Strategy Consulting Discount?
Casually observing the performance of companies that hired top 4 strategy consulting teams to support executive management I noticed that all of the firms underperformed the respective benchmark. I am wondering if this is a pattern and if others have observed such a phenomena in more detail as to derive a definite conclusion.
Reasons I could think of why this might be a pattern:
- Consultants are even less tied to firm success than managers, they extract cash immediately, therefore short term goals a likely the primary focus
- Consultants are far removed from operations, many concepts may look nice in Excel but never work in practice
- Consultants may want to change too much, too fast, failing to recognize that firms are made of people thinking and changing at different speeds, and therefore good ideas fail to realize material benefits
- Much of the advice is best practice observed and learned over the years from other clients, and therefore average at best
Reasons why the observation is not part of a pattern:
- Failing to realize material benefits will result in mandate termination
- Most consulting teams follow a sufficiently rigorous study plan to capture operational and political aspects of a firm to derive realizable improvement options
- I have only a limited sample for firms that hire consultants and imperfect information on the engagement types, duration and targets
- Consultants may decide to reject a mandate they think will not realize benefits in order to not taint their track record (selection bias).
Therefore, do you increase or decrease the discount rate of firms known or rumored to have hired consultants to support executive management?
Without initiating a discussion on consultants vs bankers, I an genuinely interested in the topic. Any pointers to research and treatment in valuation practice is greatly appreciated. |
发表于 2011-10-5 14:00
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