Hired guns taking aim at business targets
SCRATCH the surface of any one of South Africa's top 50 companies and you will in all probability find one or more management consulting firms beavering away, re-engineering a business process, installing the latest information systems, advising on strategy or searching for business improvement.
It's not only the big companies that are seeking business improvement. Smaller companies, too, are calling on these hired guns to help them make sense of the fast changing world in which they must compete.
The consulting industry is big business. How big is anybody's guess, as anyone involved in corporate advisory work can call himself a consultant. By some estimates, the industry was reckoned to be worth upwards of R1.5-billion in 1997 and to be growing at the rate of 25% a year.
The growth of the consulting industry reflects the fundamental transformation taking place in business and the public sector. Government is an avid consumer of consulting services and, for all the criticism levelled at it for using taxpayers' money to do a job public servants were hired to do, this investment is starting to bear fruit. The turnaround at the SABC, with the help of international consulting firm McKinseys, is a case in point. The Departments of Public Works and the Defence Force have made giant strides in improving efficiencies with the help of consultants.
One of the drivers behind the consulting industry is an obsession with world standards. The abolition of sanctions in 1994 and the wave of foreign competition that followed highlighted the glaring gap between domestic and international business practices and technology. Companies striving for world-class standards are rushing to implement business software packages such as SAP, Baan and JDE. The installation of these packages, known as enterprise-wide systems, often require large-scale re-engineering of the business processes.
According to Brian Henry and Angelo Kehayas of the Institute of Management Consultants of South Africa, part of a worldwide network of 35 000 members, the installation of enterprise-wide software can lead to huge cost overruns: "We know of cases where initial cost estimates for these software packages doubled or even trebled," says Kehayas.
Consultants are often less than candid with the client when embarking on these huge information systems project. Clients, once committed to the project, are loathe to discontinue, despite the heavy cost overruns.
KPMG consultant Mike Gering says companies are questioning the return on investment on new technology: "A lot of this investment in the latest technology is ill-considered," he says. "Often, it is hard to see a benefit."
The Institute of Management Consultants is concerned at the trend towards contingency fees, where consultants share in the risks and rewards of a project: "Consultants should provide advice for a fee," says Henry. "In providing advice, they are not guaranteeing results. With contingency fees, there is an incentive for the consultant to provide advice which could generate a short-term return calculated to boost their own revenues."