- •In praise of the fourth edition
- •CONTENTS
- •FOREWORD
- •The concept of consulting
- •Purpose of the book
- •Terminology
- •Plan of the book
- •ABBREVIATIONS AND ACRONYMS
- •1.1 What is consulting?
- •Box 1.1 On giving and receiving advice
- •1.2 Why are consultants used? Five generic purposes
- •Figure 1.1 Generic consulting purposes
- •Box 1.2 Define the purpose, not the problem
- •1.3 How are consultants used? Ten principal ways
- •Box 1.3 Should consultants justify management decisions?
- •1.4 The consulting process
- •Figure 1.2 Phases of the consulting process
- •1.5 Evolving concepts and scope of management consulting
- •2 THE CONSULTING INDUSTRY
- •2.1 A historical perspective
- •2.2 The current consulting scene
- •2.3 Range of services provided
- •2.4 Generalist and specialist services
- •2.5 Main types of consulting organization
- •2.6 Internal consultants
- •2.7 Management consulting and other professions
- •Figure 2.1 Professional service infrastructure
- •2.8 Management consulting, training and research
- •Box 2.1 Factors differentiating research and consulting
- •3.1 Defining expectations and roles
- •Box 3.1 What it feels like to be a buyer
- •3.2 The client and the consultant systems
- •Box 3.2 Various categories of clients within a client system
- •Box 3.3 Attributes of trusted advisers
- •3.4 Behavioural roles of the consultant
- •Box 3.4 Why process consultation must be a part of every consultation
- •3.5 Further refinement of the role concept
- •3.6 Methods of influencing the client system
- •3.7 Counselling and coaching as tools of consulting
- •Box 3.5 The ICF on coaching and consulting
- •4 CONSULTING AND CHANGE
- •4.1 Understanding the nature of change
- •Figure 4.1 Time span and level of difficulty involved for various levels of change
- •Box 4.1 Which change comes first?
- •Box 4.2 Reasons for resistance to change
- •4.2 How organizations approach change
- •Box 4.3 What is addressed in planning change?
- •Box 4.4 Ten overlapping management styles, from no participation to complete participation
- •4.3 Gaining support for change
- •4.4 Managing conflict
- •Box 4.5 How to manage conflict
- •4.5 Structural arrangements and interventions for assisting change
- •5 CONSULTING AND CULTURE
- •5.1 Understanding and respecting culture
- •Box 5.1 What do we mean by culture?
- •5.2 Levels of culture
- •Box 5.2 Cultural factors affecting management
- •Box 5.3 Japanese culture and management consulting
- •Box 5.4 Cultural values and norms in organizations
- •5.3 Facing culture in consulting assignments
- •Box 5.5 Characteristics of “high-tech” company cultures
- •6.1 Is management consulting a profession?
- •6.2 The professional approach
- •Box 6.1 The power of the professional adviser
- •Box 6.2 Is there conflict of interest? Test your value system.
- •Box 6.3 On audit and consulting
- •6.3 Professional associations and codes of conduct
- •6.4 Certification and licensing
- •Box 6.4 International model for consultant certification (CMC)
- •6.5 Legal liability and professional responsibility
- •7 ENTRY
- •7.1 Initial contacts
- •Box 7.1 What a buyer looks for
- •7.2 Preliminary problem diagnosis
- •Figure 7.1 The consultant’s approach to a management survey
- •Box 7.2 Information materials for preliminary surveys
- •7.3 Terms of reference
- •Box 7.3 Terms of reference – checklist
- •7.4 Assignment strategy and plan
- •Box 7.4 Concepts and terms used in international technical cooperation projects
- •7.5 Proposal to the client
- •7.6 The consulting contract
- •Box 7.5 Confidential information on the client organization
- •Box 7.6 What to cover in a contract – checklist
- •8 DIAGNOSIS
- •8.1 Conceptual framework of diagnosis
- •8.2 Diagnosing purposes and problems
- •Box 8.1 The focus purpose – an example
- •Box 8.2 Issues in problem identification
- •8.3 Defining necessary facts
- •8.4 Sources and ways of obtaining facts
- •Box 8.3 Principles of effective interviewing
- •8.5 Data analysis
- •Box 8.4 Cultural factors in data-gathering – some examples
- •Box 8.5 Difficulties and pitfalls of causal analysis
- •Figure 8.1 Force-field analysis
- •Figure 8.2 Various bases for comparison
- •8.6 Feedback to the client
- •9 ACTION PLANNING
- •9.1 Searching for possible solutions
- •Box 9.1 Checklist of preliminary considerations
- •Box 9.2 Variables for developing new forms of transport
- •9.2 Developing and evaluating alternatives
- •Box 9.3 Searching for an ideal solution – three checklists
- •9.3 Presenting action proposals to the client
- •10 IMPLEMENTATION
- •10.1 The consultant’s role in implementation
- •10.2 Planning and monitoring implementation
- •10.3 Training and developing client staff
- •10.4 Some tactical guidelines for introducing changes in work methods
- •Figure 10.1 Comparison of the effects on eventual performance when using individualized versus conformed initial approaches
- •Figure 10.2 Comparison of spaced practice with a continuous or massed practice approach in terms of performance
- •Figure 10.3 Generalized illustration of the high points in attention level of a captive audience
- •10.5 Maintenance and control of the new practice
- •11.1 Time for withdrawal
- •11.2 Evaluation
- •11.3 Follow-up
- •11.4 Final reporting
- •12.1 Nature and scope of consulting in corporate strategy and general management
- •12.2 Corporate strategy
- •12.3 Processes, systems and structures
- •12.4 Corporate culture and management style
- •12.5 Corporate governance
- •13.1 The developing role of information technology
- •13.2 Scope and special features of IT consulting
- •13.3 An overall model of information systems consulting
- •Figure 13.1 A model of IT consulting
- •Figure 13.2 An IT systems portfolio
- •13.4 Quality of information systems
- •13.5 The providers of IT consulting services
- •Box 13.1 Choosing an IT consultant
- •13.6 Managing an IT consulting project
- •13.7 IT consulting to small businesses
- •13.8 Future perspectives
- •14.1 Creating value
- •14.2 The basic tools
- •14.3 Working capital and liquidity management
- •14.4 Capital structure and the financial markets
- •14.5 Mergers and acquisitions
- •14.6 Finance and operations: capital investment analysis
- •14.7 Accounting systems and budgetary control
- •14.8 Financial management under inflation
- •15.1 The marketing strategy level
- •15.2 Marketing operations
- •15.3 Consulting in commercial enterprises
- •15.4 International marketing
- •15.5 Physical distribution
- •15.6 Public relations
- •16 CONSULTING IN E-BUSINESS
- •16.1 The scope of e-business consulting
- •Figure 16.1 Classification of the connected relationship
- •Box 16.1 British Telecom entering new markets
- •Box 16.2 Pricing models
- •Box 16.3 EasyRentaCar.com breaks the industry rules
- •Box 16.4 The ThomasCook.com story
- •16.4 Dot.com organizations
- •16.5 Internet research
- •17.1 Developing an operations strategy
- •Box 17.1 Performance criteria of operations
- •Box 17.2 Major types of manufacturing choice
- •17.2 The product perspective
- •Box 17.3 Central themes in ineffective and effective development projects
- •17.3 The process perspective
- •17.4 The human aspects of operations
- •18.1 The changing nature of the personnel function
- •18.2 Policies, practices and the human resource audit
- •Box 18.1 The human resource audit (data for the past 12 months)
- •18.3 Human resource planning
- •18.4 Recruitment and selection
- •18.5 Motivation and remuneration
- •18.6 Human resource development
- •18.7 Labour–management relations
- •18.8 New areas and issues
- •Box 18.2 Current issues in Japanese human resource management
- •Box 18.3 Current issues in European HR management
- •19.1 Managing in the knowledge economy
- •Figure 19.1 Knowledge: a key resource of the post-industrial area
- •19.2 Knowledge-based value creation
- •Figure 19.2 The competence ladder
- •Figure 19.3 Four modes of knowledge transformation
- •Figure 19.4 Components of intellectual capital
- •Figure 19.5 What is your strategy to manage knowledge?
- •19.3 Developing a knowledge organization
- •Figure 19.6 Implementation paths for knowledge management
- •Box 19.1 The Siemens Business Services knowledge management framework
- •20.1 Shifts in productivity concepts, factors and conditions
- •Figure 20.1 An integrated model of productivity factors
- •Figure 20.2 A results-oriented human resource development cycle
- •20.2 Productivity and performance measurement
- •Figure 20.3 The contribution of productivity to profits
- •20.3 Approaches and strategies to improve productivity
- •Figure 20.4 Kaizen building-blocks
- •Box 20.1 Green productivity practices
- •Figure 20.5 Nokia’s corporate fitness rating
- •Box 20.2 Benchmarking process
- •20.4 Designing and implementing productivity and performance improvement programmes
- •Figure 20.6 The performance improvement planning process
- •Figure 20.7 The “royal road” of productivity improvement
- •20.5 Tools and techniques for productivity improvement
- •Box 20.3 Some simple productivity tools
- •Box 20.4 Multipurpose productivity techniques
- •Box 20.5 Tools used by most successful companies
- •21.1 Understanding TQM
- •21.2 Cost of quality – quality is free
- •Figure 21.1 Typical quality cost reduction
- •Box 21.1 Cost items of non-conformance associated with internal and external failures
- •Box 21.2 The cost items of conformance
- •21.3 Principles and building-blocks of TQM
- •Figure 21.2 TQM business structures
- •21.4 Implementing TQM
- •Box 21.3 The road to TQM
- •Figure 21.3 TQM process blocks
- •21.5 Principal TQM tools
- •Box 21.4 Tools for simple tasks in quality improvement
- •Figure 21.4 Quality tools according to quality improvement steps
- •Box 21.5 Powerful tools for company-wide TQM
- •21.6 ISO 9000 as a vehicle to TQM
- •21.7 Pitfalls and problems of TQM
- •21.8 Impact on management
- •21.9 Consulting competencies for TQM
- •22.1 What is organizational transformation?
- •22.2 Preparing for transformation
- •Figure 22.1 The change-resistant organization
- •22.3 Strategies and processes of transformation
- •Figure 22.2 Linkage between transformation types and organizational conditions
- •Figure 22.3 Relationships between business performance and types of transformation
- •Box 22.1 Eight stages for transforming an organization
- •22.4 Company turnarounds
- •Box 22.2 Implementing a turnaround plan
- •22.5 Downsizing
- •22.6 Business process re-engineering (BPR)
- •22.7 Outsourcing and insourcing
- •22.8 Joint ventures for transformation
- •22.9 Mergers and acquisitions
- •Box 22.3 Restructuring through acquisitions: the case of Cisco Systems
- •22.10 Networking arrangements
- •22.11 Transforming organizational structures
- •22.12 Ownership restructuring
- •22.13 Privatization
- •22.14 Pitfalls and errors to avoid in transformation
- •23.1 The social dimension of business
- •23.2 Current concepts and trends
- •Box 23.1 International guidelines on socially responsible business
- •23.3 Consulting services
- •Box 23.2 Typology of corporate citizenship consulting
- •23.4 A strategic approach to corporate responsibility
- •Figure 23.1 The total responsibility management system
- •23.5 Consulting in specific functions and areas of business
- •23.6 Future perspectives
- •24.1 Characteristics of small enterprises
- •24.2 The role and profile of the consultant
- •24.4 Areas of special concern
- •24.5 An enabling environment
- •24.6 Innovations in small-business consulting
- •25.1 What is different about micro-enterprises?
- •Box 25.1 Consulting in the informal sector – a mini case study
- •25.3 The special skills of micro-enterprise consultants
- •Box 25.2 Private consulting services for micro-enterprises
- •26.1 The evolving role of government
- •Box 26.1 Reinventing government
- •26.2 Understanding the public sector environment
- •Figure 26.1 The public sector decision-making process
- •Box 26.2 The consultant–client relationship in support of decision-making
- •Box 26.3 “Shoulds” and “should nots” in consulting to government
- •26.3 Working with public sector clients throughout the consulting cycle
- •26.4 The service providers
- •26.5 Some current challenges
- •27.1 The management challenge of the professions
- •27.2 Managing a professional service
- •Box 27.1 Challenges in people management
- •27.3 Managing a professional business
- •Box 27.2 Leverage and profitability
- •Box 27.3 Hunters and farmers
- •27.4 Achieving excellence professionally and in business
- •28.1 The strategic approach
- •28.2 The scope of client services
- •Box 28.1 Could consultants live without fads?
- •28.3 The client base
- •28.4 Growth and expansion
- •28.5 Going international
- •28.6 Profile and image of the firm
- •Box 28.2 Five prototypes of consulting firms
- •28.7 Strategic management in practice
- •Box 28.3 Strategic audit of a consulting firm: checklist of questions
- •Box 28.4 What do we want to know about competitors?
- •Box 28.5 Environmental factors affecting strategy
- •29.1 The marketing approach in consulting
- •Box 29.1 Marketing of consulting: seven fundamental principles
- •29.2 A client’s perspective
- •29.3 Techniques for marketing the consulting firm
- •Box 29.2 Criteria for selecting consultants
- •Box 29.3 Branding – the new myth of marketing?
- •29.4 Techniques for marketing consulting assignments
- •29.5 Marketing to existing clients
- •Box 29.4 The cost of marketing efforts: an example
- •29.6 Managing the marketing process
- •Box 29.5 Information about clients
- •30 COSTS AND FEES
- •30.1 Income-generating activities
- •Table 30.1 Chargeable time
- •30.2 Costing chargeable services
- •30.3 Marketing-policy considerations
- •30.4 Principal fee-setting methods
- •30.5 Fair play in fee-setting and billing
- •30.6 Towards value billing
- •30.7 Costing and pricing an assignment
- •30.8 Billing clients and collecting fees
- •Box 30.1 Information to be provided in a bill
- •31 ASSIGNMENT MANAGEMENT
- •31.1 Structuring and scheduling an assignment
- •31.2 Preparing for an assignment
- •Box 31.1 Checklist of points for briefing
- •31.3 Managing assignment execution
- •31.4 Controlling costs and budgets
- •31.5 Assignment records and reports
- •Figure 31.1 Notification of assignment
- •Box 31.2 Assignment reference report – a checklist
- •31.6 Closing an assignment
- •32.1 What is quality management in consulting?
- •Box 32.1 Primary stakeholders’ needs
- •Box 32.2 Responsibility for quality
- •32.2 Key elements of a quality assurance programme
- •Box 32.3 Introducing a quality assurance programme
- •Box 32.4 Assuring quality during assignments
- •32.3 Quality certification
- •32.4 Sustaining quality
- •33.1 Operating workplan and budget
- •Box 33.1 Ways of improving efficiency and raising profits
- •Table 33.2 Typical structure of expenses and income
- •33.2 Performance monitoring
- •Box 33.2 Monthly controls: a checklist
- •Figure 33.1 Expanded profit model for consulting firms
- •33.3 Bookkeeping and accounting
- •34.1 Drivers for knowledge management in consulting
- •34.2 Factors inherent in the consulting process
- •34.3 A knowledge management programme
- •34.4 Sharing knowledge with clients
- •Box 34.1 Checklist for applying knowledge management in a small or medium-sized consulting firm
- •35.1 Legal forms of business
- •35.2 Management and operations structure
- •Figure 35.1 Possible organizational structure of a consulting company
- •Figure 35.2 Professional core of a consulting unit
- •35.3 IT support and outsourcing
- •35.4 Office facilities
- •36.1 Personal characteristics of consultants
- •36.2 Recruitment and selection
- •Box 36.1 Qualities of a consultant
- •36.3 Career development
- •Box 36.2 Career structure in a consulting firm
- •36.4 Compensation policies and practices
- •Box 36.3 Criteria for partners’ compensation
- •Box 36.4 Ideas for improving compensation policies
- •37.1 What should consultants learn?
- •Box 37.1 Areas of consultant knowledge and skills
- •37.2 Training of new consultants
- •Figure 37.1 Consultant development matrix
- •37.3 Training methods
- •Box 37.2 Training in process consulting
- •37.4 Further training and development of consultants
- •37.5 Motivation for consultant development
- •37.6 Learning options available to sole practitioners
- •38 PREPARING FOR THE FUTURE
- •38.1 Your market
- •Box 38.1 Change in the consulting business
- •38.2 Your profession
- •38.3 Your self-development
- •38.4 Conclusion
- •APPENDICES
- •4 TERMS OF A CONSULTING CONTRACT
- •5 CONSULTING AND INTELLECTUAL PROPERTY
- •7 WRITING REPORTS
- •SUBJECT INDEX
Management consulting
projects, they will also be influenced by the personalities and cultures of individual consultants and clients. Yet such simplification is conceptually useful and can help both consultants and clients to understand what is hidden behind the professional firms’ names, mission statements and general service descriptions. It also helps to develop realistic strategies for the firm’s future.
Image of the firm
The firm’s image is the way it is perceived by client circles and even by the general public. The image concerns various aspects of the firm’s profile and, in theory, should be a faithful reflection of this profile. In practice this is often not the case, owing to factors such as the firm’s exceptional achievements, recent misfortunes and its treatment by the media. Also, even if there is no discrepancy between the firm’s real profile and public image, this image will usually be reduced to a few characteristics and will provide a simplified (and possibly superficial) picture of the firm’s resources and capabilities.
The firm’s image plays an important role in developing relationships with clients and marketing the firm’s services. It cannot be ignored in developing strategy. In professional services, the clients’ perception of what you are is as important as what you really are. You may be the best of consultants, but if the clients perceive you differently (or if you have no image), they have no reason to turn to you. Therefore every firm needs to be aware of its image.
A self-image must not be mistaken for a real image. Professionals easily develop a self-image that is more flattering than their real image in client circles and within the profession. This can be a bad starting-point for strategic thinking.
28.7 Strategic management in practice
Strategic management is an approach, a way of thinking. Strategy is primarily synthesis, not analysis. It must not be a cumbersome procedure with a lot of paperwork and endless meetings. If it turns into bureaucracy, or if it becomes the guarded province of specialized planning units, line management and professional workers will lose interest in it. Consultants advise clients to prevent such a degeneration of strategic planning, and they must avoid this pitfall themselves. This, however, does not preclude the use of a structured strategic assessment and planning methodology, if the consultant is versed in one and has had good experience with it. There are quite a few on the market.
Self-assessment
A thorough and honest self-assessment is a necessary starting-point irrespective of the procedure and methodology chosen. It is sometimes called a “strategic audit” to emphasize the focus and purpose of the exercise. Many consultants will be able to undertake it themselves, although it is never easy to be detached and
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The consulting firm’s strategy
Box 28.3 Strategic audit of a consulting firm: checklist of questions
1.What kind of professional firm are we?
2.What are our consulting philosophy and ethics?
3.What is our organizational culture?
4.What is our image in client circles?
5.How solid is our client base?
6.How do we work with clients and how do we learn from them?
7.What are our core competencies?
8.How can we assess our service portfolio?
9.What is our competitive advantage?
10.What lessons can be drawn from our growth pattern and performance record?
11.What strategies have we pursued and with what results?
12.What is our financial position?
13.How can we assess the quality and development potential of our human resources?
14.What do we know about competitors and what can we learn from them?
15.What can we learn from other professional service firms?
16.What is our potential for further growth and improvement?
17.What is our vision of the future?
18.What are our strategic options for future years?
19.What strategic and other errors must be avoided?
objective in assessing one’s own performance, capabilities and perspectives. A peer audit may be helpful. In some situations, however, it will be preferable to turn to an independent adviser versed in the management of professional service firms. In any event, the audit should be based on facts and figures, not on illusions.
In self-assessment, the consultant will address the various issues reviewed in this and other chapters of our book. The checklist in box 28.3 gives an idea of the questions that need to be answered.
Learning from clients
The relationship between consultants and their clients lies at the very heart of the consulting profession. When the consulting firm is assessing and developing its strategy, clients play a special role: learning from clients is indeed a significant strategic choice. It would be arrogant, and futile, to draw conclusions on the firm’s capabilities and future perspectives without asking what the clients need, want and think.
First of all, the firm must know precisely what the clients think about it. Feedback from clients concerning the services provided may be available from assignment evaluation, contacts with the managers of client organizations,
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industry meetings and conferences, and other sources (see Chapters 11, 29 and 32). If your firm has an active knowledge management system (Chapter 34), including client information, a lot of this information will be readily available. In addition, clients can be asked specific questions concerning their expected future needs and requirements, and can make invaluable suggestions to the consultant.
Looking at your future market
In many situations, looking at the current market and the existing client base will not be enough. For instance, a firm may have exhausted the possibilities of offering new services to its clients, or may want to be less dependent on a small number of important clients, or may feel that its products could interest potential clients in other countries or sectors.
The identification and assessment of the potential market start with a hypothesis as to what the market might be, bearing in mind the scope and level of the consultant’s resources and capabilities. Fact-finding and market research might confirm this original hypothesis, suggest another definition of the market, confirm the original definition on condition that the consultant could improve his or her image, and so on.
A complete survey would cover:
●technical and economic characteristics and development tendencies of the sector(s) to be served: advanced or obsolete technology, growth prospects and difficulties (“smokestack” industries), position in respect to other sectors and national development strategies, inter-sectoral linkages, international competition;
●organizations in the sector: number, size, categories, leaders, monopolies, ownership pattern, traditions; more detailed information on organizations that are likely to be a prospective market (including names and addresses of firms, and, if possible, names of owners and senior managing staff);
●the management scene: level and sophistication of management, use of management systems and technologies, prevailing attitudes and traditions, background and competence of managers;
●practices concerning the use of consultants: demand, attitudes, experience with use, special requirements.
Assessing a potential market obviously involves much more than finding addresses of firms and some global information on them. It requires a thorough research effort; the consultant must know his or her potential market in considerable depth and detail. Various sources of information and research methods can be combined in order to develop a comprehensive picture of the market (business publications and reports, trade journals, official statistics, stock-market information, training events and management conferences, individual contacts and interviews, and so on). Information obtained directly from existing and potential clients is particularly useful.
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The consulting firm’s strategy
The definition of a potential market is a delicate matter for a new consulting firm, which does not have any clientele and faces the risk of adopting either an excessively wide or an unduly narrow definition of its market. In the first case, the firm’s marketing effort will be too costly and largely impractical and unproductive, embracing organizations that are unlikely to become clients. In the second case, good opportunities of finding assignments may be missed by omitting certain prospective clients.
Some consultants regard all organizations in the field of their specialization as a potential market, while others use a more restrictive definition and regard their market as consisting of organizations that have problems and require the consultant’s help. Both approaches have their rationale. An organization that does not need a consultant today may need one tomorrow, or next year, and it will be an advantage for you if it is aware of the existence and reputation of your consulting firm. Some marketing effort may therefore be directed at creating this awareness. At the same time, every consulting firm needs assignments that will keep it occupied today, and these will be found in organizations that are experiencing problems. This includes not only organizations in difficulty, but also prosperous firms that are seeking new opportunities for developing and improving their business.
The concept of market segmentation is helpful in analysing the chances of a consulting firm successfully entering a new market. Segmenting the market involves subdividing potential clients and their business and management problems into smaller groups, by one or more criteria – size, geographical location, technology used, ownership pattern, financial difficulties experienced (shortage of working capital, foreign exchange problems), market served (local market, exporting, re-export), or other issues. Such segmentation is meaningful if it identifies some common characteristics of the organizations involved, reflected in their common consulting needs and in the kind of services required. It will be useful to find a market segment, or niche, which (a) is likely to need a special service or product that you are able to provide, and (b) is not fully occupied by other consultants.
Knowing your competitors
The market analysis is pursued by assessing existing and potential competitors. As a general rule, it is essential to learn as much as possible about other consultants’ profiles, strategies and achievements, addressing questions such as those listed in box 28.4.
Learning from competitors does not mean aping them without imagination. Less experienced consultants can easily fall into a trap by trying to do exactly what their established and experienced competitors do, although their resources are usually inadequate for this.
Whether to compete or not is a delicate but essential strategic choice. Many consultants have decided not to compete with existing firms, but to offer a new service or special product that is not currently available from other consultants.
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