1. Management consulting
Human
capital
Social
Structural
Network
Capital
Client
Organizational
Management consulting
Lecture 6 and 7
Managing knowledge and knowledge workers

2. Human Capital – Intellectual Capital
Employee Knowledge Skills Experience
Human Capital
Intellectual Capital
Products and services which have market value
Staffing
Development
Human
capital
Social
Structural
Network
Capital
Client
Organizational IC
Communication
Performance Management
Remuneration and Reward

3. Structure of Lecture 6 and 7
Human
capital
Social
Structural
Network
Capital
Client
Organizational
Lecture 6
Level of analysis
Organisational perspective
Framework for analysis
Management of knowledge (reactor model)
Lecture 7
Work process
Identity model
HRM issues across both lectures
Recruitment and selection of consultants
Promotion policies – ‘up-or-out’ principle
The boundaries of HRM practices

4. Objectives
To understand the characteristics of the management consulting industry
History
Types of organisations
Types of consultancy activities
Typology of human capital
According to the client interface process
Career structures within management consultancy
The role of consultants as knowledge brokers
Typology of client capital
The consulting firm – client relationships
The HRM practice focus:
Recruiting human capital
Managing across boundaries
Human
capital
Network
Social
Capital
capital
Client
Structural
Capital
capital
Organizational
Capital

5. Marvin Bower's goal was to build an enduring institution, and for more than 60 years he dedicated himself to that proposition. Widely credited with being the founder of professional management consulting, Bower was a member of McKinsey and its guiding influence from 1933, when he joined, through his retirement in 1995 and until his death in 2003 at the age of 99. He served as managing director from 1950 to Rajat Gupta, former managing director, once said, "Convinced that behavior and conduct are every bit as important as skills and expertise, Marvin sought to build the firm into an enduring, values-based institution. He always saw McKinsey as 'one firm.' He built a truly global firm." Vision and values At Bower's retirement, former managing director Ron Daniel said that McKinsey's impact, reach, power, and influence are directly traceable "to Marvin – to his vision, his energy, his relentless determination, and his selfless commitment to making his firm – our firm – the preeminent institution it has become." Warren Cannon, a consultant from 1949 to 1988, said that Bower "picked these principles, not because they were God-given, but because they were principles he really believed in. In almost every case that I know of, he was absolutely right. They were in the long-term interest of the firm.” Bower didn't just preach values, according to Dick Cavanagh, a former principal, now President and CEO of the Conference Board, "He practiced them. That's the most effective way of teaching. He was a teacher as well as a leader." Blunt integrity But he could be blunt. Jack Crowley, a retired director, recalls the time that Bower, in a client meeting with a CEO, "bellowed out, 'The problem with this company, Mr. Little, is you.' And there was a deathly silence.  It happened to be totally accurate. That was the end of our work with that client, but it didn't bother Marvin." Individuals in the firm who worked with Bower told stories about how he turned down opportunities to counsel prominent business leaders such as Howard Hughes, and when he refused to help the U.S. government devise a bailout plan for American Motors. If he felt it was not in a company's interest for McKinsey to serve it or that top management was not committed to change, Bower wouldn't accept the company as a client. Farewell hopes In 1993, Business Week wrote that Bower's 1968 decision, on reaching the age of 65, to "sell his stock to the other partners at book value, rather than at a vast premium that might have forced the company into debt, helped make McKinsey an enduring institution.  He also required older partners to sell their stock to younger partners well before they retired. 'Young people have got to get some shares,' he said. 'They have to gain a sense of ownership.' " In a memo to the London office on the occasion of his last visit as managing director in 1967, Bower wrote: "My farewell hopes are these: first, that down the years our directors and principals will provide formal training and on-the-job coaching in the professional approach. Two, that down the years our directors and principals will shout out" – and this was underlined by Bower – "whenever they feel we're doing anything that might impair the enduring values of the professional approach or just letting those values erode through inattention. And third, that down the years our directors and principals will speak up whenever these principles that make up our philosophy are not being followed."

6. History Management as a unique field of study Arthur D.Little (1890s)
McKinsey & Company
First management and strategy consultancy
Founded by James McKinsey in 1926 (Chicago)
Hiring of bright young MBAs
Rise of management consultancy after World War II
Development of tools for strategic management
Boston Consulting Group (1963), McKinsey&Co, Harvard Business School
Bain&Co - focus on shareholder wealth
Consulting within accountancy and technology firms
PwC and IBM
Niche consultancy firms
Corporate social responsibiity
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. 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 rigorous 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 the now defunct 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. Additionally, there has also been the development of successful niche consulting firms (such as Kaiser Associates), which are often credited with providing more focused work at greater value.

7. Types of firms in the industry
Accountancy firms offering consultancy
Large non-accounting consultancies
Small specialist boutiques
Gurus
Independents
Management consulting has grown quickly, 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 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 Accenture and IBM 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 McKinsey & Company. Finally, there are boutique firms, often quite small, which have focused areas of consulting expertise in specific industries or technologies.

8. Types of Consultancy services
Strategy HR
Marketing
Change
Process and Operations
Org design
Infotech
Management consulting

9. Major consultancies Bain & Company Boston Consulting Group
Deloitte & Touche
Ernst & Young
A.T. Kearny
KPMG
Arthur D.Little
McKinsey & Co
Mercer
PriceWaterhouse Coopers

10. Different types of consulting services: a knowledge-based view
Productise
Reuse economics
People-to-documents
IT focus
Buy experience
Reward for contribution to document database
Ernst & Young
Competitive strategy
Economic model
KM strategy
Technology
HRM
Example
Bespoke
Expert economics
Person-to-person
IT enables personal
Build experience
Reward for knowledge creation and sharing
McKinsey & Company

11. Typology of Human Capital
The consultancy process
Career structures
Consultants as brokers of human capital
Boundary spanning

12. The consultancy process: Your experience
Paired assignment
Identify a consultancy experience that you have been part of.
Characterise the individual stages of the consultancy process
Interview your partner and identify:
Which skills were developed at each stage of the consultancy process
Which other knowledge resources did you rely upon during this process
Summarise your findings and be prepared to feed back to the group

13. The career structure Analysts Consultants Senior Consultants
Business development managers
Directors/Partners

14. The McKinsey Facilitator case
Specific type of human capital
Across boundaries
How would you design the recruitment process to capture this human capital?

15. Components of a high performing culture
General business knowledge
Understanding of client context
Logical problem solving IQ
Creates environment of trust
Manages group dynamics
High awareness of emotions EQ
High self knowledge
Experience of own transformational journey
Sense of vocation SQ

16. Using external facilitators poses a challenge to many forms of intellectual capital flows
Clients
Facilitators

17. Facilitator network: HC viewpoint
External pool of facilitators
Focal Practice Group
Regions
Other Practice Groups
Clients
Facilitators within clients
External skill experts
HC boundary

18. Mindsets are often misunderstood and ignored
Needs –
met and unmet
Thoughts and feelings
Values
and beliefs
What we see and usually try to change
Be- haviour
What we cannot see, make assumptions about and often do not address
A desire to change ends up like most New Year’s resolutions if root causes are not identified and addressed

19. The first step in mindset change is a new level of personal understanding
Requires insight
Requires a choice
Requires practice

20. The first step in mindset change is a new level of personal understanding
“You cannot solve
a problem from the same level of consciousness that created the problem in the first place”
Albert Einstein
Requires insight
Requires a choice
Requires practice

21. The McKinsey Facilitator case
How would you design the recruitment process to capture this human capital?

22. Facilitator network: OC viewpoint
External pool of facilitators
Focal Practice Group
Regions
Other Practice Groups
Clients
Facilitators within clients
External skill experts
Recruitment & development processes
Client delivery processes

23. Positioning in the lecture
Nature of the industry
Typology of human capital
Consulting process
Career structure
Knowledge brokers
Now we turn to the human-client capital interface
We take a closer look at how clients perceive consultants?

24. IDEA SUBMISSION PROCESS
Stick hexagon on hexagon wall with similar ideas and rejoin group
Workshop room
1. Group discussion on topic/idea
Receive hexagon at idea table and write on idea no. and title
Individual or group write up idea cover sheet and attach backup materials (others at table may start on another idea at this time if appropriate
Submit written materials at idea table
In tray
Door to patio
Filing
Cassette record sheet
Patio
Wall #1
Individual(s) go outside to record 2–3 minute video to explain idea
Video station helper puts idea no. stick on to idea coversheet and onto video cassette record sheet. Records idea title onto cassette record sheet
Individual(s) write idea no. and idea title on directors board—hold up at start of recording
Record 2–3 mins video
Video station helper with stickers of idea number

25. The perception of Human Capital
The ability to learn in practice
Why smart people don’t learn
The impact on organisational learning
The impact on social capital
The impact upon the client relationship
social construction of learning

26. The client-consultant relationship
Human capital and its link to client capital
Dimensions for analysis
Strength of ties
frequency
Relational
trust
Cognitive
Shared mental models
Giving answers or shaping futures

27. The nature of relationships
Structural density
Structural holes
Dyadic
Architecture
The nature of relationships
Social capital
(between facilitators)
Morphology
Structural density X
Structural holes
Trust:
Nature
Deep
Resilient
Positional
Generalized
(between sponsors)
Dyadic
Client-and-network capital
(between internal and external facilitators)
Organisational capital:
HRM process
Flexibility
Mechanistic
Adaptive
Client relationship process

28. Facilitator network: SC & CNC viewpoint
External pool of facilitators
Focal Practice Group
Regions
Other Practice Groups
Clients
Facilitators within clients
External skill experts
Dense: Deep and
dyadic trust
Structural holes: resilient and
generalised trust
Structural holes:
Deep and dyadic trust
Dense:
Resilient and dyadic trust

29. Books about management consulting
Flawless Consulting, Peter Block, ISBN
Guerrilla Marketing for Consulting, Jay Conrad Levinson and Michael W. McLaughlin, ISBN X
Managing at the Speed of Change, Daryl Conner, ISBN
Managing the Professional Services Firm, David Maister, ISBN
The Professional Services Firm Bible, John Baschab, ISBN
Managing Transitions, William Bridges, ISBN
Management Consulting: A Guide to the Profession, Milan Kubr (ed.), ISBN
The World's Newest Profession: Management Consulting in the Twentieth Century, Christopher D. McKenna, ISBN