Management consulting

Box 28.4 What do we want to know about competitors?

1.Who are they (names, founders, key executives)?

2.How large and how well established are they?

3.For what markets and organizations do they work?

4.Do they enjoy a solid and stable client base?

5.What is their technical competence and range of services?

6.How do they innovate and what special products do they offer?

6.What are their consulting and marketing approaches and methods?

7.In what areas are they ahead of us?

8.What professional image do they enjoy?

9.What are their terms of business?

10.What can we learn from them and what can we do better?

11.Are we likely to win or lose if we compete with them?

However, most consulting services cannot become legally protected intellectual property (except certain proprietary systems and software packages). Sooner or later competitors will come up with the same or a similar service, and the strategy will then need to be reviewed.

Understanding the business environment and climate

Your assessment of the environment has to reach beyond the market for your particular services. Various other environmental factors affect opportunities for management consulting and the approach to take in developing and marketing new services. Some of them are listed in box 28.5. These are only examples of factors that may be important to your consulting firm. Whether a particular environmental factor is important or not, and should be examined in depth, reviewed briefly or ignored, is a matter for the consultant’s judgement. A general management consulting firm that is contemplating expanding international operations will be interested in different environmental factors from a marketing consultant working with small businesses serving a limited local market.

Every consultant has an interest in the general business climate. If business is prosperous, the markets for consulting services tend to be expanding rapidly. This often stimulates consulting firms to an equally fast expansion, even if they are not always able to provide all new recruits with excellent training and maintain high professional standards.

On the other hand, economic recession and stagnation of business also affect consulting, but not necessarily all services in the same way. Services considered essential for the clients’ survival, and for achieving tangible improvements in productivity and efficiency, are likely to continue to sell well. Other services

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The consulting firm’s strategy

Box 28.5 Environmental factors affecting strategy

These include:

●the political climate;

●the current business climate and its expected changes;

●international political, economic and trade blocs and agreements;

●promotional or restrictive government policies;

●the dynamism of the business community;

●the availability and sources of finance for new development projects;

●local cultural values and traditions;

●local business practices and habits;

●labour legislation and industrial relations;

●legislation governing professional services, contracting, liability, and the like;

●technology trends likely to affect your clients in the future;

●environmental protection issues and policies;

●facilities offered to foreign investors.

may suffer. In many instances the recession, and falling demand, have forced management consultants to phase out training and other service packages that were relatively easy to sell in the period of general prosperity.

Following the developments in the profession

Although many consultants follow the developments in their profession virtually on a daily basis, a strategic audit provides an opportunity for a more thorough review of trends and of their possible implications for future strategy. Important changes that affect consulting services deserve particular attention. These may be changes in consulting methods, the conception of ethics, approaches to marketing and advertising, ways of combining management, technological and other types of consulting, relations between consulting and training, competition and cooperation with other professions, and similar issues.

Choosing coherent strategies

We have already mentioned that strategic choices affecting various aspects of the consulting firm are mutually related. There is a significant relationship between the basic objectives to be pursued, the services to be offered, the market segment that will be the firm’s target, the image to be built up, the marketing techniques to be used, the staff to be recruited and trained, the research and product development to be undertaken, and the resources to be allocated to these activities. The aim is to develop a coherent strategy, not a set of accidental, inconsistent or even conflicting choices.

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Management consulting

Involving staff in strategy formulation

There are valid reasons for organizing strategy formulation as an exercise involving as many members of the consulting staff as possible. This can be done through task forces, meetings, special projects, and so on. Participation in strategic thinking and planning helps to build up a team spirit, increase the firm’s cohesion, and counter the centrifugal tendencies that can develop only too easily in professional firms. Both senior and junior staff members thus feel associated with the strategy that is adopted, understand the reasons for it and accept it as their own choice. They will feel like “owners” of their firm’s strategy. This does not imply, however, that every strategic issue has to be discussed with all employees at every stage of the exercise. It is the task of top management to strike the right balance between adequate staff participation, confidentiality and top management responsibility.

In discussing common strategy every professional has the opportunity to compare his or her personal strategy with that of the organization to which he or she belongs. In professional services it is not uncommon for these two strategies to conflict. An individual may believe in a different mode of consulting or may just prefer to do things differently than the firm intends to do. He or she may help the firm to reconsider strategy, or decide to leave if there is no way of reconciling the two approaches.

Making strategy explicit

We have stressed that strategy should provide a framework and guiding principles for operating decisions made by all units and staff members in a consulting firm. Therefore they have to know what strategy has been chosen and understand the reasons behind it. Staff participation in formulating strategy contributes to this understanding. It is useful to inform all staff about the strategy chosen by management and about any changes. Attention must be paid to strategy in the induction training of new staff. Making staff aware of strategy is particularly important in large decentralized consulting organizations with many relatively autonomous operating units, which are exposed to a permanent danger of losing sight of common objectives and strategic choices. Also, consultant remuneration and motivation must not operate (as they often do) against strategic choices made by the firm. For example, if the firm wants to do more work for high-technology firms and phase out routine company organization work, the firm’s marketers and operating consultants must be aware of this decision and be motivated towards getting new assignments that make this reorientation possible.

Some consulting firms have found it useful to have a strategic plan for three to five years rather than just a list of policies reflecting strategic choices. If such a plan has to be prepared, the firm is encouraged to make strategic choices explicit and express them in measurable and controllable terms. The plan is a tool for achieving coherence between the various choices discussed above,

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The consulting firm’s strategy

allocating needed resources and rejecting strategies that are not feasible. However, it may be unrealistic and unnecessary to set targets for three to five years if technology changes very rapidly, future business prospects are uncertain or the firm has not gathered and analysed meaningful information. Many consultants prefer to avoid any formalized strategic planning, and to use instead a short statement of principal strategic orientations and policies.

Strategy is an internal matter and the consulting firm may treat its strategic decisions or a statement of strategy as confidential. Yet certain aspects of strategy can be made publicly known. It may be useful to give clients, current and prospective, some information on the strategy chosen, thus helping to build up the consulting firm’s image and gain clients’ confidence. This is done, as a rule, through information brochures, annual reports and other publications, or in dealing with specific clients and submitting proposals to them.

Monitoring strategy implementation

In theory, operating decisions and actions should be in harmony with strategy. Often they are not. Strategy is either ignored or for some reason cannot be applied.

Usually the reason is that strategy has been treated as a staff function separated from operations. Either the real state and possibilities of operations were not considered, or the operating consultants were kept in the dark about senior management’s strategic thinking. Both cases imply that the firm has been poorly managed and its strategic planning has probably been an esoteric exercise.

Monitoring the relationships between strategy and operations is an essential management function. If deviations from strategy are frequent and important, this probably indicates that the strategy chosen was inappropriate, that it has become outdated or that the firm’s management has been unable to translate its own strategic choices into marketing and operational practices. Alternatively, operations may have revealed new opportunities and issues important enough to justify a revision of the firm’s strategy. In any event, the firm’s senior management will have to act to bring strategy in line with new realities.

When and how should this be done? A major correction of strategy (e.g. to amend an error, or seize an excellent unexpected opportunity) should be done immediately when this becomes necessary, and people in the firm should be told about it without delay. Other adjustments may be made periodically within the framework of annual performance and strategy reviews.

1 T. A. Stewart: Intellectual capital: The new wealth of organizations (New York, Doubleday/Currency, 1997), p. 77.

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A consulting firm can exist and prosper if it gets and keeps clients. This is what marketing is about: define your market, identify clients, find out what they need, sell the consulting service to them, deliver the service to the clients’ full satisfaction and make sure that once you have good clients they stay with you and do not go to a competitor.

In management consulting, as in some other professions, there has been a long debate on the appropriateness of marketing and of its various techniques. Even today, some consultants feel uneasy about “selling” their services: they regard it as unprofessional and beneath their dignity. Many consultants are poor at marketing and, if they have to market, they do so with little enthusiasm and imagination.

Yet the marketing of consulting is as old as consulting itself. James McKinsey, one of the pioneers of management consulting, spent many hours having meals with prospective clients and other useful business contacts.1 Since McKinsey’s time, the leaders of the profession have exhibited considerable dynamism in marketing their firms’ services. They have systematically sought opportunities to make social contacts with potential clients, to be recommended by existing clients to new prospects, to carry out quick management surveys free of charge, and to speak at management conferences. This, in combination with the firm’s reputation, used to be sufficient to attract clients to the established firms, as long as the market for consulting services was small and competition was limited.

It is not surprising then that the established firms did not favour the use of a wider range of marketing techniques, and in particular of advertising. The same attitude prevailed in consultants’ associations. It was not until the late 1970s that advertising was admitted in the United States as an acceptable means of marketing professional services in a competitive environment. Stress was laid on the point that competition in professional services ought to be encouraged, as it offers the client the possibility of getting a better service for a lower price. In other countries, attitudes to the marketing of professional services have also changed.

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