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Management consulting

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Presentation on theme: "Management consulting"— Presentation transcript:

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?

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

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