As noted earlier today on Spend Matters (read posts here and here) and our premium research service Spend Matters PRO (subscription or free trial is required for access), consultancy Monitor Group has declared bankruptcy and Deloitte has stepped into the mix to buy the assets (including Monitor's entire consulting operation). It's likely the biggest winner -- if there is a winner -- in the bankruptcy will be Deloitte, which will, at least on paper, gain hundreds of highly talented consultants and partners with a particular set of skills and expertise which would be hard to replicate with the same scale and culture (provided the proposed deal closes). As we note in our analysis on Spend Matters PRO:
Observers in the management consulting industry may look at this as a professional services coup d'état for Deloitte, which will help not only differentiate the firm from other Big Five peers, but also catapult it into the strategy consulting big leagues against more specialized rivals commanding high blended rates. Those with a professional services long-term memory might recall when Deloitte purchased Braxton Associates years ago to attempt to do the same thing which in turn folded back into the corporate parent rather than spinning into a separate Deloitte Consulting brand.
Yet the big question that observers in the industry should have regarding the assimilation of Monitor into Deloitte is whether the cultures will mesh sufficiently to enable the firm to continue to thrive in its specialized practice areas (e.g., strategic planning, scenario planning). The history of consultancies that have attempted to do both strategy and operations consulting (inclusive of IT) is not exactly stellar. One only need look at the current status of the venerable old-school Cambridge firm, Arthur D. Little, to see what happens when firms lose focus. Incidentally, my first job out of graduate school was for a firm founded by a partner and other consultants from ADL who left to focus purely on strategic planning.
But Deloitte may be different. It's one of the few firms that managed to maintain a somewhat gritty and expert side while also bringing in hoards of new MBA blood from top-tier schools each year. If any "too-big-to-fail accounting/consulting" firm in the post Arthur Andersen days of can pull off the combination of a specialized strategy arm within a massive global professional services business, it just may be Deloitte.
Still, strategy firm and Big 5 cultures tend to stand at least slightly apart. Speaking from personal experience in the strategy (my former experience) and Big 5 (my wife's former experience, including Deloitte and Andersen) worlds, we have collectively observed that businesses like Monitor tend to be different in certain areas:
- Smaller, less pyramid-structured teams (typically 2-4 people versus a dozen or more consultants on a given engagement or client)
- Less of a service delivery hierarchy (i.e., at Monitor, everyone had "consultant" on their business card as a title – even partners)
- Less consistency around service delivery models. For example, projects may entail offsite work vs. just on-site work. At Big 5 firms, on-site delivery almost always rules the day. Moreover, at boutique strategy firms, managers, associates and analysts may work on multiple studies at once rather than just a single project (rather than just partners floating between studies and clients in parallel)
- More senior "doers" versus partners who just manage accounts and engagements in more of a Q/A and overall delivery role. Within strategy firms, partners are often experts, and in certain cases, the true subject matter experts (SMEs) that clients are buying. It is the combination of the partners relationships, expertise and track record – not just the firm or partner's reputation for overall management and team results – that often drives and maintains one's book of business. In other words, within a strategy firm, a partner can be as much a confidant and expert advisor to CEOs, CFOs and other executives as the general manager and relationship manager for projects that their teams deliver
- Greater autonomy within a firm to do business when and where they want without the same firm controls that are required of a Big 5 type organization with an accounting arm or a firm subject to FINRA or FINRA-like compliance, reporting and control requirements -- at least in the past (this may have changed)
These are just certain considerations, of course. There are others. From a compensation standpoint, the delta between many of the strategy and traditional consulting firms has narrowed over the years – in certain cases, completely. Of course this is aside from McKinsey, which at least until recently, has generally had steeper gains in compensation the more you move up the ranks compared with other strategy firms. Regarding the opportunity for revenue and client synergy, the ability for a global firm like Deloitte with CXO and board-level relationships at just about every Global 2000 firm will no doubt help create a new outlet for Monitor's specialized areas of expertise inside companies they had previously done little or no business with.
Alas, some things may change within Monitor if the deal closes. It's no doubt that doing studies for reformed Bedouin dictators with a track record of supporting terrorists taking down jumbo jets will no longer pass internal review committee muster inside a post-Enron Big Five culture that treats risk management as the service delivery gospel.