JOHANN HARI In the long fake boom of the Nineties and Noughties, we were sold a thousand scams. End government regulation of the financial system Pay CEOs 500 times more than their staff Bow, bow, bow before our mansion-dwelling overlords and the total efficiency they will bring Yet from under the rubble left by these delusions, one of the greatest scams has skipped out unscathed, and it is now successfully selling itself as a solution to the fading of the boom-light. It is probably in your workplace now, or coming soon. Its name? Management consultancy. There are now half a million management consultants in the world, and they all grumble that they face one question wherever they go: yes, but what is it that you actually do? They claim to be able to enter any organisation, watch its workers for a short period, and then - using graphs, algorithms, and a jargon that makes quantum physics look like Sesame Street - render it dramatically more efficient, for a fee. They are everywhere: in the US a famous company spent $500m on them in just five years, while the British state will soon be spending more on management consultants than on upgrading its nuclear weapons. Yet, the process of management consultancy has always been shrouded in priestly secrecy. Over the past few years there has been a string of memoirs by highly successful former management consultants, finally pulling back the flowcharts. David Craig gives a typical explanation of what the consultants actually do. After getting a degree specialising in romantic poetry, he was astonished to be hired by a prestigious management consultancy, given three weeks training, and then dropped into major corporations to tell them how to run their oil rigs, menswear stores, and factories, for tens of thousands of pounds a pop. In his brave memoir Rip Off he explains: We were proud of the way we used to make things up as we went along....Its like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than 7,000 per week. It consisted, he says, of lies, lies and even more lies. He worked to a simple model, which is common in the industry. He had to watch how a workforce behaved for a week - and then tell the companys bosses, every time, that they had 30 percent too many staff and only his consultancy could figure out who should be culled. If he calculated they actually had the right amount of staff, he was told by his bosses not to be so ridiculous and do his sums again: where was the money for them in a properly-staffed company? The company had to be POPed People Off Payroll. Of course, this advice was often disastrous. His company was sent into a chain of 500 menswear shops. They advised them to cut staff by 30 percent, and to replace most full-time staff with part-timers. The result? The full-time employees had been highly motivated, because they wanted a career in the company; the part-timers only wanted a little extra cash. So motivation levels in the company collapsed and with it the standard of service. The company was bankrupt within a few years. Yes, you might say, but surely he was just a bad management consultant. The rest must get results. The evidence suggests not. The Cranfield School of Management studied 170 companies who had used management consultants, and it discovered just 36 percent of them were happy with the outcome - while two thirds judged them to be useless or harmful. Matthew Stewart, another former consultant, summarises his high-flying years in the industry by saying: I felt like a snake oil salesman without snake oil. When he was sent into a company, he was told to use complex formulae to analyse the productivity of its staff, but he soon realised that the results were nearly random... Yet, on this basis, he was taking a fortune in payments, and firing thousands of productive people. There is a growing body of academic research showing that the strategies pushed by these consultancies are in fact disastrous - and hasten the collapse of a company or service. Professor Peter Cappelli studied 122 companies and found that layoffs most often shrank their future profitability, instead of swelling it. David Craig suggests a simple way to call their bluff. Insist that, from now on, all management consultants are paid by their results. If they promise greater productivity or higher sales, fine: dont pay them until it comes through. Today, almost no management consultancy works on this basis. If they did, theyd all be bankrupt. The Independent