Management consulting

From Wikipedia, the free encyclopedia

Management consulting is the practice of helping organizations to improve their performance. Organizations may draw upon the services of management consultants for a number of reasons, including
gaining external (and presumably objective) advice and access to consultants' specialized expertise.

As a result of their exposure to, and relationships with numerous organizations, consulting firms are typically aware of industry "best practices". However, the specific nature of situations under consideration
may limit the ability or appropriateness of transferring such practices from one organization to another.

Consultancies may provide organizational change-management assistance, development of coaching skills, process analysis, technology implementation, strategy development, or operational improvement
services. Management consultants often bring their own proprietary methodologies or frameworks to guide the identification of problems, and to serve as the basis for recommendations with a view to more
effective or efficient ways of performing work tasks.

Contents [hide]
1 History
2 Function
3 Trends
3.1 Big Three management consultancies
3.2 Big Four accounting firms in the management consulting market
3.3 Trends
4 Government consultants
4.1 United Kingdom
4.2 Europe
4.3 Romania
4.4 Australia
4.5 New Zealand
5 Nonprofit consultants
6 Criticism
7 International standards
8 See also
9 References
10 Further reading

History [ edit ]

Management consulting grew with the rise of management, as a unique field of study. One of the first management consulting firms was Arthur D. Little Inc., founded in 1886 as a partnership, and later
incorporated in 1909.[1] Though Arthur D. Little later became a general management consultancy, it originally specialised in technical research.

As Arthur D. Little focused on technical research for the first few years, the first management consultancy was started by Frederick Winslow Taylor, who in 1893 opened an independent consulting practice
in Philadelphia. His business card read "Consulting Engineer – Systematizing Shop Management and Manufacturing Costs a Specialty". By inventing Scientific Management, also known as Taylor's method,
Frederick Winslow Taylor invented the first method of organizing work, spawning the careers of many more management consultants. One of Taylor's early collaborators, Morris Llewellyn Cooke, for
example, opened his own management consultancy in 1905. Taylor's method was used worldwide until industry switched to a method invented by W. Edwards Deming.[citation needed]

The initial period of growth in the consulting industry was triggered by the Glass–Steagall Banking Act in the 1930s, and was driven by demand for advice on finance, strategy, and organization.[2] From the
1950s onwards consultancies not only expanded their activities considerably in the United States but also opened offices in Europe and later in Asia and South America. After World War II, a number of new
management consulting firms were formed, bringing a rigorous analytical approach to the study of management and strategy. The postwar years also saw the application of cybernetics principles to
management through the work of Stafford Beer.

The industry experienced significant growth in the 1980s and 1990s, gaining considerable importance in relation to national gross domestic product. In 1980 there were only five consulting firms with more
than 1,000 consultants worldwide, whereas by the 1990s there were more than thirty firms of this size.[3]

A period of significant growth in the early 1980s was driven by demand for strategy and organization consultancies. The wave of growth in the 1990s was driven by both strategy and information technology
advice. In the second half of the 1980s, the big accounting firms entered the IT consulting segment. The then Big Eight, now Big Four, accounting firms (PricewaterhouseCoopers; KPMG; Ernst & Young;
Deloitte Touche Tohmatsu) had always offered advice in addition to their traditional services, but after the late 1980s these activities became increasingly important in relation to the maturing market of
accounting and auditing. By the mid-1990s these firms had outgrown those service providers focusing on corporate strategy and organization. While three of the Big Four legally divided the different service
lines after the Enron scandals and the ensuing breakdown of Arthur Andersen, they are now back in the consulting business. In 2000, Andersen Consulting broke off from Arthur Andersen and announced
their new name: Accenture.[4] The name change was effective starting January 1, 2001 and Accenture is currently one of the largest consulting firms in the world. They are publicly traded on the NYSE with
ticker ACN.[5]

The industry stagnated in 2001 before recovering after 2003 and then enjoying a period of sustained double-digit annual revenue growth until the financial crash of 2008/9. With Financial Services and
Government being two of the largest spenders on consulting services, the financial crash and the resulting public sector austerity drives hit consulting revenues hard. In some markets such as the UK there
was even a recession in the consulting industry, something which had never previously happened and has not happened since. There has been a gradual recovery in the consulting industry's growth rate in
the intervening years, with a current trend towards a clearer segmentation of management consulting firms. In recent years, management consulting firms actively recruit top graduates from Ivy League
universities, Rhodes Scholars,[6] and students from top MBA programs.

In more recent times, traditional management consulting firms have had to face increasing challenges from disruptive online marketplaces that are aiming to cater to the increasing number of freelance
management consulting professionals.[7]

Function [ edit ]

The functions of consulting services are commonly broken down into eight task categories.[8] Consultants can function as bridges for information and knowledge, and that external consultants can provide
these bridging services more economically than client firms themselves.[9] Consultants can be engaged proactively, without significant external enforcement, and reactively, with external pressure.[10]
Proactive consultant engagement is engaged mainly with aim to find hidden weak spots and improve performance, while the reactive consultant engagement is mostly aimed at solving problems identified
by external stakeholders.

Marvin Bower, McKinsey's long-term director, has mentioned the benefits of a consultant's externality, that they have varied experience outside the client company.[11]

Consultants have specialised skills on tasks that would involve high internal co-ordination costs for clients, such as organization-wide changes or the implementation of information technology. In addition,
because of economies of scale, their focus and experience in gathering information worldwide and across industries renders their information search less costly than for clients.[12]

Trends [ edit ]

Big Three management consultancies [ edit ]

Main article: Big Three (management consultancies)

Three consulting firms are widely regarded as constituting the Big Three.[13] Also called the MBB,[citation needed] they are:

McKinsey & Company

Boston Consulting Group
Bain & Company

Big Four accounting firms in the management consulting market [ edit ]

The Big Four audit firms (Deloitte, KPMG, PwC, Ernst & Young) have been working in the strategy consulting market since 2010.[14] In 2013, Deloitte acquired Monitor Group—now Monitor Deloitte—while
PwC acquired PRTM in 2011 and Booz & Company in 2013—now Strategy&. From 2010 to 2013, several Big Four firms have tried to acquire Roland Berger.[15] EY followed the trend, with acquisitions of
the Parthenon Group in 2014, and both the BeNeLux and French businesses of OC&C in 2016 and 2017, with all now under the EY-Parthenon brand.[16]

Deloitte has been named as the largest consulting firm for six years running as per Gartner's annual consulting report.[17] Deloitte Consulting is broken up into three practices: Human Capital, Strategy &
Operations, and Technology.[18] They were ranked #4 on Vault's 2018, 2017 and 2016 rankings for consulting firms.[19] In 2016, PwC overtook Deloitte again as the globe's largest consulting firm, with the
revenue gap between the two Big Four firms at roughly $600 million, according to Gartner.[20]

Firm Revenues Fiscal year Source

PricewaterhouseCoopers (PwC) $16.0bn 2016 [20]

Deloitte $15.4bn 2016 [20]

Ernst & Young (EY) $14.5bn 2016 [20]

[20]
m

KPMG $11.5bn 2016

co
o.

Trends [ edit ]
er

In 2013, an article in Harvard Business Review discussed the prevalent trends within the consulting industry to evolve. The authors noted that with knowledge being democratized and information becoming
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more and more accessible to anyone, the role of management consultants is rapidly changing. Moreover, with more online platforms that connect business executives to relevant consultants, the role of the
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traditional 'firm' is being questioned.[21]

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Government consultants [ edit ]

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United Kingdom [ edit ]

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In the UK, the use of external management consultants within government has sometimes been contentious due to perceptions of variable value for money. From 1997 to 2006, for instance, the UK
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government reportedly spent £20 billion on management consultants,[22] raising questions in the House of Commons as to the returns upon such investment.[23]
sh

The UK has also experimented with providing longer-term use of management consultancy techniques provided internally, particularly to the high-demand consultancy arenas of local government and the
as

National Health Service; the Local Government Association's Improvement and Development Agency and the public health national support teams; both generated positive feedback at cost levels
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considered a fraction of what external commercial consultancy input would have incurred.
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Europe [ edit ]

European Standard EN 16114:2011 "Management consultancy services". [clarification needed]

Romania [ edit ]

In 2011, the Romanian management consulting industry began to re-initiate growth after a period of economic stagnation. At the end of 2010, a majority of Romania’s management consultancies had
experienced declining profits and by the end of 2011 about 70% of them had noted shrinking bottom lines. 2010 and 2011 represented an important test for many Romanian consulting firms according to a
European Federation of Management Consultancies Associations (FEACO) study.[24]

In 2015, Romanian management consulting had a turnover of 350 Mln. € and an export of 10% of the overall turnover, 75% within the EU and 25% outside. The local leader of the Romanian management
consulting market is Ensight Management Consulting.[25][26]

Australia [ edit ]

In 1988, the newly elected Greiner State Government commissioned a report into the State Rail Authority by Booz Allen Hamilton. The resulting report recommended up to 8,000 job losses, including the
withdrawal of staff from 94 country railway stations, withdrawing services on the Nyngan- Bourke line, Queanbeyan – Cooma line and Glen Innes- Wallangarra line, the discontinuation of several country
passenger services (the Canberra XPT, the Silver City Comet to Broken Hill and various diesel locomotive hauled services) and the removal of sleeper trains from services to Brisbane and Melbourne. The
report also recommended the removal of all country passenger services and small freight operations, but the government did not consider this to be politically feasible.[27] The SRA was divided into business
units – CityRail, responsible for urban railways; CountryLink, responsible for country passenger services; FreightRail, responsible for freight services; and Rail Estate, responsible for rail property.

New Zealand [ edit ]

In New Zealand the government has historically had a greater role in providing some infrastructure and services than in some other countries. Contributing reasons included insufficient scale in the private
sector, smaller capital markets and historic political support for government service provision. Current infrastructure investment plans are open to a range of public/private partnerships.[28] New Zealand
governments hire in expertise to complement the advice of professional public servants. While management consultants contribute to policy and to strategy development, the Government tends to use
management consultants for strategic review and for strategy execution. There is a distinction[29] between management consultants (who generally provide advice and fixed deliverables, often for a fixed
fee) and professional contractors (who work for an hourly or daily rate providing specialist services). Official figures from 2007 to 2009 show annual expenditure of about NZ$150 to NZ$180 Million by the
New Zealand Government on consultants, but this may be understated.[30][need quotation to verify] While multinational consultancy firms provide advice on major projects and in specialist areas, the majority of
management consultants providing advice to the New Zealand government operate as sole practitioners or as members of small consultancy practices. The range of services provided is large, covering
change management, strategic review, project and programme management, procurement, organizational design, etc.

Nonprofit consultants [ edit ]

Some for-profit consulting firms, including McKinsey and BCG, offer consulting services to nonprofits at subsidized rates as a form of corporate social responsibility.[citation needed] Other for-profit firms have
spun off nonprofit consulting organizations, eg. Bain creating Bridgespan.[31]

Many firms outside of the big three offer management consulting services to nonprofits, philanthropies, and mission-driven organizations. Some, but not all, are nonprofits themselves.[32][33]

Criticism [ edit ]

Management consultants are sometimes criticized for the overuse of buzzwords, reliance on and propagation of management fads, and a failure to develop plans that are executable by the client. As stated
above management consulting is an unregulated profession so anyone or any company can style themselves as management consultants. A number of critical books about management consulting argue
that the mismatch between management consulting advice and the ability of executives to actually create the change suggested results in substantial damages to existing businesses. In his book, Flawed
Advice and the Management Trap, Chris Argyris believes that much of the advice given today has real merit. However, a close examination shows that most advice given today contains gaps and
inconsistencies that may prevent positive outcomes in the future.[34]

Ichak Adizes and coauthors also criticize timing of consultant services. Client organizations, which is usually lacking knowledge it wants to obtain from the consultant, cannot correctly estimate right timing
for engagement of consultants. Consultants are usually engaged too late, when problem is visible at the organizational iceberg tip, so proactive checkup, like regular medical checkup, is recommended.[35]
On the other side, this opens additional danger for abuse from disreputable practitioners.

More disreputable consulting firms are sometimes accused of delivering empty promises despite high fees, and also with "stating the obvious" or lacking the experience upon which to base their advice.
These consultants bring few innovations, instead offering generic and "prepackaged" strategies and plans that are irrelevant to the client's particular issue. They may fail to prioritize their responsibilities,
placing their own firm's interests before those of the clients.[36][unreliable source?]

Further criticisms include: disassembly of the business (by firing employees) in a drive to cut costs, only providing analysis reports, junior consultants charging senior rates, reselling similar reports to
multiple clients as "custom work", lack of innovation, overbilling for days not worked, speed at the cost of quality, unresponsive large firms and lack of (small) client focus, lack of clarity of deliverables in
contracts, not customizing specific research report criteria and secrecy.[37]

International standards [ edit ]

ISO published the international standard ISO 20700 Guidelines for Management Consultancy Services on June 1, 2017. This document represents the first international standard for the management
consultancy industry.[38]

An international qualification for a management consulting practitioner is Certified Management Consultant (CMC).

See also [ edit ]

Big Three (management consultancies) Wikimedia Commons has

List of management consulting firms media related to
Management.
Category:Management consulting firms
Institute of Consulting
White-shoe firm
Case interview
Motivational speaking
Business coaching
Management fad
Philosophy of business
Strategic management
Operations management
Industrial engineering
Organizational psychology
Industrial psychology
Organizational development
Project management
Nathan for You and House of Lies – television programs parodying management consulting

References [ edit ]

1. ^ "Scatter Acorns That Oaks May Grow" . MIT Institute Archives 12. ^ Bessant, John; Rush, Howard (January 1995). "Building bridges 26. ^ "FEACO 2014-2015 survey" (PDF).
& Special Collections. Archived from the original on 12 March for innovation: the role of consultants in technology transfer". 27. ^ Moore, M Lagan, B. SRA takes axe to 8000 jobs. Sydney
2017. Retrieved 9 March 2011. Research Policy. 24 (1): 97–114. doi:10.1016/0048- Morning Herald, July 14, 1989.
2. ^ Kipping, M. 2002. "Trapped in their wave: the evolution of 7333(93)00751-e . ISSN 0048-7333 . 28. ^ The 30 Year New Zealand Infrastructure Plan 2015, National
management consultancies," in T. Clark and R. Fincham (eds.). 13. ^ Szczerba, Marta (5 March 2014). "The Big Three: meet the Infrastructure Unit, The Treasury, New Zealand Government.
Critical Consulting: New Perspectives on the Management Advice world's top consulting firms" (72). The Gateway. Archived from 29. ^ Page 12, RFP All of Government Consultancy Services 28
Industry. Oxford: Blackwell, 28–49. the original on 4 September 2014. Retrieved 18 October 2014. October 2014 New Zealand Government
3. ^ Canback, S. 1998a. Transaction Cost Theory and Management 14. ^ "Consultancy firms: Strategic moves" . The Economist. 2013- 30. ^ "para 16" (PDF). Archived from the original (PDF) on 2019-
Consulting: Why do Management Consultants Exist?, Working 11-09. Retrieved 2015-05-07. 01-27. Retrieved 2014-04-23.
Paper 9810002. Henley Management College, Henley-on-Thames. 15. ^ "Limitless? Big Four strategic moves in consulting" . Beaton 31. ^ Krauss, Alan (2008-11-10). "A Nonprofit Consultant Offers Free
4. ^ "Andersen Consulting Announces New Name — Accenture — Capital. 2014-04-14. Retrieved 2015-05-07. Strategic Advice Online" . The New York Times. ISSN 0362-
Effective 01.01.01 | Accenture Newsroom" . 16. ^ "French arm of strategy consultancy OC&C joins Parthenon- 4331 . Retrieved 2020-01-03.
newsroom.accenture.com. Retrieved 2017-01-24. EY" . www.consultancy.uk. Retrieved 2017-09-25. 32. ^ "Virtue's intermediaries" . The Economist. 2006-02-25.
5. ^ "ACN : Summary for Accenture plc Class A Ordinary - Yahoo 17. ^ Gartner. "Market Share Analysis: Consulting Services, ISSN 0013-0613 . Retrieved 2020-01-03.
Finance" . finance.yahoo.com. Retrieved 2017-01-24. Worldwide, 2016" . 33. ^ Dagher, Veronica (2011-04-13). "Helping Make Clients'
6. ^ Rhodes Scholars, Oxford, and the Creation of an American Elite 18. ^ "About Consulting services | Deloitte US" . Deloitte United Philanthropy Count" . WSJ. Retrieved 2020-01-03.
– Thomas J. Schaeper, Kathleen Schaeper – Google Books . States. Retrieved 2017-01-24. 34. ^ Argyris, Chris. Flawed Advice and the Management Trap. New
Books.google.co.uk. 2010-01-15. ISBN 978-0-85745-369-3. 19. ^ "Deloitte Consulting LLP|Company Rankings|Vault.com" . York: Oxford University Press, USA, 2000. Print.
Retrieved 2013-06-14. Vault. Retrieved 2017-01-24. 35. ^ Adizes, Ichak Kalderon; Rodic, Dusanka; Cudanov, Mladen
7. ^ "Consulting on the Cusp of Disruption" . Harvard Business 20. ^ a b c d e Gartner. "Gartner Consulting Report" . (2017-09-21). "Estimating consultant engagement in the corporate
Review. Retrieved 2016-03-15. 21. ^ "Consulting on the Cusp of Disruption" . Harvard Business lifecycle: study of the bias in South Eastern Europe" .
8. ^ Turner, A. N. 1982. "Consulting is more than giving advice," Review. Retrieved 2016-03-02. Management: Journal of Sustainable Business and Management
Harvard Business Review 60/5: 120-9. 22. ^ "The Times & The Sunday Times" . thetimes.co.uk. Retrieved Solutions in Emerging Economies. 22 (2): 1–12.
9. ^ Bessant, J., and H. Rush 1995. "Building bridges for innovation: 14 April 2018. doi:10.7595/management.fon.2017.0015 . ISSN 2406-0658 .
the role of consultants in technology transfer," Research Policy 24: 23. ^ "Central government's" (PDF). British House of Commons. 36. ^ "Management Consulting'?" . ArticleWorld.
https://www.coursehero.com/file/69213174/Management-consultingpdf/ 97-114. Retrieved 2007-10-19. 37. ^ "Johann Hari: The management consultancy scam" .
10. ^ Adizes, Ichak; Cudanov, Mladen; Rodic, Dusanka (2017). 24. ^ "FEACO Survey 2010-2011" (PDF). independent.co.uk. 20 August 2010. Retrieved 14 April 2018.
"Timing of Proactive Organizational Consulting: Difference 25. ^ "10.000 de angajaţi produc venituri de 380 de milioane de euro 38. ^ "ISO 20700:2017 - Guidelines for management consultancy
between Organizational Perception and Behaviour" (PDF). pe an pentru firmele de consultanţă în management - Ziarul services" . www.iso.org. Retrieved 14 April 2018.
Amfiteatru Economic. 19 (44): 232–248 – via ECONSTOR. Financiar" . m.zf.ro. Retrieved 14 April 2018.
11. ^ Bower, M. 1982. The Will to Manage. New York: McGraw-Hill.

Further reading [ edit ]

Christopher D. McKenna (2006). The World's Newest Profession: Management Consulting in the Twentieth Century. Cambridge University Press.
Joe O'Mahoney (2006). Management Consultancy. Oxford University Press.

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Categories: Management consulting Consulting occupations Strategic management

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