorter projects is forcing consultancies to take a hard look at how they run their own businesses. Under particular scrutiny is the traditional, pyramid-shaped organisation in which a few senior partners are supported by an army of enthusiastic juniors.

6 The ability to ‘leverage’ the expertise of senior consultants in this way is central to the economics of the industry. Surveys show a strong correlation between high leverage and high profits per partner. The industry’s traditional up-or-out career progression also relies on large annual intakes of raw recruits. Mr. Mankins says: ‘This is an apprenticeship industry. If you have too few people coming in at the bottom, you end up with not enough managers.’

7 The leverage model works, however, only if clients are willing to pay for bright young MBAs and sign up projects of sufficient, duration for them to learn on the job. Increasingly, they are not. ‘My sense is that a lot of firms are questioning the traditional business model,’ says Betsy Kovacs_, AMCF president. Some consultants predict the emergence of ‘diamond-shaped’ firms, in which partners are supported by more experienced consultants and fewer youngsters. Mr. Brown observes: ‘People are hiring again, but they are tending to go for the more experienced recruits.’

8 Can consultancies make money if clients decline to support, the leverage model? Yes, but only by changing their recruiting patterns and pay practices - and finding new ways to add value. Already, more than half of the AMCF’s members are companies whose primary activity is not business advice. Note that the world’s largest consulting company is not McKinsey, Bain or Boston Consulting Group - the ‘bigthree’ strategy consultants – but IBM, which sells advice alongside IT services, servers and software. Similarly, Bain is now as well known for the exploits of Bain Capital, its private-equity arm, as for strategy consulting.

9 The best that can be said at this juncture is that there will be no single ‘right’ answer for all consultants. Notwithstanding the disapproval of clients, some will doubtless find ways to maintain the leverage model. Others will evolve into diamond-shaped organisations. Some will remain pure advisers. Others will ally with companies in adjacent industries or develop new sources of income to supplement advisory fees. As consultants are fond of telling clients, the essence of strategy is differentiation.