In Part 1 of this series, I described two distinct streams in the history of consulting: content and process. Historically, content firms (Arthur D. Little, McKinsey, Boston Consulting Group, Bain, etc.) evolved from research to strategy. Content consultants believed in analyzing the market and the firm and providing answers. Process firms evolved from the operations systemization of Frederick Taylor and Frank and Lillian Gilbreth through Dr. Deming and the quality movement  of the 1980s, as well as reengineering to Six Sigma and similar process improvement methodologies today.

It isn’t oversimplifying to say content consultants rely heavily on analytics and provide answers to be implemented by their clients, while process consultants rely heavily on training and ask questions to teach their clients how to find answers to implement. My experience shows that, with some rare exceptions, the only thing these consultants have in common is that they have little use for each other.

Part 1 explains the history of this evolution  with a focus on strategy and operations firms. Part 2 discusses technology firms, largely content in orientation, and human resource firms that are largely process in orientation.

Another kind of content firm -Technology and Systems Integrators

I am the “original late adopter,” so I am probably not the best source for the history of technology consulting. Here is my limited understanding of this industry.

These days, Information Technology (IT) consultants may work for the Chief Executive Officer (CEO) or various business heads or  the Chief Information Officer (CIO). IT consultants deliver such services as IT strategy, IT architecture planning, IT Security, or Enterprise Requirements Planning (ERP) services. Or they may work for various department heads for services such as data analytics, IT implementation, software management and systems integration.

Let’s just think for a minute about what has happened to computer technology in the thirty-seven years that I was a consultant.

• Hardware – Mainframes, mini-computers like DEC PDP-8 and the IBM 360 (for which my mother programmed the operating system in the early ‘60s and was still in operations in the 1980s). Personal Computers (PCs and later Macs) were first desktops and then “portables.” (Does anyone else remember the Compac “portable?” It was the size of a  small suitcase and weighed over fifty pounds!) Then came laptops, tablets, and finally the cool flip-phones became the ubiquitous smart phone.
• Software – Operating systems for all of the above written in multiple languages I only know some names of (Fortran, Cobol, Basic. C, C++, Python, Java, C#).
• Systems and systems software – Financial and Management Accounting, Production Planning, Inventory management, materials requirements planning, Enterprise Requirements Planning (ERP providers like German firm SAP cast a huge shadow), HR Systems, (PeopleSoft and the long awaited SAP HR Module), Customer Relationship Management (Oracle, Salesforce.com), Internet, Social Media, media presence and the algorithms and Big Data analytics that go with them. There are so many; the evolution is mind-boggling.
• Services -There were always services firms – large like Electronic Data Systems (EDS) started by H. Ross Perot (who ran for president against Bill Clinton twice), sold to GM in the 1980s and spun off in the 90s. There were also thousands of small firms.

Accounting systems were the first to be automated so it is easy to understand how the Big Eight and now Big Four got into IT, including Accenture (which was born after Arthur Anderson spun off the consulting business, post Enron collapse).

Then every technology manufacturer (IBM, Hitachi, NTT) got into consulting followed by the Indian Data Center outsourcers Infosys, Wipro and multi-industry, multinational Tata, Now even the Big Three, Booz Allen Hamilton and newer firms like Cognizant, and Virtusa are all chasing “Digital Transformation,” the latest service offering craze.

The forgotten process firm – Organization or Human Resources consultants

Someone once told me, “You know the problem with organizational consultants? You guys can’t get organized.” Bada boom.

There is some truth to this. Much of the specialized content of human resource consulting firms comes from academic and applied research. Perhaps the most famous of these research studies are what came to be known as the Hawthorne studies, named for the Hawthorne factory  of Western Electric, a part of the Bell System.

At Hawthorne, George Elton Mayo, an MIT professor, and Fritz Roethlisberger from Harvard studied workers in a number of different parts of the plant from 1924-1932. They first studied the effects of lighting and then moved on to a variety of other physical environmental factors. What they discovered was, rather than an environmental factor, the act of paying attention to workers and asking them questions about the best way to do the work, allowed participation, and produced gains in productivity far exceeding any physical changes to the environment. Later this was named the “Hawthorne effect.”

The Hawthorne studies launched a field of study called the Human Relations Movement. Researchers such as Kurt Lewin studied “group dynamics” through techniques called “action learning.” At the Tavistock Institute on Human Relations in the United Kingdom, researchers like Elliott Jacques, and Wilfred Bion demonstrated the effects of participation and supervised group dynamics on motivation and performance. Professor George Litwin and  his graduate student Bob Stringer at Harvard Business School demonstrated that what Kurt Lewin called organizational climate was affected by management practice and drove motivation and performance to a high degree.

Some of the academic findings of the Human Relations Movement made it into what human resource consultants deliver. Much has been ignored by business.

Now consultants that deal with the ”people stuff” fit into many categories: training consultants, organization development firms, organization design firms, headhunters and recruiters, leadership coaches, human resource legal and regulatory advisors, employee benefits,  industrial and organizational psychologists, and organizational climate and culture specialists.

So part of the problem is that organizational and human resources consultants haven’t gotten organized, or that the research that they espouse is viewed as “squishy” compared to strategy or process improvement. Part of the struggle of human resource consultants to get beyond the boutique level is that human resources consultants have subdivided into many different specialties with little overlap or synergy between them.

It’s true that executive recruiters like Heidrick and Struggles and Korn Ferry have expanded into leadership assessment and development. Some training firms like Achieve Forum have moved from management and leadership training into leadership coaching and organizational climate work. However, it is tough for employee benefit firms owned by an insurance company (Aon Hewitt, Willis Towers Watson, and Oliver Wyman/ Marsh McClelland) to be credible in all other organizationa development disciplines. Of these firms, only Oliver Wyman, which includes heritage firms Temple, Barker, and Sloane, Strategic Planning Associates as formal consulting and Mercer Delta, the firm started by David Nadler, have some greater credibility in organizational development.

Otherwise many organizational firms are boutique firms, and many are acquired by the Big Four, or other firms. The top three tier firms all say they are in organizational consulting.

120 years of consulting history – What does it mean to you?

I once observed two Organizational Development gurus arguing. “Spare me the history.” said one. “The only thing that matters is action, what are you going to do?” “No, history is important. It sets the context for action,” said the other.

Here are my  take-aways from this history:

• Every firm is different.  Where a firm came from, and where it sits in the fragmented oligopoly determines how hard it must work to get clients, what kind of jobs it offers, and how it treats their people.

• The disciplines and service offerings you are known for often dictates hiring and the promotion ladder. In these days when every firm seems to do everything, it’s worth looking at Wikipedia and the firm’s website to understand their history, which will have an impact upon culture and the way certain capabilities are valued.

• Content consulting and process consulting focus on different audiences, executives vs. the workforce. They sell different things e.g., answers  and innovation vs. questions, methodology, and improvement.  I’ve been a part of three firms that tried to combine these two approaches; none succeeded.
• New consulting firms are formed and old firms acquired regularly, so your competencies, your knowledge and skill and how you are growing them are important.

When I joined the consulting industry as a newbie,  I didn’t anticipate consultant jokes. From the time of my first project it seemed like every person in the client system had one. One joke speaks to the history of consulting.

A small group is debating the oldest profession in the world.  “Yes, consulting is the oldest profession. God, the engineer, brought forth order from chaos, but who do you think created the chaos?” Bada bing.

The very beginnings: Arthur D. Little and Frederick Winslow Taylor

Most sources agree that the first consulting firm was started by Massachusetts Institute of Technology chemistry professor Arthur Dehon Little in 1886. Arthur D. Little (ADL) is still around today. When I grew up in the 1950s Boston suburbs, if someone’s father worked at ADL kids would joke about the “brains in that family.”

From the beginning ADL offered highly analytic problem solving. Evidently Professor Little believed that each problem was unique and deserved a unique solution and was therefore against systemization and standardization.

Frederick Winslow Taylor, the author of Scientific Management (1913), believed in systemization. Taylor analyzed time and motion of workers to find the one-best way first, then would standardize the process across all workers. As his practice grew he took these standard processes to other clients.

Each in their own way, these two men started two different streams of consulting that still exist today, content (Little) and process (Taylor).

Professor Little was a college professor; Taylor refused to go to Harvard and joined a factory in Philadelphia. Little’s clients were executives and technical managers; Taylor’s clients were plant managers and he worked directly with front line workers. This may be the precedent for one division in the industry today:

• the Strategy firm, content consulting, which brings new ideas, often focused on innovation, new products, markets and technologies and
• the Operations firm, process consulting, which focuses on continual incremental improvement, repeat buying and share of wallet, and automation technologies (improved cycle time).

I may be overdrawing a connection here and certainly there are many overlaps and hybrids over the history of consulting, but bear with me for a bit. Let’s look at a few historical events and examples and see how this plays out.

Content stream continues

In 1914 Edwin G. Booz, with a masters in psychology and a bachelors in economics from Northwestern University’s Kellogg School, founded Business Research Service, which became Booz, Allen Hamilton. Booz’s original mission statement states that senior managers needed “candid advice and an outside perspective on their businesses.” The firm became the first to work for both corporations and governments and served both markets until it spun off Booz & Company, the corporate business, to focus on government. (Booz & Co became Strategy &, which acquired Katzenbach Partners long after I left. Both are part of PwC today.)

In 1926 James O. McKinsey, a University  of Chicago professor, founded, McKinsey and Company Accountants and Consulting Engineers. McKinsey’s clients were executives and his first partner was Andrew Thomas Kearney  who ran the Chicago office. Upon McKinsey’s unexpected death in 1937,  the firm split up.

Marvin Bower, the second McKInsey partner, who ran the New York office, ultimately bought the name McKinsey & Company and the Chicago office became AT Kearney or just Kearney as it is called today.

People at McKinsey have an almost religious reverence for Marvin Bower, who resurrected the New York office and built the firm. Bower served as Managing Director of McKinsey & Company from 1950-1967, but had a major role in the firm and remained a director until 1992 even though he voluntarily sold his shares back to the firm at age 60 in 1963. Bower is widely credited with the “professionalization” of the consulting field.

The process improvement stream continues

Frederick Taylor collaborated with Morris Cooke. Cooke had an engineering degree from Lehigh University in Pennsylvania, but went to work as a machinist for his first few years and formed a consulting firm in 1903. Later, he was quite active in the rural electrification projects of the 1920s and 1930s.

Another of Taylor’s team was Henry Gantt, another degreed engineer (Johns Hopkins) who worked as a machinist and draftsman. Gantt met Taylor at Midvale Steel and Bethlehem Steel. Gantt is known for the ubiquitous project management tool the Gantt chart, which he created so that workers could understand the timing of their work and relationships to others’ tasks.

Frederick Taylor’s major competitor was Frank Bunker Gilbreth. Gilbreth founded Frank B. Gilbreth, Inc with his wife Lillian in 1903, and they were known as consulting engineers, or efficiency experts. Like Taylor, Gilbreth began work as a manual laborer, a bricklayers assistant, but his work grew into looking for the “one best way.” Taylor and Gilbreth had what was often called a “war,” so when Gilbreth died in 1924, apparently Taylor rejoiced a bit. Then Lillian Moller Gilbreth took over the business and ran it successfully for years. The Gilbreths had twelve children and were the subject of two books by their son Frank and daughter Ernestine, Cheaper by the Dozen and Belles on their Toes. Both books were made into feature films in the early ’50s, (not to be confused with much later Steve Martin movies of the same name).

The Gilbreths are widely credited as the parents of contemporary process improvement. This stream of consulting runs through Walter Shewhart of Bell Labs, who created statistical process control and Plan-Do-Check-Act in the 1920s. It includes the work of Dr. W. Edwards Deming and Dr. Joseph Juran. Deming and Juran were both graduates of the Bell System and learned from Walter Shewhart. Deming focused on statistical process control and is widely viewed as the father of the US continuous improvement methodologies.

Juran discovered the little known work of Vilfredo Pareto, a nineteenth century Italian engineer who discovered that 20 percent of pea pods produced 80 percent of the harvest. He conducted a study to show that 20 percent of the Italian population controlled 80 percent of the country’s wealth. Juran continued this research and demonstrated that 20 percent of causes produced 80 percent of the effects of a problem. Juran popularized the Pareto Principle, also known as the 80/20 rule and the “trivial many and critical few.”

Both Deming and Juran, founders of the quality movement, found no clients in the United States, but Japanese manufacturers welcomed them with open arms. They spent the 1950s through much of the 1970s improving Japanese businesses. In the late 1970s and early 1980s Japanese imports were dominating many US industries and suddenly Demming and Juran were in demand at home.

The process improvement stream of consulting took on new life in the early 1970s. Dr. Deming’s return to the US caused or coincided with the birth of the quality movement of the 1980s, which led to Lean and Six Sigma from the 1990s to the present day. Firms like Alexander Proudfoot, which bought the firm of Phil Crosby, author of Quality is Free. The combined firm evolved into United Research Company, founded by David Teiger in 1973. In 1989 Teiger bought The Management Analysis Center (The M.A.C. Group) and launched Gemini Consulting, where I worked toward the end of the re-engineering craze. The 1990s saw an explosion of re-engineering projects for Gemini and competitor CSC Index. Jim Champy wrote the book Re-Engineering the Corporation with Michael Hammer in 1993. Jim Champy’s Index was bought by Computer Sciences Corporation and CSC Index and Gemini were very hot firms for a while. The Gemini merger was funded by the French computer firm Sogeti, which owned the combination of the French computer firm CAP and the US firm Gemini Computer Services. The firm is today called Cap Gemini, one of the leading firms in the “digital transformation” space.

The 1960s and 1970s: BCG and the rebirth of content

During the late 1940s and 1950s McKinsey, Arthur D. Little, and Booz Allen Hamilton did a lot of export market studies  and organizational design for US companies. Organization design projects often consisted in at first of replicating the departmental structure learned at DuPont and then copying the product/market structures learned from Alfred P. Sloan at General Motors, i.e., “a car for every wallet.”

In 1963, Bruce Henderson left ADL to create an internal consulting firm for a bank. After the project was done Henderson formed the Boston Consulting Group (BCG) as a strategy firm. Their strategic frameworks seem very simple by today’s standards:

The Boston Box was a simple two by two matrix used to rationalize current strategic activities.

The Growth Share Matrix was used to rationalize a portfolio of businesses.

“Milk Cash Cows, Invest In Stars, Divest Dogs, and Fix Problem Children.”

The Experience Curve showed how learning occurred with cumulative production volume thereby reducing costs. Some thought this happened automatically; the wise realized that you had to evaluate learning and adopt the lessons to reduce costs.

These simple concepts revolutionized strategy consulting.

As we’ve already seen, the industry grows when consultants leave and start new firms.

In 1973, Bruce Henderson decided to accelerate with a little internal competition. He created three internal firms – red, blue, green. The leader of the blue team, Bill Bain, developed a different model of consulting with a key client, Union Carbide.  Rather than the usual six-to-eight week study, Bain sold a $25,000 per month retainer and took responsibility for longer term results. Henderson and other BCG partners objected to the risk. Bill Bain left (with Union Carbide) and formed Bain & Company.

The model was extraordinarily successful; Bain grew exponentially. When I worked for Forum, Bain was a client and we were invited to the Bain holiday party. I remember a lot of people my age passionately singing “BAIN -we’re gonna grow forever!” to the tune of the anthem from the 1980 film “Fame.” Bain is now one of the Big Three, all of whom have some retainer contracts. They also created Bain Capital to capitalize on the long term results they were achieving with a private equity model.

The industry often grows by dispersion: ADL spawned BCG ; which spawned Bain which spawned LEK and Parthenon. McKinsey tended to keep its partners in the firm after the split with AT Kearney, but I worked for Katzenbach Partners, started by Mckinsey senior director Jon Katzenbach, when he was over the mandatory retirement age with the firms blessing. Often spinoff firms run into trouble at the first recession and are acquired. Katzenbach Partners was acquired by Booz in 2007 and is now a part of PwC.

Consulting history – So what?

I wrote this article and the one that follows it for new consultants and those investigating the field. I wish I had known more about the history of consulting when I began. The Internet has made industry research easier than it was when I joined consulting, but I think it has also made the immediacy of the current day more prevalent. Witness the fact that there are many books and articles on how to “ace the case interview,” but very few on industry history.

Every firm is different and knowing that will help the newbie find his or her best fit. In Part 2 I examine technology and human resource firms.