(FORTUNE Magazine) – I worked for a major consulting firm for 22 years, serving scores of FORTUNE 500 companies. Now I've left the business and am an executive myself. My advice to fellow managers when hiring a consultant: Buyer beware.

Management consulting used to be a great business. I got into it because I knew I'd be bored doing the same thing month after month at a big corporation. Part of me, too, liked rubbing elbows with big executives, proving on a semiregular basis that I was smarter than they were--those sorts of character flaws. When I started, there were only a small number of strategy firms like McKinsey and Boston Consulting Group, and most of them did great work. Nobody else in the service business--not bankers, not lawyers, nobody--made as much money or had as much fun as consultants.

But all that's changed now. The money's not what it used to be. For one, the economics of investment banking changed, fees went up, and people in that field started earning much more than consultants. Also, Fortune 500 companies began offering stock options, and today a senior executive can make a lot more than a partner at a consulting firm. That started a stampede out of the business. So many of the good people have left consulting to pursue more lucrative opportunities that the quality of the work has sunk across the board. It just wasn't fun anymore, so I got out.

Why am I writing this confessional? Now that I'm a top executive at a major company, I've become a lot more sympathetic to the plight of managers trying to wend their way through the world of consulting. Yes, there are consultants out there who can do your company a lot of good. But there are also many who don't have your best interests at heart. I want to help you separate one from the other.

To understand how the consulting business really works, you have to look at who drives the demand. On a scale of A to F, most CEOs are C's: They're not the best or the smartest or the most anything. What they generally are is balanced, not overly analytical, not overly humanistic, or really deep as functional experts. They are guys who have moved around and have demonstrated in a variety of circumstances that they can be successful enough, and the key word is "enough." They are average in a world where average can be of tremendous potential value. CEOs know their own limitations, of course, so they think they need consultants to compensate for their failings. Consultants typically are overdeveloped in one particular skill like strategy, organizational design, or technology, and that can make them seem particularly useful to a CEO who isn't a superstar at anything.

But CEOs should be buying results, not skills, and that's where they most often get into trouble. Many consultants are more interested in the problem than they are in the solution. And they underestimate the complexity of moving from identifying the answer to fixing the problem. Consultants don't really understand what it means to do it, and it's a lot easier to say it than it is to do it.

If you want to avoid this pitfall, it helps to know what kind of consultant you're dealing with. There are basically three kinds in the world: minders, grinders, and finders. Most clients have no idea which is which or whom they need when. And that can hurt you. I worked with all three kinds of consultants during my years in the business, and if I were a client, I never would have hired 75% of my colleagues.

First are the grinders, the people you call in if you have a seasonal need or want a problem-specific troop of arms and legs to come in and crank. They are a nano-inch wide but 100 miles deep. For a particular problem that may occur over and over throughout the corporation, having that depth is valuable. A human-resources consultant might be a good example. If you're going to be downsizing or reshifting every so often, it helps to have someone around who knows how to handle the back end--severance, outplacement--over and over again. He can spread that knowledge wherever it's needed in the organization.

But in most circumstances, having someone with that depth with you day in and day out is a waste. These people don't know how to think. They know one thing well, but applying that thing to a situation that's different from the one they're used to is something they don't have any feel for. All they really are are extensions of your calculator.

Minders are the people who have the real expertise and run the consultant teams. They're the ones who deliver all the economic value to the client. If results emerge at all, they will emerge from them. The minders generally have three years' experience at the firm, so they're usually kids, and those kids are under extraordinary pressure to build a lot of hours into the assignment and plant roots at your company. Thus, you can imagine how hard it is for them to muster up the courage to tell you the truth--that you're running your business into the ground. After all, if you don't want to hear it or to do what they suggest to fix it, you'll fire them. Then they won't make partner because they will have lost all those billing hours.

The finders are like rainmakers in law firms--they spend most of their time managing prospective relationships. They're the people who may really have something interesting to say about your organization, and every consulting firm probably has one or two. They are the guys who really drive the franchise. At the same time, though, most consulting firms aren't set up to pay them what they deserve. Sure, they may earn a million bucks a year, but given the business they bring in, they're often worth five or ten times that. So they're the ones who eventually leave. Most of the great talents walk right out the door sooner or later because they know they can make more money doing something else.

An unfortunate subset of the finders is what I call the face-men finders, who talk the talk but can't walk the walk. They have friends from the train or the golf course who get them business at their company. Once they land the business, then in come the young folks who end up running the consulting job. At the end, the face-men finders look at the report, change a few sentences, then front the thing at the final meeting with the client.

It's been so long since many of those face-men finders had to do any real work that they've lost ability to execute. Instead, they hydroplane, jumping across the water, working on many assignments at a time without ever getting their feet wet in any of them and adding value to none. The dynamic is truly scary--having someone who is technically incompetent certifying the competence of the consulting team you're about to hire. Here is this old-timer who for 15 years hasn't done anything, sitting there telling the client that the firm's people are bright and that they have a proprietary understanding that will allow the client to do better. But if he hasn't done any work in over a decade, how can he have any idea whether his team is good at what they do? He can't.

Knowing what kind of consultant you're dealing with is important, but not enough. You also need to know what kind of service you're buying and whether it's right for you and your company. Remember that consulting firms are partnerships, so they're not valued like public companies with crazy multiples that make executives drunk with stock. The only way for consultants at the partner level to make a lot of money is to drive productivity as hard as they can, and the only way to do that is to suck money out of their clients as fast as they can. To do that in an increasingly competitive environment, where price sensitivity has become a much bigger issue, starts to make even the most noble of these guys play the game more for personal gain than for the client's benefit.

Consulting firms have made their money by teaching their young that their job is to cling tenaciously to every client, and that they'll be rewarded and promoted on the basis of their ability to do that. When I was a consultant, I spent more time thinking about what I was going to sell the client next than the problem I was supposed to be fixing. My goal was to stay inside forever.

Thus, our pitch when trying to sell business was pretty simple: Let me show you why I think you're sick, and let me show you how I'll make you well. Consulting is a contrived-demand business; you may not be sick, but a consultant's diagnosis will convince you that you are. Of course, once you're convinced that you're sick, it's certainly in a consultant's best interest to promise to make you well. And the promise of being made well is a very powerful promise. Yet a smart consultant would never sell a truly sick company on an assignment, because a sick company can't pay a big fee. So the challenge is to make a relatively healthy company feel that it is sick or that there is a huge upside associated with the retention of a consultant.

When consultants are pitching business, the "we" in "We promise to make you well" is always an interesting thing. Just because "we" have fixed a company like yours in the past doesn't mean "I," the guy who's pitching your business, was actually a part of it. Six of the people who did that kind of work before may be dead, and the other three have probably left the firm. My old firm is selling my experience even though I am not there, and they are selling it over and over again! It is horrifying to me that no one ever calls me and asks whether the guys who are now out selling my experience can really do the same kind of work that I did.

The bait-and-switch works in other ways too. At one time my firm was doing work for all the top companies in one particular industry. Each time a contract was put up for bid, we would win the business. So the first company got the best team we had, the second guy in got the second-best team we had, and so on. Now, back then our worst team was probably better than the best team any other consulting firm could field, so we kept winning the new business. But were we doing the best work we could have? Not even close. The client who had our worst team working for them had no idea, of course.

Before we even got the business, however, we'd always want to build the client's problem in our own image to the extent we could. Sometimes the client would tell us what other consulting firms we were up against, and other times I'd have my MBAs make calls to their friends at other consulting firms to find out if they were bidding. If I know I'm up against a boutique that doesn't have computer-systems capability, you can be sure that my pitch will be that you have to have new information systems to make the strategy work. And oh, by the way, we're the only guys who can do that. Problem defining is really where all the action is. There was always a huge opportunity for us to spin the business our way.

When negotiating the fee, the first thing we thought about was what it would cost to deliver the answer the way the client wanted it delivered. The second question was what the client could conceivably afford. What had it paid other firms in the past? Was it profitable? How desperate did it seem to get the job done right, no matter how long it took? Sometimes you discount too, just to get in the door. Then, as you begin to do the work, you try to draw a picture of your experience, your team, and how you're just the right firm to fix the problem. The idea is to soften up the client so that, when it comes time for the next assignment, he'll be willing to pay me a premium.

Clients shouldn't be so quick to pay the premium, though, since the quality of the big consulting firms has deteriorated so much. As I've said earlier, the best consultants are leaving to go into investment banking and big corporations. Many of the people who are left behind at the consulting firms are there because they can't get out. So what you have is consultants, sitting in advisory seats, who are not nearly as competent as the people they attempt to advise.

So why do the big strategy shops survive? They survive because there are companies that are consultant junkies. There are probably 150 of those. The consulting firms say that they are focusing now on limiting their client list to a handful of companies with whom they have "quality" long-term relationships. In fact, those firms are simply fishing where the fish are, casting their line at companies where it is part of the fabric of the culture to bring in everybody and his brother on a regular basis to put their stamp of approval on what everybody knew was the right thing to do in the first place.

So who are these addicts? AT&T, American Express--Philip Morris once was--IBM, and some of the big screwed-up media companies. MCA certainly was for a long time, and Fortune's parent, Time Inc., used to be a McKinsey hangout for years. These companies get hooked because it's easy, it's safe, or their management doesn't have confidence in its own troops.

It's also possible that the junkies have simply become comfortable with the idea of outsourcing their thinking. I can understand why they would outsource cafeteria management or file retrieval, but strategy? Organization? If there's a guy at a consulting firm who can build a better strategy for Company X than the CEO, then that guy should be hired as the CEO.

I have problems with the displacement theory of consulting--that consultants are working in lieu of company strategists because of all the downsizing. There are frankly very few really huge strategic bets that companies should be making in the course of a year. Strategies don't change that often, and good ones sure shouldn't. Even in fast-moving industries where the competitive landscape changes a lot, your fundamental strategy shouldn't. Strategy refinement is always in order, but that doesn't take nearly as many people or as long as strategy development.

Most companies think the benefits of consulting include the ability to get things done faster than if they did them in-house. Yes, consultants can do a job faster, but is the six months extra to do it on your own make or break? Most times it isn't. Hiring a consultant can make sense if you need to know something about yourself or your leadership skills that you can't find out on your own because no one will tell you. That is a legitimate use of an outsider, but that's not a multiyear assignment. In other words, make sure there's a very discrete, tangible reason you're bringing somebody in.

Once you've got them inside, I would never give a consultant any of my internal data. You don't want to read about your secrets on the Internet, and you certainly don't want your consultants giving them to your competitors. Instead, the way I would use those guys is as an outside resource, to bring me knowledge and insight, to tell me what they know. But, man, I would not tell them what I know, and I certainly wouldn't tell them what direction my business will head in.

Today, now that I'm on the other side, I don't bring consultants into my company en masse, ever. I bring in individuals on certain occasions to help with some issues. They bring me what I need, but I don't share anything. I don't trust them. Because there is such an explosion of supply, it has turned these guys into opportunists. The "you're my partner" speech is something you should take with a grain of salt. That was one of the things I found personally distressing about the business. Most consultants are more interested in creating value for themselves than they are for their clients.

Someone asked me recently if I would ever return to consulting, and I emitted this involuntary gasp, the strength of which surprised me. There is nothing I can think of that is less appealing than that prospect. When the professional side of this business became so unseemly, where consultants were more interested in their own growth than they were in the client's, I figured, hey, why not grow a real, live company, thank you very much. At least I can look at myself in the mirror and feel good about what I'm doing.

So how clean is my conscience? I never did a job that I didn't believe should be done, but I sold many that should have been done by the client alone. How did I justify that? I needed the billings. I needed to put food on the table for my children, and I figured I'd do a better job than the company could do itself and that I'd get it done faster. But if I was running those companies, I never would have allowed me to do most of the things I did.