A Good Word About Consultants
Charles J. Caray had known two species of management consultant in his professional lifetime, and both of them gave him the creeps.
"First came the slobs who looked like they had dressed on the subway over here," says the President and owner of Laminaire Corp., a Rahway, N.J.-based manufacturer of electronic components and industrial air filters. "And then there were the superslick, overaggressive types who drove me up a wall. It didn't help my attitude that these guys had no tangible product to offer me, either. I guess you could say I was, uh, resistant to their basic sales pitch."
You could also say that Garay, despite his low opinion of the breed, found himself in an acute consultant-shopper's posture. Not that Laminaire was floundering. On the contrary: Over six recent fast-track years, the company had outgrown its first computer system, moved to a new facility, consolidated its three discrete divisions, and more than quadrupled its work force and sales figures, from 25 employees and $1 million annually to over 100 people and nearly $5 million. The market and the bottom line both looked good.
Still, Garay was a troubled man. Despite -- or, perhaps, because of -- such expansion, Laminaire was suffering awkward delays in implementing its new software program, and job costing on some of its more complicated assembly projects was proving to be an accountant's nightmare. Growth was not the controlled variable it had been in the company's infancy, either. As he struggled to pull together new people and new departments, Garay noticed that he was calling more and more meetings and getting less and less out of them. He also realized that his in-house chain of command was more hindrance than help.
"I knew what the issues were," Garay would later say, "but I had trouble getting my people to respond, because they were so influenced by my own thinking. My ideas had become iheir ideas, and vice-versa. To a certain extent, of course, you want that in a smaller company, but it can also be a liability. If I put pressure on a product manager to change something, he turns around and puts it on the people under him, which they resent. Conversely, if something new is tried, everyone wants credit for the solution. I didn't care about the credit: I wanted results. So it dawned on me that I needed outside help. The question was, What kind of help, and who?"
Did Garay envision an answer to his managerial prayers?
"Sure," he says. "A bright young punk who understood the new technology and could apply it to my business. But I wasn't too hopeful."
If anything, Jerry Reilly, Laminaire's comptroller, was even more skeptical than his boss was. "I'd had quite a bit of experience with management consultants," says Reilly, who had toiled among them at Arthur Young & Co. and worked with many more during his tenure at Republic National Bank of New York, "and most of it was poor. These guys came in and told you what you should be doing, without delving into what the people in the company were actually trying to do. In all my years at bigger companies, I never saw a consultant's plan implemented in its entirety. But I did see an awful lot of bruised feelings."
Enter Henry Ekstein, head of his own small consulting firm, Management Resources Iric., based in nearby Teaneck, N.J. Ekstein is unique within the industry: a one-man road show with a small support staff, who feels as at-home operating in $8-million companies as he does in $80-million or $800-million ones. Garay was a bit taken aback at the first sight of Ekstein. Regal, almost stiff in bearing, a man of thick accent, Old World pedigree, and exaggeratedly professorial mien, he hardly fit the profile of the business-school hotshot Laminaire's president thought he wanted. Nor, indeed, did he conform to other popular stereotypes of his profession. Engineering and scholar by inclination, Ekstein boasted solid credentials in marketing and management and came highly recommended by Laminaire's data processing consultant, of all people, who had heard of his track record with small to medium-size growth companies.
To Garay and Reilly, however, Ekstein remained an unknown quantity. After a tough round of interviews, the consultant convinced them to give him a shot at the contract. His selling points: a fixed fee, with guaranteed results, and a process he calls "interactive consulting." The latter is a term worth defining; even its originator finds the task a slippery one.
"I'm still struggling with the theory behind the method," Ekstein admits, "but, basically, interactive consulting means working closely from the outset with the people most likely to be affected by whatever changes seem called for. Together, we design and implement these changes as we go along. The employees share directly in the credit because they share directly in the creative process."
A concise working definition may elude him, but Ekstein is eloquent about what interactive consulting is not. First of all, it is not big on the standard leather-bound report.
"The problem with most consultants," he notes, "is that the reports they write contain the seeds of their own destruction. My reports are usually summaries of changes already implemented, not plans for what might be done. When I hear about a report gathering dust on some executive's shelf, I'm not surprised. Somebody in that company wants it to fail. Tell me, isn't it logical that if an outsider came into your company representing a threat to various employees or departments, those employees would fight tooth and nail to sabotage his work? Of course they would. My general rule is, the better the consultant's advice, the greater the resistance to it."
Secondly, interactive consulting is not big on open-ended fees. Large consulting companies normally command large per diem revenues. Ekstein is content working on a flat project rate, even if the length of time required to complete the job winds up gouging him. He figures that he makes up any losses through repeat business, while avoiding the usual conflict of interest between client and consultant.
"In a per diem arrangement," he points out, "what's the consultant's incentive to work quickly and efficiently? There isn't any. And what does the client do if it drags on too long? Fire the guy and blow his already-big investment? That's hardly practical. Besides, I like coming and going as I please, and nobody worries about that as long as I'm sharing the financial risk."
That was the essence of Ekstein's pitch to Laminaire. In October, six weeks after he started here, management sounded pleased with the interim results. Garay reported a noticeable increase in the general activity level around the office. A new time sheet requiring each worker to chart his own output was estimated to have boosted employee productivity between 5% and 10%. Laminaire's president also expressed confidence that the job-costing problem was being addressed with imagination and fervor. Jerry Reilly, a cautious man, seemed cautiously satisfied.
"So far," he conceded, "Henry's been everything he promised us. To be honest with you, though, I'd still have a hard time accepting any consultant who couldn't demonstrate the strengths that Henry shows."
Howard J. Ecker had no more innate love in his bosom for management consultants than Charles Garay did. After abandoning plans to go to medical school, Ecker joined the family business eight years ago as vice-president and heir apparent to the chief executive officer's slot. Ecker Manufacturing Corp., a small company located on the northern tip of Manhattan, had been founded by his father, Warren S. Ecker, in 1947, and was doing steady if not spectacular business in the storm-window and storm-door markets. In the late '70s, however, Eckers pere et fils decided to steer their primary product line into replacement windows, a move that precipitated some key strategic decisions.
Compared to what the company had been making, replacement windows are higher ticket items requiring exact tailoring to the customer's needs. Despite relatively stable unit-production levels, dollar sales soon soared. So, however, did inventory and labor costs. A move to new facilities more than tripled manufacturing's square footage, yet "still left us with no room to breathe," according to Howard Ecker. He proposed hiring a consultant to advise him on layout and inventory control. His father told him he was crazy, that he would be throwing money away on systems they could develop themselves. Howard thought, what the hell, and got in touch with Henry. They talked. Again, there was basic managerial resistance to overcome.
"I'm not a concept-oriented person," admits Ecker. "We've always run this company by the seat of our pants. So I told Henry I wasn't looking for a report, I wanted results. The first project had to have the shortest possible payback for me, or I was going to write him off in a hurry. I also told him I had no use for any system that couldn't be adapted to current personnel, or for anything that would require a fancy computer to run it."
When asked later how Ekstein's interactive approach appealed to him, Ecker said, "I liked the outline of it because it basically sounded like the way my company worked anyway. We don't have a lot of middle management here. I expected a lot of feedback on Henry right away." Ecker added that it did not hurt when one of his foreman, who had worked with Ekstein at another client company, Remington Aluminum, spotted him on his initial tour through the plant and ran up to embrace him. "The best thing about it was that nobody in the company felt his job was threatened, or that he might wind up being replaced by a machine."
Ekstein began his first project, an overview survey, by skirting the executive offices (not exactly what you would call posh retreats to begin with) and concentrating his attention on the people in production. With the aid of a draftsman, he redrew the manufacturing layout from the ground up. Next he interviewed the foremen and plant manager, eliciting from them several useful proposals for retooling the assembly system; their names, like his, would all appear on the preliminary report.
When Ecker agreed to phase two, Ekstein did an "inventory cardiogram" analysis (see INC., December 1983, page 49), a method he uses to pinpoint lowered inventory levels that ensure maximum productivity with minimum waste. His graphs, drawn with the assistance of company personnel, set lean stock levels that allowed for fluctuations in the company's highly seasonal sales cycle. Furthermore, his revised layout scheme, according to Ecker, saved 32% on floor space and actually cut warehouse staff by reducing double handling of materials. As he worked, Ekstein almost incidentally came up with a design for homemade metal-shelving units that probably saved Ecker thousands of dollars in buying costs. Typically, he had tossed off a number of solutions to problems he had not in any formal sense contracted for. Howard Ecker summarized these changes in a letter to his father last May, and went on to say this: "Dr. Ekstein has made us all feel we have a stake in this project and, therefore, we all work together to guarantee its success. It sounds like very elementary, simple psychology but it works because it is people that make companies grow. . . ."
Ekstein's success with Ecker, Laminaire, and other small companies once wary of outside expertise begs an interesting question: Is he a charming anomaly, or part of a broader trend within management consulting to offer more value for the money to any corporate client?
"I don't know Henry Ekstein's work personally," says Arthur Turner, professor of organizational behavior at the Harvard Business School and author of a 1982 Harvard Business Review article entitled "Consulting is More than Giving Advice." "But I definitely think more and more consultants are using the kind of interactive techniques he describes. The big wave of the '70s was strategic consulting, and the attitude there was, 'We have the expertise, so we'll come in and do a study that tells you how your company should be run.' I'd have to say the bloom is off that rose. Today, the emphasis has shifted from gathering statistics to developing more productive relations with the client organizations themselves. Why? Two reasons, I think. One, because too many of those studies weren't being implemented. Two, because so many big companies have elected to bring the other kind of management-analysis skills in house."
To support his trend theory, Turner offers the observation that his Harvard course, "Consulting and Management Practice," a field-study course on the management consultant process for participating companies, has risen dramatically in MBA enrollment over the past two years. In 1980, he reports, only 2 MBAs enrolled in what was labeled, somewhat pejoratively a "behavorial course"; last semester, there were 60.
"I think the big consulting firms have sent signals to their young recruits that they expect them to have this kind of experience now," he explains, noting with some irony that the seminar had often been more popular at the schools of government and education than it had been at the business school. "Conceptually, what we're talking about here is even more relevant to INC. companies than it is to Fortune 500 ones, because with smaller companies, consultants have more direct access to top management, and management, understandably, expects short-term improvements they can see for their money right away."
Turner sprawls in his office chair, and a smile comes to his lips.
"I'll tell you a real horror story that sums up how I feel," he says. "About three years ago, somebody I know was talking to a young Harvard MBA who had been one of my students. 'What field are you going into?' my friend asked. 'Well,' came the reply, 'I'm really good with numbers, and I'm really bad with people. So I guess that pretty much narrows my field of choice to one. Management consulting.' My God what an answer! To even think that is bad enough, but to say it out loud is simply astonishing. My friend called me and said, 'Good Lord, man, what are you teaching them over there?' I couldn't blame him."
One of Turner's former students who managed to escape Harvard without the same skewed self-image is Kevin Eichner, president of The Financial Collaborative Inc., a three-person consulting group in St. Louis. Eichner, Harvard MBA '77, deems interpersonal skills a high priority. He says he set up his practice specifically to cater to companies in the $10 million to $30 million range because "there, you're working with a different breed of animal, not the ones hung up on paychecks and promotions but the ones at the top making the blood and guts decisions." These include a lot of companies -- Eichner has worked with about 60 in all -- that are owner-operated (often second generation) and groping their way through the third or fourth stage of growth. Like Ekstein, he works on a fixed project-fee basis and relies more on referrals than brochures for new clients.
"In the smaller business community, word of mouth works the best," says Eichner, "and you don't get the right reputation if you're not good with people. That includes balancing off your own ego needs with those of your client. At the same time, you have to be tough. It is not easy to go into a company that's already very successful but wants to be more successful, and tell the owner he's the main problem -- and then help him deal with that."
His methodology may not be unique, but Henry Ekstein's background and training certainly are singular. Born in Krakow, he fled Poland with his father the morning of the 1939 Nazi invasion and spent the next several years wandering around Russia, Asia, and the Middle East. Ekstein's mother and sister stayed behind, later to join Henry in Israel.
The war years were not easy on any of them. Henry, a bright boy and talented young engineer (he built his first working camera out of a tea tin at age 14), hated the interruption in his formal education and yearned to be back in school. His father was a Jewish scholar and successful real estate man who took few hard assets out of Poland to support them. Often, his son recalls, he played exhibition chess to raise money for their bed and board. Although the father did not survive the war, something in the father survived in his son: an appetite for education and a tenacious aptitude for problem solving.
Henry studied at Technion, the Israeli equivalent of Massachusetts Institute of Technology, and upon graduation in 1954 took his first job as a consultant. Anyone who has worked with Ekstein will not be surprised at the story of how he solved his first assignment. As he recounts it, he was called in to study a barge-maintenance problem at a key Israeli open seaport.
"Many other consultants had studied the situation," he says. "But no one had been able to find a way to institute substantial savings. The problem was this: There were 100 barges in operation, and each barge spent about 102 workdays out of commission due to repairs. The barges had to be shipped in, scraped, all the rust chipped off, patched, and painted four times. By far the most time-consuming step was the chipping -- something like 81 days, average. Naturally, that becomes the first place you look for waste."
He sits up straighter in his chair at the mere memory of the struggle. "I study and I study. I think, chip with two hammers? Use other mallets? I consider all the possibilities. For two weeks I don't sleep. Nothing looks better than 10, 25% savings, and it's driving me crazy. Finally, it comes to me in the middle of the night: What if you didn't have to chip at all? Now, there would be savings!"
And, indeed, there they were. Henry's solution was maddeningly simple. Instead of chipping, paint the bottom of each barge with four different layers of color. When the last layer of paint is exposed, haul the barge out of water, scrape the hull, repaint it. No corrosion, no rust. Under this system, each barge would spend an average of 36 days a year in dry dock, not 102. And it would probably last three times as long.
Ekstein says he arrived at this solution by freeing his mind from thinking in terms of the yearly calendar and focusing instead on the barge itself. "You might say," he says, "that equipment, like the sun, has a cycle all its own, and is more useful to study. Yes?" You might also say that, right out of the box, Henry showed he had the consultant's version of Triple Crown potential.
His first years in America were spent earning a master's degree from the Bernard M. Baruch School of Business Administration and a doctorate from Columbia University. In 1970, he took a management position with Remington Aluminum, which was then a $2.5-million-a-year manufacturer in Hicksville, N.Y., on Long Island. As Remington grew (to $18 million in 1977, after having been bought by Evans Products Inc.), it needed consultants, and Ekstein hired and worked with several of them. None of them convinced him that they were going about their business in a very productive manner, especially when it came to implementing what they had recommended. At the same time, he continued teaching (first at Rutgers University, then at Touro College), his other passion. When he finally decided to leave Evans and go into business for himself, in 1978, his old company became his first client. Six years later, it remains with him.
Harold Kaye, Remington's executive vice-president and general manager, came to the company 13 years ago with Henry Ekstein. Currently, Ekstein is helping him compare costs at Remington's two facilities (in Hicksville and in Kansas City, Mo.) in order to plot long-term manufacturing strategy. Kaye does not mince words. "I'm not here to endorse Henry," he says, "but I will say this: To me, the true sign of a successful consultant is when my own people come up to me after a project and say, 'Well, it went okay, but we didn't need him. He just copied down what we said.' You understand what I'm saying? When they question the need for somebody like Henry -- that's a very good sign. It means they think they did the work themselves, so they live better with the results. Henry is probably better at doing that than any other consultant I've seen."
He's real good at getting other people to reach the conclusions for themselves," echoes Bob Whalen, vice-president of National Health Laboratories Inc. Two years ago, National Health, a more than $100-million-a-year clinical laboratory chain owned by Revlon Corp., used Ekstein's services to study waste in supply costs/inventory controls. He found plenty. "In theory, his report could have been very critical of management, but there were no cheap shots in it," says Whalen. "As it happened he wanted to implement his control system, and we elected to put in our own. But we did wind up with considerable savings. Is that all to Henry's credit? No. Was he worth the money? Yes."
"His biggest asset to me personally?" Kaye continues. "Mind expansion. Henry starts me talking out ideas and then takes me further and in more directions with each idea than I could ever get myself." Would Henry have been as effective as a corporate vice-president? "To be candid, no. I think he lacks the raw leadership qualities that you need in that position. As good as he is, Henry isn'tthe kind of person people will line up behind and follow through hell, if you know what I mean."
Henry is driving his Chevrolet Caprice into midtown Manhattan. He is talking animatedly, cursing, in his academic, analytical way, the wasted manpower visible all around him. Construction crews on major streets at midday. Ten-minute toll lines. Parking meters. All give him the willies, much as some people feel about consultants. Henry is discussing the draft of a letter he wants to send to the Port Authority of New York and New Jersey. He figures he can find enough waste in the system to make New York City America's sweetheart once more. His passenger agrees. Henry is making his point by slowing down at every intersection, green light or red, and pondering his next move. There are cab drivers in the vicinity who are not amused by this. His passenger winces. Like the CEO who needs advice, the passenger thinks, I am in the hands of a strange consultant who may run me into a bus. Fortunately, Henry is cool.
"I think what makes smaller companies interesting," he is saying, "is that management hasn't been exposed to quite the range of expertise I have. They have a lot of ideas in those areas which are dormant, though, and it's my job to awaken them. Without a specialized department to handle each problem as it comes up, the multi-disciplinary approach becomes that much more important."
He ignores a horn that may or may not have been in his honor. "You see," he continues, "I don't like to come into a company just to solve a particular problem, although that's what I'm usually hired for. Ultimately, my goal is to change the way manugement thinks. To make them better at solving their own problems. Often that means, the better I do my job, the less likely my client will need me again. Am I working against my own interests?" He shrugs. "Maybe. But what can I do? I am doing what I want to do. I'm enthusiastic. I think enthusiasm's incredibly important to what I do. Do you see that?"
His passenger thinks he: does. Even with one eye out for buses.