Management consulting

Structure of Lecture 6 and 7Lecture 6Level of analysisOrganisational perspectiveFramework for analysisManagement of knowledge (reactor model)Lecture 7Level of analysisWork processFramework for analysisIdentity modelHRM issues across both lecturesRecruitment and selection of consultantsPromotion policies up-or-out principleThe boundaries of HRM practices

ObjectivesTo understand the characteristics of the management consulting industryHistoryTypes of organisationsTypes of consultancy activitiesTypology of human capital According to the client interface process Career structures within management consultancyThe role of consultants as knowledge brokersTypology of client capitalThe consulting firm client relationshipsThe HRM practice focus:Recruiting human capitalManaging across boundaries

Human capitalSocial capitalStructural capitalNetworkCapitalClient CapitalOrganizationalCapital

HistoryManagement as a unique field of studyArthur D.Little (1890s)McKinsey & CompanyFirst management and strategy consultancyFounded by James McKinsey in 1926 (Chicago) Hiring of bright young MBAsRise of management consultancy after World War IIDevelopment of tools for strategic managementBoston Consulting Group (1963), McKinsey&Co, Harvard Business SchoolBain&Co - focus on shareholder wealthConsulting within accountancy and technology firmsPwC and IBMNiche consultancy firmsCorporate social responsibiity

Types of firms in the industryAccountancy firms offering consultancyLarge non-accounting consultanciesSmall specialist boutiquesGurusIndependents

Types of Consultancy services

Major consultanciesBain & CompanyBoston Consulting GroupDeloitte & ToucheErnst & YoungA.T. KearnyKPMGArthur D.LittleMcKinsey & CoMercerPriceWaterhouse Coopers

Different types of consulting services: a knowledge-based viewBespoke

Expert economicsPerson-to-personIT enables personalBuild experienceReward for knowledge creation and sharing

McKinsey & Company

Typology of Human CapitalThe consultancy processCareer structuresConsultants as brokers of human capital Boundary spanning

The consultancy process:Your experiencePaired assignmentIdentify a consultancy experience that you have been part of.Characterise the individual stages of the consultancy processInterview your partner and identify:Which skills were developed at each stage of the consultancy processWhich other knowledge resources did you rely upon during this processSummarise your findings and be prepared to feed back to the group

The career structure AnalystsConsultantsSenior ConsultantsBusiness development managersDirectors/Partners

The McKinsey Facilitator caseSpecific type of human capitalAcross boundariesHow would you design the recruitment process to capture this human capital?

Components of a high performing cultureIQEQSQGeneral business knowledgeUnderstanding of client contextLogical problem solvingCreates environment of trustManages group dynamicsHigh awareness of emotionsHigh self knowledgeExperience of own transformational journeySense of vocation

Using external facilitators poses a challenge to many forms of intellectual capital flowsClientsFacilitators

Facilitator network: HC viewpointHC boundary

Mindsets are often misunderstood and ignoredBe- haviourA desire to change ends up like most New Years resolutions if root causes are not identified and addressedWhat we see and usually try to changeWhat we cannot see, make assumptions about and often do not address

The first step in mindset change is a new level of personal understanding

The first step in mindset change is a new level of personal understandingYou cannot solve a problem from the same level of consciousness that created the problem in the first place

Albert Einstein

The McKinsey Facilitator caseHow would you design the recruitment process to capture this human capital?

Facilitator network: OC viewpoint

Positioning in the lectureNature of the industryTypology of human capitalConsulting processCareer structureKnowledge brokersNow we turn to the human-client capital interfaceWe take a closer look at how clients perceive consultants?

IDEA SUBMISSION PROCESSWorkshop room1. Group discussion on topic/idea Individual or group write up idea cover sheet and attach backup materials (others at table may start on another idea at this time if appropriateReceive hexagon at idea table and write on idea no. and titleStick hexagon on hexagon wall with similar ideas and rejoin groupVideo station helper puts idea no. stick on to idea coversheet and onto video cassette record sheet. Records idea title onto cassette record sheetIndividual(s) write idea no. and idea title on directors boardhold up at start of recordingRecord 23 mins videoIndividual(s) go outside to record 23 minute video to explain ideaPatioVideo station helper with stickers of idea numberFilingSubmit written materials at idea tableCassette record sheetDoor to patioWall

The perception of Human CapitalThe ability to learn in practiceWhy smart people dont learnThe impact on organisational learningThe impact on social capitalThe impact upon the client relationshipsocial construction of learning

The client-consultant relationshipHuman capital and its link to client capitalDimensions for analysisStrength of tiesfrequencyRelationaltrustCognitiveShared mental modelsGiving answers or shaping futures

The nature of relationshipsArchitecture

Dyadic

Structural holes

Structural density

Social capital (between facilitators)MorphologyStructural density X Structural holes Trust:NatureDeep XResilientPositional XGeneralizedSocial capital (between sponsors)MorphologyStructural densityX Trust:NatureDeepResilientXPositional DyadicGeneralizedXClient-and-network capital (between internal and external facilitators)Morphology XStructural holesTrust:NatureDeep XResilientPositional Dyadic XGeneralizedOrganisational capital:HRM processFlexibilityMechanisticAdaptiveXClient relationship processFlexibilityMechanisticAdaptiveX

Facilitator network: SC & CNC viewpoint

Books about management consultingFlawless Consulting, Peter Block, ISBN 0-7879-4803-9 Guerrilla Marketing for Consulting, Jay Conrad Levinson and Michael W. McLaughlin, ISBN 0-471-61873-X Managing at the Speed of Change, Daryl Conner, ISBN 0-471-97494-3 Managing the Professional Services Firm, David Maister, ISBN 0-7432-3156-2 The Professional Services Firm Bible, John Baschab, ISBN 0-471-66048-5 Managing Transitions, William Bridges, ISBN 1-85788-341-1 Management Consulting: A Guide to the Profession, Milan Kubr (ed.), ISBN 92-2-109519-3 The World's Newest Profession: Management Consulting in the Twentieth Century, Christopher D. McKenna, ISBN 0-521-81039-6

*Management consulting grew with the rise of management as a unique field of study. The first management consulting firm was Arthur D. Little, founded in the late 1890s by the MIT professor of the same name. Though Arthur D. Little later became a general management consultancy, it originally specialized in technical research. Booz Allen Hamilton was founded by Edwin G. Booz, a graduate of the Kellogg School of Management at Northwestern University, in 1914 as a management consultancy and the first to serve both industry and government clients. The first pure management and strategy consulting company was McKinsey & Company. McKinsey was founded in Chicago during 1926 by James O. McKinsey, but the modern McKinsey was shaped by Marvin Bower, who believed that management consultancies should adhere to the same high professional standards as lawyers and doctors. McKinsey is credited with being the first to hire newly minted MBAs from top schools to staff its projects vs. hiring older industry personnel. Andrew T. Kearney, an original McKinsey partner broke off and started A.T. Kearney in 1937.After World War II, a number of new management consulting firms formed, most notably Boston Consulting Group, founded in 1963, which brought a rigorous analytical approach to the study of management and strategy. Work done at Booz Allen, McKinsey, BCG, and Harvard Business School during the 1960s and 70s developed the tools and approaches that would define the new field of strategic management, setting the groundwork for many consulting firms to follow. Another major player of more recent fame is Bain & Company, whose innovative focus on shareholder wealth (including its successful private equity business) set it apart from its older brethren. Also significant was the development of consulting arms by both accounting firms (such as the now defunct Arthur Andersen) and global IT services companies (such as IBM). Though not as focused on strategy or the executive agenda, these consulting businesses were well-funded and often arrived on client sites in force. Additionally, there has also been the development of successful niche consulting firms (such as Kaiser Associates), which are often credited with providing more focused work at greater value.*Management consulting has grown quickly, with growth rates of the industry exceeding 20% in the 1980s and 1990s. As a business service, consulting remains highly cyclical and linked to overall economic conditions. The consulting industry shrank during the 2001-2003 period, but had been experiencing slowly increasing growth since. In 2004, revenues were up 3% over the previous year, yielding a market size of just under $125 billion.Currently, there are three main types of consulting firms. First, there are large, diversified organizations, such as Accenture and IBM Global Services that offer a range of services, including information technology consulting, in addition to a management consulting practice. Second are the large management and strategic consulting specialists that offer purely management consulting but are not specialized in any specific industry, like McKinsey & Company. Finally, there are boutique firms, often quite small, which have focused areas of consulting expertise in specific industries or technologies.********