How management consulting works

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Manag. Consult. cov only 7/11/02 11:09 AM Page 1 MANAGEMENT CONSULTING A Guide to the Profession MANAGEMENT CONSULTING Fourth editon This widely recognized reference work on the state of the art of management consulting KUBR MANAGEMENT offers an extensive introduction to consulting: its nature, professional standards, intervention methods, behavioural rules, current developments and future perspectives. It has been used both by students of consulting and seasoned practitioners worldwide, either in it’s English original or in one of the 13 editions in other languages. Fourth CONSULTING Today, the information and knowledge-based economy is creating new opportunities and edition challenges for consultants, who can find enough work and be well paid for their services, provided they are able to cope with complex and rapidly changing conditions, and meet the demands of increasingly sophisticated clients. In this climate, consultants must A GUIDE TO THE PROFESSION continuously “reinvent themselves”. More than ever, learning is a lifelong job for consultants. This fourth edition actively reflects and confronts these developments and challenges. New topics (all treated from a consultant perspective) include: e-business; knowledge management; total quality management; corporate governance; company transformation and renewal; social responsibility of business; intellectual property; public administration; and a guide to essential information sources. The entire text has also been substantially enhanced and updated. The book is an indispensable tool for Fourth edition individuals and organizations wishing to start consulting, become more competent at serving clients or manage consulting firms and assignments more effectively. “…the most comprehensive capture of the body of knowledge of management consulting …the most thorough guide for those who want to develop the competence leading to certification in this profession.” (E. Michael Shays, CMC FIMC-Executive Director, International Council of Management Consulting Institutes). “…a great starting-point to understanding the state of the industry and how it’s evolving.” (Wayne Cooper, Publisher, Management Consulting International and Edited by MILAN KUBR Consultants News). ISBN 92-2-109519-3 9789221 095194 INTERNATIONAL 120 Swiss francs LABOUR OFFICE GENEVA INTERNATIONAL LABOUR OFFICE GENEVANATURE AND PURPOSE OF MANAGEMENT CONSULTING 1 1.1 What 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 1 actually responsible for doing the task itself but is helping those who are.” 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 2 officially call themselves consultants.” 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 imple- 3 mentation of solutions”. 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 4 with management responsibilities”. 3Management 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 con- sulting 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 develop- ment of the practice, the knowledge and the profession of management”, wrote 5 Peter Drucker. The term knowledge, as used here and in most of the literature on knowledge management, encompasses experience, expertise, skills, know- how 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, con- siderable knowledge of effective ways of acting in various management situations. They have learned how to discern general trends and understand 4Nature 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 6 does not know more. But he has seen more.” 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 organiz- ation, 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, tech- nology, 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’ require- ments and complaints, a stable network of reliable subcontractors, a strategy for the next five years, or a feasibility study for a merger. 5Management 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.” Plautus “To accept good advice is but to increase one’s own ability.” Goethe “Many receive advice: few profit by it.” Publius Syrus “To profit from good advice requires more wisdom than to give it.” John Collins “Men give away nothing so liberally as their advice.” La Rochefoucauld “Never give advice in a crowd.” Arabian proverb “We give advice by the bucket, but take it by the grain.” William Alger “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.” Helvetius “Good counsellors lack no clients.” Shakespeare “Advice is like mushrooms. The wrong kind can prove fatal.” Unknown “The greatest trust between man and man is the trust of giving counsel.” Francis Bacon “Free advice is often overpriced.” Unknown 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. 6Nature 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 7 done when you are not in charge”. 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 7Management 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 self- defeating 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 8Nature 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 consult- ing 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 inter- vention may provide considerable relief to a troubled client, but they will not liberate the client from inherent managerial responsibility for decisions and 9Management consulting their consequences. If – as sometimes occurs – a consultant agrees to run a client’s business and make decisions on his or her behalf, he or she stops being a consultant for that activity and period of time. As mentioned earlier, consulting does not have to be a full-time occupation. If other professional criteria are met, it is not important whether the consultant is primarily (and for most of the time) a business school professor, a researcher, a retired executive or any other sort of worker. Also, if quality and independ- ence are assured, consulting does not have to be an external service. Our definition Following this short discussion of the basic characteristics of management consulting, we offer the following definition: Management consulting is an independent professional advisory service assisting managers and organizations to achieve organizational purposes and objectives by solving management and business problems, identifying and seizing new opportunities, enhancing learning and implementing changes. We have chosen a definition that omits certain characteristics that are not common to all consulting, such as “external” service, or service by “specially trained” persons. Conversely, our definition includes the fundamental, or generic, purposes of consulting that are discussed in the next section. 1.2 Why are consultants used? Five generic purposes A manager may turn to a consultant if he or she perceives a need for help from an independent professional and feels that the consultant will be the right source of this help. But what sort of help are we talking about? What can be the purpose of using a consultant? Consulting purposes can be looked at from several angles and described in various ways. Let us look first at five broad, or generic, purposes pursued by clients in using consultants, irrespective of the field of intervention and the specific intervention method used (figure 1.1): – achieving organizational purposes and objectives; – solving management and business problems; – identifying and seizing new opportunities; – enhancing learning; – implementing changes. 10Nature and purpose of management consulting Figure 1.1 Generic consulting purposes Achieving organizational purposes and objectives Solving Identifying Enhancing Implementing management and learning changes and seizing business new problems opportunities Achieving organizational purposes and objectives All consulting to management and business tends to pursue a general and overriding purpose of helping clients to achieve their business, social or other goals. These goals may be defined in various ways: sectoral leadership, competitive advantage, customer satisfaction, achieving total quality or pro- ductivity, corporate excellence, high performance, profitability, improved business results, effectiveness, growth, etc. Different concepts and terms reflect the thinking and the priorities of both clients and consultants, the current state of the art of management and consulting, and even fashion. Different purposes will be stressed in commercial enterprises, public services and social organizations. The time horizon of a consultancy will differ from case to case. Yet the common denominator remains the same: consulting has to add value to the client organization, and this value should be a tangible and measurable contribution to achieving the client’s principal purposes. 11Management consulting This global purpose of management consulting provides a rationale and a sense of direction for all consulting work. What would be the sense of organizational learning or costly and risky restructuring if the client organization could not get closer to its principal goals? What would be the use of successfully solving a few seemingly pressing management problems if “like the mythological hydra that grows two heads for every one cut off, the solutions we develop are 8 often rapidly overwhelmed by a plethora of new problems”? The purpose of achieving the client organization’s goals assumes that the client has defined such goals. In some organizations this is not the case, and management operates without any perspective, goal or sense of mission. The consultant’s main contribution may well be in helping the client to develop a vision of the future, set ambitious but realistic goals, develop a strategy, focus on results, and start viewing current problems and opportunities in the light of longer-term and more fundamental organizational goals. Consultants must appreciate that client organizations may be pursuing different sorts of goals. At times, the objective of a consultancy may be to advise the client on how to maintain the status quo or even how to get out of business. Solving management and business problems Helping managers and other decision-makers with problem-solving is probably the most frequently mentioned purpose of consulting. The consultant’s task is described as professional assistance in identifying, diagnosing and solving problems concerning various areas and aspects of management and business. Within a business firm, a “problem” justifying the use of a consultant can result from any of the following (and readers can undoubtedly think of many other causes): complaining clients high staff turnover poor business results unrealistic self-image unexpected loss lack of cash natural disaster idle resources loss of important market pressure of competition lack of perspective failure to meet targets obsolete control system lack of self-confidence wrong investment choice excess of self-confidence missed opportunity slowness of action reluctance to change internal conflicts The reader should be aware of the different uses of the term “problem” and of their practical implications. If “problem” is used to mean only mistake, failure, shortcoming or missed opportunity, the client’s and the consultant’s perspective will tend to be essentially backward-looking and narrow, and the focus will be on corrective action (with implied criticism and determination of responsibilities). The term “problem” can also be used as a more general concept to describe a situation where there is a difference or discrepancy between what is actually 12Nature and purpose of management consulting happening or will be happening and what should be happening. In this definition, a problem is described in relative terms, i.e. as a difference between two situations. In addition, someone has to be concerned about this difference and aim to overcome or reduce it. The problem must “belong” to someone – there must be a “problem owner”. Frequently the current situation of the client organization is compared with a situation that existed in the past. If there has been a deterioration such as falling sales or profits, the problem is defined as a need to restore the original condition. This explains why consultants are sometimes called “troubleshooters”, “company doctors” or “business healers”. Alternatively, the current situation may be compared with some standard (benchmark). The problem is then defined as the need to meet or surpass the standard, e.g. a competitor’s product quality, range of models offered or after- sales service. In this sense, even a successful and forward-looking company that has been pursuing and achieving ambitious business objectives may have “problems” – a desire to further enhance its competitive advantage, to become a sector leader, not to miss a new marketing opportunity, to identify a new business partner, to explore an emerging technology, and so on. In this guide, the term “problem” will be used in this second way – as a generic term describing a client’s dissatisfaction with the difference between any comparable (but mainly between existing and desirable) situations in the organization. Thus, some of the problems will be related to past errors and shortcomings that need to be redressed; many others will concern perspectives, opportunities and strategies for improving the business in the future. A correct definition of the problem to be resolved, and the purpose to be achieved by the consultancy, is critical. Experienced consultants warn against accepting the client’s perception of the problem at face value. If the problem has been wrongly defined or misjudged, the consultant will be caught in a trap. He or she will then work on the wrong problem, or the problem and potential benefits from its solution may not justify the consultant’s intervention and the costs incurred. To avoid this, most consultants insist on making their own independent assessment of the problem presented to them by the client, and on developing an agreed definition in discussion and collaboration with the client. The purpose of the consultant’s intervention provides a perspective for deal- ing with particular problems (see box 1.2). It could be argued that “the purpose is to solve the client’s problem”, but this provides little insight. It has been observed that “effective leaders and problem solvers always placed every problem into a 9 larger context”. This implies getting answers to a number of questions about the purposes of the client organization and its key constituents, the focus and the sig- nificance of the proposed assignment, and the immediate and ultimate benefits to be obtained by the client if the current problem is resolved. In this way, it will be 10 possible to select the “focus purpose”, avoiding purposes that are too narrow, as well as those that are too wide and distant to be tackled by the client at present. However, these wider and longer-term purposes ought to be kept in mind in order 13Management consulting Box 1.2 Define the purpose, not the problem The way consultants define a problem is critical to the quality of the solution. If they define the problem in terms of its origin or cause, they will tend to focus on who or what is to blame. This is likely to be a fruitless exercise, and can actually get in the way of finding the best solution. It can also discourage staff from taking initiative, in order to avoid being blamed in the future. Rather, management consultants can achieve breakthroughs for their clients by focusing on a series of incrementally larger purposes to be achieved. Narrow consulting approaches – focusing on the problem, starting with data collection, copying others, taking the first solution that can be made to work, failing to involve others – create problems of their own. These approaches lead to excess costs and time, early obsolescence of solutions, wasted resources and repetition of work in the consulting process. Breakthrough thinking provides a more effective approach. It is not a step- by-step process but involves seven ways of thinking about problems and their solutions, based on the following principles: (1) The uniqueness principle: Whatever the apparent similarities, each problem is unique and requires an approach based on the particular context. (2) The purposes principle: Focusing on expanding purposes helps strip away non-essential aspects and avoid working on the wrong problem. (3) The solution-after-next principle: Innovation can be stimulated and solutions made more effective by working backwards from an ideal target solution. Having a target solution in the future gives direction to short-term solutions and infuses them with larger purposes. (4) The systems principle: Every problem is part of a larger system of problems, and solving one problem inevitably leads to another. Having a clear framework of the elements and dimensions that comprise a solution ensures its workability and facilitates implementation. (5) The limited information collection principle: Excessive data gathering may create expertise in the problem area, but knowing too much detail may prevent the discovery of some excellent alternative solutions. Always determine the expanded purposes of any proposed information collection before doing it. (6) The people design principle: Those who will implement and use the solution should be intimately and continuously involved in its development by being involved in the first five principles. Also, in designing a solution to be implemented by other people, include only the critical details in order to allow some flexibility during its application. (7) The betterment time-line principle: The only way to preserve the vitality of a solution is to build in and then monitor a programme of continual change to achieve larger purposes and move towards target solutions. Author: E. Michael Shays. A detailed discussion can be found in D. Nadler and S. Hibino: Breakthrough thinking: The seven principles of creative problem solving (Rocklin, CA, Prima Publishing, 1994). 14Nature and purpose of management consulting to place the client’s problem in a proper time perspective and seek solutions that will not block the path to the future. Consulting that is confined to corrective measures, aimed at restoring a past situation or attaining a standard already met by other organizations, may produce significant and urgently needed benefits. A crisis may be avoided, negative developments may be arrested and the client’s business may survive. Yet merely ensuring a return to a previously existing situation or catching up with competition gives the client no competitive advantage, and little additional competence or strength for coping with new situations and achieving superior performance in the future. Identifying and seizing new opportunities Most consultants feel that they can offer much more than simply helping organizations to get out of difficulties. This has been recognized by many business corporations and other organizations that are well managed, successful and ambitious. While they may at times call on a consultant to track back deviations that have taken place, and find and correct the reasons for them, they usually prefer to use consultants for identifying and taking new opportunities. They regard consulting firms as a source of valuable information and ideas that can be turned into a wide range of initiatives, innovations and improvements in any area or function of business: developing new markets and products; assessing and using state-of-the-art technologies; improving quality; becoming more useful to customers; developing and motivating staff; optimizing the use of financial resources; finding new business contacts (and contracts), and so on. Experience shows that even strong and important corporations have developed many ideas for action and have seized major business opportunities with the help of consultants. Consulting in e-commerce and e-business is a case in point: its purpose has not usually been to solve existing problems, but to help clients to see and take major new opportunities that can be exploited by adopting new approaches to doing business. Enhancing learning “The only work that is really worth doing as a consultant is that which educates – which teaches clients and their staff to manage better for themselves”, said Lyndon Urwick, one of the main contributors to the development of pro- fessional management consulting. In the modern concept of consulting this dimension is omnipresent. Many clients turn to consultants, not only to find a solution to one distinct problem, but also to acquire the consultant’s special technical knowledge (e.g. in environmental analysis, business restructuring or quality management) and the methods used in assessing organizations, identifying problems and opportunities, developing improvements and imple- menting changes (interviewing, diagnosis, communication, persuasion, feedback, evaluation and similar skills). 15Management consulting Consulting assignments become learning assignments. The purpose is to empower the client by bringing new competence into the organization and helping managers and staff to learn from their own and the consultant’s experience. It is often stressed that in this way organizations are helped to help themselves and become learning organizations. As already mentioned, this is a two-way exchange, since by helping clients to learn from experience a manage- ment consultant enhances his or her own knowledge and competence. The learning effect of consulting is probably the most important and durable one. The choice of the consulting methods and the degree of the client’s involve- ment can increase or reduce this effect. We shall, therefore, pay considerable attention to these questions in our guide. Implementing changes “Change agent” is another label frequently given to consultants. They are proud to be referred to in this way since this is a reflection of another general purpose of consulting: helping client organizations to understand change, live with change and make changes needed to survive and be successful in an environment where continuous change is the only constant. The importance of this consulting purpose has considerably increased in the current period owing to the complexity and pace of environmental changes, the need to keep informed about changes that may affect the organization and to think constantly of possible implications, the speed with which organizations have to adapt, and the increased demands on people’s flexibility and ability to cope with change. 1.3 How are consultants used? Ten principal ways In pursuing the generic purposes outlined in the previous section, consultants can intervene in many different ways. Both clients and consultants can choose among so many alternatives that trying to give an exhaustive and complete picture of these alternatives would be an impossible task. However, most of the consulting assistance to management will be given in one or more of the following ten ways: ● providing information; ● providing specialist resources; ● establishing business contacts and linkages; ● providing expert opinion; ● doing diagnostic work; ● developing action proposals; ● developing systems and methods; ● planning and managing organizational changes; ● training and developing management and staff; ● counselling and coaching. 16Nature and purpose of management consulting Providing information Better, more complete and more relevant information is often the main or only thing that a client needs to make the right decision. It may be inform- ation on markets, customers, sector trends, raw materials, suppliers, competitors, potential partners, sources of engineering expertise, government policies and regulations, or other. The consulting firm may have this inform- ation in its files, or know where and how to find it. Information gathering and analysis may be the only or the main objective of an assignment. Finally, any consulting assignment will have an information dimension and function. There is no consulting that does not involve working with and providing information. In providing information, a delicate question of confidentiality may be faced. Consultants have to distinguish between information that can be provided to a client because it is publicly available or has been gathered and developed specifically for that client, and information developed for previous clients or obtained from private sources, which may need to be treated as confidential. Providing specialist resources A consultant can be used to supplement the client organization’s staff. Usually such consultants will be specialists in areas where the client is looking for short- term expertise, or wants to avoid recruiting a new employee. Some clients, mainly in the public sector, use consultants in this way to bypass restrictive regulations preventing them from recruiting new staff and/or to avoid keeping expensive specialists on the payroll. Other clients may have been forced to cut down their technical departments and find it convenient to recruit short-term specialists from consulting firms. A special case is “interim management”. Recently this way of using con- sultants has become more widespread and some client firms may “borrow” staff members of consulting firms to occupy a position in their management hierarchy on a temporary basis. Establishing business contacts and linkages Many clients turn to consultants in their search for new business contacts, agents, representatives, suppliers, subcontractors, joint-venture and merger partners, companies for acquisition, business and professional networks, sources of funding, additional investors and so forth. The consultant’s task may involve identifying one or more suitable candidates (people or organizations), presenting their names to the client, assessing their suitability, recommending a choice, defining and negotiating conditions of an alliance or business deal, and acting as intermediary in implementation. Often these contacts will be in sectors or countries not sufficiently known to the client. 17Management consulting Providing expert opinion Various activities fall under this heading. The consultant may be approached to provide expert opinion in cases where the client can choose among several alternatives and seeks impartial and independent third-party advice before taking the decision. Consultants may be invited to act as an expert witness (testifying expert) in lawsuits or arbitrations calling for specialized knowledge. Conversely, expert opinion can be provided in a totally informal way. This is the case when decision-makers use consultants as a sounding-board without asking for a formal report. It should be stressed that any consultancy involving assessment and choice will engage the consultant’s expert opinion, in particular if management decisions risk being affected by shortage of information, company myopia, lack of expertise, emotions or vested interests. Doing diagnostic work Diagnostic skills and instruments are among the consultant’s principal assets. Clients use consultants for a wide range of diagnostic tasks concerning the organization’s strengths and weaknesses, positive and negative trends, potential for improvement, barriers to change, competitive position, underutilized resources, technical or human problems requiring management’s attention and so on. Diagnostic work may concern the entire business or a part – a depart- ment, sector, function, process, product line, information system, organizational structure or other. Developing action proposals Effectively completed diagnostic work may be followed by the development of specific action proposals in an area that was diagnosed. The consultant may be asked to do the whole job, share the task with the client or act as an adviser to a client who has chosen to develop new proposals with his or her own resources. Action proposals may involve one or more alternatives. Also, the consultant may be asked to present alternatives with or without recommendations on the course of action to be taken by the client. Developing systems and methods A major portion of all consulting services concerns systems and methods in areas such as management information, business planning, operations scheduling and control, business process integration and management, inventory control, client order processing, sales, personnel records, compensation, and social benefits. Traditionally, many consulting firms have developed one or more of these areas as special lines of expertise. The systems may be custom-made or standard. The consultant may take full responsibility for choosing the most appropriate system, establishing its feasibility, adapting 18Nature and purpose of management consulting it to the client’s conditions and putting it into effect in collaboration with the client’s staff. Alternatively, clients may play a more active role in developing and adapting the system with the consultant’s support. Many organizations prefer to retain the consultant until the system has been “debugged”, becomes operational and achieves the promised performance. In today’s consulting, most of the systems provided are computerized, and their development, design and application require a combination of manage- ment and information technology consulting. A great amount of new systems development and installation is in the fields of e-commerce and e-business (see Chapter 16). Planning and managing organizational changes A fairly common case is that of a client who possesses the technical and managerial expertise to run the organization, but has difficulties and feels insecure when organizational changes are anticipated and cannot be avoided. Often these changes will put a lot of strain on people, since deeply rooted relationships, work habits and individual or group interests will be affected. In such situations, the special expertise sought from a consultant would be in change management – in identifying the need for change, developing a change strategy and plan, choosing and applying the right approaches to encourage change and overcome barriers to change, monitoring the change process, evaluating the progress made and results obtained, and adjusting the approach taken by management at all stages of the change cycle. Box 1.3 Should consultants justify management decisions? From time to time consultants may be approached with a request to undertake assignments and submit reports so that a manager can justify a decision by referring to an external consultant’s recommendations. In other words, a manager may have determined his or her aims and have reached a personal decision, but wants to be able to say that he or she is putting into effect suggestions made or endorsed by an independent and respected professional adviser. This can turn out to be another straightforward and correct case of providing expert opinion. It can also be a trap. A consultant who accepts such an assign- ment may be pulled into the hidden and intricate world of in-company politics. His or her report will have a political role in addition to the technical message it carries. This role may be constructive and useful if a manager is facing strong resistance to changes that are inevitable, and needs to refer to the consultant’s authority. It can also happen that a consultant produces a report that will be misused for promoting vested individual or group interests. Independent and impartial assess- ment of every situation will help the consultant to avoid being used as a scapegoat. 19Management consulting The consultant may provide expertise and advice both on specific methods and techniques that are being changed, and on how to deal with interpersonal relations, conflicts, motivation, team building, and other issues in the organizational and human behaviour field. The weight given to behavioural skills will be greater in assignments where change will put a lot of strain on people, resistance to change can be expected and management feels that its own change management skills are inadequate. In addition to behavioural skills, which are sometimes referred to as “soft” skills, the consultant may also provide help in the “hard” skills area: effective scheduling of change; sequencing; coordination; redefining structures; responsibilities and relationships; reallocat- ing resources; adjusting recording and control systems; preventing gaps and disorder caused by poor monitoring of change operations; ensuring smooth transition from old to new work arrangements, costing the project and measuring the results, etc. Training and developing management and staff While learning is a general purpose inherent in all consulting, training and development of managers or staff may be a distinct client service provided separately or in conjunction with and in support of other services. The client and his or her staff will need to be trained in the new methods and techniques provided by the consultant, so that they become autonomous in using and improving them. There are many ways in which diagnosis, advice, systems development and training can be combined in consulting practice. Training can be an alternative to the interventions and ways of using con- sultants described above. Rather than asking a consultant to work on a specific diagnostic, problem-solving or change management assignment, the client may prefer the consultant to prepare and conduct a course or a workshop for managers and/or staff on the subject. For example, instead of requesting the consultant to identify specific productivity improvement measures and present a productivity improvement programme, he or she may be asked to organize a set of workshops on productivity diagnosis and improvement. Counselling and coaching Management consultants can render an excellent service to managers and entrepreneurs who need strictly personal feedback and relaxed friendly advice on their leadership style, behaviour, work habits, relations with colleagues, weaknesses that could be damaging to the business (such as the reluctance to make decisions or the failure to seek the advice of collaborators) and personal qualities that need to be well utilized. Personal counselling is necessarily a one- to-one relationship based on trust and respect. It can be informal and should be fully confidential. Coaching, or executive coaching, pursues similar purposes (see section 3.7). Despite its obvious potential, few consultants offer such a service to clients and few clients ask for it. 20Nature and purpose of management consulting 1.4 The consulting process An overview During a typical consulting intervention, the consultant and the client undertake a set of activities required for achieving the desired purposes and changes. These activities are normally known as “the consulting process”. This process has a clear beginning (the relationship is established and work starts) and end (the consultant departs). Between these two points the process can be subdivided into several phases, which helps both the consultant and the client to be systematic and methodical, proceeding from phase to phase, and from operation to operation. Many different ways of subdividing the consulting process, or cycle, into major phases can be found in the literature. Various authors suggest models 11 ranging from three to ten phases. We have chosen a simple five-phase model, comprising entry, diagnosis, action planning, implementation and termination. This model, shown in figure 1.2, will be used consistently in our book. Obviously, Figure 1.2 Phases of the consulting process • First contacts with clients • Preliminary problem diagnosis 1. Entry • Assignment planning • Assignment proposals to client • Consulting contract • Purpose analysis • Problem analysis 2. Diagnosis • Fact finding • Fact analysis and synthesis • Feedback to client • Developing solutions • Evaluating alternatives 3. Action planning • Proposals to client • Planning for implementation • Assisting with implementation 4. Implementation • Adjusting proposals • Training • Evaluation • Final report 5. Termination • Settling commitments • Plans for follow-up • Withdrawal 21

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