Client Wins Lawsuit Against Management Consulting Firm For Giving Inept Advice

["Jonathan Siegel" <jmsiegel.info.research@worldnet.att.net>]

That you might be interested in this court case, at

http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=01-3095

It was just decided. It's a rare case where a company sued a management
consulting firm for giving inept management advice - and won. 

Here's an excerpt from Chief Judge Posner's summary of the evidence.
Does any of the advice the firm gave, or its consequences, sound
familiar?

The 33 weeks ended in August of 1997,
but (we are now summarizing the evidence
developed at trial, construed as
favorably to Rexnord as the record
permits) the promised $4 million savings
had not yet been achieved and DBA chose
to continue working. Why had the savings
not materialized? Well, DBA had
recommended that Rexnord reduce the
number of its workers in certain
departments, and Rexnord had complied.
But the recommendation had proved to be a
bad one, so DBA had changed course and
recommended that workers be moved into
those departments from other departments.
When this failed too, DBA had changed
course once again and urged Rexnord to
hire a number of new employees, which
Rexnord did. These about-faces in
personnel policy caused the morale
ofRexnord's employees to plummet, and in
August more than half the employees could
be seen wearing T-shirts emblazoned
"DON'T MISMANAGE OUR JOBS AWAY," with the
letters D, B, and A emphasized. Turnover
among both supervisors and workers had
soared, causing impaired productivity and
additional severance and recruitment
expenses. The company lost business and
market share, customers were permanently
lost, profits fell, rework and scrap
increased, overtime increased, delivery
reliability deteriorated. All these were
consequences of the disruptive effects of
DBA's inept recommendations regarding
staffing; and the poor quality and
defective implementation of the
recommendations could be traced in turn
to breaches by DBA of specific promises
in the Proposal, such as the promise to
install a management operating system
that would determine optimal staffing
requirements and the promise to train
supervisors and employees in the new
systems. (DBA objected to a number of
Rexnord's damages exhibits on the ground
that Rexnord had failed to prove a causal
relation between breach and damages; but
this just is not so.)

I wonder what consequences this case will have, and if there will be
others like it. Will management consulting firms be so quick to
recommend layoffs as the solution to all problems if they can be exposed
to liability for the consequences?

Jonathan Siegel