- •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
Professionalism and ethics in consulting
Box 6.3 On audit and consulting
Over the years, professional accounting firms doing statutory audits have been adding new services to their portfolio, notably in consulting, advisory, training, legal, IT, e-business, valuation, actuarial, small business development, mergers and acquisitions, and venture capital. They have become multifunctional or fullservice professional firms, offering integrated service packages and advising business clients on a wide range of issues. When the Big Eight entered management consulting in the early 1980s, it was obvious that their audit experience and relationships with audit clients were major assets in their fast progression in consulting. Clients raised no objection. On the contrary, most of them were glad to use consultants from firms that had audited their financial statements and accounts and therefore were already familiar with their problems and possibilities. Cross-selling became an important marketing strategy of accountants and consultants alike, although this was never fully recognized.
However, it also became rapidly obvious that auditor independence was often compromised and overt or covert conflicts of interest became more and more frequent, at times leading to insoluble situations. While auditing accounted for 70 per cent of the total revenues of the largest accounting firms in 1977, it had dropped to 30 per cent in 1999, and consulting and management advisory services went up over the same period from 12 to more than 50 per cent. Cheaper audit services served to promote more lucrative management and financial consulting. Some large firms did not escape escalating internal conflicts, as demonstrated by the splitting of Arthur Andersen into Andersen and Accenture in January 2001, the terms of which were agreed only after a lengthy process of arbitration.
By the end of the 1990s, the Securities and Exchange Commission (SEC) in the United States decided to tighten up the rules governing auditor independence (see www.sec.gov). It identified four key principles by which to measure an auditor’s independence: an auditor is not independent if he or she (i) has a mutual or conflicting interest with the audit client, (ii) audits his or her own firm’s work, (iii) functions as management or employee of the audit client, or (iv) acts as an advocate for the audit client. The new rules list nine types of non-audit services that are deemed inconsistent with an auditor´s independence. Most of these services are in the province of consulting. However, auditors are not prevented from providing such services to other clients. It should be noted that in preparing the new rules the SEC had to cope with considerable resistance and lobbying by influential accounting firms. In Europe, principles based on a similar philosophy have been drafted and submitted for consultation within the European Union (see: europa.eu.int/comm/internal_market/en/company/audit).
Despite these undoubtedly useful new principles, the current institutional arrangements concerning the audit function and the relationships of auditors to clients make total auditor independence unrealistic. It has been rightly observed that there will always be some dependence and conflict of interest as long as auditors are selected, appointed, remunerated, extended, fired, recommended to business friends etc. by their clients, and as long as they need to develop and
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maintain close human links with the client´s managers and staff in performing statutory audits. In sum, auditors’ judgements are likely to be biased in favour of their own and their client’s interests (see M. H. Bazerman, K. P. Morgan and G. F. Loewenstein: “The impossibility of auditor independence”, in Sloan Management Review, Summer 1997).
A financial scandal of exceptional magnitude and far-reaching consequences, in which auditors were unwilling or unable to reveal management’s fraudulent business and reporting practices, had to occur for these and similar warnings to be taken seriously. In December 2001, Enron, the American energy sector giant, filed for bankruptcy. Andersen, its auditor and business consultant, had earned more from Enron in 2000 for non-audit services (US$27 million) than for auditing (US$25 million). It either did not see what was going on at Enron, or preferred to keep silent. Andersen is reported to have shredded documents related to the case.
At the time of writing, it is difficult to predict what regulatory measures authorities in different countries will take, or what lessons the accounting and other professions will draw. It is certain, however, that, as The Economist pointed out (9 February 2002), “at the heart of these audit failures lies a set of business relationships that are bedevilled by perverse incentives and conflicts of interest”, and “the entire auditing regime needs radical change”.
What does all this mean to management consultants? It is in the consultant’s interest to follow closely the debates and changes in formal regulations concerning statutory audits and the activities of auditors. Conflicts of interest may arise not only if a firm performs audits and consulting, IT and other projects for the same client, but in many other situations. Management consulting is not a regulated profession and ethical codes tend to refer to conflicts of interest in general and vague terms only. Also, what is seen as conflict of interest in one country or organization may be seen as standard and even effective practice elsewhere. Globalization tends to bring closer together different business values and legal environments, but consultants and consulting firms are, and will continue to be for quite a long time, the main judges and arbitrators in choosing how to handle conflicts of interest. It should be remembered that self-regulation helps to prevent government-imposed regulation.
Consultants who are looking to the future do not see teaching and training clients as a threat. They do not view the future as a simple repetition of the present, which would permit them to continue to do the same things indefinitely. Clients will have new sorts of problems, and a consultant from whom a client has learned useful skills may be called on again. Such a client will also recommend the consultant to business colleagues. Other clients will come, and so on.
Impartiality and objectivity
Clients who turn to professional advisers expect to receive impartial and objective advice. They assume that the consultant will be free of biases,
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prejudices, preconceived ideas, and prefabricated and prepackaged solutions, which may have worked in other contexts but be inappropriate for the given client. The true professional aims to be as impartial and objective as possible, controlling emotions and not letting prejudices erode the value of advice. In practice, however, absolute impartiality and objectivity are difficult, if not impossible, to attain.
In addition to conflicting interests, other factors may affect impartiality and objectivity. Every consultant is influenced by his or her cultural background and personal value system, which may include political, racial, religious and other beliefs and prejudices. In addition, consultants have their own approaches to problem-solving, change and helping clients who face problems. Some consultants believe strongly in the power of behavioural sciences and process consulting, while others favour a rigorous and systematic approach to problem diagnosis and change management, using highly structured procedures, techniques or models.
The consultant must make every effort to become aware of his or her personal values and biases, as well as of forces and interests within the consulting firm and the client’s environment that may affect impartiality and objectivity. An open discussion with the client on these issues may be necessary and helpful. In many cases, objectivity can be increased by reviewing the approach and the solutions envisaged with other members of the consulting firm, who may have faced similar problems with other clients. In an extreme case, a real professional would decline an assignment where he or she cannot be objective.
Internal consultants should be particularly aware of their dependence on their own organization and of the factors that might make them less impartial than an external adviser. They should not be given assignments where they clearly cannot think and behave impartially.
Confidentiality
Confidentiality is another universal principle of work done by independent professionals for their clients. Management consultants should accept neither to disclose any confidential information about clients, nor to make any use of this information to obtain benefits or advantages personally, for their firms, or for other clients. Clients must be sure that they can trust consultants. As a rule, some reference to confidentiality will be made in the consulting contract, but it may be general and could be easily overlooked during the assignment. The client may not specify what information must be treated as confidential and may be unaware of the various risks in working with information (see also Appendices 4 and 5).
In internal consulting, the situation with regard to confidentiality can be complicated. In certain cases consultants have an obligation to (or there is a possibility that they might) disclose information on a client to a common superior (minister, director-general or other official). Under such
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circumstances, managers regard internal consultants as central management’s spies and are reluctant to use them. To counter this, many business corporations have declared confidentiality as a principle that will be scrupulously respected in using internal consultants as well as external ones. A similar approach is increasingly taken within the public sector.
Confidentiality can also be violated unintentionally – by carelessness in handling documentation, naivety in discussing work-related issues in social contexts, or lack of precautions in quoting confidential information in public speeches or articles.
Commissions
Not all commissions are equivalent to bribery. Yet certain commissions are bribery, or can be perceived as such, especially if not disclosed to the client. In any event, commissions are a delicate issue. Codes of ethics do not ignore them, but most codes fail to provide sufficient guidance.
It is of course impossible to give universal guidelines on the acceptability of commissions from the viewpoint of professional ethics. Local business practices and cultures are difficult to ignore. In some countries, commissions and discounts constitute an inevitable means of doing business, including in professional services. In other countries any unreported and untaxed commission is illegal. As a general rule, the client should be informed of commissions or similar favours received, paid or promised by the consultant in connection with the assignment.
Within a professional firm, the issue of commissions may constitute an ethical dilemma. Some consulting firms have lost important contracts only to see that a less able competitor was chosen thanks to greater “flexibility” in offering a commission to a particular decision-maker.
In consultants’ circles, the prevailing position on commissions is as follows:
–a commission paid by a consultant to a client or the client’s staff in order to obtain an assignment, or to get the consultant’s proposals accepted, is unethical;
–a commission accepted by a consultant in order to make certain recommendations, which may concern an issue within the client organization, the selection of a supplier or another issue where the choice proposed by the consultant is likely to affect the client’s decision, is also contrary to the code of ethics;
–a commission paid by a consultant to the person or organization that introduced him or her to the client, or acted as an intermediary in a similar way, is acceptable in most cases; such commissions are normal practice in many countries and can even be declared to tax authorities as costs; however, the client should be made aware of the commission and find it acceptable.
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Value for money
The fees charged to clients (Chapter 30) raise several ethical questions. Professionals are concerned about the relationship between the benefits drawn by the client and the cost of the assignment. If they feel that the outcome does not justify the cost, or that there will be little or no benefit, they should warn the client before starting the job. Generally speaking, professional ethics require that consultants charge “normal” and “reasonable” fees, judged by the profession’s current standards and prevailing practice.
Charging excessive fees to uninformed clients is clearly unprofessional. Undercutting fees and working at a loss in the hope that this will eliminate competition is unprofessional too, in particular if the consultant does this with a new client, knowing that he or she will soon have to readjust the fee to the normal level. Furthermore, certain fee formulas (see Chapter 30) may be regarded as inappropriate or even unethical.
Wider social concerns and the client’s ethics
Consulting assignments often involve issues where the client’s interest may be in real or potential conflict with wider social interests. Or the consultant may uncover practices that, according to prevailing social norms or in his personal opinion, are socially harmful and undesirable, if not illegal. The consultant may then face an ethical dilemma. He may have an opportunity to seek advice from senior colleagues and advisers, but eventually he must himself resolve such a dilemma, which may be difficult. Codes of consulting ethics provide some guidance for the consultant’s behaviour, e.g. on avoiding conflict of interest in working for a client; but they leave it entirely to the consultant to distinguish between ethical and unethical behaviour of the client.
Unfortunately, despite years of research and a proliferation of publications, the concept of managerial and business ethics has remained vague and controversial. True enough, there are extreme situations of clients involved in illegal or fraudulent dealings. A professional consulting firm would withdraw from an assignment where such client behaviour is discovered or suspected. The vast majority of situations are less clear, and recommending a course of action that meets both commercial and ethical criteria may not be easy. As a minimum, the consultant should draw the client’s attention to the possibility of conflict between these criteria. As an optimum, the consultant and the client should work towards decisions where business and ethics are not in conflict.
Defining what can be judged as ethical in a given context is in itself difficult. Ethical norms are social, culture-bound norms, and different social groups may hold different views. Consultants are of little help to clients if they take a strictly moralistic stance. They can be more helpful by suggesting how to minimize potentially harmful consequences of business decisions, how to increase the social responsibility of the client’s business or how to optimize
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