Different industries or businesses operate in a competitive business environment in today’s time and various companies look for unique ideas and methods to enhance their market share, business expansion, and growth. The company may look for business expansion in terms of exploring new market segments, new product development, or expanding operations. These expansion strategies require strategic decision-making capabilities.
Here the role of Management Consulting comes into the picture which is an industry that assists businesses with the above type of superior problem-solving and decision-making. Management consulting can be viewed as a separate business that analyzes and offers business solutions to critical issues or problems with a company. This is considered as a valuable service as it offers unbiased views and solutions to the problem and maximum effort to provide the best possible solutions for it.
Management Consultants are the key personnel of management consulting and support companies in making those strategic decisions that may have a direct impact on its entire business. By evaluating the problems or issues that clients are facing, management consultants facilitate them in making action plans to resolve those issues.
Management consulting includes various types of service areas including strategic consulting, HR consulting, and Operations consulting.
In general terms, Management consulting or Business consulting is considered as services related to implementation and/or advisory that are offered to the top management of businesses and aimed at making an improvement in their operational processes, business performance, and business strategy’s effectiveness.
Larry Greiner and Robert Metzger have defined Management consulting as an advisory service provided to and contracted for companies by highly qualified and trained people who support their client company in an independent and objective way, to determine management issues or problems, analyze them, suggest solutions to those, and provide help, when seek, in implementing the solutions.
According to ILO (International Labour Organization), management consulting can be viewed as a professional work carried by people having required qualifications, expertise, technical skills, and the right attitude to suggest and support the management of an organization professionally for sorting out their management-related issues or aiming at increasing the organization’s business opportunities at maximum level.
In the late 19th century, the Management Consulting industry started developing within a short span of time after the management field recognized as a unique function of the company. At the early stage, management consulting firms were initiated by professors of the university. The first firm i.e. Arthur D. Little was started in the late 1890s and initially it was specialized in technical-based research. Later, it developed as a general management consultancy firm. The management consultancy Booz Allen Hamilton which was discovered by Edwin G. Booz in 1914, served both government and industry clients. Later on, its name was changed to Booz & Co.
McKinsey & Company is considered as the first modern Management Consulting firm and was discovered in Chicago by James O. McKinsey in the year 1926. Further, lots of new firms started their management consulting services in the 1960s, 1970s such as Roland Berger, BCG, Bain & Co. (in 1973).
The management consulting industry progressed a lot in the late 1990s due to different factors such as privatization, new consulting practices in IT, strong global economy, emerging markets, etc. New firms were opening all over the world and lots of already established firms were enjoying 20% revenue annually or more.
The current trend includes management consulting as a separate and clear segment or function.
OBJECTIVES OF MANAGEMENT CONSULTING
The fundamental objectives of management consulting are defined below in a hierarchy
1. To provide information
One of the most common purposes of companies, seeking the assistance of management consulting is to gain information. Different activities or tasks such as cost studies, market surveys, attitude surveys, feasibility study, and competitive structure analysis of a business may be required in the compilation process of the information. For this, an organization may look for the special expertise of a management consultant as it may not be feasible to spare resources or required time to produce data internally.
2. To sort out the client’s problems or issues
The next important objective of management consulting is to resolve problems given by their clients. Organizations often give tough issues or strategic problems to consultants such as a client organization might want to know if a component or product should be purchased or to be made, to divest or acquire a business line, to make changes in marketing strategy, etc. Other than this, management of the organization may also look for restructuring its organization, financial policies that can be adopted, or the best practical-oriented solution of problems related to efficiency, compensation, control, internal management, etc.
3. To conduct effective diagnosis
The value of most management consultants lies in their level of expertise in conducting an effective diagnosis of problems. This purpose includes diagnosing strategic issues in close connection with issues at the organizational level.
4. To provide recommendations for actions to be taken
Another aim of management consulting includes providing final recommendations on solutions to problems given by their clients. The whole exercise of management consulting has a conclusion including the final report and recommendations that the client is required to do.
This involves a great effort i.e. to design reports that carry clear analysis, information, and diagnosed-based recommendations. The purpose of management consulting services is supposed to be fulfilled when consultants represent a step-by-step logical and consistent action plan to improve or resolve diagnosed issues or problems. After the recommendations of management consultants, the organization takes a decision on implementing it.
5. To assist in the implementation of changes
The next aim of management consulting is to provide assistance in the implementation of recommendations made by them as the absence of implementation or poor implementation leads to wastage of both time and money. Management consultants facilitate their clients by installing the recommended system. The effective installation or implementation of a new system requires commitment, new techniques of problem-solving, etc.
6. To build agreement and commitment
The purpose of management consulting also includes making or building an agreement for necessary steps in the execution of the solution to the problem given by the client. In other words, one purpose is to establish proper agreement within the company to provide enough support to clients stepping towards actions to be taken.
7. Assist client learning
This purpose is related to facilitate clients to learn the methods required to deal with challenges in the future. Management consulting firms fulfill this purpose adding the organization’s members in the process of assignment. Management consultants assist clients in learning by helping them in designing learning opportunities for goal-setting processes, methods of work-planning, task force assignments, etc.
8. To improve an organization’s effectiveness
Organizational effectiveness indicates the ability to implement future strategy and management consulting includes this purpose to contribute to maintaining the future feasibility of an organization in changing the world of business.
PROCESS OF MANAGEMENT CONSULTING
The management consulting process includes a well-structured beginning or starting point (to establish a relationship with the client and start working) and closing (moving of management consultant from the project). The process can be further categorized into different phases between these two points that facilitate both client and management consultants to proceed from one phase to another in a systematic way. Phases of the management consulting process are as follow:
1. Entry phase
The entry phase is considered as the planning and preparation phase in which the management consulting firm comes in contact with a client first time and starts its consulting work with the client. Therefore, this phase is considered as the first interface or point of contact between the consultant and the client. This consists of the discussions to start the consulting services i.e. what are the changes required by the client company or what it wants to achieve in its organization and on what aspect management consultants might assist in that. This phase also includes preparing a plan for assignment according to the preliminary analysis of the problem and signing a management consulting agreement.
Face to face meeting is arranged to help the client and consultant to know each other. On preliminary grounds, the consultant decides his/ her role in assisting in problem-solving and the way to do so. This phase provides the ground for the things that will be followed further as the next phases will be influenced a lot by the quality of already completed conceptual work and also, the relationship type that is established between the consultant and the client while entering into the agreement.
This is the stage of preliminary and in-depth diagnosis of the issue that is required to be sorted-out. In this phase, the main focus is on the problem and purpose analysis. Both client and consultant cooperate with each other to identify the required change type, define the purpose in detail that needs to be achieved through assignment, and also, access the resources, performance, perspectives, and needs of the client. conclusions are made on orienting work as per proposed action plans to make sure that real problems or issues get resolved and the expected aims are achieved. So, this phase also includes emerging of a few possible solutions.
Although the least priority is given to fact-finding and diagnosis, still decisions related to the type of data to be accessed or not to be accessed, aspects of the issue for in-depth examination, and facts to be skipped, etc. helps in predetermining the quality and relevance of the solutions that are about to be proposed. Both client and management consultant clear the payment terms in this phase in order to avoid any kind of dispute or delay.
3. Action planning
This phase of the Management consulting process is aimed at finding and offering the different solutions of the given problem. This consists of working on either a single or more alternative way outs, evaluating different possible alternatives, elaborating a plan for implementation of changes, and presenting proposals for the client’s decision.
This is the fourth phase of the management consulting process and includes the implementation of proposals that are developed by the management consultant in coordination with the client company. This phase is considered as a conclusive test to examine the feasibility and relevance of proposals. Adjustments can be made in a proposal if required. It is quite possible that unexpected problems or hurdles may arise. Also, planning-related shortcomings can be detected and necessary steps can be taken for rectification. Evaluation of possible resistance to the change process can be done. Implementing training programs for staff of the client company is also part of this phase.
5. Windup or termination
This is the final phase of the management consulting process and involves a lot of activities. Both consultant and client evaluate the performance of the consultant during the given assignment, the approach that the consultant took, changes done, and results obtained. Presentation of final reports and final discussions are made. The settlement of mutual commitments is also part of this. In the case of continuing the collaborative relationship, the negotiation on future contracts and follow-up agreements get executed. After completion of these activities, the termination of the consulting agreement happens through mutual agreement and consultant service withdraws from the organization of the client.
MANAGEMENT CONSULTING FIRMS
The market share of management consulting consists of over 50% of the total consulting industry. So, most industry players are either firm with specialized management consulting or companies that offer management consulting through its business unit. These types of organizations include mostly big IT service providers who offer change management and implementation support, recruitment agencies, or companies that provide HR advisory along with HR services, or temporary employment agencies that provide consulting services to contract or temp portfolio. There are management consultants who are freelancers or independent advisors.
Major tasks or functions of Management consulting firms
1. To provide functional expertise: The leading management consulting firms carry great expertise in key aspects. So, companies get engaged with consulting firms when they face crisis situations or critical challenges or problems, and for solutions, expertise level is required.
For example, let’s say a big IT company wants to adopt the strategy of merging with another IT competitor company of similar size. Both companies have never done such type of merger on a large scale in the past and they don’t have the in-house expertise to execute the merger properly. So they seek expert services of management consulting firms for this.
2. To guide or provide opinion: One of the main functions of management consulting firms is to provide the third party and objective opinion on the important decisions a company wants to take such as large investment, merger or acquisition, outsourcing, or a strategic decision, etc.
3. To advise decision-makers of an organization on strategy-related and organizational matters.
4. To develop a better strategic plan for achieving growth and cost reduction.
5. Proposing solutions to the problems support in implementation, execution of recommended solutions.
6. To improve the efficiency of processes of a business.
7. Supply chain optimization, new IT system implementation, etc.
Types of Management Consulting Firms
Various different aspects of a business are involved in management consulting as it is a diverse field. The management consulting firms are categorized into different groups as mentioned below based upon their role or type of services they offer:
1. Strategy management consulting firms
Strategy consulting is considered as one of the most profitable roles offered by management consulting. Businesses take the advice of management consultants for the right strategy to adopt for overcoming a critical problem. Strategy consulting analyzes client operations and potential challenges for offering the best suitable recommendations. This type of consulting also provides advice on organizational restructuring to their clients. The extent to which client companies can influence or control the professional service delivery process is very high for strategy management consultants because of the similar resource expertise between the consulting firm and the client. Also, the firm’s goodwill to obtain further work from the client depends upon how it maintains a good relationship with the client.
Also, management consultants carry vast knowledge on particular topics or industries. For example, in the case of wind-up or closing down of a company requires great expertise in the closure process as it is not a frequent task that happens in an organization. A strategy management consulting firm has experience in handling these types of situations with other clients, so, their experience can help organizations to run things smoothly.
Companies that are providing the best strategy services include BCG, McKinsey, and Bain & Co.
2. Information Technology (IT) management consulting
This type of management consulting firm offers consulting services related to information technology/ operations and controlling costs. Due to the technology being a center in the service, IT management consulting firms are gaining popularity. The main focus of this is to assist clients in developing and implementing IT solutions within the company. In this, consulting firms use their technical knowledge up to the maximum extent that they have acquired through their extensive experience across different industries and contexts. These are mostly associated with a client for a longer period for providing implementation support that includes training of the employees of the client Company.
The management consultant providing services in this domain suggests the best ways to use technology in order to enhance the business of the client. The activities performed by a consultant may include designing and developing unique software as per the need of the client, assisting in efficiency tests of currently available devices, and programs in the company of the client.
For example, an XYZ retail company decides to introduce its own app for its staff to handle customers effectively and boost sales. For this, services of IT consultants are considered for developing an app, staff training of using the system, and troubleshoot any issue if occurs.
Renowned management consulting companies that provide IT consulting services are Accenture, IBM, CGI Group, Capgemini, etc.
3. Specialist management consulting
Niche consulting firms that offer specific services to the client i.e. specific solutions for specific functional domain or industry; fall under the category of specialist management consulting firms. Their vast domain expertise differentiates these firms from each other and these firms are generally associated with their client for the long-term. Due to the deep involvement in serving their clients, these firms implement their recommendations and also handle issues related to change management. These specialist management consulting firms are further categorized into below types based upon their functional expertise:
- Accounting or financial advisory management consulting
Management consulting services are also provided by the big accounting firms. The main focus of these consulting firms is financial advisory roles. Other than the evaluation of the financial capabilities of the client, these firms handle queries related to the financial reporting process, techniques to improve cash flow, managing risk, and tax-related issues.
The main role of financial consultants is to assess the financial position of a client for the purpose of representing a plan for better management of the finance-related things of the business, Other than handling tax-related issues, this may also include advising management on investment strategies, providing information, and suggesting day-to-day management of business expenses. Giving insurance advice is also comes under the preview of financial management consultants.
Various big management consulting firms like KPMG, Deloitte, PWC, etc. provide such services.
- Human Resource (HR) Management consulting
The main focus of different businesses is to have the right kind of talent with their organization. To handle matters related to employees of a company is the forte of human resource management consultants as they deal mainly with the employee side of a company. HR consulting supports its clients in employee management and performance improvement of each employee. These management consulting firms handle different HR-related problems such as talent management, organizational management, employment terms, etc. HR consultants assist clients in the process of recruitment and transition to select the right people in suitable roles. They also do research and develop a system for well-being, look after communication problems, and take part in compensation and change management. They may also be part of transforming the culture of an organization by becoming an expert in it and HR-related core processes or systems. So, they are capable to consult on issues related to the successful merger of two companies without any clashes. HR consulting firms also handle outsourcing.
There are both big and small HR management consulting who take care of the HR issues of a client. Small consulting firms mainly focus o specific problems and industries.
The big names in HR consulting firms include Randstad, The Manpower group.
- Operations consulting
These consultants handle the systems of clients being used to attain objectives and work towards enhancing efficiency. The work portfolio of operating consulting firms includes assessing various operational activities of a client such as sales, production, customer service, purchase, and distribution. The operation consultants also look after redefining the above operational activities or processes in terms of time, employees involved in it, costs, and procedure required, to best achieve targets.
So, the functional perspective of operations consulting is to improve the processes, working methods, and systems across various functions, especially in Supply chain, Finance, R&D, Sales & Marketing, Purchase, etc.
For example, A XYZ retail client might be interested in taking services of operations consulting firms for reducing their production costs that in result helps in reducing the selling price of products and increase their competitiveness.
Firms such as Big 4, PIP (Partners in Performance) are great names in providing operations consulting services.
- Internal management consultants
These are the internal team of management consultants of an organization. They are employees and their main role is to look after the operational part of an organization and suggest new growth strategies.
Internal management consulting firms are useful for organizations because they are well-versed with the operations of the organization and able to provide better solutions to critical problems.
MANAGEMENT CONSULTING IMPORTANCE/VALUE
The field of management consulting is very valuable as it provides lots of opportunities to develop both professionally and personally. Management consulting firms grow steadily in their field by sorting out complex issues of their clients, taking advantage of their experience in different industries, and by networking with a wide range of clients.
Each fiend of management consulting carries different advantages and skillsets. As discussed above, IT consulting is the most growing sector in the management consulting field wherein, strategic consulting provides the best opportunities for top leadership roles in the organization.
RENOWNED AND TOP MANAGEMENT CONSULTING FIRMS
1. McKinsey & Co
McKinsey & Company is a management consulting firm at the global level and is considered as an industry leader. The company provides its services into strategy and management consulting like planning for salesforce restructuring, developing a new business strategy, giving opinions or recommendations on merger or acquisition, downsizing, etc.
The leading institutions, businesses, governments all over the world, consider McKinsey as their trusted advisor. The company’s working area includes public, social, private sector institutions in order to help them in improving their performance and goal achievement. It also provides staff compensation plans that are highly competitive in the industry. Its vast experience in management consulting shows the problem-solving and effective approach in dealing with problems. Their core competency lies in their knowledge, scale, and scope to handle problems. Apart from the vast industry and functional expertise, McKinsey also has a great geographical reach.
The company has expertise in building leadership and capability skills at every stage. By doing so, McKinsey is able to provide internal support, understand the actual issues, and suggest more practical recommendations to the client. Also, the development of workforce skills, implementation of new working methods, initiating operational improvement, etc. come under their management consulting portfolio.
2. Boston Consulting Group (BCG)
This management consulting is also another renowned consulting firm. BCG adopts a unique and holistic management consulting model in providing its consulting services to clients i.e. thought leadership approach model. This approach is an academic approach that is an effective tool to resolve complex issues or problems. BCG approach is used by various industries and organizations. The company offers customized solutions to its clients all over the world through its multifunctional and integrated team. They help clients by providing complete transformation services such as enhancing growth opportunities of the company, competitive advantage, driving typical change.
3. Bain & Company
Bain was launched by Bill Bain who is the former partner of BCG and the company includes a vast segment of industries. The company is famous for its competencies to serve private equity and financial service clients.
Bain & Company management consulting is also known for supporting bold thinking level, result-oriented, and ambitious. The company develops specific solutions to critical problems and uses a data-oriented approach to calculate results.
4. Deloitte management consulting
Deloitte provides management consulting services as a part of its wide range of professional services. They facilitate various businesses by solving critical problems.
5. Accenture management consulting
Accenture is also considered as a growing management consulting company and supported various clients in achieving innovation, growth, and performance. Clients have taken benefits from their focus on digital transformation.
CHARACTERISTICS OF HIGHLY SUCCESSFUL MANAGEMENT CONSULTANTS
- Strategic thinkers
- Mindset of process-improvement
- A great understanding of performance-related metrics
- Helping hand for leaders and teams
- Grasp the complete scope of a strategy.