Good Medicine for Ailing Companies

WHEN Lawyer George Alpert took over the ailing New Haven Railroad, his first move was to call in a management consultant. As soon as Joseph Grazier became president of American Radiator & Standard Sanitary, he sent for a consultant. While Dwight Eisenhower was campaigning in 1952, businessmen backers called in McKinsey & Co. (TIME, Jan. 12,1953), to determine the 250 top policymaking jobs through which the Republicans could make their policies felt.

Once, consultants were little more than efficiency experts with a fancier title. Today the management consultant tries to be a hired superman: a co-strategist, talent scout, policy adviser, hatchet man (to chop down executive deadwood), naysayer and new-business finder. In the postwar boom the consultant business (2,000 firms grossing more than $400 million annually) has grown faster than ever, as industrialists, facing the largest opportunities (and pitfalls) in history, have looked for experienced guides for mergers and for diversification.

This mushroom growth has exposed the management consultant business to the withering charge that it is a fad, a fraud--and worse. In fact, says one consultant: "This isn't a profession; it's a racket." Many old corporate hands hoot at the whole business and its many fuzz-cheeked practitioners, recall that the affairs of one consult ant got so snarled up that the firm hired another to come in and tell it what to do.

The field has attracted fakers and incompetents. The classic boner was made by the experts who, in the 1920 depression, strongly advised G.M. to drop Chevrolet and quit the low-priced car business. Some consultants, concerned more with fees than duty, sidestep the job of giving unpleasant advice. One consultant spent three years at a troubled corporation, amassing a $600,000 fee and making numerous recommendations. But he avoided the only important one: fire the family management whose incompetence was the real cause of the trouble.

The largest consultant in the business, Chicago's George S. May Co. (1955 billings: $9.300,000), recruits its "experts" through want ads, and woos worried businessmen with a pitch something like this: "We'll come in and tell you what's wrong with your business for $100." Once in, May's "actioneers" get to work "opening the job," and sell the client--who falls into one of 49 types ("Penny Pincher, Stone Face, the Playboy, the Boor, the Weakling")--a long service which often costs thousands.

But management consultants have been employed repeatedly by some of the largest U.S. corporations, such as American Cyanamid. General Foods and RCA, and obviously have earned their fees. One of their chief values is that they bring in a completely fresh viewpoint. They may not be smarter than the men they advise, but they offer a corporation the analytical eye of a competent outsider who is not entangled in the company's day-to-day operations and politics. Sometimes the consultant can apply know-how gained in a similar situation with another client. Most often, says Robert Heller & Associates, they find that the solution is right within the company: underlings know what should be done, but could not sell their ideas to the top brass.

However, it is hard to measure exactly how effective consultants are. The hiring firms are usually closemouthed, as though they were admitting to a shameful weakness, while the consultants themselves tend to be glowing and nonspecific about their work. Often their job is in the policy area and cannot be measured in dollars and cents. But there are tangible evidences of successes. A Cresap, McCormick & Paget survey of the New York Central introduced new budget and inventory control systems, divided jobs into staff and line posts, and resulted in a payroll saving of $600,000 annually. Ernst & Ernst's management consultant division charged Pan American a whopping $750,000 for reorganizing its huge Miami engine overhaul base and crew scheduling system, but saved the airline "millions," according to Pan Am's own estimate. Robert Heller & Associates' reorganization of the Post Office Department into 15 regions, and the regions into many districts, eliminated so much duplication that the Postmaster General also saved many millions. Another Heller job slashed the FTC's procedural work by 50%.

The best proof of the need for the profession has been its continuing growth and acceptance. While the shady firms look constantly for new suckers, the sound outfits have lists of waiting clients, and report that 80% of their customers come back regularly. But even the management consultants know that they must be used sparingly. Like antibiotics, they should be called in only when necessary, lest the corporate body lose its own vitality and capacity for self-correction.

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