Taming the consulting industry when ‘doing the right thing’ is an objective reality
Positive regulation of the consulting industry requires a significant mindset shift.
First published in the Mandarin
The inquiries into the consulting industry have returned, providing fresh insights into ongoing transgressions, misunderstandings and leadership hubris. Soon, the committees will pivot from raking over the coals to considering the future.
The Department of Finance is seeking industry input on a Supplier Code of Conduct supporting clauses to include in commonwealth contracts effective April.
However, it is important to understand what you are regulating when designing regulation for an industry that has steadfastly refused to be regulated.
A predictable start
Codes of conduct and ethical practice are widespread in the public and consulting sectors. Codes of behaviour and practice describe the minimum expectations for professional conduct.
Typically, codes are mentioned in induction training and are most likely to be revisited when something has gone wrong. Codes are written to influence behaviour positively but are often implicitly read as a list of things not to do.
In response to robodebt, the APS Code of Conduct is an after-the-fact response. At the same time, academic research has consistently shown that codes of ethics in consulting have little influence on ethical behaviour.
The proposed Supplier Code of Conduct is a mix of social, economic, and process practices businesses should consider part of their Corporate Social Responsibility (CSR) obligations. But as Rio Tinto demonstrated, what is espoused in a glossy CSR brochure may not be embedded in corporate culture.
The Supplier Code of Conduct is necessary, but it will have little or no direct influence on ethical behaviour in consulting firms. The financial services industry has been subject to regulatory initiatives and codes of practice for many years, but the Hayne royal commission showed how little these had affected behaviour. Internal business performance incentives had a more immediate effect on what was valued and what wasn’t.
Trusted partners
Positive regulation for the industry should start with the question, ‘What is consulting?’ More often than not, the understanding is assumed and often flawed. Consulting is both means and ends, process and outcome. And this is where the ethical issues begin.
Clients don’t call consultants when everything is going well. They call consultants when they are uncertain about the process, the outcome, or both. Consultants should bring an independent perspective and act as a sounding board for testing decision options.
But sometimes, clients employ consultants not because they are uncertain but because they want the legitimacy of an agreeable external opinion. Clients sometimes employ consultants as a shield for unwelcome decisions that have already been made.
The ethics of consultants cannot be divorced from the ethics of their clients. The Supplier Code of Conduct is silent on the client’s ethics and behaviour in using consultants. Not all clients are well-intentioned.
Inevitably, consultants are inside client deliberations, so they have a privileged position and information. Independence, prudence and reasonableness are core principles of the consultant’s art. They are keepers of secrets, and consequently, they have power.
Consulting advice can be provided on the outcome, but more often, the focus is on working with the client to develop options for achieving the outcome. This is sometimes portrayed as a doctor-patient relationship. The consultant is the doctor diagnosing the disease and recommending treatment options for the patient to follow. This is not accurate.
The relationship is more akin to a temporary dance partner. The consultant and client come together for as long as the music lasts. When it works well, each is enriched by the interaction. The focus is on partnership and performance rather than expert and object.
Proven experience
Professionals — doctors, engineers, psychologists, accountants — have specialist knowledge and credentials to work with that knowledge, their activities are regulated, and they have shared values and ethics in the practice of the profession. A person cannot join a hospital and practice as a doctor. But it is possible to become a consultant by joining a consulting firm.
So, what is it that consultants bring to the dance? ‘Proven experience’ is a common phrase consultants use to demonstrate their value.
A doctor or engineer acts on an established body of knowledge; management consultants don’t. The nature of the role is that there can be no specific body of knowledge. Knowledge comes from previous interactions with clients on similar problems. This knowledge is, in theory, disseminated through the firm.
Methods and playbooks are substituted for knowledge. Assessing and adapting to organisational politics becomes the principal skill — the recent insights into ‘power mapping’ demonstrate the importance of knowing client politics in detail. The technique is necessary for practitioners operating from the experience of previous practice rather than specialist domain knowledge.
The knowledge base of consultancy is largely unverifiable. It is demonstrated by reference to the previous engagements rather than specialist expertise that is tested, verified and grown.
The tools, techniques and methods are equally unverifiable other than through the firm’s experience. Ultimately, clients have few guides or tests to determine whether the assertion of proven experience can be trusted. Consequently, the decision is based on personal trust between the client and the consultant.
The relationship between client and consultant is an inevitable determinant of ethical practice. Both parties need to be clear on their roles, and they must navigate day-to-day ethical dilemmas together.
Getting upstream of the problem
How we think about ethical behaviour is more than just an academic pursuit. The metaphors and short-hand language we rely on govern our everyday actions down to our most mundane behaviours.
The government procurement processes and guidelines create an adversarial relationship between the buyer and supplier. The structure of these processes shapes the understanding clients and consultants alike have about their relationship. Buyers and suppliers become organised around an adversarial relationship’s customs, habits and traditions.
Positive regulation should shift the focus from remedying ethical breaches based solely on compliance with the rules to an upstream focus on seeing the reality of the relationship between buyer and supplier.
It would shake up our view of clients and consultants to include regulations that deal with the raw facts of probity in procuring services and the complexity of receiving and delivering those services. Ethical education would focus not only on the rules but also on the principles and reasons that lie behind the rules.
Repeating the mistakes of the past
Ethical behaviour does not arise from applying a familiar flowchart or algorithm, and the rules do not create it. Instead, ethical behaviour is discovered through the client-consultant interaction.
It is discovered through a relationship in which empathy and care for each other’s circumstances are fostered, hubris and prejudice are challenged, dissent and difference are valued, and basic behaviours for understanding right from wrong are assumed.
It’s an idealist’s view, maybe. But what’s the alternative? Continuing to repeat the mistakes of the past?
Positive regulation of the consulting industry requires a significant mindset shift.
Ethical behaviour is not solely the responsibility of consultants; clients must also acknowledge their responsibilities. Consulting firms must face the reality that their incentive structures work directly against making good ethical decisions. Clients need to be more aware of how the framing and processes of procurement influence behaviour.
‘Doing the right thing’ is an objective reality. Maybe future industry regulation should start there.
