Management Consulting Firms & Business Ethics: A Troubling Relationship
Although most of us typically think of management consulting firms as advisors who recommend solutions for the most challenging problems facing top management, some client companies may also attempt to use the consulting firm to perform another, less well-known function. This controversial purpose involves the way management can exploit consulting firms to diffuse or avoid responsibility for criticized, unpopular, or unprincipled actions.
Whether an MBA accepts a job with a consulting firm or one of the many client companies known to maintain long-standing consulting firm relationships, that MBA deserves forewarning about this covert function so that they can recognize it and the ethical issues it raises.
By drawing attention to potential responsibility issues within consulting relationships, we at BSchools don’t mean to dissuade MBAs from going to work for consulting firms.
To the contrary, as we point out in our BSchools Guide to MBA Careers, we believe that management consulting firms offer unparalleled career opportunities for MBA graduates. It’s not surprising that the Harvard Business School sends about a fifth of its graduates into consulting, and the University of Pennsylvania’s Wharton School sent more than a quarter of its 2019 class into the industry.
Rather, we wish to point out that a client company’s management may seek to receive benefits from their relationship with a consulting firm aside from the advisory services that the firm provides. Frequently a situation like this can arise where management needs to justify cost-cutting, like layoffs.
Three Ways Management Consulting Firms Help Companies Avoid Responsibility For Their Employees
Here are some of the responsibility dynamics in play when a client firm’s leadership relies on their management consulting firm to help evade accountability—and consequences.
Using the Consulting Firm as a “Heavy”
A fascinating social psychology dynamic can play out when an organization’s top management hires an “MBB” consulting firm like McKinsey & Company, the Boston Consulting Group, or Bain & Company. A similar dynamic can manifest that involves the management advisory services divisions of accounting firms.
Suppose a manager is told to lay off employees. A minority of managers enjoy firing employees because they believe doing so makes them look like tough, ruthless bosses. But most managers are human beings with feelings. They hate putting folks out of work because they don’t enjoy disrupting the lives of all these employees and their families. And they don’t want to be perceived as cold and heartless—especially once the press and social media latch on to the story.
What to do? Hire a consulting firm. That way, management has a convenient authority they can creatively use as a “heavy.” Duff McDonald, who wrote a book named The Firm which profiles McKinsey’s history, told Slate:
You’ve got to fire a bunch of people or you decided that that is the course of action that you should take. It’s a lot easier to say that to your employees with a straight face, the ones who will still be showing up to work, that “I didn’t want to do this, but we went and asked McKinsey and this was their advice.” McKinsey will willingly be the scapegoat for that story.
Executives can claim that their expert consulting firm—one that must always be right because they may charge tens of millions of dollars—has recommended that the client company take this step. Perhaps if they don’t follow that advice, claims management, the consultants’ proprietary projections indicate that the company’s survival could be threatened. Accordingly, the managers will assert that they were “just following recommendations,” and that they really didn’t have much of a choice.
So effectively, management assigns that responsibility to the consulting firm. This way, managers can sleep well at night.
To pull this off, it doesn’t hurt to have hired an esteemed consulting firm that has spent a century building an elite, exclusive, prestigious brand. And in global business, nobody considers themselves more “esteemed” than McKinsey. Through most of its history, the firm enjoyed a reputation as the “bluest” of all the blue-chip American multinational corporations, and as the gold standard against which clients measure the performance of all other management consulting firms.
Professor Seth Green teaches at Loyola University Chicago’s Quinlan School of Business and serves as the founding director of the Baumhart Center for Social Enterprise and Responsibility. He began his career as a consultant at McKinsey after he had graduated from Yale Law School. Professor Green recounts this anecdote:
The firm sent an email to us as alumni where it referred to us as “the most esteemed alumni group in any institution by any measure.” And it went on in detail about how amazing we were as a firm. . .And what was striking to me about that e-mail is it started with the same communication the firm has been putting out for nearly 100 years, which is this is the place for the best, and brightest, and most elite.
Professionalism Absolves the Consultants’ Responsibility
But what about a McKinsey consultant who recommended the layoffs? Don’t they feel some responsibility for all these employees they’re about to let go, and their families they’re about to disrupt?
One should appreciate that traditionally, for most of McKinsey’s history, the firm’s consultants viewed themselves as professionals, much like doctors and lawyers. That’s because the firm’s patriarch Martin Bower—who held a law degree from the Harvard Law School and an MBA from the Harvard Business School—built McKinsey’s reputation around professional standards of practice similar to those within the legal profession.
Bower believed that a professional would never unjustly enrich themselves from a client relationship, but would instead always do what was best for the client. Bower also believed that a professional would always give the client good advice unavailable within their organization—even if that counsel included truthful guidance that would be difficult for the client to hear.
Back to our scenario, does the consultant feel responsible for the effects of the layoffs? Yale Law School Professor Daniel Markovits, who wrote a controversial article entitled “How McKinsey Destroyed the Middle Class” that appeared in The Atlantic in February 2020, doesn’t think so:
You know, if I’m working at McKinsey, when I decide to give the best professional advice I can following the principles of integrity that McKinsey insists on for its workers, I don’t characterize myself as having fired 50,000 people. What I’ve done is give the best professional advice that I can. And that’s a perfectly apt way to think about your life.
But from a systematic or a structural perspective, it insulates everybody from responsibility for terrible outcomes.
In other words, Professor Markovits argues that management consultants convince themselves to focus narrowly on the quality of their professional advice, and not to consider the effects of that advice that might adversely affect the lives of the client firm’s employees and families. After all, focusing on those effects could lead consultants to mistakenly rule out options that actually are “optimal” from the perspective of the client firm’s top management that hired the consulting firm in the first place. Because of this philosophy, the consultants can also sleep well at night.
But see what’s happening here? As Professor Markovits points out, a system gets set up that diffuses any sense of responsibility by anyone for these potentially life-damaging outcomes. Top management assigns that responsibility to the consultants and the consultants diffuse that responsibility away through their “professionalism.” Insulated from responsibility, everybody sleeps well at night—except all those employees who lost their jobs.
If professionalism isn’t enough to diffuse that responsibility, a form of moral indifference which Slate contributor Justin Peters calls “systemic amorality” can finish off the job. As described by Professor Green, this view encompasses the narrow belief by consultants that the moral and ethical effects of management consulting recommendations amount to none of their concern:
You know, I saw people that were highly heightened in their interactions with the people that were around us. I mean, I can’t tell you how many team managers I had who would literally worry if we were leaving the room too dirty because the janitor who is coming shouldn’t have to clean this up. Or who would be very mindful if anything was happening to the life of someone who was a supportive team member, that they would reach out and they would be really empathetic.
But then, you know, you’d walk into another part of their professional life and their understanding of the world was just that they are seeking to be most efficient, and that they are not even really an actor. They are a technocrat who is deciding how to solve a problem that someone else has given them.
And in those settings, those same people that I think had the capacity for great moral thought and empathy would not see themselves as the agents who should be applying those.
A Basis for Discussion
To reiterate, we hardly mean to discourage MBAs from taking jobs with management consulting firms because they might observe dynamics like those reported above. Instead, we’re drawing attention to these dynamics to provide a basis for discussion among MBAs, and among management consultants, their supervisors, and their clients.
It’s curious that one famous former McKinsey consultant—2020 Democratic Presidential candidate Pete Buttigieg—told reporters he would have left the firm rather than work on projects inconsistent with his values. However, a resignation for that reason would have been unlikely, because associates at most consulting firms exercise some choice over the clients they serve. For example, consultants uncomfortable serving as a client company’s scapegoat for unpopular or unethical actions would probably receive the option of switching to another client’s project team.