Management consulting

Management consulting (sometimes also called strategy consulting) refers to both the practice of helping companies to improve performance through analysis of existing business problems and development of future plans, as well as to the firms that specialize in this sort of consulting. Management consulting may involve the identification and cross-fertilization of best practices, analytical techniques, change management and coaching skills, technology implementations, strategy development or even the simple advantage of an outsider's perspective. Management consultants generally bring formal frameworks or methodologies to identify problems or suggest more effective or efficient ways of performing business tasks.

Management Consulting is becoming more prevalent in non-business related fields as well. As the need for professional and specialized advice grows, other industries such as government, quasi-government and not-for-profit agencies are turning to the same managerial principles that have helped the private sector for years.

There is a relatively unclear line between management consulting and other consulting practices, such as Information technology consulting.

History

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, considered the current leader in the field. 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 vigorous 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 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.

Current state of the industry

Management consulting has grown rapidly, 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 IBM's 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 the McKinsey & Company. Finally, there are boutique firms, often quite small, that have focused areas of consulting expertise in specific industries or technologies.

The Rise of Internal Corporate Consulting Groups

Added to these approaches are corporations that set up their own internal consulting groups, hiring internal management consultants either from within the corporation, or from external firms whose employees have tired of the road warrior lifestyle. Corporations such as SunLife, IBM, Fidelity, Chevron Texaco, Metlife and Bristol Myer Squibb have found these groups to be particularly helpful. Many of these corporations have interal groups of as many as 25 to 30 full-time consultants.

The internal consultant approach is chosen for a variety of reasons: The corporation does not want to pay the large fees typically associated with external consulting firms. They want to keep certain corporate information private. Or they want a group that more closely works with, and monitors, consulting firm relationships. Often, the internal consultant has less ramp up time on a project due to familiarity with the corporation, and is able to guide a project through to implementation--as step that would be too costly if an external consultant was used.

Internal consulting groups are formed around number of practice areas: organizational development, process management, information technology, training and development to name a few of the more common practice areas. And, while there are positive cost and relationship benefits, there are potential problems. Often the internal consultant does not bring the objectivity to the consulting relationship that an external firm can provide. Many times, when the external consulting industry is strong, it is increasingly difficult to find the required high calibre of consultant provided by consulting firms. And, when financial times get tough, often the internal consulting group is the first to face layoffs.

Approaches

Management consulting has become the primary source for innovation in the practice of management, forming a bridge between academia, firms, and thought leaders in other fields. As a result, management consulting firms use a variety of tools and techniques to approach business problems. See strategic management, operations management, and industrial engineering for more information.

Criticism

Management consultants are often criticized for overuse of buzzwords, reliance on management fads and a failure to develop executable plans that can be followed through. A number of highly critical books about management consulting argue that the mismatch between management consulting advice and the ability of business executives to actually create the change suggested results in substantial damages to existing businesses, see, for example Dangerous Company by James O'Shea.

Further criticisms include: analysis reports only, junior consultants charging senior rates, reselling similar reports to multiple clients as "custom work", total lack of innovation, overbilling for days not worked, speed at cost of quality, unresponsive large firms & lack of (small) client focus, lack of clarity of deliverables in contracts, and more.

Not surprisingly, management consulting is also the butt of many business-related jokes, such as: "Question: What’s the difference between a management consultant and a used-car salesman. Answer: A used car salesman knows when he is lying."

Books about management consulting

Flawless Consulting, Peter Block, ISBN 0787948039
Guerrilla Marketing for Consulting, Jay Conrad Levinson and Michael W. McLaughlin, ISBN 047161873X
Managing at the Speed of Change, Daryl Conner, ISBN 0471974943
Managing the Professional Services Firm, David Maister, ISBN 0743231562
The Professional Services Firm Bible, John Baschab, ISBN 0471660485
Managing Transitions, William Bridges, ISBN 1857883411

External links