The World's Newest Profession: Management Consulting in the Twentieth Century (review)

In this engrossing study of management consulting, Christopher McKenna seeks to understand the prominence of consulting within American business. Focusing on a small set of elite consulting firms, but frequently discussing others, McKenna argues that the legitimacy and knowledge sold by consultants to their clients were rooted in the growing complexity and internationalization of the American economy (the forces conventionally invoked to explain consulting's rise), as well as changes in federal regulations in the 1930s, 1950s, and 1980s. McKenna's is a compelling, well-told story that goes a long way toward explaining the ubiquity, intentions, and limitations of modern management consultants. The book makes an important contribution to the literatures on professionalization, on twentieth-century business history in the United States, and on corporate culture—the last, a subject, which McKenna ties back into the history of American consulting.

The book opens with a wide-angle examination of how consulting fits into economic thought, especially the Coasean theory of the firm, and of modern American political–economic history. In both contexts, McKenna asks why managers would hire outside consultants to provide knowledge when that knowledge could be generated by employees inside their firms. Why buy, when you could make? McKenna's answer is straightforward: federal regulation compels managers to look outside their firms for certain kinds of expertise. For instance, the Glass-Steagall Banking Act of 1933, by separating investment from commercial banking, encouraged entrepreneurial bankers and accountants to offer novel, but crucial, services that bridged new gaps between the types of banking and between the securities sellers and buyers.

Over the course of the book, McKenna uses a set of narrow-focus lenses to examine key facets of management consulting. In chapter 2, he shows that, contrary to conventional professional and academic thinking, consulting grew not from Frederick Taylor's “scientific management”, but from corporate research & development and the creation of cost accounting in the 1920s. Cost accounting promised to build a foundation of scientifically determined costs beneath the Roaring Twenties' “associational” ideology, which survived the onset of the Great Depression and culminated in the National Recovery Administration (NRA). When the NRA fell apart in 1935, cost accountants, offering a set of skills, which usefully complemented those of traditional managers, shifted to outright consulting on the best means to structure large organizations.

McKenna uses four more chapters to substantiate and expand this point. After describing the reorganization of U.S. Steel in the 1930s (chapter 2) and the serial reorganizations of Lukens Steel from the 1930s to the 1970s (chapter 3), McKenna seeks to understand how consultants contributed to the rise of the postwar “proministrative state” between the 1940s and 1950s (chapter 4). The mix of cases made this the most interesting chapter, for McKenna shows how consultants helped create the federal government's distinctive “hollowed-out” shape. During World War II, the Navy used private consultants' knowledge of best practices to reorganize its war production. After the war, President Truman's famous Hoover Commission asked consultants to recommend reforms of the federal executive branch. In the late 1950s, consultants (successfully) advised that the new National Aeronautics and Space Administration consist of a relatively small cadre of managers and engineers who would hire outside experts for virtually all of the agency's activities. From here, McKenna shifts to the consultants' efforts to extend their work beyond American business and governmental settings, chiefly by proselytizing for the multidivisional organizational model. Postwar consultants transferred the “M-form” from business to the American “nonprofit” sector (chapter 5) and to companies and governments in Europe (chapter 7).

The book takes two detours into the cultural side of business history. Chapter 6 examines the consultants' “Gilded Age” in the 1960s, a moment when American consultants were overwhelmingly homogeneous, both sociologically and ideologically. Partly, a means to defend consultants against other professional competitors, this homogeneity also fed consultants' sense that they need...