[cjalmeida]

If you think management is only common sense, then paying 500 bucks an hour for MBA grads is ridiculously.

Using that logic, either the CEO is stupid, or the company employees are utterly incompetent and lacks common sense.

Or, more likely,

a) there's some science/skills behind management that can be learned at school even by non experienced people;

b) those young MBA people worked 60/70 hours per week for 3/4 years being part of a team reporting directly to the C-level executives of Fortune 500 corps, solving quite complex problems.

[gaius]

either the CEO is stupid

He or she might be; plenty get those kinds of jobs on their personal connections rather than their track records.

But a more usual scenario is that the CEO wants to fund their next bonus by slashing jobs, and paying management consultants - with the company's money - to facilitate that is, to that sort of person, a shrewd move.

[cjalmeida]

>He or she might be; plenty get those kinds of jobs on their personal connections rather than their track records.

I'm yet to see a stupid person as the CEO of a large corp. Sociopath maybe, but hardly stupid.

Now an unpopular opinion: maybe the slashed jobs were no longer necessary and letting people go was needed for the company to remain competitive?

[gaius]

Those people were hired for a reason; if the CEO literally cannot think of anything useful for them to do then they have utterly failed as leaders. But they are lavishly rewarded nonetheless.

[coryrc]

Or, c) principal-agent problem in action

[ahartmetz]

I'm not sure if this is what you mean, but what I heard is that the most common task of management consulting is to sell an already made decision to the rest of the company. The consultant appears neutral and is expected to have good presentation and sales skills. The analysis technique and inputs can be chosen to yield the desired result. The more expensive the consultant the better for credibility. So it's obviously a great way to make money.

The principal-agent problem is thus between the company and the person hiring the management consultant(s).

[cjalmeida]

Backfilling a CEO idea happens sometimes. And that's not bad per se. They still need to see if their idea holds water, and consultants have great presentation skills that the CEO can leverage trying to explain the idea to stakeholders.

But most of the time, at least the top consultancies, they will call out stupid ideas. They have their own reputation to keep and shareholders, the guys actually paying for the party, don't usually like being made fools constantly.

Or, most commonly, be hired to shed some light on a bunch of seemingly equally good ideas. Business strategy issues hardly have black or white and sometimes the recommendations fail. People in the company make sure to publicize the consultancy involvement as a cover your a strategy, but hardly share the credit when things work.

About the parent comment on principal-agent problem. He must be a management consultant for throwing a buzzword around in a discussion and dropping the mic :)