I hear this all the time but it sounds like an urban myth.
I highly doubt someone is not getting fired because the consultants they hired fucked up. They're still responsible for the business. I think consultants can help more with the "we need to do X, Y, Z" with consultant's report backing it up.
I didn’t hear it. I’ve spent years as an L3 (CEO is L1) of one of the largest enterprises in the free world, interacting with other enterprises at that level, and collaborating with all the top consultancies’ teams that work at that level.
My take is while not always the case, the higher level the committee approving the consulting spend (because even that choice/decision is diffused), the more frequently this is involved.
At the end of the day, the CEO works for the Board, who are external and most definitely do not get paid enough to go to jail. Everyone involved needs decision insurance.
The CEO works for the board. The CEO can be fired at will just like any other employee.
They will get an incredibly generous pay-off, unless they have fucked up to a world-beating historic extent. (And sometimes even then.)
But as soon as the CEO loses the confidence of the board, they're on their way out.
And most boards are only really interested in the financials. They don't care about culture, reputation, product range, or any of those other things. That's detail stuff, and it doesn't interest them.
This is a cozy arrangement because no one is personally responsible for anything the company does. The CEO and the board are covered by limited liability, and they won't be going to jail for common crimes - like poisoning water sources, or setting fire to forests.
They may go to jail if they fuck with the financials. Extreme fraud can be a showstopper.
But having a national monopoly on pushing highly addictive drugs isn't. That's a regrettable offence which deserves a medium-ish fine. And - you know - let's say no more about it.
Consultants - like auditors - exist to add another level of deferred responsibility. They're not there to make decisions, they're there to provide legal air cover for decisions that have already been made which need someone else's signature.
The meetings, reports, the hasmter-on-a-wheel super-keen grad cadres and the rest are just theatre.
https://www.npr.org/sections/money/2017/07/19/538141248/epis...
> They weren't idealists or social activists--just two shareholders who thought the CEO was being grossly overpaid. And they figured that salary was paid with money taken out out of their pockets. So they tried to force a pay cut.
> My take is while not always the case, the higher level the committee approving the consulting spend (because even that choice/decision is diffused), the more frequently this is involved.
It sounds this has more to do with the clout of the individual than it does "oh well mckinsey said this."
Redirecting blame is a lot easier when you have an external party. More interestingly though is it forces a conversation/decision on a particular problem, since you’ve already spent exorbitant sum of money on the consulting fees.
It took me a while before I understand the political side of how this works. For a while, the biggest question in my head was what the CEO gets out of the whole transaction -- the manager intuitively gets power vis-a-vis proximity, but what does /their/ manager get out of it?
I think this confusion wears off the first time you see a sacrifice in management made. That's when you start being able to see how the value chain which is attached to that confidence default occur. Then it becomes completely rational that decision insurance is priced into both the manager's internal calculus and that of the corporation.
The problem with running a company this way is that "your margin" eventually becomes "my opportunity" and that transition gets especially jerky in a frothy market like the one we have now. Do you really need the layers of middle management there, at all? If someone raised a boatload of cheap capital and rebuilt the high margin bigmoat stuff from scratch, would they out-execute you?
In mega enterprises the CEO matters a lot, but the next 3 or 4 layers often exist primarily to filter and spin bad news, diffuse accountability, and occasionally get burned at the stake as a witch in league with evil spirits when nobody wants to acknowledge the cholera water making the whole village ill.
Given that, the easiest witch to lay hands on is the consultant, which is why they bill hazardous duty pay levels.