An Introduction to Management Consultancy

Marc Baaij

• Publisher: SAGE Publications Ltd
• Year: 2013
• ISBN:
  9781446293508
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Beratung

'I have never seen such a book about management consulting before: this sets a new standard. This book is extremely thorough and addresses all of the relevant topics.' - Sander van ?t Noordende, Group Chief Executive Products Operating Group, Accenture Whether you are looking to build on your management studies or experience of working in business, you are likely to have come across management consultancy and will need a clear and concise introduction to this area to help you understand its practices and techniques in order to hire and implement management consultancy in the future. This text provides you with these essentials for success in your studies and later industries when working with and not just for consultancy firms.

The text is built around learning objectives to empower your understanding of the ?what?, ?how?, ?when? and ?why? at macro and micro levels of management consultancy and its stakeholders, and provides you with engaging real life examples and extra web materials for study.

As well as full courses on management consultancy, this text will be invaluable to your management knowledge and skill-set across strategy, change, analytics, problem-solving, solution implementation and decision-making as applied by the world?s top management consulting firms, such as McKinsey & Company, The Boston Consulting Group, and Bain & Company. Lecturer's resources

• Lecturer's guide
• Teaching notes per chapter
• Answer guidance to end-of-chapter questions in book
• Suggested discussion questions
• Suggested small group assignments
• Suggested small group field project
• Lecture slides
• Option 1: provide all figures of the book on PowerPoint slides
• Option 2: create complete PowerPoint presentations for each chapter
• Exercises
• Exam questions
• Discussion forum

Student resources

• Templates for developing logical structures
• Web resources
• Consultancy publications
• Consultancy web site, career page
• Job application preparation services
• Consultancy institutions

PART 1

THE MANAGEMENT CONSULTANCY PHENOMENON

PART MAP

1 Defining management consultancy

2 Origin and development of management consultancy

3 Reasons, risks, and results of management consultancy

This part sets the scene by investigating what management consultancy is. Management consultancy is a popular term. But what do people actually mean when they speak of management consultancy? Each part of this book is designed to achieve a specific set of learning objectives. After studying the first part, you should be able to:

• Evaluate which professional services belong to the domain of management consultancy and which ones do not (Chapter 1).

• Explain the value propositions and market positions of management consultancy firms in terms of the historical development of the industry (Chapter 2).

• Critically evaluate when it is justified to hire management consultants (Chapters 1 and 3).

• Distinguish clients’ informal reasons for hiring management consultants (Chapter 3).

• Critically reflect upon the impact of management consultants (Chapter 3).

• Determine which type of management consultancy project best fits a specific client’s situation and need (Chapters 1 and 3).

• Critically reflect upon the question of whether or not management consultancy is a profession (Chapters 1 and 3).

CHAPTER 1: DEFINING MANAGEMENT CONSULTANCY

To develop a better understanding of management consultancy, this chapter investigates the distinguishing characteristics of management consultancy. Building on previous definitions of management consultancy, this book proposes a synthesis, which consists of a broad definition and a narrow definition of management consultancy. The chapter also investigates which professional services belong to the domain of management consultancy. Another important question you may ask is: who is responsible for a management consultancy project? This chapter shows how responsibilities between clients and their management consultants may be divided. It reviews the various roles – both the formal and the informal – that management consultants may realize. Finally, the chapter examines whether or not management consultancy is a profession.

CHAPTER 2: ORIGIN AND DEVELOPMENT OF MANAGEMENT CONSULTANCY

The second chapter deals with the history of the management consultancy industry. The key questions answered in this chapter are: where does management consultancy come from and how did the industry evolve over time? This review uncovers patterns in the history of the industry and explores the underlying causes, as well as the consequences. The chapter also explains why many management consultancy firms of the past were replaced by new entrants. The chapter might also have been named: ‘The rise and decline of management consultancy firms’. Last but not least, it discusses the consequences of these historical patterns for today’s management consultancy firms.

CHAPTER 3: REASONS, RISKS, AND RESULTS OF MANAGEMENT CONSULTANCY

The third chapter concentrates on the question: why do managers use consultants? The chapter identifies formal and informal reasons for using management consultants and then discusses whether or not management consultants meet clients’ expectations. The chapter also critically explores the impact of management consultancy on clients, on the clients’ industries, and on the broader, macro-environment. Furthermore, we compare internal and external management consultancy and discuss the main risks of external consultants. The chapter ends with explaining the impact of management consultancy in terms of its worldwide growth.

1

DEFINING MANAGEMENT CONSULTANCY

INTRODUCTION

The central question of this chapter is: what is management consultancy? There are different definitions of what constitutes management consultancy. The roles and effects of consultancy are subject to debate. The management consultancy industry is rather secretive. Its boundaries are ambiguous. Moreover, the industry is heterogeneous in type of firms. The best known management consultancy firms are large, globally operating organizations with strong brand names. However, there are only a few of those firms. Most management consultancy is done in (very) small firms that operate on a national or local scale. Many consultants are sole practitioners. Because most consultancy firms are not (well) known, outsiders may think that management consultancy is only about big global brands.

This chapter examines the key characteristics of management consultancy and reviews several definitions to arrive at a synthesis of definitions. Next, the chapter explores the boundaries between management consultancy and other business services. A case study gives an example of a management consultancy project. The chapter also provides an overview of the formal and informal roles of consultants. Furthermore, the chapter shows how these formal and informal roles are related. After an overview of management consultancy tasks, the chapter compares external management consultancy with the internal variant, and investigates the differences between internal and external consultancy as well as sketching the implications. Finally, for readers interested to develop a deeper understanding, the chapter considers the question whether or not management consultancy is a profession and identifies the benefits as well as barriers against management consultancy as a profession. It closes with a summary, reflective questions, a mini case study, suggestions for further reading, and references.

Main learning objectives

• Critically reflect upon the identity and boundaries of management consultancy.

• Distinguish the functionalist and the critical perspective on management consultancy.

• Understand the differences between existing definitions of management consultancy.

• Identify the distinctive characteristics of management consultancy.

• Distinguish client problems and opportunities that may require management consultancy.

• Understand the tensions in the division of responsibilities between consultants and clients, and the tensions that exist for a consultant who is serving clients in the same sector at the same time.

• Distinguish between different types of consultancy and business services.

• Identify and assess the different roles of management consultancy.

• Understand the differences in terms of roles and benefits between external and internal management consultancy.

• Critically reflect upon the question of whether or not management consultancy is a profession.

OPPOSING PERSPECTIVES ON MANAGEMENT CONSULTANCY

Functionalist perspective

You may ask: what is management consultancy about? Let’s begin with a normative perspective on management consultancy. Management consultants are professional helpers. They create value for their clients, mostly managers of organizations, through providing independent advice. By advising managers on how to improve their organizations, management consultants may also create value for society. A popular analogy of management consultants is the medical doctor. Management consultants like to be compared with medical doctors. In the same way as doctors cure sick patients, management consultants cure ‘sick’ organizations. But management consultants do more than their medical counterparts. Management consultants can also make healthy organizations even better. The mission statements of global management consultancy firms illustrate management consultancies’ ambitions to help clients create value. For instance: ‘Our mission is to help our clientsrealize substantial and sustainable performance improvements’.

Critical perspective

In sharp contrast to this functionalist perspective on management consultancy, stands the perspective displayed in the critical academic literature (for an overview, see Clark and Fincham, 2002). This stream of research argues that management consultancy faces ambiguities over:

• the knowledge that management consultants claim

• what management consultants claim to do with that knowledge

• the claimed results of management consultants (Alvesson, 1993).

According to this critical research, part of management consultancy’s knowledge consists of management fads and fashion that cater to the managerial need for reassurance in a world full of uncertainties (e.g. Kieser, 1997). Because of the difficulties of investigating the effectiveness of management consultancy projects, critical academic studies have not focused on the effect of management consultancy. Instead the critical literature concentrates on the rhetoric of management consultancy. The researchers claim management consultancies use their persuasive power to build legitimacy (e.g. Kieser, 1997; Legge, 2002). In contrast to the academic studies, popular criticism by some journalists and alumni of management consultancies does question the effectiveness of management consultancy. These articles and books typically seek out disastrous failures of consultancy projects to characterize management consultants as, for instance, witchdoctors and con men (e.g. O’Shea and Madigan, 1997; Pinault, 2000). It should be acknowledged that most – if not all – of these texts are anecdotal and are based on subjective interpretations of the authors’ personal experiences.

Comparing perspectives

Which perspective is correct? Are management consultants like doctors, or are they masters of rhetoric, or maybe even witchdoctors? As in most cases, the real world picture is not black or white. Looking at the management consultancy industry does not provide an answer to this question. The spectrum of firms that call themselves management consultanties is rather broad. It includes the global top tier management consultancies, such as McKinsey & Company, which advise chief executive officers on strategy but it also includes the advisory services units of the big accountancy firms, such as Deloitte, and the consultancy arms of the big technology firms, such as Accenture. Furthermore, there are many small- and medium-sized management consultancy firms that operate locally or nationally. Some niche players with high-level expertise in a specific domain, for instance mergers and acquisitions, may even operate on a global scale. Finally, the number of sole practitioner management consultants is growing. This chapter explores the distinctive characteristics, roles, and responsibilities of management consultants. Chapter 3 looks at the effects of management consultancy on clients and the broader environment.

CHARACTERISTICS OF MANAGEMENT CONSULTANCY

Management consultancy is a service

To understand what management consultancy is, let’s take a closer look at the distinctive characteristics of management consultancy. Management consultancy is a service. This has several implications. Being a service, management consultancy is intangible. There are no physical features that can be displayed or communicated. Typically the tangible outputs are the consultants’ reports and PowerPoint presentations. The product of management consultancy is an intangible experience, which cannot be owned (Bowen and Schneider, 1988). However, in specific consultancy projects, such as cost reductions, the impact of consultancy is immediately measurable and therefore tangible. In fact, increasingly clients demand so-called contingent projects where (part of) the fees will be directly related to the achieved results. The fee may for instance be a percentage of the operational expense reduction.

Moreover, the creation and consumption of management consultancy take place simultaneously and are inseparable (Bowen and Cummings, 1990). The relationship between management consultants and clients is the medium of service delivery. The clients of the management consultant play an important role in both the consumption and creation of management consultancy (Argote, 1982). Management consultancy may be perceived as a form of ‘co-creation’. Therefore, management consultants are heavily reliant on intimate access to their client’s organization for knowledge. Moreover, as a service, management consultancy is perishable. It cannot be stored. Management consultancy is about utilization of the capacity of the consultancy staff. Although management consultancy is highly labour-intensive, there are opportunities for leverage and scalability. Procedures and software – for consultancy – enable levera...