SAGE has been part of the global academic community since 1965, supporting high quality research and learning that transforms society and our understanding of individuals, groups and cultures SAGE is the independent, innovative, natural home for authors, editors and societies who share our commitment and passion for the social sciences Find out more at: www.sagepublications.com © Marc G.Baaij 2014 First published 2014 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted in any form, or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued by the Copyright Licensing Agency Enquiries concerning reproduction outside those terms should be sent to the publishers All material on the accompanying website can be printed off and photocopied by the purchaser/user of the book The web material itself may not be reproduced in its entirety for use by others without prior written permission from SAGE The web material may not be distributed or sold separately from the book without the prior written permission of SAGE Should anyone wish to use the materials from the website for conference purposes, they would require separate permission from us All material is © Marc G Baaij, 2014 Library of Congress Control Number: 2013939740 British Library Cataloguing in Publication data A catalogue record for this book is available from the British Library ISBN 978-1-4462-5612-1 ISBN 978-1-4462-5613-8 (pbk) SAGE Publications Ltd Oliver’s Yard 55 City Road London EC1Y 1SP SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320 SAGE Publications India Pvt Ltd B 1/I Mohan Cooperative Industrial Area Mathura Road New Delhi 110 044 SAGE Publications Asia-Pacific Pte Ltd Church Street #10-04 Samsung Hub Singapore 049483 Editor: Matthew Waters Editorial assistant: Nina Smith Production editor: Sarah Cooke Copyeditor: Gemma Marren Proofreader: Audrey Scriven Indexer: Silvia Benvenuto Marketing manager: Alison Borg Cover design: Francis Kenney Typeset by: C&M Digitals (P) Ltd, Chennai, India Printed and bound in Great Britain by Ashford Colour Press Ltd CONTENTS About the Author Preface Acknowledgements PART 1: THE MANAGEMENT CONSULTANCY PHENOMENON Defining management consultancy Introduction Opposing perspectives on management consultancy Characteristics of management consultancy Definitions of management consultancy Case study: Seizing the real opportunity Categories of professional services Roles of management consultants Divisions of responsibilities External versus internal management consultancy Management consultancy as a profession Summary Reflective questions Mini case study: To certify or not to certify Further reading References Origin and development of management consultancy Introduction The advisor through the ages The emergence of the first field of management consultancy: operations consultancy The emergence of the second field of management consultancy: organization and strategy consultancy The emergence of the third field of management consultancy: information technology consultancy Institutional changes driving the growth of management consultancy Case study: McKinsey & Company The rise and decline of management consultancies Summary Reflective questions Mini case study: The return of an accountancy firm Further reading References Reasons, risks, and results of management consultancy gate reviews, 383 GE-McKinsey matrix, 456 gender, 308–309 general surveys, 51 geography clients and, 115, 116–117, 121–124, 121 competition and, 148 consultancy firms and, 131–133, 134–135 glass ceiling, 308 Glass-Steagall Banking Act (1933), 49 globalization capitalism and, 57–58, 200–201 competitive forces and, 167–168, 167 management consultancy firms and, 131–133, 132 grey hair consultancy compared to brain and procedure consultancy, 142–143, 143 knowledge and, 140, 456 leverage and, 259 organizational structure and, 246 overview, 195–196 grey hair consultancy cont people in, 277 personalization strategy and, 225 profit per partner and, 263, 264 guessing, 422 Hammer, M., 189 Harvey balls, 477, 477 hedging, 478 Henderson, B., 52, 248 human resource management (HRM), 227–228 Iacocca: An Autobiography (Iacocca), 194–195 Iacocca, L., 194–195 IBM, 53–54, 184 IBM Consulting Group competition and, 148, 156 history of, 55, 69, 162 organizational structure of, 246 scale of, 125 identity, 253 implementation assistance overview, 16–17, 222–223, 323, 535 recommendation vs., 537–538 roles of management consultants and, 538–540, 539 solution development and, 545–547, 546–547 See also structured implementation In Search of Excellence (Peters and Waterman), 61, 68, 87–88, 198, 199 indirect procurement, 357–360, 357 induction hypothesis testing and, 460, 460, 462, 463 overview, 423, 424 presentations and, 504–505, 505 industrial engineers, 47 industrial revolution, 45 industry convergence, 166–167, 167 industry cost curve, 518, 518 Information Consulting Group (ICG), 61 information technology, 167, 168–170, 184, 234 information technology (IT) consultancy business models of, 63–65 corporations and, 155–156 effect of, 89, 90 history of, 53–55, 62–63, 67–68, 183–184, 185 An Inquiry into the Nature and Causes of the Wealth of Nations (Smith), 47 intellectual abilities, 287–288 intellectual property, 192, 356 inter-personal interaction qualities, 288 interim management, 23 interim presentations, 497, 509–510, 509–510 internal combustion engine, 183 internal consultancy, 255 internal management consultancy vs external management consultancy, 31–32, 32, 92–96, 93, 96 overview, 25 internal studies, 225–226 International Council of Management Consulting Institutes (ICMCI), 13, 34, 35, 36 internet, 184, 185–187, 218, 456 interpersonal fit, 335 interviews, 224, 279–286 investor capitalism, 58 involuntary turnover, 305–306 isomorphism, 97–98 junior consultants, 392–393, 469 junior partners client’s perspective on, 333 overview, 292, 292, 293, 294 Kaplan, R., 189, 194, 456 Kennedy Information, 118 key performance indicators (KPIs), 381–383 Kipping, M., 259 knowledge accumulation of, 140, 140, 455 development of, 324 effects of, 86–88, 86, 87 exploration and exploitation of, 139–144, 140 public domain and, 455–456 risks and, 98–99 knowledge management, 225–227, 229, 229, 455 knowledge management systems, 226 Kotter, J., 548 KPMG, 124–125, 156 labour specialization, 47 leaders (tracers, trackers), 526, 526 leadership business models and, 241–245, 241 control and, 248–250, 252 culture and, 250–253 economics and, 259–268 legal forms and, 253–255 organizational structure and, 245–247, 245, 247, 248, 248 overview, 228 legal advice, 23–24 leverage client’s perspective on, 333 growth and, 267, 267 overview, 257–258, 258, 301 profit per partner and, 263 pyramid structure and, 291 Lewin, K., 548 liability, 356 Little, A.D., 46 See also Arthur D Little (consultancy firm) M-form, 51–52 Maister, D.H., 259 managed professional business (MPB) career structure of, 292 overview, 245, 246–247, 247 vs professional partnerships, 251 management, 195 management audits, 48–50, 64 management consultancy vs business consultancy, 17–18, 18 characteristics of, 10–12 as co-production, 80–81 critical perspective on, 9–10, 84, 332 definitions of, 13–18, 15, 16, 112–113 division of responsibilities and, 30–31, 31 drivers of demand for, 114–117, 115 effect of, 76–79, 77, 84–85, 88–90, 89, 103 functionalist perspective on, 8–10, 83–84, 332 history of, 43–55, 45, 183–184 impact of business cycles on, 179–182, 182 impact of management knowledge on, 187–192 impact of technological waves on, 58, 183–184 institutional changes and, 55–59, 55 practices for generating demand for, 100–101 price of, 307–308 as a profession, 32–36, 36, 38 reasons for hiring, 11, 82–84, 83, 180, 334, 339–344, 342, 540–541 resistance to, 100 management consultancy cycle, 322–323, 323 management consultancy firms business models of, 63–65, 169–170, 241–245, 241 career structure of, 291–298, 291 economics of, 259–268, 266, 268, 269–270 legal forms and, 253–255 organizational structure of, 245–247, 245, 247, 248, 248 overview, 18 reasons for applying to, 274–276 rise and decline of, 62–69, 62 scale of, 124–127, 125, 126, 148–149, 148 scope of, 127–133, 128, 148–149, 148, 243 size of, 244–245 management consultancy industry size of, 112–117, 114 three dimensions of, 117–122, 117, 118, 120, 121 management consultancy value chain competitive advantage and, 231–233, 232 as cycle, 322 disaggregation of, 233–236, 235 vs manufacturer’s value chain, 215–216 outsourcing and, 230–231, 237 overview, 215, 215 primary activities of, 217–224, 229–231 support activities of, 224–231 management consultants as agents of change, 534–535 career structure and, 291, 291, 292, 294 control of, 248–250, 252 effects of informal roles of, 90–92 identity and, 253 life as, 297–298, 298 management gurus and, 196–197, 197 management knowledge cluster and, 195–197 perspective of, 324–330, 325 management consultants cont responsibilities of, 257 roles of, 25–30, 25, 83, 127–128, 181, 340, 343–344, 538–540, 539 management education, 197–198 See also business schools management engineering, 50–51, 64 management fashion backlash against, 199–200 client’s perspective on, 332 management gurus and, 196–197, 197 overview, 188–192, 188, 191 producers of, 198–199 See also management knowledge cluster management gurus management consultants and, 196–197, 197 overview, 24, 194–195, 198, 199 management knowledge, 184, 187–192, 203 See also management fashion management knowledge cluster management, 195 management consultants, 195–197 management education, 197–198 management media, 198 overview, 192–195, 193 management media, 198 See also publications managerial capitalism, 58, 201 managers interviews and, 284 overview, 290–291, 292, 293, 294 responsibilities of, 257 margin, 263 market maturation, 167, 170–173 marketing consultant’s perspective on, 325–327, 326 market maturation and, 170 overview, 217–218, 322 recruitment and, 224 marketing mix, 456 mass production techniques, 183 master–apprentice model, 226 McCallum, D., 149–150 McKinsey & Company alumni and, 88, 309 competition and, 148 history of, 50–51, 52, 59–61, 67, 68 offices of, 131, 132 scale of, 124 services offered by, 129, 129 software-based consultancy and, 142 See also 7-S framework McKinsey, J.O., 59–60 McKinsey Solutions, 142, 170 MECE (mutually exclusive, collectively exhaustive), 419–421, 420–421 mentors, 296 Microsoft Excel, 142 military-industrial complex, 56 mini-MBA, 295 Minto, B., 419 Monitor Group, 24 monitoring, 249 moving box, 525, 526 multiple office consultancy firms, 246 negative disturbing events, 406 neo-liberalism, 200–201 networking, 217–218, 295 new entrants competition and, 151, 151, 162–165, 163, 168–169 disaggregation of the value chain and, 235–236 Norton, D., 189, 194, 456 Ohmae, K., 456, 460 oil, 183 one-firm model, 246 online consultancy, 170 operational excellence, 144, 145 operations, 215–216 operations consultancy business models and, 63–65 effect of, 89, 89 history of, 45–49, 62–63 operations–sales sequence, 215 opportunism, 98 opportunity diagnosis and, 432–437, 433, 435, 437–438 presentations and, 502, 503 organization and strategy consultancy business models of, 63–65, 66 effect of, 89, 90 history of, 49–53, 62–63, 66–68 See also organization consultancy; strategy consultancy organization consultancy effect of, 90 history of, 51–52, 183 out-consultants, 309 outsourcing, 169, 230–231, 237 overdependence, 96–97 P2-architecture See professional partnerships Pareto principle (80/20 rule), 221, 415–416, 427 partners capacity planning and, 264–265 interviews and, 284 overview, 292, 292, 293, 294 project managers and, 390 promotion to, 301–303, 303, 312–314 responsibilities of, 257, 301 sales leads and, 327 steering committees and, 390 See also junior partners; profit per partner; senior partners Peirce, C.S., 422 penicillin, 183 performance appraisals, 296, 298–303, 299, 300, 565 Perot, R., 54 personal coaching, 24, 295 personality, 288 personalization strategy, 225 Peters, T.J., 24, 68 See also In Search of Excellence (Peters and Waterman) pharmaceutical discoveries, 183 plastics, 183 Popel, H., 477n1 Porras, J., 199 Porter, M competitive forces framework and, 151, 151, 221, 456 on competitive strategies, 144, 146 on competitors, 153 as management guru, 24, 194 positive disturbing events, 406, 432–433 presentations interim presentations, 497, 509–510, 509–510 during the project, 495–496 See also final presentations PriceWaterhouseCoopers Consulting, 69 The Principles of Scientific Management (Taylor), 48 pro-bono projects, 12, 325 problem solving approaches to, 401–402, 402 people and, 400–401 problem statements, 428–430, 429, 432, 458 problems definition of, 403 result gaps and, 403–406, 405 procedure consultancy codified knowledge and, 225 compared to brain and grey hair consultancy, 142–143, 143 implementation and, 535 knowledge exploitation and, 456 leverage and, 259 organizational structure and, 247 overview, 141–142, 173, 195–196 people in, 277 profit per partner and, 263, 264 training and, 294 See also software-based consultancy process consultation, 27 procurement, 216, 356–360 product leadership, 144–145 productivity, 263–264 professional managers, 56 professional partnerships career structure of, 292 legal form of, 254 vs managed professional business, 251 overview, 245–246, 245 professional procurement, 358 professional services categories of, 21–25, 22 See also consultancy services professionalism, 251, 252 profit, 261–263, 261, 266–267, 266, 301 profit per partner, 261, 262–263, 262, 264 project managers clients and, 396 communication and, 371–372 partners and, 390 presentations and, 496 quality assurance and, 221–222 responsibilities of, 389–392 risks and, 380 steering committee and, 371 work plans and, 472 project teams, 257–259, 259, 385–389, 389, 392–394 projects client’s perspective on, 330–334, 330 closure of, 323, 383–384, 385 consultant’s perspective on, 324–330, 325 control and, 381–383, 383, 385 definition of, 367 design of, 220, 323, 373–380, 374, 378, 379, 385 evaluations and, 223, 296, 323, 384 example of, 19–21, 19 execution of, 381, 385 initiation of, 370–373, 385 knowledge and, 225 organization of, 386–389 overview, 259 staffing and, 294–295 structure of, 368–370, 369 types and scopes of, 367–368, 371–372 promotion and advertising, 218, 322 promotions to manager, 249, 300–301 overview, 275–276, 293 to partner, 249–250, 301–303, 303, 312–314 proposals development of, 347–351, 348, 350, 351 presentation of, 354–355, 362–363 prospects competitive strategies and, 145 hiring reasons of, 339–344, 342 marketing and, 217–218, 322, 325–327 perspective of, 78 referrals and, 326 relationship with, 334–338, 334 sales and, 219, 322, 326–328 sales leads and, 327 public corporation, 254 public domain knowledge, 455–456, 468–469 public sector, 56, 185–186, 201 publications, 87–88 pull marketing, 322 purchase of expertise consultation model, 26 PwC, 124–125, 148, 156 pyramid structure, 291–293, 291 qualifications, 279 quality assurance, 221–222, 370 R&D (research and development), 216 real options, 478–479 recruitment client services and, 229, 230 desired qualities and, 287–290, 287, 290 overview, 224 process of, 278–287 Reengineering Management (Champy), 189 Reengineering the Corporation (Hammer and Champy), 189 referrals, 326 repeat business, 99, 326, 328 reports, 384 reputation in different fields of management consultancy, 65, 66 evaluations and, 565 knowledge spill-overs and, 99 projects and, 324 sales leads and, 326–327 request for information (RFI), 358 request for proposals (RFP), 358 resources in different fields of management consultancy, 64, 66 implementation and, 562 projects and, 220, 372, 376, 377–378, 379–380 result gaps implementation and, 552–553 overview, 403–406, 405 presentations and, 500–501 See also structured problem solving revenues, 259–260 rewards, 249–250 rhetoric, 196, 332, 336 risks change and, 542 external management consultancy and, 96–99 fees and, 81–82 projects and, 380 robots, 184 Roland Berger Strategy Consultants, 53, 162 salaries, 249–250, 275 sales consultant’s perspective on, 326–329, 326 overview, 218–219, 322 sales leads, 325–326 sanctions, 250 Sarbanes-Oxley Act (2002), 69 scientific management, 46–50, 195 second industrial revolution, 46, 49, 183 Securities Act (1933), 49 Securities and Exchange Commission (SEC), 50 semi-conductors, 183 senior consultants, 392 senior partners capacity planning and, 264–265 client’s perspective on, 333 overview, 292, 292, 293, 294 promotion to, 302–303 sensitivity analysis, 475–476, 477 sequential analysis, 407 share-holder capitalism, 201 Simon-Kucher, 128 single best solutions, 480 slides, 511–516, 513, 515, 527, 528–529 Smith, A., 47 social responsibility, 360–361 software-based consultancy, 141–142, 170 sole proprietorships, 246, 254 solutions presentations and, 501–502 types of, 480–483, 481, 482–483 sounding board, 370–371 staffing, 294–295 stage gate process of recruitment, 278, 278 stage gates, 478 stakeholders obligations towards, 360–361 presentations and, 496–497 problem diagnosis and, 428–429, 430 prospects and, 337 relationship with, 347 role of, 344–347, 345, 346, 346 standardization, 250 start-ups, 246 status, 276 steel production, 183 steering committees client relationship management and, 384, 390 closure and, 383–384 communication and, 371–372, 375, 381 control and, 381–383 evaluations of solutions and, 501–502 overview, 220, 370–371 partners and, 390 presentations and, 496, 497 project design and, 376 project managers and, 371 quality assurance and, 221–222, 370 risks and, 380 scope of projects and, 371–372 strategy consultancy effect of, 90 history of, 52–53, 183–184 strategy map, 456 structured communications interim presentations and, 497, 509–510, 509–510 during the project, 495–496 See also final presentations structured implementation evaluation of, 564–568 failure and, 559–564, 560 plan for, 483–485, 484 process of, 548–559, 549, 551, 553, 557, 569–571, 569–570 structured problem solving opportunity diagnosis and, 432–437, 433, 435, 437–438 overview, 402 problem diagnosis and, 406–432, 407, 410–411, 414, 416, 418–422, 429–431, 439–445, 439, 440, 443–445, 446 solution development and, 451–484, 452–453, 454, 459–461, 462, 464–468, 470, 472–473, 475–477, 479–480, 481, 482–485, 486, 487, 488–490, 489 substitutes, 151, 151, 165–166, 166 suppliers, 151, 151, 159–162, 160, 471 support staff, 246, 379 tacit knowledge, 141, 225, 226–227 talent, 276–277 Tata Consultancy, 55 Taylor, F.W., 47–48, 195 team management, 391–392 team room, 379 technical buyers, 357 techno-structure, 245–246 technology, 58, 183–184 telecommunications, 184 temporary work (body shopping), 23 terms and conditions, 350–351, 351 time series, 520–521, 521 tracers (trackers, leaders), 526, 526 trade associations, 34 training vs management consultancy, 11, 22–23 for management consultants, 227, 294, 295–296 transparency, 236 Treacy, M., 143, 146 turnover, 303–307 uncertainty, 474–479, 475 up-or-out policy gender and, 308 overview, 268, 303–305, 304 projects and, 324 promotion to partner and, 301 value chain, 214, 214 See also management consultancy value chain value chain framework, 221 variable fee, 354 venture capital investing, 23 visualizations, 516–526, 517, 518–527 voluntary turnover, 307 warlord model, 246 Waterman, R.H., 68 See also In Search of Excellence (Peters and Waterman) Wiersema, F., 143, 146 work plans, 472, 472 ... PART 2: THE MANAGEMENT CONSULTANCY INDUSTRY Overview of the management consultancy industry landscape Introduction Analysing the management consultancy industry The management consultancy industry... MANAGEMENT CONSULTANCY PHENOMENON Defining management consultancy Introduction Opposing perspectives on management consultancy Characteristics of management consultancy Definitions of management consultancy. .. courses and workshops on management consultancy He also trains managers and management consultants in the best practice problem solving method of the top tier consultancy firms An Introduction to Management