Management consulting

1.5Evolving concepts and scope of management consulting

It is important to be aware of some dilemmas in the nature and purpose of management consulting and to understand how they are reflected in evolving consulting concepts and practices.

Advice or results?

We have shown that consultants are advisers and remain in this position except when they are recruited by clients to become temporary members of staff. Advisers have no authority to make decisions about a client’s business and their influence has limits. The assignment may be too short and understaffed to produce tangible results, the client may be unwilling to follow the advice given, staff may not collaborate or their resistance and inertia may be too strong, or the consultant may be unavailable for follow-up and debugging. Even the soundest advice alone cannot provide absolute assurance that there will be tangible, measurable, and sustainable results.

There is therefore a growing tendency to use consultants for more than providing advice. “Advice” tends to be defined more and more loosely and liberally, and consultants are increasingly viewed as assistants, helpers, service providers or even service brokers who work with clients on various issues for as long as necessary to make sure that tangible and measurable results are achieved. Also, consultant remuneration tends to be increasingly related to results, rather than to time spent on providing advice. Clients would be wise not to get bogged down in vaguely defined time-based assignments with unclear consultant responsibilities and uncertain results. In large and expensive projects, which are often focused on management systems and information technology, clients need to have safeguards against escalating costs, low reliability and failure to meet set parameters and promised performances. Consultants may be offered roles and positions likely to increase their impact on results or to give them more authority and responsibility for achieving certain results in client organizations. New ways of remunerating consultants have become widespread, including equity and stock options (see Chapters 30 and 36). In this way the consultant is clearly accepting to be dependent on the wider and longer-term business results and prosperity of the client, sometimes even beyond the scope of improvements that can be attributed to the consultant’s intervention.

Management consulting, business consulting, or any consulting?

Traditionally the scope of the services offered by management consultants was confined to functions, subjects and problems regarded as part of management,

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Nature and purpose of management consulting

although the scope of “management” has never been fully and accurately defined. Management consultants were keen to stick to their business and maintain their identity, and most of them were not particularly seeking to broaden their services and explore new territory.

Over recent decades this attitude has changed dramatically, and in several directions, both in management consulting and in other professional services. Management consultants have started to rethink and redefine their business, widening and enhancing their service offerings, merging or establishing alliances with other consultants and professional service firms, and abandoning self-imposed restrictions on the sort of work they are prepared to undertake.

These changes have been triggered by a number of factors, including the growing complexity and sophistication of doing business in national and international environments, market deregulation and liberalization, new opportunities for innovative consulting, growing demand for integrated and “one-stop” professional services, competitive pressure coming from other professions and, above all, the advancement of information technologies and their rapid penetration into management and business processes. In using consulting and other professional services the clients are asking “what will add value to my business”, and the service providers must inevitably adopt the same perspective.

In this new environment, some consultants have felt the need to stress that their field of activity is no longer management consulting (narrowly and rigidly defined), but business consulting (a wider concept and service portfolio) or consulting to management, consulting to business or organizational consulting (more open concepts permitting the service portfolio to be easily adjusted as opportunities and demands change).

Consulting coupled with other business?

The information technology giant IBM is often mentioned as a pioneer of a new approach, where management and business consulting is provided by a manufacturer, a software house, an investment bank or another business entity. Traditionally a leading supplier of office and computer hardware, IBM decided in the early 1990s to position itself as a provider of systems and services to clients. This included management consulting alongside IT services. IBM thus became the first large manufacturer and IT service provider with important management consulting services. In 2000, IBM had 50,000 consultants on its payroll and was one of the largest consulting firms in the world. Many other firms in manufacturing, utilities, finance or professional services have adopted a similar strategy and have included integrated management and business consulting (often called management services) in their offer to clients, with considerable success.

The reasons for this success are similar to those mentioned above. Clients that choose these service providers are seeking a complete, integrated and firsthand service in combination with know-how about the latest technology and the sector in general. They may be less concerned about independence and potential conflict of interest, e.g. if a consultant quite naturally suggests software or

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Management consulting

hardware made by his or her employer, or if a consultant coming from the same industry sector is in some way related to the client’s competitors in the sector.

Commoditization

Commoditization is a common trend in professional services and is currently very pronounced in management, business and IT services. Rather than identifying needs, devising a solution and implementing a new and “tailor-made” system for every client, a consulting firm has a range of products that are offered to all clients (or categories of clients). Advice and know-how are turned into a commodity. The client can choose among standard offerings “off the shelf” – diagnostic instruments, change and project management programmes, training and selfdevelopment packages, production control systems, enterprise resource planning (ERP) or customer relationship management (CRM) systems, e-business or knowledge management software and so on. These products may be the result of the consultant firm’s own research and development and based on its own work experience, or the consultant may have acquired the product from another firm, or be distributing and using it under a licensing agreement.

Commoditization of methods and systems is currently a feature of knowledge management and transfer. It responds to demands from clients, who want to get the best (or at least a good and easily applicable) system, methodology or approach at an affordable price, within reasonable time limits, and with a guarantee of applicability and standard performance. This is what the commoditized professional services aim to provide.

Conversely, the client accepts that the solution will not be unique, may have features that he or she does not need, and will be quite widely used, hence also by competitors. Indeed, most commoditized products cannot provide any distinct competitive advantage. Rather the risk is that a client will be disadvantaged by not following the trend and not buying a product that has become commonly used by his or her competitors.

Professional service providers who have commoditized their knowledge enjoy an enormous business advantage – if the product is in demand and sells well. They can serve large numbers of clients. Clients who would not consider buying a tailor-made solution for their organization may easily become interested in a standard product. Instead of using experienced and highly competent consultants for each assignment, the consulting firm can develop standard procedures for delivering standard products, and hence use more junior and less experienced staff, and cut the price. The spectacular growth of IT and e-business consultancies (discussed in Chapter 2) would not have been possible without considerable service standardization and commoditization.

Outsourcing

Outsourced services are activities that the client previously carried out within its normal structure and resources, but now chooses to contract out to a

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Nature and purpose of management consulting

consultant or another service provider. By branching out into new service areas, management consultants behave in the same way as other professions do – looking for new markets and opportunities and aiming to satisfy their clients’ demand for new, innovative and complementary services. The factors that may influence them in deciding to enter other fields of business service are:

●benefit to clients (Will the client appreciate such a service and will the service be really helpful to the client?);

●technical (Do we have the technical capacity and will the new service be synergetic with what we are already doing for the client?);

●legal (Does legalization allow a new service to be combined with the consultant’s current service portfolio within the same organization?);

●ethical (Is it appropriate for a management consultant to operate such a service and will no conflict of interest or other ethical problem arise?);

●commercial (Is the new service profitable and a potential source of future income?).

Outsourcing has been transforming the shape of the consulting sector. It has been greatly facilitated and boosted by the new information and telecommunication technologies, which permit software and application service providers to be accessed via the Internet (see Chapters 16 and 22). More and more business and management processes and functions are regarded as suitable for outsourcing, and many developments in IT focus on enlarging the scope and enhancing the efficiency of outsourcing. These developments cover issues such as reliability, confidentiality, speed of data transfer, worldwide access to business information, etc. In addition to the direct provision of outsourced services, new opportunities for consultants are created by the need to select and evaluate systems and providers of outsourcing, identify and modernize processes to be outsourced, assist with organizational and other changes connected with outsourcing, manage and control outsourced services, integrate services outsourced to different providers, etc.

In larger IT and management consulting firms, outsourcing has become the fastest-growing area of service and an indispensable source of stable and longterm income. This reflects the fact that the consulting firm may be better equipped to carry out certain activities, which it can perform more efficiently and economically than the client while keeping up to date with advances in the field. It also reflects new ways of doing business and managing knowledge, in which clients focus on their core business and use intellectual capital and financial resources in areas of their principal strength.

1F. Steele: Consulting for organizational change (Amherst, MA, University of Massachusetts Press, 1975), p. 3.

2P. Block: Flawless consulting: A guide to getting your expertise used (San Francisco, CA, Jossey-Bass/Pfeiffer, 2nd ed., 2000), pp. xvi and 2.

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3L. E. Greiner and R. O. Metzger: Consulting to management (Englewood Cliffs, NJ, Prentice-Hall, 1983), p. 7.

4See www.icmci.org., visited on 19 March 2002.

5P. Drucker: “Why management consultants”, in Perspectives (Boston, MA, The Boston Consulting Group), No. 243, 1981.

6Ibid.

7See G. M. Bellman: Getting things done when you are not in charge (San Francisco, CA, Berrett-Koehler, 1992).

8P. Stroh: “Purposeful consulting”, in Organizational Dynamics (New York, American Management Association), Autumn 1987, pp. 49–67.

9G. Nadler and S. Hibino: Breakthrough thinking: The seven principles of creative problem solving (Rocklin, CA, Prima Publishing, 1994), p. 128. See also Stroh, op. cit.

10Nadler and Hibino, op. cit. p. 149.

11Frequently referred to is the Kolb–Frohman model, which includes the following seven phases: scouting, entry, diagnosis, planning, action, evaluation, termination. See D. A. Kolb and A. L. Frohman: “An organization development approach to consulting”, in Sloan Management Review, Vol. 12, No. 1, Fall 1970.

12For example, framework contracts with consultants are used by the European Union in technical assistance programmes.

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