Management Consulting

Abstract

Like the people who comprise them, organizations are constantly changing. Sometimes these changes are for the better and sometimes they are not, and any resulting problems need to be solved. Although many of the day-to-day problems encountered by organizations can be handled internally, some are so deep, complex, or systemic that the objective observations and expert advice of an outside party are necessary. Management consultants fill this role by applying business or behavioral science knowledge to the situation to diagnose and make recommendations for rectifying existing business problems or to help in the development of future plans. The decision to choose a consultant is not necessarily an easy one, but there are several indicators to help in making it. Management consultants can work on a short-term basis supporting such activities as risk assessment or strategic planning, or on a longer-term basis in the process of organization development, helping the organization become more effective and managing the concomitant change.

A management consultant is a qualified professional who works with upper level management in an organization to analyze the organization's health and effectiveness, identify problem areas, and make recommendations on how to fix the problems. Depending on the problem, the management consultant may also continue to guide the organization during the implementation of the recommendations. The use of management consultants to do these tasks is often a cost-effective approach to problem solving for two reasons. First, qualified management consultants typically have both more training and more experience in solving complex or systemic organizational problems than do managers working in the organization. In addition, management consultants typically can be more objective than persons working within the organization because they are not entrenched in the organization's culture and do not take its norms, values, and working assumptions for granted. Because management consultants are hired on a contract or retainer basis and not involved in the internal politics or day-to-day operations of the organization, they do not have the same assumptions about organizational norms and culture as do those who work directly for the organization. As a result, they are better able to step back and see the big picture and spot where problems lie.

Management consultants can be either independent contractors or employees of a consulting firm. Although there are large firms that offer management consulting services, most management consultants are individuals or small firms who specialize in these services. Some management consultants specialize in a specific type of organization (e.g., healthcare, nonprofit, service) while others are generalists who work with a wide range of organizations. Typically, management consultants are hired by top level management within the organization. This means that the consultant will be perceived by the organization as having the support of top management. If the role of the consultant is properly introduced to the organization, this also means that employees at all levels of the organization will be more likely to cooperate with the consultant because they will see his/her presence as being of importance to the organization. The fact that the consultant is hired by top management also means that s/he will have access to top management should any problems arise in the course of the consulting project or if cooperation needs to be encouraged. Access to top management also is important if the consultant's recommendations are to be taken seriously and implemented properly within the organization. Without such backing, implementations are more likely to fail.

As outside change agents, management consultants have a clear-cut role and are less likely to be affected by organizational norms and culture than is someone who works within the organization. This means that the consultant is freer to approach the problem objectively without the burden of preconceived notions of how the organization should or should not be working, ideas about what the problem is, or assumptions about who is at fault. In addition, most consultants tend to look at the organizational as a system where changes in one part have impact throughout the organization. This helps the consultant better identify and treat underlying problems rather than merely treating symptoms.

There are, however, people who work as direct employees for the organization who also are also sometimes asked to do the same kinds of activities that an external consultant would do. Such internal consultants, however, are more likely to run into problems in their activities and less likely to be successful for a number of reasons. In general, internal consultants are embedded in the culture of the organization, so they take the values, attitudes, and norms of the organization for granted. This makes it difficult for internal consultants to objectively view the organization or diagnose its problems. In addition, since internal consultants are part of the organization, they tend to think in terms of what the organization has traditionally done rather than what can be done, and is more ready to accept the system as given rather than see the ways that it can be improved. For the same reason, they also have a tendency to not want to rock the boat since they must continue to work in the organization once the change has been implemented. For example, the suggestion to reduce the size of the organization's workforce would be more difficult for an internal consultant to make than for an external consultant because the people who were to be laid off might be friends or because the remaining employees would see the internal consultant as a "hatchet" person who laid off their friends. This would make continuing to be successful as an internal consultant difficult since people would be less likely to cooperate with further consulting efforts. Another negative result of internal consultants being part of the organization is that they have difficulty distinguishing the organizational forest from the trees, and tend to focus on a micro view rather than on a wider systems view that is necessary for success.

Management consultants' activities include diagnosing and making recommendations for existing business problems or supporting organizational management in the development of future plans. One of the major activities of many management consultants is organization development, a long-range effort to improve the organization's problem-solving and renewal processes. Organization development involves the application of behavioral science knowledge to the problems of the workplace. Management consultants also may evaluate existing programs, practices, or procedures within the organization to determine their effectiveness and where and how they need to be improved. Management consultants can also provide expertise to organizational management in the areas of strategic planning and risk assessment and management. The management consultant often acts as a change agent, guiding an organization through a change effort to either improve current functioning and effectiveness or to help plan for a new path in the future. To be effective in these tasks, management consultants need to have knowledge of how to conduct a change effort, an understanding of the organization, and sufficient power to be able to implement the change. This latter qualification means that they need the backing of top level management to support their efforts and implement their recommendations.

Once the organization and the consultant mutually agree to enter into a relationship, there are several phases in the process, as shown in Figure 1. During the first phase, the consultant will learn more about the organization, collecting data, and diagnosing the problems facing the organization. During this phase, the consultant may use any number of techniques in an effort to diagnose the problems of the organization and determine the best way to rectify them. Some of these tools and techniques include questionnaires, individual and/or group interviews, personal observations, objective data (e.g., turnover, tardiness, market demographics), outside opinions, confrontation meetings). Once the consultant has diagnosed the problem, s/he will make recommendations to management as to the best way to proceed. These recommendations are then turned into plans and implemented.

After the plans have been implemented, there follows a period of stabilization during which the employees acclimate to the new way of doing things. When this phase is over, the consultant will typically evaluate how well the change fixed the problem. Frequently, the problems being experienced by the organization are deep, complex, and systemic. Therefore, it is unlikely that the single application of any one tool or technique will produce lasting change. Rather, most consulting efforts are iterative. If the organization is still experiencing difficulties, therefore, the consultant will do more data collection and analysis to diagnose the remaining problems. When this is done, the organization and consult sever the consulting relationship.

Application

Although management consultants can be invaluable to the health and growth of an organization, it can be difficult to know when an organizational problem or opportunity for growth can be handled internally and when a consultant is needed. Once the consultant is hired, it is also important to understand what to expect and how to work with him/her in a way that helps maximize the effectiveness of the client/consultant relationship.

Knowing When a Consultant Is Needed

Many of the day-to-day problems encountered in organizations can be solved by the organization internally. There are, however, some problems that are either outside the capabilities of the organization or so systemic that the help of an outside consultant are not only advisable, but essential. A number of indicators can alert organizational management to the possible need for external, professional help.

Organizational theorists talk about two facets to the organization. The formal organization comprises those aspects of the organization that are obvious to all but the most casual observer. Included in the formal organization are its stated goals, short- and long-term objectives, and other data easily found in its annual report or strategic plan. Another aspect of the formal organization is the structure of the firm: the way it is designed in order to facilitate performance effectiveness, including its division of labor, delegation of authority, and span of control (the number of people who directly work for a person on the next level of the organizational hierarchy). Other aspects of the formal organization include its resources, including its financial capital, equipment, and technology. Resources also include the human capital of the organization and the expertise of the organization's employees, including knowledge, skills, abilities, training and education.

The formal aspects of the organization can often benefit from the services of a management consultant. For example, management consultants can be very helpful to the organization in doing strategic planning; helping the organization better understand the market and its needs, the risks associated with alternate plans, how to implement the plans, and ways to better structure the organization to support the new objectives. Similarly, management consultants can be very helpful for an organization that needs to cope with a merger. Other dysfunctions in the formal organization that can indicate the need for an external consultant include problems in communication systems, difficulties with managerial strategies, or inefficiencies resulting from the structure or roles within the organization. Management consultants can help organizations deconstruct symptoms in these areas to understand the underlying problems and develop and implement appropriate plans that will correct not only the symptom, but the underlying problem.

In addition to the formal organization, there is an informal aspect to each organization comprised of less obvious aspects such as attitudes, values, feelings, interactions, and group norms. Such factors are part of the organizational culture; the set of basic shared assumptions, values, and beliefs that affect the way employees act within an organization. Because these aspects are not written down like the formal aspects of the organization, they can be easily dismissed as not important. However, they have a profound impact on the functioning of the organization and its concomitant health and effectiveness. In fact, like the proverbial iceberg, most theorists believe that the majority of organizational problems stem from aspects of the informal organization. Dysfunction in these aspects of the organization is more likely to be seen by a managerial consultant as an objective outside observer than by someone who is entrenched within those aspects as a member of the organization.

Organizational culture is one of the major factors that can affect the effectiveness of the organization. For example, an organizational culture that is very formal (e.g., with a suit-and-tie dress code and highly structured communication channel requiring multiple layers of approval before an innovation may be implemented) is unlikely to foster the entrepreneurial spirit necessary to be on the leading edge of the industry, surviving on sustainable innovation. Similarly, the norms of the organization -- the standards or patterns of behavior that are accepted as normal within the culture—can increase or hamper its effectiveness. Another aspect of the informal organization that can have great impact on effectiveness is its values. For example, a company that builds training devices for the military will have difficulty being successful in its field if it sees itself as an engineering company that happens to build training equipment. To be truly effective in this situation, engineering is a support service that designs the equipment to meet the needs identified by the training function. If this is not understood, the resulting product would be a well-engineered product that does not train well.

Another aspect of the informal organization that is important to the effectiveness of the organization and that often requires the help of an external consultant, is worker motivation. Understanding the values of one's workers, for example, can help the organization understand how to better motivate them. However, such information is often obtained more easily by an external consultant not only because of his/her training, but also because employees are less likely to talk openly about values or offer criticisms to management who has power over them in the organizational setting. Most management consultants are not only neutral third parties who can objectively diagnose the problems of the organization, they also keep the identities of individuals from whom they collected the data confidential—even from management in the organization. This enables them to collect the data needed for this diagnosis and better help the organization.

A parallel in the informal organization to the communication patterns in the formal organization are conflicts or other difficulties in intra- or inter-group cooperation. As discussed above, most employees are typically more willing to give honest feedback to an objective outside party than they would be to their own management. This means that an external consultant will be better able to deconstruct the situation to determine the underlying problem and recommend better, more appropriate potential solutions.

Choosing a Consultant

Choosing a consultant is like choosing any other professional, including a lawyer, accountant, or physician: One must attempt to find the best person for the job based on the need and the consultant's credentials. Although anyone can call themselves a management consultant, it is important to make sure that they have an adequate education to back up their claims. No matter how experienced a person is, if s/he does not have an education in the broader principles, tools, and techniques of management consulting, s/he will only be able to extrapolate what s/he has done on previous jobs. However, every organization is different and the needs of every organization are also different. Some consultants offer solutions looking for problems, however, rather than recognizing the uniqueness of each organization and determining what is needed for each situation and developing a targeted solution based on this information. Similarly, other consultants try to give advice based on a few isolated cases without sufficient knowledge or education to underpin their recommendations. However, mere extrapolation of a few isolated cases is unlikely to be successful. There are a wide range of tools and techniques that can be applied to diagnosing an organization's problems. Successful diagnosis is often based on an iterative process using multiple techniques. If the consultant only offers a single approach based on limited past experience, it is best to be wary.

In addition to the appropriate educational background, a good consultant will also have experience in management consulting. Depending on the needs of the organization, this can be general management consulting experience or consulting experience within a specific industry. As when hiring any professional, it is important to check the consultant's references before making the decision to enter into a formal consulting relationship. In addition, each consultant will have his/own personality just as each organization has its own culture. Most consultants are willing to engage in an initial exploratory consultation to see if there is a good fit between the consultant's expertise and the needs of the organization.

Working with a Management Consultant

Although the management consultant may have more objectivity and be able to bring different insights to bear on the problems facing the organization, s/he cannot solve all the problems of the organization alone. The management consulting process is a collaborative effort requiring the involvement and commitment of both the consultant and the organization. To help ensure that the change process is successful, top management within the organization must support the effort. This includes assurance that change will occur and gives the consultant a power base out of which to operate. If top management is not behind the change effort, no matter how appropriate the consultant's recommendations, they will not be implemented or, worse, not implemented properly. This could potentially leave the organization worse off than it was before.

Top management in the organization is not the only level of employee involvement needed to help ensure the success of the relationship, however. In addition, key management at all levels of the organization need to be involved in the change process. This will help ensure that plans and decisions are not being made too far from the source of the problem and that the consultant will receive all necessary data and feedback to make the intervention successful. Further, any employees who will be affected by the proposed changes need to be informed and involved as soon as possible. If not, serious repercussions could occur, including job dissatisfaction and lack of motivation (both on the job and in supporting the change effort).

Terms & Concepts

Change Agent: A person who guides an organization through a change effort. To be effective, change agents need to have knowledge of how to conduct a change effort, an understanding of the organization, and sufficient power to be able to able to implement the change.

Formal Organization: The goals, structure, skills, technology, and other resources of the organization that are readily observable to others.

Informal Organization: The attitudes, values, feelings, interactions, and group norms that affect organizational functioning and effectiveness.

Management Consultant: A management consultant is a qualified professional who works with upper level management in an organization to analyze the organization's health and effectiveness, identify problem areas, make recommendations, and assist in implementing the recommendations. Management consultants' activities include diagnosing and making recommendations for existing business problems or in the development of future plans.

Norms: Standards or patterns of behavior that are accepted as normal within the culture.

Organizational Culture: The set of basic shared assumptions, values, and beliefs that affect the way employees act within an organization.

Organization Development (OD): A long-range effort to improve the organization's problem-solving and renewal processes. OD involves the application of behavior science knowledge to the problems of the workplace.

Risk Assessment: The process of determining the potential loss and probability of loss of the organization's objectives. Risk assessment is one step in risk management.

Risk Management: The process of analyzing the objectives of the organization, planning ways to reduce the impact if the predicted normal course of events does not occur, and implementing reporting procedures so that problems are discovered earlier in the process rather than later.

Strategic Planning: The processes of determining the long-term goals of an organization and developing a plan to use the company's resources—including materials and personnel—in reaching these goals.

Systems Theory: A cornerstone of organizational behavior theory that assumes that the organization comprises multiple subsystems and that the functioning of each affects both the functioning of the others and the organization as a whole.

Bibliography

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Huse, E. F. (1980). Organization development and change (2nd ed.). St. Paul, MN: West Publishing Company.

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Klarner, P., Sarstedt, M., Hoeck, M., & Ringle, C.M. (2013). Disentangling the effects of team competences, team adaptability, and client communication on the performance of management consulting teams. Long Range Planning, 46(3), 258–286. Retrieved October 31, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=89101564&site=ehost-live

McShane, S. L. & Von Glinow, M. A. (2003). Organizational behavior: Emerging realities for the workplace revolution (2nd ed). Boston: McGraw-Hill/Irwin.

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Suggested Reading

Gallessich, J. (1982). The profession and practice of consultation. San Francisco, CA: Jossey-Bass Publishers.

Kelley, R. E. (1981). Consulting: The complete guide to a profitable career (rev.). New York City, NY: Charles Schribner's Sons.

Lippitt, G. L. (1977). Research on the consulting process. Academy of Management Proceedings, 153–157. Retrieved April 18, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4977219&site=bsi-live

Phillips, J. J., Trotter, W. D., & Phillips, P. P. (2015). Maximizing the value of consulting: a guide for internal and external consultants. Hoboken, NJ: Wiley.