The Origins of Modern Management Consulting

In 1993, AT&T spent more on management consulting services than on corporate research and development, and AT&T is not alone [8, p. 60], Wall Street analysts expect billings for consulting services to advance at twice the rate of corporate revenues over the next decade. Yet, despite the size, growth, and influence of consulting firms, business historians have remained uncharacteristically silent about the origins, development, and impact of management consulting, or "management engineering" as it was known before the Second World War.2 In this paper, I will describe the professional origins of management consulting firms at the turn of the century and discuss why, after slow, gradual growth through the 1920s, these firms took off during the 1930s. I argue (1) that historians have wrongly assumed that management consulting arose directly out of Taylorism, (2) that engineers, accountants, and lawyers, often supervised by merchant bankers, provided counsel that later became the primary repertoire of management consultants, and (3) that the legal separation of investment and commercial banking in 1933 drove the rapid professionalization and growth of management consulting during the Great Depression. Recent historians of scientific management, including Daniel Nelson, Stephen Waring, and Judith Merkle, have traced the impact of Taylorism on contemporary institutions as diverse as business education, public administration, and British industry long after the Progressive-era craze for "efficiency" ended [29, 36, 26]. The proponents of scientific management, Frederick Taylor, Henry Gantt, Morris Cooke, Frank and Lillian Gilbreth, and Harrington Emerson, consulted with nearly 200 businesses on ways to systematize the activities of their workers through the application of wage incentives, time-motion studies, and industrial psychology [29, p. 11]. Naturally then, historians of Taylorism have assumed that they could describe contemporary practitioners of "industrial engineering," "production