Management Consulting Today and Tomorrow

Perspectives and Advice from Leading Experts

Flemming Poulfelt, Thomas H. Olson, Flemming Poulfelt, Thomas H. Olson

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781317300571
• Topic: Business
• Subtopic: Business General
• Index: Business

This new edition gathers more than 22 experts to outline the theory behind consulting, providing insight into change processes and management issues in the field. The business of consulting has grown faster than most other businesses, due not only to increased demand by clients, but also to the innovative capabilities of numerous consulting firms as they develop new services.

Divided into six parts, the book introduces readers to the consulting industry, addressing the major practice areas, contexts, and implementations of the field. Significant updates detail the effect of the economic troubles between 2004 and 2010 and then 2010 and now; analyze the market response to consulting in recent years; and provide a more thorough understanding of how consulting is applied in the different areas of a business, such as operations, marketing, and finance. Introductions written by the editors offer further insight into the themes and learning goals of each section, helping readers to recognize the elements of a successful consultation, and utilize their new skill set. The text concludes with a look at the future of consulting with regards to ethics standards and how strong manager-client relationships contribute to financial growth. Readers will also learn how the developing field of entrepreneurship creates new economic structures and job opportunities.

Practitioners, consultants, clients, faculty, and students of business and management will learn not only how to consult, but also gain the skills needed to adapt to and lead organizational change, giving them a competitive edge when they enter the field.

Part I
Consulting Industry, Skills, and Professionalism

1 The Changing Global Consulting Industry

(FLEMMING POULFELT, COPENHAGEN BUSINESS SCHOOL AND THOMAS H. OLSON, UNIVERSITY OF SOUTHERN CALIFORNIA UPDATED FROM FLEMMING POULFELT, COPENHAGEN BUSINESS SCHOOL, UNIVERSITY OF SOUTHERN CALIFORNIA, ARVIND BHAMBRI AND LARRY GREINER)

2 Professionalism in Consulting

(DAVID MAISTER)

3 The Marketing and Selling of Consulting Services

(PETER R. GIULIONI, UNIVERSITY OF SOUTHERN CALIFORNIA, UPDATED FROM ROBERT DUBOFF BOSTON COLLEGE)

Introduction

Management consulting has long been in the fast lane of an expansive and straight track that has never seemed to circle back on itself. In Chapter 1, “The Changing Global Consulting Industry,” it makes clear that the business of consulting has grown faster than most other businesses, not only from increased demand by clients, but also from the innovative capabilities of numerous consulting firms as they developed new services. At the end of the last century, the world economy was booming. Everything was moving fast and upwards, seemingly unstoppable. An economic tailwind was apparent as the consulting business rode its tidal wave of success.

However, trees rarely grow into the sky—not even for the consulting industry. In late 2001, a sudden downturn for the industry occurred when a number of negative forces, beginning with the 9/11 tragedy and the Enron and Arthur Andersen debacle, deeply impacted the economies of the world. Chapter 1 describes these changes and how the industry responded with cost cutting, layoffs, and deficits. But beneath these quick fixes, the chapter also points out that a number of transformational forces are still deeply at work within the industry, producing new challenges for firms and for consultants. The industry itself will be transformed over the coming decade.

Major changes stemming from the Internet, social media, information technology, and innovation are likely to continue to significantly alter the face of consulting for the long term. The outsourcing of IT and other services is changing the economic and strategic face of many consulting firms. In addition, clients have become more sophisticated, now expecting their consultants to collaborate rather than to stand apart as lone objective evaluators. Strategic responses from Private and Public Sector consulting firms and companies and their consultants to these many changes will determine their mutual fate in the years ahead. But changes in services, economics, and skills will likely not be enough.

The improprieties in its audit and consulting divisions that led to the demise of Arthur Andersen has brought to the forefront the importance of professionalism and ethical conduct in management consulting. Chapter 2’s focus, “Professionalism in Consulting,” recognizes that the lack of professionalism by a few consultants is able to bring down a whole firm and place a taint on the entire industry. This chapter attempts to define professionalism and how it should be inculcated by firms into the psyches of consultants. The concept of professionalism, in the author’s view, is an ambiguous one that refers to a wide range of skills, attitudes, values, and behavior. He points out that professionalism is a state of mind embedded in the consultant’s individual behavior, and thus is not easily regulated by codes of ethics and industry rules.

The key message of Chapter 2 is that professionalism is nothing a consultant can claim for himself or herself; rather, it’s an adjective that one hopes that clients and colleagues will apply to each other’s behavior. Professionalism, in essence, has to be earned through one’s daily behavior by taking the “high road” to results.

The marketing and competitive positioning of a consulting firm affects not only the success of the firm but its degree of professionalism and even the future of the industry. In Chapter 3, “The Marketing and Selling of Consulting Services,” the authors make clear that without successful marketing, no consulting revenue is forthcoming. The chapter emphasizes that successful consulting requires both effective marketing and exceptional sales skills; one cannot exist without the other. Consulting is a subjective service that is purchased by wary clients who need both persuasion and reassurance when making large expenditures for consulting projects in the millions of dollars. The ethics of consulting marketing require that clients be led to expect a service that can be delivered as promised. Chapter 3 discusses various other issues in marketing and sales, such as the role of market research, compensation and rewards, relationship marketing, public relations, sponsorship, and ethical marketing. Although consulting has become more mature as a business, the underlying theme of the chapter is that professional marketing and sales are still in their youth, searching for maturity.

Taken together, these three chapters provide an important orientation to a dynamic industry, the complex issues facing it, and the required skills that consultants, both neophytes and those with long experience, will need to acquire if they are to succeed. While there are many problems to overcome, the opportunities remain bright. Consulting is an industry making a significant impact far beyond its size, not only for improving the performance of clients but also in developing new knowledge about business and in improving the state of the global economy.

1 The Changing Global Consulting Industry

Flemming Poulfelt and Thomas H. Olson, updated from Flemming Poulfelt, Arvind Bhambri, and Larry Greiner

The Changing Global Consulting Industry was the headline of the chapter on the consulting industry when the book was published originally. Yet the title seems even more relevant to Private Sector, as well as Public Sector, consulting in 2016, as these Sectors are once again undergoing major transformation. In hindsight, we might conclude that consulting is permanently in a state of transition. In fact it needs to be, if a firm wants to present itself as a professional advisor to businesses and Public Sector organizations facing their own need to evolve and change. So it is fitting that consulting firms and practitioners describe themselves as being embedded and engaged in a continuous change process. As we noted in the first edition, “It is not the strongest of the species that survive, not the most intelligent, but the one most responsive to change” (Darwin). This observation is just as valid today.

Our original mapping of the industry and its major challenges still has relevance too, although the context now differs from that of the big market shock at the turn of the millennium – the bursting of the dotcom bubble, 2001 bankruptcy of Enron and ensuing recession, compounded by 9/11/2001, implosion of Arthur Andersen in 2002, and increasing global unrest. All of this hurt the consulting industry across sectors for years, creating a turbulent time of fluctuating revenues and profits. It wasn’t until around 2004–2005 that the industry started to recover: as late as 2003 a consulting magazine cited the continued wait for a market upturn.

But what has been happening since then? What has been the experience of the industry over the last decade, and what are some of the challenges consultancy firms are facing today? The following provides an update.

A Return to Consulting's Heyday

The turbulence experienced by the consulting industry following the economic recession in the early decade of this century wasn’t wholly negative: firms became crisper and clearer in the way they ran their organizations. For example, efficiency had been on the agenda, followed by new development in service offerings to clients. The industry took off again, seeing new high growth rates and an increase in employment. In 2006 and ensuing years consulting business boomed across sectors once more, and many firms assumed something of a ‘walk on the water’ attitude. Growth rates were back to double digits (around 10 percent), new services such as real outsourcing were being introduced, intensive price competition persisted, IT heated up again, and classic services thrived as buzzwords lost credibility. Optimism largely dominated until early 2008 when signs of economic malaise began to appear, as the financial sector started to overheat.

The Global Financial Meltdown

On October 9, 2007, the Dow Jones Industrial Average set a record by closing at 14,047. A year later, it had plunged to just above 8,000, having dropped by 21 percent in the first nine days of October 2008. Major stock markets in other countries had plunged alongside the Dow. Credit markets were nearing paralysis. Companies began to lay off workers in droves and were forced to put off capital investments. Individual consumers were being denied loans for mortgages and college tuition. After the nine-day US stock market plunge, the head of the International Monetary Fund (IMF) had some sobering words, warning that “Intensifying solvency concerns about a number of the largest US-based and European financial institutions [had] pushed the global financial system to the brink of systemic meltdown” (“IMF”).

The explicit trigger was the collapse of the investment bank Lehman Brothers, which filed for bankruptcy on September 15, 2008, initiating a cascade effect across Wall Street and other financial institutions around the world. The ripples were felt across most markets, including the Public Sector. Everyone was hurting. Before long, booming consulting markets turned to doom.

The implications for consulting were tremendous as clients started to cut back. Firms found themselves having to lay people off again, as they took their foot off the accelerator.

The road to recovery would be a long one.

Back on Track

Turning the consulting business around again took time, due to the industry’s dependence on the recovery processes in other markets. But slowly it adapted to the ‘new normal’, fueling positive growth rates, although on a lower level compared to ‘the good old days’.

Taking stock of the consulting industry in the year of 2016 provides the following picture:

Good Times Return

Although not quite enjoying a booming market, consulting has been growing on a healthy trajectory compared to many other industries. On average, the Private Sector consulting industry has seen growth rates in the 5–10 percent range, though with geographical and discipline-related variations. For the Public Sector, and with major synergies and client needs, the grow rate has outstripped the Private Sector for particularly the major companies. This led to the splitting of Private and Public Sector services – with a most notable being the historically older Booz Allen Hamilton. The most recent estimates for revenue in Public Sector note that the US alone spends approximately 600 billion dollars on one of its major clients – quite a large pool of monies for contractors and the Public Sector Consulting / Contactor Industry.

Paradoxically, demand has been going up, yet fees have not. So firms have not been able to rely on the old model of pushing up rates once business picks up; the market’s ability to sustain price hikes can no longer be assumed. For the Public Sector, performance metrics have grown as more the basis for compensation. For the Private Sector, this may well be a result of central procurement departments’ greater involvement, despite consultancy’s associations with knowledge skills and the emphasis on people and relationships. Seemingly this now has less bearing on decision-making processes, which are increasingly based on securing greater value for less money.

Another increasingly common theme being seen in many consulting markets is a rise in tender processes, especially in the Public Sector. In many countries this is an explicit part of the public procurement for tasks above a certain scope.

Commoditization Continues

Private Sector consulting firms have commonly struggled to find the right balance between tailoring a solution to the client versus delivering standardized off-the-shelf solutions. To some degree we have seen a trend towards greater commoditization of services, over developing unique solutions for clients. This might be due to the pressures on pricing, but it could be argued that it also reflects the relatively low rate of innovation in consulting. For Public Sector consult...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Contributors
• PART I Consulting Industry, Skills, and Professionalism
• PART II Major Practice Areas in Consulting
• PART III Consulting in Different Contexts
• PART IV Implementation in Consulting
• PART V Managing and Growing the Consulting Firm
• PART VI Looking Ahead at Management Consulting
• Literature on Management Consulting
• Index