Should companies organize themselves like consultancies? If they do, they need to hire like them as well.

A recent HBR article (October 2013) ┬ámentioned that P&G and other companies are rethinking how they organize themselves. The basic idea is that instead of having fixed organizations, companies should organize themselves like consultancies–everything is a project and you assemble/disassemble teams as needed to solve problems. There will be some ongoing operations that do require “flat” jobs–jobs that more repetitive but still require knowledge workers?

The article begs the question of whether organizing into projects and flexible staff (like consultancies) is a good thing for companies that are heavily knowledge worker based. Part of the proof that knowledge work is becoming more dominant is by looking at the decreasing COGS and increasing SG&A lines on financial statements. COGS indicates decreasing amounts of “blue-collar” work over time while SG&A is a good proxy for white-collar, knowledge worker type jobs.

So is it?

My view is that it is not so cut and dry. Consultancies create large labor pools at the practice area level that generally have a specific industry expertise. Generally, there are horizontal practices for people who specialize in skills that cut across industries. Typically, these practice areas are large enough that the random noise (!) of projects starting and stopping creates a consistent utilization curve over time. And a management structure, for performing reviews, connecting with people, is still needed to ensure consultants feel like they have a home.

Another important aspect quoted in the article is the creation of repeatable methodologies that consultants are trained on so that knowledge can be codified instead of horded.

Consultancies are good, but not super great, at knowledge management and sharing deliverables so that practices that have proven themselves to work can be re-used in other projects or contexts.

Let’s look at companies:

  • Companies have people, often fairly substantial groups, that are focused on a horizontal area e.g. finance, marketing, IT, customer service. Companies are often organized by product which also forces it to be organized by industry, but there are many variations to this model.
  • Companies try to organize activities into projects. Not everything can be a project e.g. ongoing operational support of different kinds. But companies do try to kick-off efforts, set deadlines, integrate teams from different groups, etc.
  • Companies share deliverables from one project to another. Unlike consultancies, the pool of deliverables is often narrower because of the corporate boundaries and sharing within an industry are often not as robust as in a consultancy. Companies that hire talent from the outside frequently can bring these elements in, however.
  • Groups share resources, although not as robustly as consultancies, across projects and groups. Companies are less robust at true sharing because inside of companies, people count is often a measure of power. At consultancies, revenue and margin usually are the primary metric, but of course, these are only achieved through resources.

Companies today are already employing many elements of what this model calls out. Most companies are not as robust as consultancies at some aspects. But are these differences the primary reason why consultancies have shown good resilience to execution in different circumstances?

There is probably another aspect. Consultancies typically seek out and retain a large amount of quality talent. Companies, to varying degrees, do not always hire highly talented individuals. Their pay, performance management approach and culture do not attract the best talent in the marketplace.

While companies could improve certain areas of their capabilities, there was an entire part of the story that was missing in the HBR article–a focus on top talent across the entire company and not just for a few key roles.