MANAGEMENT CONSULTINGAN OVERVIEWMatthias Kipping

Schulich School of Business

Toronto, Canada

Overview

Definitions Assets of Consulting Firms Evolution of the Industry How Consultants Market Themselves Responsibilities and Risks

McKinsey at Enron

How it works

Clients Consulting Firm Assets

Consultants

Better performance

(benchmarks)

New knowledge

Knowledge-Expertise

-Analytical Tools-Process

Experience/Educati

on

Intense Training

Legitimacy

Enhanced reputation

Reputation(Image)

Top Schools

Improve CV

Confidence/Trust

Recommendations

Networks Alumni Network

New Contacts

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Dominant Client Firm

Type

PeriodDominanc

e

Prominent Consultancie

s

Scientific Management

Production Unit

1900s-80s 1930s-50s

Emerson, Bedaux, Big 4,

Maynard,

Strategy & Structure

Corporation(M-form)

1930s-?? 1960s-80s

BAH, McKinsey, ATK, ADL, BCG

Information & Communication

Network Organisation

1950s-?? 1990s-??

IBM, Accenture, Capgemini,

EDS/HP

How it evolved

Why marketing?

To establish and maintain reputation

QUESTIONS: How do consultants get their foot in the

door for the first time? How do they retain their clients

subsequently?

Unique product6

Attempts to create proprietary approaches Bedaux / MTM systems (shop floor efficiency) Multidivisional form (corporate organization) Business Process Re-engineering (value chain) Data bases (e.g. benchmarking; remuneration)

Efforts to make them widely known Publications (e.g. In Search of Excellence) Teaching at Business Schools Presentations to managers (at conferences)

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Difficult to sustain

Success eliminates the market for product McKinsey decentralised many European

companies Competitors imitate: Commodification

Consultancies “invent” own version of BPR New “fads” appear with increasing speed

From JIT to TQM to BPR to CRM Consultants: Creators and Victims of

“Management Fashions”

8

Sales efforts and incentives

Contact potential clients directly, repeatedly Through mail shots, phone calls, etc.

Separate sales efforts from consulting Different people sell and carry out projects

Provide consultants with sales incentives Relate part of the pay to successful selling Make promotion dependent on new sales

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Works only in the short-term Very fast initial expansion

Example George S. May BUT: Many clients complain very soon

About unrealistic promises of sales staff Consulting firm looses market share

Some even collapse completely Often creates bad reputation

For consulting firm and industry as a whole

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Advertising for image building Used since beginning of century

Usually quite boring style Not allowed by professional rules

But often hidden as job advert Has become more widespread

Pioneering role of Andersen Consulting Taken on by other large consultancies

Use of television and stars

Early examples: Reach for the moon, shark

Change of name on 1 January 2001 Recent campaigns

Ideas Be a Tiger: Remake, Revision, Invention

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17

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Relationship marketing

Building trust-based personal relations between consulting partner and client CEO

Often based on similar background Culture, education (“old schools ties”), etc.

BUT: There are also some problems Spin-offs: Partners leave with clients International expansion: need for “bridges”

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Why long-term relationship?

Provides the consultancy with a stable income stream and…

reduces the costly efforts to identify and sign up new clients

Clients have a better idea about the quality of the consulting service and…

only need to disclose confidential information to one consulting firm

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How McKinsey does it

Famous “up or out” policy Only 1 out of 10 recruits makes partner

Former consultants in top positions CEOs of potential client companies (e.g.

IBM) McKinsey maintains this network

Through newsletter, social events, etc.