by Daniel R. Hoffman, Ph.D.
At some point, anyone who has done a substantial amount of business research for pharma will have encountered one or more of the major management consultancies. Previous postings here have characterized their analysts as 30-something, Ivy League MBAs who are adept at manipulating spreadsheets but possess minimal knowledge and less experience in pharma.
The view of many pharma insiders toward the top-tier consultancies emerged from an exchange that appeared a few years ago on an industry message board. A senior rep at Merck wrote, "Who are those ______ Group people I see running around UG [Upper Gwynedd] all the time, disrupting everything"? His colleagues apprised him of the fact that the company's CEO at the time, Ray Gilmartin, was enamored of that particular firm. At Gilmartin's behest, this consultancy set the directions of numerous operations and products. The big-picture result was that during the eleven-year period of their reign with Gilmartin, Merck lost more than one-third of its capitalization.
So it came as a great surprise the Sunday before last when the Inquirer printed an op-ed piece by Peter Vanham, extolling the supposedly positive effects on Mitt Romney of having worked at Bain Consulting. Vanham characterized Romney's experience there as an energizing boot camp that produced disciplined work habits, rigorous thinking and a constructive approach to finding solutions.
That's certainly the PR that the boardroom consultancies try to sell to prospective clients. Vanham's whitewash description of the consultants' culture dovetails completely with the message that Romney's campaign wants to create about their candidate. Both Vanham and the Romney campaign, however, intentionally leave out some other, more important characteristics of the operating values at the prestige consultancies. Any realistic account of how the consultants' culture may predict presidential behavior would have to include some other elements.
While the experiences of other service suppliers to pharma may lead them to other conclusions, I have found that the top-tier consultancies often seek to imbue in their analysts a reflexive ability to step aside from principles.
In many cases, managements already know the course of action they want to take before they engage a consultancy. Their real purpose in bringing in name consultants lies in placing an outside imprimatur on those schemes.
I remember participating in a series of engagements for a large, diversified health care company that was advised by a big name consultancy to enter a durable medical equipment market involving high-end products for people with permanent disabilities. Our particular task consisted of benchmarking the three leading manufacturers already in that market. It became clear to me very early that unless the client's goal was to reduce their earnings per share, the margins in that business wouldn't justify the investment. I spoke with the contact at the major consultancy and explained why the client's higher fixed costs would reduce their margins below those of the potential competitors. He agreed, so when it came time to present our findings to the operating managers, I assumed the consultant would either concur or, at the least, offer a more nuanced and qualified demurral. Silly me. Instead he collapsed his integrity and reversed course the same way Mitt Romney weasels around his Massachusetts health plan in front of a Tea Party audience.
If analysts at big name consultancies really do internalize the culture there, then another feature they acquire is a tendency to mask their fundamentally poor understanding of the industries for which they consult by projecting a demeanor of sophistication.
I know of a few firms that actually give their recruits formal lessons in this low art. Twenty-five years ago, I attended a presentation at a client's office in Basking Ridge, New Jersey, where a partner with a prominent, New York consulting firm gave a presentation worthy of a master class at the American Academy of Dramatic Art. He did command everyone's attention, at least until some of us saw his insights were at the level of informing us that a dog has four legs. Nonetheless, his junior colleague, sitting next to me, proudly indicated that they receive formal training on how to cloak such emptiness with profound gestures.
Good acting, however, requires repose, hard work and a skill set quite apart from working a spreadsheet. As a result, analysts at these firms usually fall short of enacting sophistication. Most of the time they come off as merely arrogant.
The political counterpart of this emptiness-plus-arrogance appears in Mitt Romney's lack of specific programs for kick starting the economy, followed by his boasts about installing household elevators for his cars.
A discussion about the unsavory aspects of corporate cultures at major consultancies can easily run to book length, but one more mention is in order. While educators, communication scholars and social psychologists contend that knowledge and insight are the cumulative properties of communities, some consultancies encourage their minions to act as if they invented the wheel.
To enhance such misappropriations of credit, some analysts at prominent consulting firms regularly avoid attributing insights to others. Instead they often disparage the contributions of others and claim the insights as their own. Many is the time I've seen supervisors at the boardroom consultancies admonish their charges that clients are not paying them to summarize the work of others. The lesson gets rammed home that clients expect "originality" for their six- and seven-figure fees. The implication is that even inauthentic originality will do.
From such encounters there has emerged the rough-and-ready definition of boardroom consultants as people who borrow your watch to tell you the time of day.
To be fair, some analysts steadfastly refuse to pilfer the insights of others. Instead they just produce PowerPoint decks exceeding 100 slides, filled with charts and graphs that a reader can search in vain for a usable idea.
Now the extent to which a work environment can shape an adult's work methods and character remains open to debate. But if someone presumes, as Peter Vanham apparently does, that Bain Consulting shaped Mr. Romney's personal makeup, then the pharma experience many of us had with top-tier consultancies shows those effects can potentially contain some unsavory elements. At a minimum these undesirable qualities include a willingness to abandon principle or even avoid it altogether. Finally, it deserves mentioning that all of these sociopathic elements within some consulting firms rest on the support of an old boy's network within the top one percent.
The major consultancies have produced what is at best a checkered effect on pharma. Some of the old boy partners and their jackal analysts led the industry to its current condition of depressed stock prices, under-performing pipelines and an outmoded business model. Now these same firms come back after the fact to quantify the disaster while claiming they can lead the industry forward. So looking through the lens of pharma's experience, perhaps Romney's tenure at a major consultancy does tell us what he'd do as president after all.
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