The Consultant Industrial Complex
Why so much organisational change advice is sold with certainty and delivered with mediocrity - and why the people who most need to hear this are the ones least likely to say it.
There is a sentence that appears, in various forms, in a remarkable number of post-mortem analyses of failed organisational change programmes. It runs something like this: ‘We engaged external advisors to support the transformation.’ The sentence is usually followed, several paragraphs later, by a description of the outcomes, which are usually disappointing. The connection between these two things is rarely examined.
Let’s examine it.
McKinsey’s own senior partners have stated publicly that organisational transformations fail about 70% of the time. This figure has been cited, cross-referenced, and debated extensively in the management literature. Some researchers dispute its precision, while noting that the underlying pattern it describes feels real and consistent. And this is not a figure produced by McKinsey’s critics. It is a figure that McKinsey itself has published, most recently in video content from its Transformation Practice, while simultaneously selling transformation services. Erm.
That is, to put it gently, a fascinating commercial position.
The industry has identified a 70% failure rate in the thing it sells. The response has not been to fix the failure rate. The response has been to sell the fixing of the failure rate as an additional service. Erm, indeed.
The structural incentives that produce poor outcomes
To understand why the consulting model systematically produces disappointing outcomes in organisational change, it helps to understand the incentive structure under which it operates.
The first problem is billing by time rather than outcome. The overwhelming majority of management consulting engagements are priced on a day-rate or project-fee basis, with no meaningful linkage to whether the advice delivered actually produces the intended result. The consulting firm is paid for presence and output: the workshops run, the documents produced, the presentations delivered. Whether the organisation actually changes is somebody else’s problem, and usually somebody else’s budget line. This creates a structural incentive to produce work that is extensive, impressive, and inconclusive enough to require follow-on billable work. A neat, self-sustaining snake oil factory.
The second problem is risk aversion built into the advisory model. External advisors whose reputation depends on not being wrong have a systematic incentive to recommend solutions that are defensible rather than effective. The recommendation that follows the diagnostic, the framework that is presented as the answer, the implementation roadmap with its colour-coded phases and governance structures. These are all designed, consciously or not, to look like rigorous analysis. They are rarely designed to survive the specific cultural conditions of the specific organisation that has commissioned them.
The third problem is what Mariana Mazzucato and Rosie Collington, in their 2023 book ‘The Big Con’, call the hollowing out of organisational capability. When an organisation repeatedly outsources its thinking to external advisors, it atrophies the internal capacity to think. The people who could have developed the knowledge, worked through the problem, and built the institutional understanding necessary to implement change are instead briefing consultants and reviewing PowerPoint decks. The organisation becomes dependent not because the consultants are particularly good, but because the alternative (rebuilding internal capability) has been deferred for too long. Indeed, it is part of the solutions that change consultancies sell: ‘outsource your thinking to save yourself money so that you can spend more on, errr, us.’
What the evidence says about what actually works
The research on organisational change is reasonably consistent on a set of findings that the consulting industry’s business model makes structurally difficult to deliver.
The first is that sustainable change requires deep knowledge of the specific organisation’s cultural rules: what gets rewarded, what gets punished, who the informal power brokers are, where the real resistance lies. This knowledge takes years to accumulate and cannot be acquired through stakeholder interviews and diagnostic surveys, no matter how well designed. The leaders who possess it are almost always internal. The people who do not are almost always the ones producing the change strategy, displayed in pretty charts and presented by £2,000 suits.
The second is that the most effective change is driven by leaders who are credible to the people they are asking to change. An external consultant, however senior, does not have the relational equity, the shared history, or the day-to-day accountability that makes a change message persuasive. An internal leader who has built trust over years, who is known to be honest, and who has a track record of doing what they say they will do, is exponentially more likely to drive genuine behavioural change than a visiting expert with impressive slides.
The third is that McKinsey’s own research ( sorry, McKinsey) has identified that organisations whose leadership clearly defines roles, responsibilities, and communicates project progress are around more likely to succeed in transformation than peers who don’t. The variable that most predicts success is not the quality of the external advice. It is the quality of internal leadership.
The question boards should be asking
None of this is an argument that external expertise is without value – obviously, I would say that. It very clearly has value in specific, bounded contexts: bringing knowledge the organisation genuinely lacks, providing analytical capacity for time-limited intensive work, offering an outside perspective that internal teams genuinely cannot generate. The problem is not that organisations consult. It is that they consult as a substitute for the harder work of developing internal leadership capability, making the genuinely difficult cultural decisions, and holding themselves accountable for outcomes rather than activities.
The consulting industry valued at over $900 billion globally (a figure that has grown ninefold since 1999, as Mazzucato and Collington document) is, in significant part, a measure of the volume of difficult decisions that organisations have preferred to outsource rather than make. Boards and leadership teams that commission expensive external change programmes are, in many cases, paying for the comfort of having an expert to blame if it goes wrong, rather than for the expertise itself.
Sources
McKinsey & Company. Transformation Practice. ‘Common pitfalls in transformations’ (2022) and ‘Perspectives on transformation’. Senior partner Jon Garcia: ‘Research shows that 70 percent of the time companies fail’ in large-scale transformation. mckinsey.com/capabilities/transformation/our-insights/common-pitfalls-in-transformations-a-conversation-with-jon-garcia
McKinsey & Company research. Organisations whose leadership clearly defines roles and responsibilities and communicates project progress are approximately 8 times more likely to succeed in transformation than peers. Cited across multiple McKinsey change management publications.
Mazzucato, M. & Collington, R. (2023). The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments, and Warps Our Economies. Penguin Press. The consulting industry was valued at over $900 billion globally in 2021, a ninefold rise since 1999. Core thesis: overreliance on consultancies hollows out internal organisational capability and harms public interest.
Hughes, M. (2011). ‘Do 70 Per Cent of All Organizational Change Initiatives Really Fail?’ Journal of Change Management, 11(4). Academic examination of the 70% failure figure: while the precise number is contested, the underlying pattern of high failure rates in large-scale organisational change is well-supported across the literature.
CB Insights (2021). ‘The Disruption of Management Consulting’. Documents structural vulnerabilities in the consulting model: time-based rather than outcome-based billing; value dependent on information asymmetry; recommendations that are difficult to evaluate for effectiveness. cbinsights.com/research/disrupting-management-consulting
Consulting industry structural incentives: academic consensus across management literature (Sturdy, 2011; Curuksu, 2018) that conflicts of interest are a major issue in the consulting industry, arising from billing models that reward extended engagements rather than resolved client problems.