| White Paper on Management Consulting Services Standards |
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A White Paper on Consulting Standards
This White Paper reviews the history of standards in the management consulting profession, addresses the current status of the Statement on Standards for Management Consulting Services (SSMCS) and reviews questions asked by the IMC USA Executive Committee proffered on June 4, 2004, all suggesting why the IMC USA Board of Directors should adopt SSMCS now.
History of Professional Standards in Management Consulting 1. In developing the history of IMC USA under Chair Baldwin Tom CMC, we learned that “professional standards” were a stated objective of IMC in 1968, the time of our founding. This goal has been restated at various times since. 2. In 2001, a committee was formed by E. Michael Shays CMC, FIMC to evolve and report back to the IMC USA Board of Directors regarding standards. 3. The standards committee recognized more management consultants were working in American Institute of Certified Public Accountants (AICPA) member firms than in management consulting firms, and learned of the existence of AICPA standards for consulting services – Statement on Standards for Consulting Services–1 (SSCS-1), developed by the Executive Committee of the Management Advisory Services section of the AICPA. 4. Many CMC’s and IMC USA members are employed by AICPA member firms, and are ipso facto covered by SSCS-1. 5. The IMC USA standards committee unanimously agreed that what ever evolved from us must not conflict with SSCS-1, be unique to management consulting and be based on our Code of Ethics, etc. These became objectives of the committee. 6. When the recommendation for adoption was submitted the next year, changes in both Chair and Board had occurred. There was insufficient interest and/or understanding for it to be adopted. It was tabled. 7. Subsequently, the Legacy Committee (in about 2003/4) recommended that IMC USA should lead the profession through the adoption of professional standards. 8. When next reviewed by the IMC USA Executive Committee, again a different group due to the natural order of things, concern was about the AICPA background of SSCS-1 (not invented here); some were not up to speed on the process, while others felt a fresh start was needed. Some were convinced only our Code of Ethics was necessary. There was not sufficient interest or understanding for adoption. It never came to a vote of the Board of Directors. 9. The Midwest Society of Professional Consultants adopted SSMCS on June 2, 2004. It is on their web site at www.MSPC.org under “consulting standards:
1. The above background must be reviewed in the context of what was happening during this period amongst our clients as well as regarding our profession. 2. In July, 2000, Business Week reported that law suits brought by clients against management consultants were up by 30% in the preceding five years. 3. Enron’s collapse brought down Arthur Andersen, once the largest of the Big Eight professional services firms – Andersen Consulting was then the largest management consulting firm in the world. 4. Government agencies are increasingly willing to punish an entire profession for the bad deeds of a few. Sarbanes/Oxley flew through congress at lighting speed. 5. A call for self regulation appears in Consultants News (August 2002). Regulate soon, the author pleaded, before various levels of government interfere. In October 2003, Consultant News carried a response to the August 2002 call, noting the existing standards of the AICPA, and that lawyers had successfully defended consultants and their firms based on these standards. 6. MC News (November 2004) carried an interview regarding professional standard in management consulting in their internet base column. The current (March 2006) issue of C2M carried two articles – one regarding SSMCS and the other about legal pitfalls facing management consultants. Having provided a cursory review of the history of “standards” in our profession as well as discussed the climate during the past several years, let us now turn to a review of five questions asked by the IMC USA Executive Committee regarding “standards” by email on June 4, 2004. Following are those questions, and updated response thereto:
Question 1. Purpose of the standards? a) A prime purpose is to lead our profession to the next level; joining other significant professions (law, accounting, engineering, architecture, medicine, etc.), all of which have stated standards. b) To protect individual management consultants as well as our clients by defining the roles of each. c) To define for the reviewer of any dispute between client and consultant, the agreed upon scope of work between the parties. d) To preempt political bodies from identifying consulting services billings as a new source of tax revenue. e) Finally, SSMCS fulfills stated objectives of the founders of IMC USA.
Question 2. How do we use these? a) When adopted by IMC USA, SSMCS should be announced to all professional journals, business publications, and news’ media of expanded types. It is IMC USA recognizing today’s need for Standards and our leading the consulting profession by developing them. b) As SSMCS is the stated outgrowth of our long standing Code of Ethics, etc., SSMCS should be prominently displayed on our Web Site and in our literature. c) Since SSMCS applies to all CMCs and Management Consultants providing Consulting Services as defined therein, IMC USA should use SSMCS in recruiting and in training. d) IMC USA has given much to the consulting profession since our inception in 1968: certification (CMC), the Journal of Management Consulting (now C2M), the Fellow recognition, many training courses, CONFAB, ICMCI, to name but a few. However, we have not given anything to the profession for a long, long time. Adopting SSMCS would be a significant return to giving something to the profession as well as repositioning IMC USA as the national leader. e) Individual management consultants involved in a client dispute can use SSMCS to preempt law suits as well as in dispute resolution.
Question 3. What is the benefit to the individual member? a) SSMCS raises the value of IMC USA to each CMC and member by taking our wide-ranging profession to the next level. b) Having SSMCS adopted by IMC USA differentiates our organization from the several splinter associations which compete for members and for recognition. c) The member belongs to an association which serves our clients and our profession as the national leader in recognizable ways.
Question 4. What case examples are available regarding management consultants enmeshed in a problem due to the lack of a set of standards? a) Mississippi State Tax Commission v. American Management Systems, Inc., River Oaks Furniture v. BDO Siedman LLP, et al., and W. W. Chamberlain v. Northwest Airlines. It may be of interest that Chamberlain was a CMC at the time of this case and won his case. SSCS-1 was employed in the BDO case by their expert witness. BDO prevailed in that matter. b) Several were cited by Business Week/July 17, 2000. c) There are many other cases whose specific captions are not known to me. Question 5. What differences and similarities are there between a Code of Ethics, a Code of Professional Conduct, and Standards? a) SSMCS is based our IMC USA Code of Ethics and Code of Professional Conduct. The Code of Ethics is referenced in Paragraphs No. 3, 8, 10, and 11, of SSMCS. b) The Code of Professional Conduct is referred to in Paragraph No. 5 of SSMCS. c) Our Codes, like similar codes of other professions and associations, are not recognized by the courts. As a result, they do not protect the consulting practitioner or the client. Standards protect both. This fact is a significant difference. c) SSMCS is the natural outgrowth of our Code of Ethics, Code of Professional Conduct as well as the Common Body of Knowledge. You should not be surprised to find similarities.
Recap of SSMCS: • SSMCS contains 13 substantive paragraphs, a 14th paragraph noting the effective date, and four (4) footnotes. • Footnotes define Integrity, Objectivity, Independence, and Conflict of Interest. • The first five paragraphs (1. to 6.) provide a brief history of management consulting and our various national and international organizations. • Paragraph seven (7.) applies SSMCS to “. . . all CMCs and management consultants providing Consulting Services as defined herein.” • Paragraph eight (8.) defines the roles of the consultant and the client in a management consulting services’ engagement. • Paragraph none (9.) limits the nature and scope of work to the agreement between the parties. • Paragraph ten (10.) beginning on page two of SSMCS defines Management Consultant/Consulting Services Practitioner, Consulting Process, and continues on pages three and four with the definition of Consulting Services. • Paragraph eleven (11.) begins with the third reference to the IMC USA Code of Ethics and follows with general standards which apply to all Consulting Services performed by management consultants. • Paragraph twelve (12.) lists general standards all Consulting Services addressing valid limitations which may be placed on the consultant and references the Code of Ethics for the fourth time. • Paragraph thirteen (13.) discusses professional judgment and its application to SSMCS. • Paragraph fourteen (14.) notes the effective date as well as the date of adoption by IMC USA. This paper is intended to update IMC USA on SSMCS and provide the nexus for adoption by the Board of Directors.
Jack Chapin CMC, FIMC,
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