The twenty first century has presented numerous challenges to organizations. For example, the business environment today is characterized by frequent changes which pose new challenges to organizations. In tradition organizations, change was moderate and predictable. As a result, the management teams could easily predict change and implement long-term plans to deal with the changes.
Strategic plans could anticipate long-term changes and plan on how to handle the changes. Unlike the traditional organizations, modern organizations have to deal with frequent changes effectively for them to remain competitive. Globalization, technological advancement and other changes make business environment in the 21st century to be highly unpredictable and challenging calling for effective change management.
Implementing change in an organization is usually a challenge. It is estimated that approximately seventy percent of organizational change projected fail (Kotter, 1996, p. 12; Higgs & Rowland, 2000, p.122). With the increment in the degree of complexity in business environments, many organizations are resulting into management consultancy in an effort to understand their business situations. Despite management consultancy being an old concept, it has undergone a rapid growth over the past few years.
As a result, management consultancy is currently a big industry contributing significantly to Gross Domestic Product. Among areas where services of management consultants are sought relate to managing change. Complexity of understanding trend in business environments and implementing appropriate actions to respond to the trends has called for consultancy. This essay reviews the conventional approaches to management consultancy and compares the approaches with social constructionist alternative.
Although management consulting is not a new concept, there has been limited research on the subject. Management consulting refers to the practice of, or industries of assisting organizations to improve their performance. The main objective of management consulting is to analyze business situations facing organizations and develop or propose plans to help the organization respond appropriately (Keeble & Schwalbach, 1995, p.57). There are a number of reasons why organizations to seek services from management consulting. The motivations include the need to obtain external advice on how to respond to a management problem thus taking advantage of specialized expertise of the consultants.
Management consultancy has been a preferred alternative in management issues. Unlike in the past where management decisions were mainly made from within an organization, today some decisions are outsourced from consulting firms. Among other factors, complexity in business environment has been one of the major sources of motivation towards management consultancy (Kipping, 2002, p. 108).
Consultancy firms are considered to be better placed in analyzing management problem and developing solutions to the problems. Their exposure with many organizations and many business environments give them advantage over internal decision makers. Despite their wide exposure, solutions from management consultancy firms may not be effective because of lack of transferability of the practices from one organization to the other.
Change management is one of the areas where management consultancy is sought. Consultancies can be use to provide assistance in change management. They can help in developing coaching skills; assist in developing strategy for dealing with a certain business situation, implementing new technologies in an organization or in improving operations in an organization. Management consultants usually come up with frameworks to assist in the process of problem identification. There mandate is summed up by providing an organization with recommendations on how to respond to certain business problem of advise on effective business practices.
Approaches in Management Consultancy
Management consultants integrate two main approaches in providing their services. In one way, they act as experts, providing prescription to management problems while on the other hand they take facilitative approach. Using expert approach, management consultant act as experts where they provide expert advice on how to deal with a particular management problem without collaboration in its implementation (Keeble & Schwalbach, 1995, p.59). In facilitative approach, there is less focus on particular expert knowledge; instead, the focus is more on process of consultation. Facilitation approach to management consultancy is mostly referred to as process consulting because of its focus on the process.
Management consultancy services vary from one industry to the other. Many of the consulting firms have specific service which they offer or consult in a particular industry. Some type of consulting that can be offered can include operations, strategy, technology, process improvement, executive leadership, sales, talent management and others (Kipping, 2002, p. 113).
Considering the existence of differences in management needs from one industry to the other, management-consulting firms mainly focus on specific industry. For instance, a management consultancy firm may offer services to oil and gas industry, automobile, retail or any other industry. Consultancy firms usually combine one or more functions and industries. For instance, a management consultancy firm may offer consultancy in process improvement in oil and gas industry or offer consultancy in talent management in banking industry among other combinations.
Growth in Consulting Firms
As aforementioned, management consultancy is experiencing a rampant growth across the globe. Among other reasons, the growth has resulted from loss of control at the entry point. Being not institutionally or legally protected has attracted many individuals and management consultancy firms. The enormous growth potential provided by the current business environment has also allowed management consultancy industry to grow at a faster rate. Although large consulting firms have experienced high growth in the last two decades, small consultancy firm represent the highest percentage of the growth.
Survey conducted by Cambridge Small Business Research Centre shows that management-consulting firms had the largest growth rate of approximately 117.8 % in Britain during the period between 1985 and 1992 (Keeble & Schwalbach, 1995, p. 61). 57% of consulting firms surveyed were established after 1980 while 37% had been established after 1985. Although the birth rates for management consultancy firms have been high, their mortality rates have also been substantially high. For instance, about 33% of all management consultancy firms which existed in 1985 had withdrawn from the market by 1990 (Keeble & Schwalbach, 1995, p. 63).
Management consultancy has not only been attractive to startup companies only. Other firms have extended their services to management consultancy. As a result, the boundary between management consultancy industry and other industries has narrowed. Organizations from very different background have taken advantage of the high growth potential in the industry to offer consultancy services.
For instance, the ‘big five’ accounting firms have expanded their consultancy services to include information technology, legal advice and management consulting (Kipping, 2002, p.112). Advice provided by banks and auditing firms entails management consultancy. The high demand for management consultancy services has also led to some former internal consultancy divisions of some firms extending their serviced to other sectors.
Consultancy divisions of organizations such as Siemens, DaimlerChrysler and IBM extend their specialized consultancy services to other firms. Although there is high growth potential for management consultancy firms, transparency in this industry is relatively low. The transparency is affected by among other factors uncertainty about sustainability of management consulting firms, professional background and qualification of its staff.
Concept of Consulting
Consulting is conventionally considered as the sale of solutions to challenges that are specified by the client. Consultants are considered to act as external experts. They are assumed to sell their expertise is different areas to a passive receptive client firms. This perception of consultants is reflected in management consultant association where management consultants are conceived of as autonomous, objective advisers who have superior knowledge.
This conception of managing consultancy does not take into consideration that management is a two-way interaction which entails cooperation and learning. This conception of managing consultancy is reflected in the Tendency to seek management consultancy services. For instance, it is common that firms which are more competent are the ones that are ones more likely to seek management consultancy services compared to those that are not competent (Wood, 1998, p.656).
Thus, in general consultancy tends to reinforce strength of well-established firms rather that compensate for the weaknesses of companies with less experience. Firms seeking consultancy services do so with intention of improving certain operations. However a firms’ competency is usually its competitive edge. This implies that the consultancy firms have a lot to learn from their clients. The implication is that consulting firms are able to profit as well and learn from their clients during the process of service provision.
Co-production and the reciprocal interaction between consultant and client make consultancy services to be nontransparent. Likewise, coproduction relationship shows that clients have significant influence on the outcome of consultancy. This implies that the course of consultancy assignment is highly contingent as is depends on objectives, skills and strategies of both parties. The outcome is also highly dependent on ability of the parties involved to cooperate towards the objectives (Sturdy, 1997, p. 391).
Evaluating Consultancy services
Quality of service is a major factor in management consultancy. In conventional organizations, quality and price are the two main ways through which organizations compete with each other. To gain competitive advantage, conventional organizations choose between offering high quality products and lowering prices. Product differentiation is considered as one of effective ways of gaining competitive advantage over other organizations. In commodified goods market, information of quality and price are sufficient to enable and buyer make decision on whether to purchase a product of not.
The strategy of product differentiation, however, is not effective in management consulting market. This is mostly due to existence of difficulty in measuring quality in management consultancy (Nayyar, 1990, p. 515; Clark, 1993, p. 37). Management consultancy is essentially a knowledge-intensive service. Knowledge-intensive services are fundamentally different from spot-exchange commodities. In spot-exchange commodities, the producer produces products which the customers can see or compare before they make decision to buy (Levitt, 1981, p. 97).
Thus, in spot-exchange commodity the producer takes the risk since there is no guarantee that produced products will be purchased. Knowledge-intensive services are different from in-spot commodities in that the product is generated only after agreement. This implies that in this case the client rather than the producer takes the major risk. Instead of buying ready-made products, consultancy clients contract a consultancy firm to carry out a service but with subsequent cooperation.
This implies that quality of services offered by a consulting firm cannot be evaluated prior to the assigned project. Inability to assess quality prior to project results into performance risk (Das & Teng, 2001, p. 258). Taking in to consideration that corporate development depends on many decisions and changing conditions, assessing the quality of consultancy service even after a project is completed is not easy.
Performance evaluation in a consultancy project is highly subjective with few objective criteria. Since quality of service is not assessed objectively, price tagged to the service cannot be used as an indicator of quality. Since results from a products are unique and not easy to compare with results from other projects, is it difficult to come up with any objective pricing. As a result, consultancy clients are not able to screen the market for the best consultancy providers using prices.
Management roles in modern business environment are challenging. Individuals need to have wide and in-depth understanding of the business environment in order to be successful. Thus, management consultants are considered as supplement to management by providing advice or facilitation on handling some management situations. Management consultants are considered to have deeper understanding on their areas of consultancy.
Having exposure to many management issues and organizations, they are better placed to give effective advice to management problems. Conventionally, the alternative for seeking services from management consultant is in-house development of the knowledge (Das & Teng, 2001, p. 267). Individuals involved in decision-making would be trained on necessary skills and knowledge in order to put them in a better position to make better decision on behalf of an organization. Although in-house knowledge can be developed on various areas, it is not possible to have sufficient knowledge on every area.
Change management is one of the areas where management consultancy is sought. Managing change is usually a complex issue. Extensive training is usually required in order for a manager to be able to handle change effectively. Considering the frequency of changes in organizations and the cost involved in training managers to handle the changes, many organizations result to management consultancy. Change management consultants would assist the organization to implement change management theories making it easier to handle change.
Failure in Consultancy projects
Project failure is a regrettable experience in management consultancy. Despite organizations spending a lot of money as consultation fees, there is high rate of project failure. The major contributing factor to these failures is lack of effective communication between client(s) and consulting firm (Consulting-Business, 2009, para. 4). Consultancy firm and the clients must be reading from the same script in order for desired result to be attained. The client must be able to communicate the nature of management problem for consulting firm to be able to offer the appropriate advice. Proper reporting is essential throughout the process to facilitate proper communication. The clients must be able to provide all the necessary information to help a management-consulting firm handle the management issues adequately.
Business environment today is characterized by frequent changes that pose challenges to organizations. Unlike the traditional organizations, modern organizations have to deal with frequent changes effectively to remain competitive. Globalization, technological advancement and other changes make business environment in 21st century highly unpredictable and challenging calling for effective change management.
With increases complexity in business environments, many organizations result to management consultancy in order to understand their business situations and solve management problems. To do this, management consulting firm use expert and facilitation approaches. The approaches lead to various challenges such as communication and quality of service. Management consultancy is a major industry today contributing significantly global economy. As management consultancy becomes more acceptable, it is appropriate to address the issues of professionalism and quality of services.
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