Chapter 1 Defining Management Consultancy
Mission statements: ‘Our mission is to help our clients realize substantial and sustainable
performance improvements’.
In specific consultancy projects, such as cost reduction, the impact of consultancy is immediately
measurable and therefore tangible (fee might be directly related to achieved results), however most
forms are intangible.
Different hierarchical levels for the managers you are focused at: junior management to board level.
The domain of the management decisions on which consultancy focuses is the positioning and
functioning of organizations. This varies from strategic management and organization to the various
business functions, such as operations and human resource management.
The first level is about improving the long-term performance of the client organization as a whole.
The second level is about improving the performance of one or more of the organization’s operational
activities over a shorter term.
,Management consultancy may include both advising on decisions and assisting clients on
implementation of the solution. Just as advice provided by management consultants refers to
management’s decisions, the implementation assistance provided by management consultants
should refer to the management’s tasks regarding the implementation of the decisions. The client
management’s tasks with respect to implementation are limited to:
- Designing the implementation plan
- Forming a team of client employees to execute the plan
- Training the team members
- Providing the communication of the plan
- Coaching client management and team members
- Advising management on an ongoing basis on the optimal approach throughout
implementation
- Monitoring the progress of implementation and suggesting adaptive and corrective actions
when necessary
- Evaluation the implementation
Management consultancy is a knowledge-intensive service which independent business professionals
provide to managers of client organizations, and consists of objective advice on management’s
decisions regarding the solutions to the client organization’s problems and opportunities (narrow
definition), and may, in some cases, also consist of assistance with the management’s tasks regarding
the implementation of these solutions (broad definition).
The management consultant’s services should always be at the client management level.
Management consultancy, therefore, excludes doing the work of the professional staff that report to
client management. Providing assistance for these non-management tasks regarding implementation
may be termed ‘business consultancy’.
Main criteria for determining whether a service qualifies as management consultancy:
- We may interpret hiring external management consultants as a form of outsourcing. However,
if we define outsourcing in narrow terms as the externalization of business processes, such as
operations, logistics, or administration, then outsourcing is not part of management
consultancy. Such outsourcing is not the provision of advice on a management decision.
Instead, this type of outsourcing is the outcome of a management decision.
- Training does not belong to the domain of management consultancy either. Training is neither
advice on management decisions, nor assistance on management’s tasks regarding the
implementation of solutions. Some definitions of management consultancy will include the
‘capability development’ of clients as one of the benefits of management consultancy. Client
management and staff may indeed learn from management consultants while working together
during the consultancy project. However, this is a knowledge spill-over that is a positive side
effect of the project. If clients decide to hire their management consultants only for the
purpose of training their management and staff, then this service does not qualify as
management consultancy.
- Temporary work, or so-called ‘body shopping’, does not qualify as management consultancy if
it is not about advice on management decisions, or assistance on management implementation
tasks. Some clients may use management consultants for non-management implementation
tasks. In such a case, the consultants will offer business services instead of management
consultancy.
, - Venture capital investing does not belong to management consultancy. Venture capitalists may
provide advice on management decisions. But venture capitalists are not independent as they
have an equity stake in their ‘clients’.
- Interim managers are not management consultants. Unlike management consultants they
assume managerial responsibilities. Interim managers do not give advice on decisions, they
take decisions.
- Legal advice is not management consultancy. Lawyers may provide advice to managers but not
on business decisions. The domain of lawyers is legal problems and opportunities, rather than
business ones. We acknowledge that business problems have legal aspects and therefore
management consultants have to consider the legal side of their clients’ business problems as
well. Consultants may work together with legal advisors to investigate the legal side of the
business problem. For the same reason, accountancy does not belong to management
consultancy. Accountants may advise management on financial reporting. Of course business
problems may have financial aspects. In such cases, management consultants should
investigate the financial side of the business problems. However, accountancy in its pure form
does not comprise advice to management on business problems or opportunities. Engineering
is not part of management consultancy either. Engineers may provide advice but they must
focus on technological problems and opportunities rather than business ones. Again, business
problems may have technical aspects. Such problems require management consultants to
consider these technical facets. They may hire engineers to analyse the technical side of the
business problems.
- Personal effectiveness coaching is not management consultancy. Coaches may provide advice
on the personal effectiveness of the individual manager. The problems and opportunities of an
individual manager are not the domain of management consultancy. Management consultancy
is about management decisions on the business problems and opportunities of the client
organization.
- Management gurus may be part of management consultancy. Communicating management
ideas through articles, books, websites, and speeches is not management consultancy. Only if
gurus also advise managers on business decisions, do they provide management consultancy.
- Management consultancy is not reserved for external providers. Some large organizations have
formed internal management consultancy units. These units serve managers in their own
organization. As long as these internal consultants can operate independent of their clients,
their work qualifies as management consultancy. In some cases, these internal consultancy
units may also work for external clients.
Formal
Roles
Informal
Roles
, Expert: Purchase of expertise consultation model. These clients (think they) know that their
organization has a problem/opportunity and they think they can define their problem.
Management consultants may provide benchmark information and other external knowledge. They
may also provide clients with contacts from their network.
- Knowledge innovator: develops or creates the knowledge.
- Knowledge broker: disseminates knowledge across organizational borders and/or industry
borders.
o An example of knowledge brokering within one industry is when the management
consultant transfers best practice manufacturing process from the leading automotive
producers to a client automotive producer whose manufacturing process is trailing these
best practices in automotive manufacturing. An example of knowledge brokering across
industries borders is when the management consultant brokers knowledge about a
business model from the consumer electronics industry to a client in the automotive
industry.
o In the case of knowledge brokering, the knowledge may be new to the client but it may
not be new to the client’s industry. It is certainly not new to the world. Knowledge
brokering needs to respect the interests and intellectual property rights of clients if it is
not to become unethical or even illegal. A management consultant cannot broker sensitive
knowledge from a particular firm, for instance a competitive strategy, to a direct
competitor of that firm.
Doctor: Clients may think they have a problem, or an opportunity. They have only vague ideas about
this problem, or opportunity. For instance, an insurance company sees its profitability declining over
time. The management of this insurer has no idea about the cause of this decline -> doctor-patient
consultation.
Both is called content consultation (expert and doctor provide content, or solutions).
Facilitator: In process consultation, the client does the work under the guidance of the management
consultant. Process consultation helps to get acceptance of solutions and eases the implementation
of solutions because it is the client’s own work. A benefit of process consultation is that clients may
learn the consultant’s methods and techniques for defining and solving problems and opportunities.
Process consultation facilitates client capability development. To enhance capability development,
client management needs to carefully select the employees to participate in the consultancy project
on the basis of the need for capability development, not on the basis of availability for the project.
Hiring hand: Clients may hire management consultants not for their expertise, or their problem
solving skills, or for their process, but just because they are temporarily understaffed. The ‘hired
hand consultants’ may be put to tasks that clients would generally do themselves, but for which they
temporarily have capacity constraints.
Legitimator: The corporation, then, hires a prestigious management consultancy firm to develop a
new corporate strategy that includes the desired diversification. . Even worse is the situation where
the management consultant is asked to rubber stamp a solution that the client has already
developed.
Political weapon: The client management may use the management consultant to fight a political
battle with actors inside or outside the client’s organization. The consultant is supposed to provide
arguments for the client’s position. This may be an internal battle within the client organization, for
