- ABCs of strategy consulting
- 03 November 2016
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The economic crisis has hit the business world hard, and strategy consulting firms saw an opportunity. More and more of them are ogling the area of corporate turnarounds.
Facing them are historic players, such as AlixPartners or Alvarez & Marsal. Two worlds that sometimes don’t play well together.
Firms fight for talent
McKinsey quickly understood the benefits that could be drawn from the global economic meltdown. In 2010, the firm created an entity dedicated to turnarounds, McKinsey Recovery & Transformation, which rapidly developed across the world. In France, the company last year recruited an entire team, namely that of Helen Lee Bouygues, formerly of Alvarez & Marsal.
Elsewhere, McKinsey went so far as to poach at least eight associates from AlixPartners, which didn’t go without causing a stir. A lawsuit is ongoing in the United States, with two of the defectors being accused by their previous employer of having taken confidential documents with them.
McKinsey doesn’t appear to have benefited from the alleged facts, but the suit is also symbolic. It reveals tensions between historic players and newcomers. In the other direction movement is rare but not inexistent. In 2014, three German associates from Roland Berger left for Alvarez & Marsal. AlixPartners had for its part long since created a strategic consulting division; of the 50 to 60 people making up its Parisian office, only 40% are dedicated to turnarounds (AlixPartners has set up five poles of activity: Turnaround & Restructuring, Enterprise Improvement, Financial Advisory Services, Information Management, Leadership & Organizational Effectiveness). The boundaries between these two worlds have become increasingly porous.
Corporate turnarounds, a highly lucrative business
Roland Berger was an early mover into the restructuring sector. According to Emmanuel Bonnaud, the Parisian partner in charge of the practice, “it is one of the firm’s historic activities, and represents an important part of its revenues.” In its native lands, the German firm claims to lead the market. In France it made its move in the early 2000s, with development accelerating in 2008 with the arrival of Emmanuel Bonnaud, who came from a background of “pure and hard restructuring”. According to him, the firm’s activity has tripled since then: “In good years it makes up 20 to 25% of sales, and never less than 10%.”
It is difficult to know what rates are being charged, but one thing is for sure: missions can pay big dividends. Alvarez & Marsal supposedly pocketed some 627 million dollars just from its work on Lehman Brothers four years ago. AlixPartners is no slouch – the firm has handled some rather notable turnarounds, such as that of General Motors, considered to be the largest in history.
“Difficult to combine management and consultancy positions”
Each firm has its own strategy to seize the lion’s share of the business. McKinsey seems to focus on operational aspects, with long interim management missions. Right now this is notably the case with Vivarte, where Helen Lee Bouygues is handling the duties of deputy managing director. Roland Berger claims to avoid such mandates whenever possible.
For Emmanuel Bonnaud, “even at its most involved, a consultant’s profession is very different from that of an operational manager, and it is therefore very difficult to combine management and consultancy positions in the same firm.” He does admit that Roland Berger has sometimes placed a consultant in the role of Chief Restructuring Officer (CRO), “but only very discreetly, when the context demanded it.” There are, however, no plans to generalize this practice. “I don’t see how management can trust a consultancy that is also aiming to serve as interim managers.”
To handle turnaround missions, Roland Berger has developed a hybrid approach, halfway between consulting and operational work. The cabinet creates dedicated “restructuring offices”, and assigns senior personnel to work alongside managers. “We work in a two-pronged manner, with consultants who are very operational but who don’t take a position.”
The historic players generally don’t get involved in interim management either. Nicolas Beaugrand, one AlixPartners’ managing directors in France, insists on this distinction: “We are first and foremost consultants. We don’t define ourselves as being transitional managers.” That option is only considered in specific situations, “when there is a crisis between the shareholders and the management team,” he details. “Otherwise we come to support the managers.”
A business for seniors
The most fundamental differences have more to do with each firm’s approach. To discuss his integration at Roland Berger, Emmanuel Bonnaud highlights its behavior: “The partners at Roland Berger aren’t afraid to bring us to the clients because they know we won’t use any inappropriate terminology.” Strategy consultants are all about smoothness, whereas operational ones may have a more direct approach.
This characteristic is in fact present in consulting missions, and Nicolas Beaugrand sees a fundamental difference: “We take on [consulting] missions with AlixPartners’ genes. Those of action rather than recommendation.” Somewhat mockingly, he brings up an oft-heard phrase: “Consultants are able to say: we made our recommendations, now it’s up to the client to decide. I’ve never heard that at AlixPartners. We go further in the implementation.”
In fact, strategy consulting firms and turnaround specialists are seeking the same kind of profile for these missions: senior personnel with business world experience. At Roland Berger about 15 people are involved in the turnaround practice.
Emmanuel Bonnaud believes that this type of work can only be carried out by experienced staff: “It’s very important to know where people’s heads are at when operational changes are implemented, and that is a skill that takes 20 years of experience to acquire.” The firm’s more junior personnel intervene on missions as well, but only in conventional strategic analysis roles. “In general the juniors love it,” says Emmanuel Bonnaud. “The missions are highly concrete, decisions are made rapidly and there are daily or weekly interactions with top management.”
No fresh graduates at AlixPartners, at least five years of experience are required to join the teams – and the Parisian office’s consultants actually have an average 15 years’ worth. Personality is also very important. “In addition to experience and academic background, we look for exceptional leadership qualities.” Recruitment firms have fully understood this, and regularly drop bait in this very pond for their clients’ general management needs.
Gillian Gobé for Consultor