Market of Consulting in Business

There are many opportunities in the field of business consulting, but one area that continues to grow is management consulting. This article will focus on how management consultants apply different techniques and approaches when assisting organizations with developing and implementing strategies. These business consultants use a variety of methods and approaches when helping organizations to reach their goals, maximize their potential, and minimize their risks. An organization may use an external consultant, an internal consultant or a combination of both. The article also explores how consultants can be an asset to small businesses.

Keywords Business Consulting; Competitive Advantage; Consulting Firms; External Consultant; Industry; Internal Consultant; Management consultants; Small Business; Strategic Planning

Marketing > Market of Consulting in Business

Overview

There are many opportunities in the field of business consulting, but one area that continues to grow is management consulting. Management consulting dates back to the early 1900s, and had a strong engineering orientation in devising solutions to an organization's problems (Oosthuizen, 2003). The Institute of Management Consultants' (2007) mission and vision statement defines management consultants as “recognized experts in their disciplines or industries, who provide a superior resource to help members increase value to their clients, enhance effectiveness of client organizations, and improve the quality of our communities.” These business consultants use a variety of methods and approaches when helping organizations to reach their goals, maximize their potential, and minimize their risks. Clients may be internal or external; therefore, it is important for these consultants to determine their audience as well as determine their needs. "It is incumbent upon the good consultant to find out the back story so that he or she can better ensure a desirable outcome for everyone involved" (Marren, 2004, p. 5).

Management consulting and strategic consulting are concepts that are used interchangeably. The concept refers to when a person or organization helps a company improve their performance and develop strategies to maintain a competitive advantage. Management consulting may involve the development of best practices, analytical techniques, change management interventions, coaching skills, technology implementations or strategy development Management consultants will use their expertise to help corporations identify problems and recommend solutions. The key is to create recommendations that are customized for the specific organization (i.e. the client) requesting the intervention.

Growth of Management Consulting

The demand for consulting has been growing and the area of management consulting has grown into a $100 billion global industry. Although management consulting has been a popular practice in the corporate arena, the use of consultants has spread to other industries such as government and non-profits. In addition to individual practitioners, there are three major types of consulting firms and each has a specialty. There are large, diversified consulting firms (i.e. IBM Global Services, Accenture) that specialize in a variety of services such as information technology and strategic consulting. Boston Consulting Group is another type of consulting firm. These types of organizations tend to offer strategic consulting services only and work across a variety of industries. The third type of consulting firm has been referred to as a boutique firm. Boutique firms tend to be small and focus on specific industries and technologies. All three of the above-mentioned approaches reference consultants that are external to the organization. However, many organizations have started to hire internal management consultants.

Internal vs. External Consultants

An organization may use an external consultant, an internal consultant or a combination of both. Organizations should evaluate the consulting phase and consider the reasons why they wish to utilize the services of a consultant when determining which type of service to use. Cummings and Worley (1993) created a process consisting of five phases in the consulting process. These phases are entering, contracting, diagnosing, intervening, and evaluating.

1. Entering

a. External Consultant — This stage tends to be the most difficult stage for the external consultant because the individual needs to market himself and build a client base. Once clients have been identified, the external consultant must build relationships and become familiar with the organization.

i. Advantage: Select projects based on their criteria

ii. Disadvantage: Need to learn company jargon

b. Internal Consultant — Little time is spent on entry for the internal consultant since he is considered an insider of the organization.

i. Advantages: Ready access to clients

ii. Disadvantages: Obligated to work with everyone

2. Contracting

a. External Consultant — The consultant must work with the client to develop a mutual understanding of what the expected outcomes and deliverables will be. At this stage, the consultant and client communicate expectations and create a legal contract that both will be bound by. The purpose of the contract is to clarify goals, roles, use of resources, and ground rules (Block, 1981).

i. Advantages: Can terminate project at anytime; maintain "outsider" role.

ii. Disadvantages: May incur "out of pocket" expenses, especially when unexpected events occur.

b. Internal Consultant — The internal consultant works under a contract as well. However, most are verbal versus written. The internal consultant has internal clients that require services. However, one of the disadvantages is that the internal consultant must be sensitive to the "personalities" and politics of the organization. An external consultant can be more vocal with their opinions because they will eventually leave. However, the internal consultant has to remain within the organization and be sensitive to backlash and retaliation.

i. Advantages: Information can be open or confidential.

ii. Disadvantages: Must complete projects assigned; may experience client retaliation and loss of job.

3. Diagnosing

a. External Consultant — During this stage the external consultant will start collecting data such as employee surveys, meeting with focus groups to get follow-up information and feedback, and conducting individual meetings in order to develop an analysis and make recommendations for change. Once the plan has been developed, the consultant will schedule a meeting to provide the client, and special guests, with feedback on what needs to occur in order to implement the plan.

i. Advantages: External personel exude prestige.

ii. Disadvantages: Data kept confidential often increases political sensibilities.

b. Internal Consultant — This phase is the same for both the internal and external consultant.

i. Advantages: Has relationships with many organization members.

ii. Disadvantages: Openly sharing data can reduce political intrigue.

4. Intervening

a. External Consultant — The design of what issues need to be addressed are the focus of this stage. It's important that the external consultant can get the participants to buy-in to the process because authentic information is required at this point. There has to be commitment on the part of the participants, and the external consultant may include this request at the beginning when the contract is being written. The external consultant needs to be assured that there will be individuals taking ownership of the outcomes and that the process will be implemented and maintained once he has left.

i. Advantages: Can insist on receiving authentic data and internal commitment.

ii. Disadvantages: Must adhere to the regulations, standards and boundaries of the client organization.

b. Internal Consultant — Although this phase is the same for both the external and internal consultant, there is one exception for the internal consultant. Buy-in is key for the external consultant. However, the internal consultant considers it a luxury. Many employees do not have the opportunity to be authentic and recognize the political ramifications if they are completely honest. The internal consultant recognizes this dilemma. "Although most change projects begin with testing the waters of opportunity, hoping to build critical mass that will sweep in all members and result in commitment to change, all projects are not successful in generating enthusiasm for change" (Lacy, 1995, p. 4).

i. Advantages: Has the power to garner support across organizational lines.

ii. Disadvantages: Cannot require information and internal commitment is a luxury.

5. Evaluating

a. External Consultant — During this phase, the external consultant is constantly assessing the process and results while making revisions to the plan. The external consultant may make some assumptions and solicit feedback from the client to see what level of customer satisfaction is present.

i. Advantages: Can use project success as a means of gaining repeat business and customer referrals.

ii. Disadvantages: Seldom see long term results.

b. Internal Consultant — This phase is similar for both types of consultants. The client will require more measurable results as the amount of money spent on the project intervention increases. In addition, there are potential personal rewards for the internal consultant. If the project is successful, there are opportunities for an increase in salary as well as promotions. However, there is a down side. Being an internal consultant can be lonely because many people within the organization may not understand the job. There will be questions regarding what the consultant actually does and whether or not the work adds value to the bottom line.

i. Advantages: Is able to experience the change.

ii. Disadvantages: Often, receives sparse recognition for good work.

Both external and internal consultants perform many of the same functions throughout the consulting process as each attempt to create a plan of improvement for the organization. However, each will face unique sets of challenges and obstacles as he attempts to obtain his goals. Each must also make sure that their recommendations are applicable to the situation so that the plan does not fail.

Reasons for Strategic Planning Failure

Although management consultants tend to be the experts in the field, there are occasions where their recommended plans may not succeed. A strategic plan could fail if:

• The consultant has misread the situation and provided a plan that the client did not request.
• The consultant did not have the ability to predict reactions such as competitor response and government interventions.
• Inadequate resources were available for the implementation of the new plan.
• Current organizational structure cannot accommodate the new plan and a new structure was not a part of the plan.
• Unrealistic timeline.
• Organization's inability to follow the plan as prescribed.
• Lack of buy-in from the employees.
• New plan not effectively communicated to the employees.
• Senior management team not certain that the plan will succeed.

Issues Concerning Plan Implementation

CEOs in industries across the world have expressed concern regarding many of the issues mentioned above. Although they may be happy with the consultant's work, they are not sure how to implement the recommendations and when the results will pay off (Maira, 2005). There are several sets of issues that must be addressed in order for the CEOs to be completely confident in what has been presented to them. According to Maira (2005), one set of issues involves how to connect the design to the implementation phase and the second set of issues involves the objectivity and relevance of the recommendations.

First Set of Issues

• Recommendations cannot be purely rational and driven by numbers. In order to obtain support for a plan, the consultants must also show how they address the political forces in the organization as well as feedback from principal protagonists. Support and commitment must be obtained throughout the organization, not just the CEO's vote of confidence.
• Consultants should obtain support from various stakeholders prior to making recommendations.
• Everyone needs to challenge the practice of "first the strategy, then the implementation" concept. The "how" should be considered simultaneously with the "what."

Second Set of Issues

• Consultants need to consider the emotional and political impact on the employees when devising a strategy.
• Consultants need to validate that they have all of the information that is needed in order to determine a resolution. Sometimes, it may require digging down to the root causes of the problem versus making an assessment based on what they see.
• Consultants need to make sure that they do not bring their biases into the implementation process. Consultants have mental models in their heads and must make sure that they do not bring their preconceived ideas and beliefs into new consulting situations.
• Consultants must understand the context of the situation.

Application

Management Consultants & Strategic Planning

The strategic planning process has two phases which are strategy formulation and strategy implementation. The formulation phase requires an organization to determine where they are, where they want to go, and how they plan to get there. The implementation phase outlines what the plan will look like. Consultants may assist the senior management teams at organizations with either or both of these phases.

Steps in the strategy formulation phase include conducting a self assessment which addresses where the organization is, what the competitors are doing, and how both affect the organization from a micro and macro viewpoint; establishing the mission, vision and objectives of the organization; and drafting a strategic plan that takes the information from steps and into consideration.

Steps in the strategy implementation phase include allocating the appropriate resources to carry out the plan, establishing the organizational structure that will support the new plan, assigning tasks to various people within the organization, making sure the required processes are adequately managed, and providing training for individuals involved with the implementation of the plan.

Viewpoint

Consulting & Small Businesses

Entrepreneurship has grown into a very lucrative business over the past couple of decades. Since most small businesses have limited budgets, many have sought consultants to assist with different functions such as management and operations. Although the general classification for a small business is a company that has $5 to $100 million in annual sales, Tunwall & Busbin (1991) describe a small business as one "with both moderate size and managerial sophistication" (p. 16). Consultants are very useful for small businesses because they may not be able to justify hiring full-time employees while the company is still growing. In spite of the financial situation, they still need managerial expertise in order to remain competitive and grow.

Challenges Faced by Consultants

Consultants can be a valuable resource to the small business. Most consultants have stated that they feel valued by small companies, are placed in visible positions when working on a consulting project, and have the opportunity to leave a lasting effect on the organization. In spite of these rewarding feelings and opportunities, many consultants are faced with challenges when they work for small businesses. Thus, they will need to identify and resolve issues that may hinder them from completing their assigned tasks. According to Tunwall & Busbin (1991) some of the issues may involve:

• Low Budgets. Many small businesses are struggling, and managers do not see the need to hire consultants when the funds can go toward operational expenses. In addition, budgets for projects tend to be around $3,000 to $5,000. Consultants may be accustomed with dealing with larger budgets, but they must adjust their mindset in order to assist the small business with limited funding.
• Impatient Managers. Many managers in small companies tend to be intense, and there may be a conflict between the consulting process and the manager's personality because solutions are not being delivered quick enough. Consultants can circumvent this conflict by using active means of communication, anticipating the manager's level of anxiety, being professional with keeping managers in the loop regarding what is going on with the project, delegating tasks to managers so they have buy-in, and providing the managers and main clients with plenty of feedback throughout the process.
• Source Credibility. Some managers may have had bad experiences with consultants so they scrutinize every new one that comes into the company. It is important that consultants do not become sensitive to this practice and establish their credibility from the beginning.
• Management Knowledge. The managers in a small business tend to have a wealth of knowledge. It is important for consultants to tap into this very reliable, valuable resource. Some suggestions for initiating this first step include holding discussions with managers away from the company, interviewing managers privately, ensuring confidentiality, conducting second rounds of interviews when clarification is required, creating "what if" scenarios for managers so that they can share their unique skill set, and reviewing current trends in the industry and asking the managers questions about their opinions on the topics.
• Focus on Results. Since many managers tend to focus on the bottom line, consultants will need to educate them on the process that gets them to the bottom line. This objective can be accomplished by not outlining the entire game plan in order to de-emphasize the need to get to the end results and asking the managers to participate in completing different components of the project.
• Wants and Needs. Managers may have a vested interest in the project and supply information based on their perception. Since the consultant may not know the company history, he or she may want to compromise by providing the manager with what they think they need, or attempt to convince the client to accept what is really important in the situation.
• Training and Intelligence. Since many managers are not savvy with the concept of consulting, many consultants may want to provide condensed and simple resolutions that managers understand.
• Aversion to Statistics. Managers may not understand the statistical components of the resolution. Therefore, consultants will need to dissect and interpret the resolutions in terms that make sense to the management team. This is not the time for the consultant to show how smart he or she is. Rather, this is an opportunity for the consultant to show his or her ability to provide interpretative skills.

Conclusion

Although the field of management consulting is growing, consultants must make sure that their recommendations are in alignment with the needs of the organization. They must look at each situation with new eyes and develop customized strategic plans that will work for that particular organization. Consultants must analyze the situation properly as well as get buy-in from all levels of the organization. Maira (2005) suggested three specific tools to make sure that recommendations are not misaligned. The recommendations include:

• Aspiration Alignment. Consultants must find out what people care about and what would aspire them before attempting to get their buy-in on the strategy.
• Generative Scenario Thinking. In order to avoid preconceived biases, consultants should bring together a diverse group of individuals who can provide their knowledge on different facets of the scenario so that different perspectives can be collected.
• Story Telling. Consultants must encourage the stakeholders to develop stories to describe the journey of implementing the strategy from beginning to end.

These tools should be used in conjunction with the other techniques that consultants use in order to provide organizations with the best practices on how to grow their companies. In order to be successful, management consultants must show that they can positively affect the financial and operational aspects of an organization (Kumar, Simon & Kimberley, 2000).

Terms & Concepts

Business Consulting: The process of giving expert or professional advice to organizations.

Competitive Advantage: A position a firm attains that leads to above-normal business or a superior financial performance.

Consulting Firms: A firm of experts providing professional advice to an organization for a fee.

External Consultant: Individual that specializes in a field and is hired to provide assistance and counsel to an organization.

Industry: A group of firms that market products which are close substitutes for each other. Grouping of businesses that share a common method of generating profits.

Internal Consultant: Organizational development professionals who work exclusively for one organization and are direct reports to a designated level of management.

Management Consultant: Individual that is hired by an organization to aid in recognizing and ameliorating problems in strategy, policy, markets, organization, procedures and methods.

Small Business: A business with a small number of employees; tend to be under 100 employees in the United States and under 50 employees in the European Union.

Strategic Planning: Involves the process of defining objectives and developing strategies to reach those objectives. The process also uses "the big picture" to pursue large scale, long term objectives.

Bibliography

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Cummings, T., & Worley, C. (1993). Organization development and change (8th ed). New York: South Western College Publishing.

Institute of Management Consultants (2007). Retrieved June 7, 2007, from http://www.imcusa.org/.

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Maira, A. (2005). Aspiration alignment: A hidden key to competitive advantage. Journal of Business Strategy, 26, 12-18. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=19329859&site=ehost-live

Marren, P. (2004). Who is the client? Journal of Business Strategy, 25, 5-7. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=13333879&site=ehost-live

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Suggested Reading

Dulmanis, P. (2003). A practitioner's perspective on the execution of strategy. Mt. Eliza Business Review, 6, 24-28.

Fielden, S. (2005). Management consultancy. Blackwell Encyclopedic Dictionary of Human Resource Management.

Ganesh, S. (1978). Organizational consultants: A comparison of styles. Human Relations, 31, 1-29.

Stock, H. (2006). Up and running. Bank Investment Consultant, 14, 12-13. Retrieved June 7, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=21558224&site=ehost-live