Do management consulting firms add more value to their clients than the fees they charge?

Question

A [recent question here] prompted me to ask the more fundamental question of whether the fees charged by professional advisors can be shown to be worth it.

Many consulting firms certainly claim their advice adds value. Here is the claim from Mckinsey:

Our mission is to help our clients make distinctive, lasting, and substantial improvements in their performance ...

Accenture's slogan is:

High performance: Delivered.

or variants thereof.

While there is a lot of cynicism about the value of consultants, the obvious retort is that clients would not keep buying advice if it didn't work. On the other hand the old joke goes:

A consultant is someone who borrows your watch to tell you the time.

(Some consultants, not me, obviously, might respond that clients are people with watches who can't tell the time).

But, aside from anecdote, is there any objective evidence that consulting advice is worth paying for?

Full disclosure: I work for a consulting firm.

Answer 1

S. Dubner (of Freakonomics fame) covered this in one of Freakonomics podcasts:

http://freakonomics.com/2012/11/26/i-consult-therefore-i-am-a-new-freakonomics-radio-podcast/

They present evidence both ways, but the "yes" evidence is backed up by a nice study by Nicholas Bloom of Stanford University called "Does Management Matter? Evidence from India".

To investigate this, we ran a management field experiment on large Indian textile firms. We provided free consulting on management practices to randomly chosen treatment plants and compared their performance to a set of control plants. We find that adopting these management practices raised productivity by 17% in the first year through improved quality and efficiency and reduced inventory, and within three years led to the opening of more production plants.