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American Management Consulting Companies in Western Europe, 1920 to 1990: Products, Reputation, and Relationships

Published online by Cambridge University Press:  13 December 2011

Matthias Kipping
Matthias Kipping
Affiliation:
MATTHIAS KIPPING is Reader in European Management and Director of the Centre for International Business History (CIBH) at theUniversity of Reading, U.K.
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Abstract

This article surveys the expansion of American management consulting companies to Western Europe in the twentieth century. It focuses on the way these consultancies built and sustained activities outside their home country. A number of elements facilitated expansion abroad, including the creation of new and distinctive “products,” or approaches to management, and the use of domestic multinational clients as “bridges” to foreign countries. But to be successful in the long run, American consulting companies needed to create relationships with clients in the host country. In this respect, social and, sometimes, political contacts with the local elite, usually established through a few well-connected individuals, proved a crucial advantage.

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Articles
Information
Business History Review , Volume 73 , Issue 2 , Summer 1999 , pp. 190 - 220
Copyright
Copyright © The President and Fellows of Harvard College 1999

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13 I am especially indebted to John E. Pleming, who made his extensive collection of personal papers available to me. He is the son of Norman Pleming, who in 1927 became the first British national to join the Bedaux Consultancy and in 1939 became its managing director. I am also grateful to former consultants and executives who agreed to share their experience of the industry with me, namely Len Brooks, Sir Alcon Copisarow, Gerhard Kienbaum, E. N. B. Mitton, and Dr. Helmut Wolf.

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21 Workers were expected to achieve a minimum of 60B per hour; For more details, see Laloux, Pierre, The systètme Bedaux de calcul des solaires (Paris, 1950).Google Scholar

22 NICB, Systems of Wage Payment (New York, 1930).Google Scholar While not statistically representative, this survey covered 1,214 plants, employing a total of almost 800,000 workers. The vast majority of them were working under time wages or piece rates. Among the competing incentive systems, Bedaux came first, being applied to more than three times as many workers (33,177) than the next two, Halsey (9,953) and Emerson (9,252).

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26 NICB, Systems of Wage Payment, 8.

27 Sanders, Thomas H., “Wage Systems—An Appraisal,” Harvard Business Review 5:1 (Oct. 1926): 19.Google Scholar Numerous articles in the journal of the National Association of Cost Accountants in the United States show indeed how many companies used the system not only to reduce unit labor costs, but also for cost accounting purposes.

28 Littler, Craig R., The Bureaucratization of the Shop-Floor: The Development of Modern Work Systems (Ph.D. diss., London School of Economics, 1980), 403–11.Google Scholar This case study was omitted from the published version of the thesis.

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32 See Personnel of the Chas. E. Bedaux Companies; and International Bedaux Company Inc., Representative List of Clients of all Bedaux Companies (New York, 1934)Google Scholar, New York Public Library, in folder “Material on the Bedaux Principle.”

33 The first chairman of Chas. E. Bedaux Ltd. in Britain, Sir Francis Rose, knew many company directors and introduced the consultancy to companies like British American Tobacco. In Italy, the Chairman and owner of Fiat, Giovanni Agnelli, became President of the Società Italiana Bedaux, and one of the Pirelli brothers, Piero, a board member. Both had been among the first Italian companies to install the Bedaux System in their factories and their support undoubtedly played an important role in its subsequent application in other Italian companies. See the unpublished A History of Inbucon, chap. 1, written by Mildred Brownlow in the early 1970s, and an undated draft on Norman Pleming's years with Bedaux/AIC. Both are located in the Pleming papers. For details and additional references on Bedaux in Italy, see Musso, Stefano, La gestione della forza lavoro sotto il fascismo (Milan, 1987), chap. 2Google Scholar; and Faliva, Giuliano and Pennarola, Ferdinando, Storia della consulenza di direzlone in Italia (Milan, 1992), 9–14.Google Scholar

34 Records of such an “Intercompany Meeting,” held at the Drake Hotel in Chicago on 4–5 Feb. 1928, were found in the Lucas Archives, Industrial Relations, Bedaux, Folder A/292, British Motor Industry Heritage Trust, Gaydon.

35 Attached to the employment contract between Chas. E. Bedaux Ltd. and Norman Pleming, 1 Feb. 1927, in the Pleming papers.

36 For the activities of Thompson and Planus during the interwar period, see Moutet, Les hgiques de l'entreprise.

37 Nicolas Berland, “Consultants, innovation de gestion et contrôle budgétaire: Pechiney et Saint-Gobain entre 1929 et 1960,” Cahiers d'histoire de l'aluminium 19 (Winter 1996–1997): 6–23.

38 Arbeitswissenschaftliches Institut der DAF, Das Bedaux-System (Berlin, [1938])Google Scholar, Staatsbibliothek Munich. Bedaux was allowed to re-establish it in 1937, albeit under a different name. The new consultancy had no more success than the earlier one. See the files of Bedaux's German lawyer G. A. Westrick, Bundesarchiv Koblenz, N1200, Box 1045.

39 Flanner, “Annals of Collaboration I,” 31 and 41–7; Christy, The Price of Power, chaps. 10–13.

40 See Tisdall, Agents of Change; and Kipping, “Consultancies, Institutions.”.

41 For Orr's role in Geneva, see Wrege, Charles D., “The International Management Institute and Political Opposition to its Efforts in Europe, 1925–1934,” Business and Economic History 16 (1987): 249–65.Google Scholar

42 According to E. N. B. Mitton who had joined AIC in 1937; interview on 23 Apr. 1997. See also Brownlow, A History of Inbucon, chap. 4.

43 The client/assignment list and annual turnover figures for Charles E. Bedaux, British Bedaux and AIC Ltd. are found in Pleming papers.

44 For the government role, see in general Tiratsoo, Nick and Tomlinson, Jim, Industrial Efficiency and State Intervention: Labour 1939–51 (London, 1993)Google Scholar, chap. 4; for the exemption from military service, see Mitton interview on 23 Apr. 1997.

45 See Henry, Odile, “Le conseil, un espace professionel autonome?” Entreprises et Histoire 7 (Dec. 1994): 37–58.CrossRefGoogle Scholar

46 Interview with Gerhard Kienbaum on 16 Jan. 1997. See also Kienbaum und Partner. Geschichte einer Unternehmensberatung 1945–1995 (Gummersbach, 1995).

47 Interview with Mitton, 23 Apr. 1997.

48 From £1.9 million in 1952 to £6.9 in 1961; MCA Archives, Box 6. (By 1961, four much smaller consultancies had joined the MCA.) In addition, the British consultancies also expanded abroad, mainly to the Commonwealth countries which accounted for up to one-third of their revenues by the early 1960s. Like in the case of the U.S. consultancies in Western Europe, this expansion benefited from the presence of British multinationals there.

49 For more details, see Ellwood, David W., Rebuilding Europe: Western Europe, America and Postwar Reconstruction 1945–1955 (London, 1992)Google Scholar; Carew, Anthony B., Labour Under the Marshall Plan (Manchester, 1987)Google Scholar, McGlade, Jacqueline, The Illusion of Consensus: American Business, Cold War Aid and the Reconstruction of Western Europe, 1948–1959 (Ph.D. diss., George Washington University, Washington, D.C., 1995)Google Scholar; and the contributions in The Americanisation of European Business, eds. Matthias Kipping and Ove Bjarnar (London, 1998).

50 See International Cooperation Administration, European Productivity and Technical Assistance Programs: A Summing Up, 1948–1958 (Paris, 1958)Google Scholar.

51 This can be gauged from several letters found in the Marshall Plan archives; National Archives and Records Administration, College Park, Md., Record group 469.

52 In 1965, they only employed 22 consultants, compared to 429 for AIC and 480 for PA; MCA Archives, Box 22. They remained marginal and, in 1974, merged with Stevenson, Jordan & Harrison, a long established, but also declining consulting company; MCA Council agenda, 09/26/1974, Ibid., Box 4.

53 Ludovic Cailluet, “Selective Adaptation of American Management Models: The Longterm Relationship of Pechiney with the United States,” in The Americanisation of European Business, 190–207.

54 “Les sociétés de service,” Les dossiers de l'entreprise 10 (Mar. 1969): 36.

55 Interview with Mitton on 23 Apr. 1997.

56 On the MTM system in comparison, see Niebel, Benjamin W., Motion and Time Study. An Introduction to Methods, Time Study, and Wage Payment (Homewood, Ill., 1958).Google Scholar

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58 Paulsen, Wolfgang, “Vormarsch der amerikanischen Unternehmensberater in Europa,” Die Welt, 6 Sept. 1969Google Scholar; and Winter, Rosemarie, “U.S.-Herausforderung in der Praxis,” Industriekurier, 9 Apr. 1970.Google Scholar

59 See Higdon, Hal, The Business Healers (New York, 1969), chap. 7.Google Scholar

60 See the archives of Lukens Steel, Hagley Museum and Library, Accession 50, Box 2019. The company's Corporate Secretary, James Stewart Huston, received letters and brochures from May once or twice per month from 1936 to 1943. However, Lukens never became a May client.

61 See ACME's “Code of Professional Ethics” and “Obligations of Good Practice” in Higdon, The Business Healers, app. D.

62 “Hier wird der Chef aufs Kreuz gelegt,” DM, 4 Mar. 1965; quoted by Rieke, Michael, “Die freiberufliche Unternehmensberatung 1900 bis 1960” (Master's thesis, University of Munich, 1989), 32.Google Scholar

63 See Faliva and Pennarola, Storia della consulenza, 75–7 and Tisdall, Agents of Change, 64–5. May's bad reputation in die U.K. was such that it was still vividly recalled by most of the former British consultants interviewed.

64 For the development and extension of work study, see Brownlow, A History of Inbucon, chap. 7, which focuses on AIC; for its impact on shop floor performance, see Johnston, J., “The Productivity of Management Consultants,” Journal of the Royal Statistical Society, series A, 126:2 (1963): 237–249.CrossRefGoogle Scholar

65 At the end of the decade, none of them appeared any longer in the hit lists published by the popular management journals. However, May remained active in the 1990s in the U.S., with estimated revenues of $56m in 1995; Ronnow, Karin, “Corporate upheaval boosts U.S. market,” Management Consultant International (Aug. 1996): 10–5.Google Scholar

66 One of the first to highlight these developments was Geoffrey Owen, “Quality Control for the Management Consultants,” Financial Times, 18 July 1966.

67 Chandler, Alfred Jr, Strategy and Structure: Chapters in the History of the American Industrial Enterprise (Cambridge, Mass., 1962).Google Scholar

68 See Higdon, The Business Healers, 49.

69 Kahn, E. J., The Problem Solvers: A History of Arthur D. Little, Inc. (Boston, 1986).Google Scholar

70 “Management Experts Thrive on Own Advice,” Business Week, 23 Apr. 1960, 104–18 and Higdon, The Business Healers, chap. 5.

71 McKinsey, James O. and Hodge, A. C., Principles of Accounting (Chicago, 1920)Google Scholar; McKinsey, James O., Bookkeeping and Accounting (Cincinnati, 1920)Google Scholar and Budgetary Control (New York, 1922). For McKinsey's intellectual origins and development, see Wolf, Walter B., Management and Consulting: An Introduction to James O. McKinsey (Ithaca, N.Y., 1978)Google Scholar.

72 Higdon, The Business Healers, chap. 6; O'Shea, James and Madigan, Charles, Dangerous Company: The Consulting Powerhouses and the Business They Save and Ruin (New York, 1997)Google Scholar, chaps. 2 and 8. For the crucial role of Bower, see Amar V. Bhide, “Building the Professional Firm: McKinsey and Co., 1939–1968,” Harvard Business School Working Paper 95–010 (Boston, 1995).

73 See Higdon, The Business Healers, 64; and Kahn, The Problem Solvers, 143–50.

74 Hans Martin Kolle, “Amerikanische Untemehmensberater haben Erfolg,” Die Welt, 8 July 1969.

75 Shanks, Michael, “Management Consultants: Breaking through the British Boardroom,” The Director (May 1964): 268–73Google Scholar; see also Kölle, “Amerikanische Untemehmensberater” and Wolfgang Paulsen, “Vormarsch der amerikanischen Untemehmensberater in Europa.”

76 Servan-Schreiber, Jean-Jacques, The American Challenge (London, 1968), 38–9.Google Scholar

77 See Chandler, Alfred Jr with Hikino, Takashi, Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990).Google Scholar

78 Channon, The Strategy and Structure of British Enterprises; Dyas and Thanheiser, The Emerging European Enterprise; and Christopher D. McKenna, “The American Challenge: McKinsey & Company's Role in the Transfer of Decentralization to Europe, 1957–1975,” paper presented at the Academy of Management Annual Meeting, Boston, 10 Aug. 1997.

79 McCreary, The Americanization of Europe, 160–165.

80 According to Kahn, The Problem Solvers, 150.

81 The booklet can be found in the Pamphlet Collection at the Hagley Museum and Library, Wilmington, Del. The article in question was written by Hugh Parker and John G. McDonald, both of whom played a major role in the expansion of McKinsey in Western Europe.

82 From a book value of $1.73 to $24.52 billion; see Wilkins, The Maturing of Multinational Enterprise, chap. 13, esp. tables 13.2 and 13.3; see also Jones, The Evolution of International Business, 46–9 and 127–37.

83 Deschamps, Pascale-Marie, “McKinsey: Les sorciers de l'entreprise sont de retour,” L'Expansion 527 (13–26 June 1996): 116–123.Google Scholar

84 McKenna “The American Challenge”; for Britain, see also Tisdall, Agents of Change, 72–5.

85 Wilkins, Mira, “French Multinationals in the United States: An Historical Perspective,” Entreprises et Histoire 3 (May 1993): 14–29.CrossRefGoogle Scholar See also Cailluet, “Selective adaptation.”.

86 For additional details and references, see Matthias Kipping, “Bridging the Gap? Consultants and Their Role in France,” The University of Reading, Discussion Papers in Economics and Management, Series 8 (1997/98), No. 375. It should be noted that Pechiney had employed Clark, Bedaux, and Planus in the 1930s, but this was long after the first two had established offices in France.

87 See Kahn, The Problem Solvers, chaps. 9 and 10.

88 Gretton, John, “Efficiency Unlimited,” New Society, 27 Aug. 1970, 357–8.Google Scholar

89 Interview with Sir Alcon Copisarow on 29 July 1996.

90 Ibid.

91 Ibid.

92 Ibid.

93 Interview with Dr. Helmut Wolf, former chief executive of Krauss Maffei, on 10 July 1997. For the Flick group, see also Dyas and Thanheiser, The Emerging European Enterprise, esp. 97.

94 In contrast to the earlier literature which highlighted the scarcity of management skills in Europe, a number of more recent authors have highlighted the considerable problems in the transfer and adaptation of U.S. management models to European companies; see especially Kogut and Parkinson, “The Diffusion of American Organizing Principles” and Kipping, Matthias, “The U.S. Influence on the Evolution of Management Consultancies in Britain, France, and Germany since 1945,” Business and Economic History 25:1 (Fall 1996): 112–23.Google Scholar McKenna, in “The American Challenge,” continued to insist on superior know-how as the basis for the success of McKinsey in Western Europe.

95 See Kipping, “The U.S. Influence.”

96 “Diener vieler Herren,” Wirtschaftswoche, 2 Aug. 1974, 72.

97 Gretton, “Efficiency Unlimited,” 357–9.

98 For details on these developments see Henry, “Le conseil.”

99 Kearney press release, 3 Mar. 1969; MCA Archives, Box 3. Incidentally, after some hesitation, the MCA in 1971 allowed A.T. Kearney to take the place of Norcross among its members.

100 For a detailed presentation of the matrix and its underlying logic, see Hedley, Barry, “Strategy and the Business Portfolio,” Long Range Planning, (Feb. 1977): 9–15.CrossRefGoogle Scholar

101 For BCG's evolution in the U.S., see O'Shea and Madigan, Dangerous Company, chap. 5.

102 Sir Jack later became implicated and was convicted in the scandal surrounding the acquisition of United Distillers by Guinness, one of Bain's major clients at the time; for details, see Ibid., chap. 7.

103 See “Diener vieler Herren” (for the 1974 ranking); and “Roland Berger 60 Jahre,” Frankfurter Allgemeine Zeitung, 21 Nov. 1997.

104 For the developments in Italy, see Faliva and Pennarola, Storia della consulenza; for Value Partners, see Deschamps, “McKinsey,” 121.

105 On the training and selection of German managers in general and the Baden-Baden seminars in particular, see Kipping, Matthias, “The Hidden Business Schools: Management Training in Germany since 1945,” in Management Education in Historical Perspective, ed. Engwall, Lars and Zamagni, Vera (Manchester, 1998), 95–110.Google Scholar The Baden-Baden seminars were set up in the early 1950s, inspired by Harvard's Advanced Management Program, but deliberately much less publicized.

106 Winter, Rosemarie, “Deutliche Akzente gesetzt,” Industriekurier, 21 Feb 1970Google Scholar; according to Dr. Peter Zürn, long-time chairman of the Baden-Baden seminars, McKinsey and die leading German consultant Roland Berger are the only ones to be invited there regularly; interview on 24 Sept. 1996.

107 For an overview, see O'Shea and Madigan, Dangerous Company, chap. 8; for a more detailed discussion and additional references, see Matthias Kipping and Celeste Amorim, “Consultancies as Management Schools” (paper presented at the 15th Colloquium of the European Group for Organizational Studies, Warwick University, 4–6 July 1999).

108 Catherine Sauviat, “Les reseaux internationaux de services: le cas du conseil et de l'au-dit,” Rapport final pour le Ministère des Enterprises et du Développement Economique, IRES, Apr. 1995.

109 For the earlier practices, Higdon, The Business Healers, chap. 9. Their recent growth has made it difficult for these consultancies to limit their recruitment only to these institutions; O'Shea and Madigan, Dangerous Company, 281–5.

110 Gemelli, Guiliana, “Per una storia delle business school in Europa: Le origini del'Insead,” Annali di storia dell'impresa 9 (1993): 339–404.Google Scholar

111 Interview with Sir Alcon Copisarow, 29 July 1996.

112 Matthias Kipping and Thomas Armbriister, “The Challenges of New Management Knowledge: Beyond Conventional Management Consulting,” paper presented at the annual meeting of the Strategic Management Society, Berlin, 3–6 Oct. 1999.

113 Similarly, the extent and the scope of British FDI helps explain why consultancies from the U.K. directed most of their international activities toward the Commonwealth countries where they occupied a predominant position for much of the post-war period. By contrast, the limited development of multinational activities from France, Germany, and Japan held back the internationalization of consulting companies from these countries until the late 1980s.