Organizational Change and the Economics of Management Consulting: A Response to Sorge and van Witteloostuijn

Abstract

This essay responds to Sorge and van Witteloostuijn (2004) and argues that consulting firms play an important economic role in helping organizations trigger and deal with change. Sorge and van Witteloostuijn claim that management consultancy is a business in which clients buy into hype-driven and unsubstantiated advice, and they imply that consultants yield returns from short-term opportunism based on information asymmetries. We propose that clients have several sources for assessing consulting service quality, and word-of-mouth effects discourage short-term opportunism of consultants. We also question Sorge and van Witteloostuijn's view that the need for organizations to change is largely a myth. We present data on economic changes over the last three decades to which firms had to respond and continue to do so. Accordingly, we argue that the continuing demand for consultancy is genuine, rather than induced by hype.