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“Management consultants are the shamans of modern society”

Matthias Kipping, a business historian at York University in Toronto, Canada, does research on the history of management consulting. In June he completed a one-year stay as a Humboldt Research Award recipient at Freie Universität.

Nov 07, 2019

Industrialization speeded up production: The first assembly line in the world ran in 1911 at the Ford Motor Company.

Industrialization speeded up production: The first assembly line in the world ran in 1911 at the Ford Motor Company.
Image Credit: Picture Alliance

Management consultancies are omnipresent. Companies such as McKinsey, the Boston Consulting Group, or Bain & Company operate globally, each with tens of thousands of employees. For a long time now, they have not only been advising companies, but also non-governmental organizations, cities, and states – and even the Catholic Church. Matthias Kipping points out that through their own think tanks, which are intended to give the appearance of being research institutes, management consulting firms also shape debates on social issues, such as artificial intelligence or the future of cities. The consultants suggest that they have a suitable solution for every topic. “Management consultancies have managed to create an almost sacred aura around themselves,” says Kipping, a professor of business history at York University, Toronto. “They present themselves as guardians of superior knowledge like priests or shamans used to. And perhaps they even hold a similar position of power today.”

Matthias Kipping is a professor of strategic management and the Richard E. Waugh chair in business history at York University, Toronto.

Matthias Kipping is a professor of strategic management and the Richard E. Waugh chair in business history at York University, Toronto.
Image Credit: Private collection

Matthias Kipping is a leading expert on the history of management consulting. Last year Professor Kipping was awarded a Humboldt Research Award by the Alexander von Humboldt Foundation (AvH) following a recommendation by Georg Schreyögg and Jörg Sydow, both professors of business administration at the School of Business and Economics at Freie Universität. He used the award to do research in Berlin-Dahlem from July 2018 to June 2019. During this time, he dealt mainly with the political and social influence exerted by management consultants. “Consulting firms today not only have an influence over management decision making, but increasingly also in social matters,” he says and continues, “We should ask ourselves, if that is what we want as a society.”

Origins: Consultants with a Stopwatch

The history of management consulting, says Kipping, began at the end of the 19th century. At that time, companies became so big and complex that they were hard to manage. Consultants began to sell organizational technologies in an attempt to make the movement of goods and work processes more efficient, faster, and cost-effective. They also introduced new mechanisms of control. “The first so-called efficiency consultants sat in the factory or the office with a stopwatch and measured how long the workers needed for each step,” says Kipping. “It is basically no different today, except that everything is done by computer.”

Management Consulting Expanded in the 1980s

The number of consultants exploded in the 1980s, when the financial markets in the US were liberalized under Ronald Reagan and in the UK under Margaret Thatcher. “Since then, regulations for companies have been cut back to a great extent worldwide, and new markets opened up,” says Kipping. “After the legal and geographical hurdles were removed, companies sought clarity and guidance from the consultants for new opportunities for global expansion.” At the same time, digitalization was taking hold of the economy. “Consulting firms introduced software systems such as SAP around the world,” Kipping adds.

Researchers attribute the continued success of management consulting firms not only to the increasing complexity of global capitalism. There are also psychological models to explain the phenomenon. “Some authors point to the loneliness of top managers,” says Kipping. “They are alone at the very top. They cannot confess any sense of insecurity to their staff. To talk about problems, it is preferable to consult someone from outside the company.”

According to Kipping, once the consultants are there, they are hard to get rid of. “Of course, in many cases companies can benefit from consultants,” he says. “But the consultancies also have their own economic interests and constraints: They have to grow!” So, they are always looking for new difficulties and problems they can offer solutions for. Kipping adds, “It is not always clear, whether the problem or the consultant was there first.”

The Growing Influence of Think Tanks

Many consulting firms have created their own think tanks to help shape the issues of tomorrow. Their publications like those issued by the McKinsey Global Institute are widely read by decision makers and in many cases are already more influential than publications by academic researchers.

Consulting firms are venturing into ever more areas of society in order to sell their solutions. Kipping says that while the breadth of topics increases, the answers from the consultants usually remain the same. He suggests that societies should give more thought to whether areas such as public health care should be approached with the same logic as the optimization of supply chains.

Kipping points out that think tanks run by management companies can have a positive social impact. “In particular, in terms of gender equality or sustainability, some of these institutes have definitely taken on a pioneering role,” he says. “In the future, they could use their influence for more good causes – if they are really concerned about benefiting society and not just the wallets of managers and shareholders.”

The original German version was published on July 15, 2019, in the campus.leben online magazine of Freie Universität Berlin.