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Summary Management and Practice of Consulting (E_BA_MPC)
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Lecture 1 Introduction to the course and the field of ConsultingWhat is a management consultant?
Consultant can be about various types of topics
vooral about adding value to the work of organizations, by providing advice, helping with
implementation
there is no clear boundary of what is expected from you, it really depends on the
assignment, specific organization, specific project
Historical perspective of the rise of Management Consultancy
Emergence of the industry: the first wave
- it happened somewhere during the second industrial revolution - why at this time?
production increased, professional new scientific management principles
- big corporations started to emerge -> work becomes more complex, is divided and
needs to be integrated, coordinated = more organised and managed
we moved from craftsmanship to large production mines, managing and organizing
this became a challenge
- emergence of first business schools (Harvard, HEC), there came education for
managers who could understand how this process can be managed in industrial area
- incredible growth of business schools, management education over time
- initial advice came from lawyers, bankers, accountants, but not everyone was familiar
with all topics
- managers become key actors and require advice, they have to manage the process.
whenever the demand in the environment changes, the consultancy adapts (idea
from the paper). the environment changed, we moved to an industrial area,
management appeared and consultancy became much more needed
- development of scientific management. Frederick Taylor is often named as the “first
consultant”. main principles of scientific management:
- one best way (observation of workers, identification of the best steps,
measure of time, elimination of useless gestures) - look at how the workers
work and try to optimize their activities
- vertical division of labour (this ideal sequence is defined by engineers,
workers are heavily supervised) - every person does one part of the products
production process, people are splitted in the divisions
- the right man in the right place (selection of workers + can get a lot of extra
money for working above the standard)
- elaboration of similar payment-by-result methods by other engineers (Emerson,
Bedaux) who set up the first consultancies in the US and Europe, giving advice about
how to organize the work form in the best possible way
- refinement of methods, growth of existing firms, rise in the number of consultancies
exponentially grew
Organization and Strategy Consulting - second wave
- change in the market related to the growth of the companies, adoption of the
<<Multidivisional-Form>> spread by consultants - it was impossible to maintain these
companies in one entity. start of decentralisation trend, especially around the 50s:
, companies were so big that some of the power needed to be transferred back to
smaller/ more local entities - a lot of companies started to diversify as well
- rise of multidivisional form spread by consultants themselves
=> so on one hand we see a change in the environment, on the other hand
consultants are actively pushing their services into the companies, promoting their
services
- McKinsey was an example that pushed the M-form strongly forward
- opportunity to offer other advice to top managers
- some consultants that opened up their own businesses, early movers: Arthur D.
Little, Booz Allen & Hamilton - all specialized in different advice. many times a
consultancies merge from another consultancy
- soon overcome by: McKinsey (one of the companies that was derived from all the
waves, it started at the second wave and is still successful today) and later by the
BCG
- introduction of the <<up or out>> career system - this was usually adapted at law
firms and so the structure was quite different from the traditional M-form
IT-based Consultancies - third wave
- in 1970/1980s large diversified organisations were under pressure, repeated
economic crises, internationalisation trends: new competitors - IT began to become
an important part of the organization, they tried to optimize by integrating some IT-
systems that helped them to make better decisions, increasing productivity
- again a change of the role of the managers (from a focus organization and strategy
towards the management of the value chain and of internal/external relationships
- development of information technologies: implementation of company wide software
(ERP/SAP) - lots of companies tried to integrate these systems, making it their
competitive advantage
- an opportunity for the big accountancies to offer the whole package of advice
(emergence of multidisciplinary practices including law, tax and management advice)
- why, what allows big companies to do many things at the same time? it became
easier to offer because they already had the reputation. later on it became a problem
because of the increased interests. another problem is that if you screw one project,
your reputation was also screwed for the other projects
- they were followed by hardware manufacturers (like IBM) as well as computer and
software services firms
- when IT consultancies came in, it also changed the structure of consultancy: the
solutions were even more standardized leading to higher leverage between seniors
and juniors. organisational consequences: higher leverage, bureaucratisation
- is IT consulting actually management consulting? in that time, ERP systems were
only used by senior managers to understand how to use the resources and how to
optimize them, so it was more to make managerial decisions. nowadays, it is within
more layers of the organization so you can ask the question if it is always about
management
difficulty for consultancies to move from one wave to the next - a lot of consultancies
from wave one did not make it to wave two and wave three, reasons:
, - intangibility of consulting services and role of reputation - consultancy does not really
provide an end product, there is a hidden reputation that you built with your client. to
build up this capacity, trust, reputation takes a lot of resources and time
- need to match skills with client expectations - lack of skills makes it difficult to keep
up with the changes - wave one were more engineers, wave two people giving
advice on accountant, strategies with all have a different skill set
- different leverage structures required for different types of services
- lot of waves appear simultaneously, you don’t really know when the waves are
changing - when engineers were still giving advice about how to optimize the
production line, there were already some consultants giving advice about strategies
and financial situations
- what happened with the consultancies from the previous waves? - vb advice on how
to optimize the production line is in other stages no longer needed, because things
have been automatised already, some knowledge just become obsolete and known
by everyone
key take aways
- the evolution of the consulting industry is closely linked to the development of
management practice and ideology - whatever managers are faced with, whatever
challenges they have, the consultancy has to adapt. however, the management
needs to drive the consultancy development
- when there is a major shift in the role of managers, the kind of consultancy also
changed
- shifts to not occur overnight: consultancies of different generations may coexist for
some time - one wave overlaps another one, that is why it is so difficult to understand
when the shift really happens
what is changing at the moment in the consulting industry?
- new ways of working and how we strive for the work-life-balance is one of the issues
that managers are facing now
- consultancy starts to merge with some IT companies (AI, machine learning) and
replacing some of the skills
- sustainability is a current trend, new business models
- sophistication of clients’ demands
- pressure on cost because we automise so much
- demands for more flexible work and more autonomy from consultants
- continued impact of technology on client firms (big data, data analytics, machine
learning, covid crisis) - digitalization
Lecture 2 The consultancy process & new business models
How do consultants and consultancies work?
Traditional (linear) view of the consulting process
5 step approach
- entry: how to get into clients, clients
usually do not show up spontaneously,
you need to get them in yourself
, - diagnosis: what is going on
- action planning: how are we going to solve the problem/question, looking for
solutions, sometimes already solutions available, sometimes make up your own
- implementation: here is when change management comes in
- termination: when you leave the client, sometimes hard for companies because they
want to keep the clients
=> different parts can be done by different consultants
how to ensure a client asks you to make an offer: the entry phase
how to get entry to a client?
depends on who the client is
government vs company: OH: easy to know where to look, but also lot of competition,
difficult to grant a contract. private; marketing related activities
getting in touch with an opportunity
- brand: big four, strategy houses, personal brand - individuals that are really known
- thought leadership: publications, conferences, newspaper articles, research
- existing network: regular clients
- formal search processes by clients: via procurement procedures or external
recruiters, linkedin
- reputation/word of mouth; clients recommend the consultants to others
- cold calling - salesperson contacts individuals who have not expressed interest in the
offered services, by phone or telemarketing
- portals with assignment: some assignments are published on online portals
client initiated projects
- request for information (RfI): client wants more information from consultants to get a
clearer view about what the clients’ precise question is
- request for proposal (RfP): request to write a full proposal, usually accompanied by a
procedure stating:
- whether and how you can ask questions to the client
- scope
- dates, budgets
- who will judge the proposal
- the criteria against which the proposal will be judged
- date at which the project will be granted
- pre-qualification/preferred suppliers
- selection of potential consultants to develop a list of consultants who will
receive RfPs for a certain time period - vb dutch government selected five
preferred suppliers who will execute consulting work over budget for a period
of four years
- preferred suppliers receive RfPs for which they have to develop proposals, in
competition
- consultant’s dream is to escape all these systems and write proposals without
competition
consultant initiated assignments
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