1.1What is consulting?

There are many definitions of consulting, and of its application to problems and challenges faced by management, i.e. of management consulting. Setting aside stylistic and semantic differences, two basic approaches to consulting emerge.

The first approach takes a broad functional view of consulting. Fritz Steele defines consulting in this way: “… any form of providing help on the content, process, or structure of a task or series of tasks, where the consultant is not actually responsible for doing the task itself but is helping those who are.”1 Peter Block suggests that “You are consulting any time you are trying to change or improve a situation but have no direct control over the implementation… Most people in staff roles in organizations are really consultants even if they don’t officially call themselves consultants.”2 These and similar definitions emphasize that consultants are helpers, or enablers, and assume that such help can be provided by people in various positions. Thus, a manager can also act as a consultant if he or she gives advice and help to a fellow manager, or even to subordinates rather than directing and issuing orders to them.

The second approach views consulting as a special professional service and emphasizes a number of characteristics that such a service must possess. According to Larry Greiner and Robert Metzger, “management consulting is an advisory service contracted for and provided to organizations by specially trained and qualified persons who assist, in an objective and independent manner, the client organization to identify management problems, analyze such problems, recommend solutions to these problems, and help, when requested, in the implementation of solutions”.3 Similar more or less detailed definitions are used by other authors and by professional associations and institutes of management consultants. According to the International Council of Management Consulting Institutes (ICMCI), for example, “management consulting is the provision of independent advice and assistance about the process of management to clients with management responsibilities”.4

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Management consulting

We regard the two approaches as complementary rather than conflicting. Management consulting can be viewed either as a professional service, or as a method of providing practical advice and help. There is no doubt that management consulting has developed into a specific sector of professional activity and should be treated as such. At the same time, it is also a method of assisting organizations and executives to improve management and business practices, as well as individual and organizational performance. The method can be, and is, applied not only by full-time consultants, but also by many other technically competent persons whose main occupation may be teaching, training, research, systems development, project development and evaluation, technical assistance to developing countries, and so on. To be effective, these people need to master consulting tools and skills, and to observe the fundamental behavioural rules of professional consulting.

In our book, we have chosen to address the needs of both these target populations. Although it has been written primarily about and for professional management consultants, the needs of other people who intervene in a consulting capacity, even though they are not full-time consultants, are borne in mind.

We start by reviewing the basic characteristics of management consulting. The key question is: what principles and approaches allow consulting to be a professional service that provides added value to clients?

Adding value by transferring knowledge

Whether practised as a full-time occupation or an ad hoc service, management consulting can be described as transferring to clients knowledge required for managing and operating businesses and other organizations. To provide added value to clients, this knowledge must help the clients to be more effective in running and developing their business, public administration agency or other non-profit organization.

Thus the quintessential nature of consulting is to create, transfer, share and apply management and business knowledge. “What is unique to management is that from the very beginning the consultant played a key role in the development of the practice, the knowledge and the profession of management”, wrote Peter Drucker.5 The term knowledge, as used here and in most of the literature on knowledge management, encompasses experience, expertise, skills, knowhow and competencies in addition to theoretical knowledge. Thus, knowledge transfer is concerned not only with the knowledge and understanding of facts and realities, but also with approaches, methods and capabilities required for the effective application of knowledge in particular economic, business, institutional, cultural, administrative or organizational environments.

Management consultants can assume their roles in knowledge transfer because they have accumulated, through study and practical experience, considerable knowledge of effective ways of acting in various management situations. They have learned how to discern general trends and understand

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Nature and purpose of management consulting

changes in the environment, identify common causes of problems with a good chance of finding appropriate solutions, and see and seize new opportunities.

Clearly, management consultants cannot acquire such capabilities by theoretical study only, although this continues to be an essential source of new knowledge during their whole career. They learn from the experience of their colleagues and from the consulting firm’s accumulated know-how. However, experience and know-how concerning management and business practices come mainly from working with clients. “Every consultant knows that his clients are his teachers and that he lives off their knowledge. The consultant does not know more. But he has seen more.”6 Thus, knowledge transfer is a two-way process: in enhancing their clients’ knowledge and capacity to act effectively, the consultants learn from them and enhance their own knowledge and capacity to advise their clients, current and future, more effectively, in new situations and on new issues.

The fields of knowledge embraced by management consulting relate to two critical dimensions of client organizations:

●The technical dimension, which concerns the nature of the management or business processes and problems faced by the client and the way in which these problems can be analysed and resolved.

●The human dimension, i.e. interpersonal relationships in the client organization, people’s feelings about the problem at hand and their interest in improving the current situation, and the interpersonal relationship between the consultant and the client.

For methodological reasons, our guide will often deal separately with these two dimensions. In real life they are not separated: technical and human issues of management and business are always interwoven. In consulting, it is essential to be aware of these two sides of problems in organizations, but mere awareness is not enough. Ideally, the consultant should choose approaches and methods that uncover and help understand both the technical and the human issues involved, and that help the client to act on both of them. In practice, however, many consultants tend to be concerned more with one or the other dimension of client organizations.

It is even possible to discern two types of consulting. The first type is predominantly technical. Its protagonists are technicians competent in providing advice on business processes, strategies, structures, systems, technology, resource allocation and utilization, and similar tangible, quantifiable and measurable issues in areas such as production, finance and accounting. The consultants’ knowledge backgrounds may be in technology, industrial engineering, computer science, statistics, mathematics, operations research, business economics, accounting, or other areas. Such consultants tend to treat the client’s problems as mainly technical and systems problems, e.g. the client needs a better cost control system, better information on customers’ requirements and complaints, a stable network of reliable subcontractors, a strategy for the next five years, or a feasibility study for a merger.

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Management consulting

Box 1.1 On giving and receiving advice

“Every man, however wise, needs the advice of some sagacious friend in the affairs of life.”

“To profit from good advice requires more wisdom than to give it.” John Collins

“Do not have the conceit to offer your advice to people who are far greater than you in every respect.”

Rabindranath Tagore

“Harsh counsels have no effect; they are like hammers which are always repulsed by the anvil.”

Selected by James H. Kennedy.

The second type focuses on the human side of organizations. Its roots are in behavioural sciences and its doctrine is that, whatever the client thinks and tells the consultant, there is always a human problem behind any organizational problem, whether technical or financial. If human problems can be understood and resolved in ways that motivate, energize and empower people, and that make individuals and teams more effective in using their knowledge and experience, all other problems will be resolved, or at least their solution will be greatly facilitated.

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Nature and purpose of management consulting

Organization development (OD) and human resource development (HRD) consultants are typical representatives of this second type. Their share in the whole consulting industry has been relatively small, but their influence has been out of proportion to their numbers. As distinct from the previous group, the behavioural scientists have been active not only in consulting but also in writing extensively about their approaches and experiences. Most of the writing on consulting concepts and methodologies comes from this group.

Advice and assistance

Consulting is essentially an advisory service. This means that, in principle, consultants are not used to run organizations or to take decisions on behalf of the managers. They have no direct authority to decide on or implement changes. Their responsibility is for the quality and integrity of their advice; the clients carry all the responsibilities that accrue from taking it.

Of course, in the practice of consulting there are many variations and degrees of “advice”. Not only to give the right advice, but to give it in the right way, to the right people and at the right time – these are the critical skills and art of a consultant. Above all, the consultant’s art consists in “getting things done when you are not in charge”.7 The client in turn needs to become skilful in taking and using the consultant’s advice and avoiding misunderstanding on who is responsible for what.

In explaining the nature of consulting we also use the term “help” or “assistance”. To be useful to the client and help the client to achieve results, the consultant often needs to do more than give “pure” advice, i.e. suggestions and recommendations that the client may choose to accept and apply, or ignore. In current consulting practice there is a general tendency to extend advice over the whole change cycle, i.e. the client uses the consultant’s services for as long as necessary while implementing what the consultant has advised. Furthermore, in addition to advising clients, many consultants do other things that are closely related and complementary to their advisory roles, such as training, encouraging and morally supporting the client, negotiating on behalf of the client, or performing certain activities in the client organization together with its staff.

The term “assistance” can also cover services that are not consulting per se, or at best are on the borderline between consulting and other professional and business services. Outsourcing provides a good example. Currently many firms in management and information technology (IT) consulting also provide services, such as information processing, bookkeeping, record-keeping, marketing, selling, distribution, advertising, recruitment, research, and design on a long-term contract basis.

The consultant’s independence

Independence is a salient feature of consulting. A consultant must be in a position to make an unbiased assessment of any situation, tell the truth, and

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Management consulting

recommend frankly and objectively what the client organization needs to do without having any second thoughts on how this might affect the consultant’s own interests. This detachment of the consultant has many facets and can be a tricky matter in certain cases.

Technical independence means that the consultant is in a position to formulate a technical opinion and provide advice independently of what the client believes, or wishes to hear.

Financial independence means that the consultant has no financial interest in the course of action taken by the client, e.g. in a decision to invest in another company or to purchase a particular computer system. The desire to get more business from the client in the future must not affect the objectivity of the advice provided in the current assignment.

Administrative independence implies that the consultant is not the client’s subordinate and cannot be affected by his or her administrative decisions. While this does not present a problem to autonomous consulting organizations, it may be a rather complex, although not insurmountable, problem in internal consulting (see section 2.6).

Political independence means that neither the client organization’s management nor its employees can influence the consultant using political power and connections, political party membership, club membership and similar influences.

Emotional independence means that the consultant preserves personal detachment and objectivity, irrespective of empathy, friendship, mutual trust, emotional affinities and other personal pressures that may exist at the beginning or develop in the course of an assignment.

It could be argued that absolute independence is a fiction and that no professional adviser can claim to be totally independent from his or her client, and from various interests and objectives pursued by the consulting firm. After all, consultants do depend on clients to get recruited, correctly paid for their work, used again for other work and recommended to other clients. Getting a great amount of work from one client tends to create dependence on this client. Income from non-consulting services is very important to some consultants but may weaken independence. Conversely, clients have no legal obligation to use consultants and can choose them freely. They sometimes attach less importance to individual consultants’ independence than to their technical competence and personal integrity. These are valid points and consultants cannot ignore them. Yet the beauty and strength of free professions is in independence. Sacrificing independence and objectivity for short-term benefits may be tempting but risky and selfdefeating from a longer-term perspective (see also section 6.2).

Consulting as a temporary service

Consulting is a temporary service. Clients turn to consultants for help to be provided over a limited period of time, in areas where they lack technical

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Nature and purpose of management consulting

expertise, or where additional professional support is temporarily required. This may even be in areas where the requisite skills are available in the organization, but managers or staff specialists cannot be released for a major problem or project. Consultants can not only provide the expertise required, and give undivided, 100 per cent attention to the problem at hand, but will leave the organization once the job is completed. Even if the relationship is excellent and extends over a long period, the client always retains the right to discontinue it.

Consulting as a business

A practitioner who does management consulting for a living has to charge a fee for all the work done for clients. Consulting firms are sellers of professional services and clients are buyers. In addition to being professional service organizations, consulting firms are also businesses.

A consulting assignment must therefore be not only a technically justified activity, but also a financially feasible and profitable commercial undertaking according to both the client’s and the consultant’s criteria. From the client’s point of view, the benefits obtained should exceed the costs incurred, including the fee paid to the consultant and other costs to the client such as staff time or the purchase of new computer programs. From the consultant’s point of view, consulting must be a profitable activity as measured by normally applied criteria. This will be examined in detail in Part IV.

In certain cases, the fee paid by the client will not cover the full cost of the consulting service received. As we shall see later, consulting may be subsidized as a result of government economic policy or for another reason, which may be economic, commercial, political or social. For instance, an institution may provide consulting in conjunction with training and subsidize it from the income earned from training; a not-for-profit social organization may provide consulting and counselling as a fully or partially subsidized service to potential entrepreneurs in underprivileged social groups or neglected regions.

What should not be required from consulting

There is an abundance of case histories of successful assignments carried out by some of the world’s best management consultancies in order to rescue companies facing bankruptcy, or to give new life to ageing firms. They have created a reputation that suggests that some consulting firms can resolve virtually any management difficulty. This is exaggerated. There are situations where nobody can help. And even if help is possible, it would be unrealistic and unfair to expect consultants to work miracles.

Also, the consultant should never be expected to take a problem away from the client, on to his or her own shoulders. A consultant’s presence and intervention may provide considerable relief to a troubled client, but they will not liberate the client from inherent managerial responsibility for decisions and

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