The most infamous management consultant of all time will most likely forever remain Edward Snowden, who leaked probably the largest volume of US secrets ever whilst working at the National Security Agency (NSA). Recall that it was the Edward Snowden leaks in 2013 that led to the public realisation that the US was unofficially spying not only on individuals under suspicion, but on everyone they could through various surveillance programs.
Few people outside of the business of management consulting realise that Edward Snowden was not, in fact, an NSA employee – but was a Booz Allen Hamilton consultant (Booz Allen Hamilton being a management consulting firm known particularly for its government services work). It is somewhat surprising that even the most secretive of official spy organisations in modern history would use external consultants. Yet, it is even more astounding that an external consultant to the NSA would have access and be privy to America’s most tightly-held secrets.
Irrespective of what one thinks of Edward Snowden, and irrespective of whether one agrees that the behaviour of the US government in spying wantonly and relentlessly on its own people, as well as on foreign leaders, warranted Snowden’s enormous and embarrassing information leak; his ability to do so – to access such confidential information – as a contractor, is telling. It is imperative to understand this, for it is the perpetuation of a new way of working globally, rather than an idiosyncratic case, that enabled Snowden to steal so much high-security information.
Quoting at length from the Vanity Fair article on Snowden from their May 2014 issue, another disgruntled NSA official who turned on the agency, Thomas Drake, had this to say: “The culture of contractors is one of huge elephants in the room. Because 9/11 just opened up the floodgates. We have always had contractors in the government. We’ve even had contractors in intelligence, but historically it tended to be much more circumscribed. What were historically considered government functions only are essentially being outsourced, contracted, to private industry, who are focused on how much money they can make, on shares, on revenue streams. It’s a profit centre.”
Whilst this may sound like an indictment on the use of consultants in government, and in the intelligence community in particular, one needs to remember that the complexity in the systems – software and hardware – required to gather information on the scale demanded after 9/11, was gargantuan. Companies like Booz Allen Hamilton, Dell, IBM, Boeing and Raytheon, all contributed to the effort and were amply rewarded for their work. In fact, the US military even outsourced some of their on-the-ground work in Iraq and Afghanistan to military contracting firms in order to appear to reduce their troop numbers, as well as to perform tasks that they did not wish to perform officially themselves.
The military community and the intelligence community in the US are no different from the Fortune 500 companies in the US, or for that matter anywhere in the world. Large institutions often need assistance in, as the Vanity Fair article so befittingly puts it, “everything an agency could need, from security guards and maintenance staff to satellites and supercomputers”. This new structural work environment, in which significantly important pieces of the overall mission are outsourced to consulting firms, is no longer unusual at all. In the UK banking environment, for example, an enormous proportion of those working on Basel projects or on Anti-Money Laundering (AML) projects, or on other mission-critical pieces of regulatory work, are contractors. This means that they are not formally employed by the banking institution, they can be fired at any time, and they are remunerated on an hourly or daily basis. They do not receive sick leave, there is no company culture to speak of, and there certainly is no Christmas party.
The firms that do employ contractors do so for low margins and they do so in volumes. Whilst this way of acquiring key skills at a moment’s notice does offer efficiency rewards and does allow banks to apparently run leaner, the agency problem rears its head. It is not illogical, for example, to contemplate that a project manager contracted to implement a Basel III liquidity risk measurement and reporting system at a bank – who is employed under a contract arrangement remunerated on a daily basis – would not be overly stressed, should a time extension eventuate out of some kind of technical delay. In fact, purely on a commercial basis, this would suit the project manager in question.
The agency problem is defined as the conflict of interest that is inherent in any relationship where one party is expected to act in another’s best interest. The greater the degree to which the firm separates itself from its own workers, the greater the risk of the agency problem arising. In the new world order, in which technology has made it possible for work to be performed remotely, in which teams can be made up of people who never meet, and in which actual meetings take place on behalf of an organisation in which only contractors and consultants are present, the agency problem can become detrimental not only to organisational efficiency, but also to the people doing the work.
It is important to consider the effects of the agency problem on efficiency within an organisation. But, in observing the Edward Snowden case, it is also worth considering the effects of the agency problem on individual ethical behaviour, especially in making the distinction between employees of an organisation, contractors to the organisation, and consultants brought in to complete a specific piece of work. To many, this distinction between consulting and contracting must seem like splitting hairs. After all, if one works for Booz Allen Hamilton – which calls itself a management consulting firm – then one must be a consultant. But the pasting on of a veneer of company culture will not for a moment distract from the fact that Edward Snowden was contracted to the NSA, for a substantial stretch of time, and was part and parcel of the NSA infrastructure. In fact, his security clearance was specifically high because he was responsible for network security. And, irrespective of how he was remunerated, he believed that he was an NSA man. In fact, it was his conviction that he was working for an unethical organisation that led him to expose what the NSA was doing, that drove him to divulge its most cherished secrets.
But, there is a distinction to be made. For, in a consulting firm, consultants are clearly remunerated on their ability to deliver, rather than on their ability to burn hours. Consultants are trained together to work under pressure in team environments, rather than working alone in disjointed open-plan offices with no connection to their employing firm. There exists a sense of responsibility to the project, in a consulting environment, and to one’s peers, rather than to a timesheet. These are the characteristics that can distinguish consulting from contracting, and in so doing, limit to some degree the agency problem within the target organisation.
It is imperative to realise that whilst there will always exist the agency problem in the world of consulting, the agency problem in the world of contracting is at its most severe. Had Edward Snowden been a member of a Booz Allen Hamilton team, and had that team been managed to deliver, rather than simply provide a stand-in set of skills, then he may have gone to his consulting peers, or to his consulting partner, to confess his moral urge to expose America’s desire to spy on people on a mass basis. Nevertheless, irrespective of what Edward Snowden would have done, his firm Booz Allen Hamilton was ultimately not held responsible for his actions. And this is really the most significant difference between consulting and contracting. A consulting firm will take responsibility for the actions of its consultants; and a contracting firm, profiting from hours on a timesheet alone, will not.