Week 1: Defining management consultancy and the industry
● Baaij chapter 1,2,5
● Colonizing Knowledge: Commodification as a Dynamic of Jurisdictional Expansion in Professional
Service Firms - Suddaby and Greenwood (2001)
Chapter 1: Defining Management Consultancy
2 Opposing perspectives on management consultancy:
1. Functionalist perspective
○ Management consultants are professional helpers.
○ They create value for their clients, mostly managers of organizations, through providing
independent advice
2. Critical perspective
○ Critical academic literature argues that management consultancy faces ambiguities over:
A. The knowledge that management consultants claim
B. What management consultants claim to do with that knowledge
C. The claimed results of management consultants
Characteristics of management consultancy:
1. Management consultancy is a service
2. Management consultancy is directed at managers
3. Management consultancy is about decisions
4. Management consultancy is knowledge-intensive
5. Management consultancy is based on independence (to give impartial advice)
6. Management consultancy is a business (project is a business transaction with client)
7. Management consultancy is about projects
8. Management consultancy can be full-time and part-time
Definitions of management consultancy:
1. Recommendation and implementation
2. Objectivity and independence
3. Support decision making
4. Change implementation
5. Any form of help
Narrow definition:
Management consultancy = a knowledge-intensive service which independent business professionals provide
to managers of client organizations, and consist of objective advice on management’s decisions regarding the
solution to the client organization’s problems and opportunities
● Concentrates on giving advice
● Not involved in implementation
Broad definition :
Management consultancy = a knowledge-intensive service which independent
business professionals provide to managers of client organizations, and consists of objective advice on
management’s decisions regarding the solutions to the client organization’s problems and opportunities, and
may, in some cases, also consist of assistance with the management’s tasks regarding the
implementation of these solutions
● Includes both advising and assisting clients on implementation of the solution
○ = Assistance in management tasks of the implementation
● 3 Categories of implementation tasks:
A. Tasks involving the organization units as a whole
■ Acquire/ integrate/ divest an organization,
B. Tasks involving an individual primary activity of the organization
■ Build logistics system/ withdraw from distribution channel
C. Tasks involving an individual support activity of the organization
■ Negotiate terms with suppliers/ develop skills through training
1
,Business consultancy = combination of giving advice to management with providing assistance on
non-management tasks of implementing management solutions
Business services = only providing assistance, without giving advice
4 Main criteria for determining whether a service qualifies as management consultancy:
1. Advice on management decision
2. Decision on management problem regarding the business
3. Assistance in managerial tasks of implementation
4. Independence of client management
Roles of management consultants:
● Formal roles
1. Expert = provide knowledge to solve a problem defined by the client
■ Purchase of expertise consultation
2. Doctor = identify and solve a problem for the client
■ Doctor-patient consultation
3. Facilitator = provide process which the client can use to identify and solve a problem
■ Process consultation
● Informal roles
1. Hired hand = provide temporary capacity for the client, not related to the specific topic
2. Legitimator = provide legitimacy to a client’s solution which other stakeholders oppose
3. Political weapon = provide arguments for a client’s position in a political fight
4. Scapegoat = take blame for a client’s solution that is not in the interest of other stakeholders
→ Accepting informal roles erode the consultancy’s reputation (ethical issues and negative commercial
effects)
5 Sub-processes of the management consultancy process:
1. Identifying the problem (opportunity)
2. Diagnosing of the problem
3. Developing one or more alternative solutions
4. Making a decision
5. Implementing the decision
→ Management substitute (responsible or all processes) vs. bogus consultancy (no responsibility)
Internal management consultants = permanent employees of an organization and that will typically only
consult for this single ‘client’
→ Lower fees, better client understanding, subject to hierarchy
External management consultants = owners or permanent employees of an independent consultancy firm
with temporary consultancy engagements at varying client organizations.
→ More impartial, broader knowledge, strong public reputation
2
,Chapter 2: Origin and Development of Management Consultancy
2 Characteristics of clients of management consultants:
● High-value decisions
● Wealth and power
The emergence of management consultancy fields:
3 Types of changes that shaped the development of consultancy fields:
1. Technological change
2. Regulatory change
3. Institutional change
Second industrial revolution (1870):
● Production of steel became cheaper
● More infrastructure (bridges, railroad)
● Urbanization
● Huge growth of firms
● High capital requirements
First field of management consultancy: Operations Consultancy
● Industrial revolution gave rise to separation of ownership and management which to the professional
manager
● Challenged by new technologies and large scale operations, these managers sought to increase
efficiency (ROI)
● Frederick W. Taylor developed scientific management: decompositions into simple tasks and optimize
each task
● Prominent firms: Arthur D. Little, Bedaux Consultancy
3
, Wall street crash and regulatory change:
● Wall Street crash 1929: overproduction of agricultural products, excessive speculation, and consumer
debt
● 1933: Glass-Steagall Banking Act forced independent advice from banking activities
● 1933: Securities Act: due diligence by independent consultants before financing
● 1936: legislation forbade accountants and lawyers to advise while performing financial audits
Second field of management consultancy: Organization and Strategy Consultancy
● 1940-50s: as companies grew larger, they wanted to adopt the M-form
● Organization consultancy focused on implementing this form at clients
● By 1940 there were 400 firms, with numbers growing with 15% per year
● Prominent firms: Booz Allen Hamilton, McKinsey & Company
● 1960s: diversified organizations struggled with coordination
● Demand for portfolio management, or corporate strategy advice
○ Where should we compete and how do we coordinate?
● Prominent firms: BCG, Roland Berger, Bain & Company
Third field of management consultancy: IT Consultancy
● 1950s: mainframe computing became popular
● IBM is the first to mass-produce mainframes
● IBM and a few others were under anti-monopoly legislation until 1982
● Accounting firms entered IT consultancy
● Prominent firms: Arthur Anderson, CapGemini
4 Factors the 3 fields of management consultancy differ in:
4
● Baaij chapter 1,2,5
● Colonizing Knowledge: Commodification as a Dynamic of Jurisdictional Expansion in Professional
Service Firms - Suddaby and Greenwood (2001)
Chapter 1: Defining Management Consultancy
2 Opposing perspectives on management consultancy:
1. Functionalist perspective
○ Management consultants are professional helpers.
○ They create value for their clients, mostly managers of organizations, through providing
independent advice
2. Critical perspective
○ Critical academic literature argues that management consultancy faces ambiguities over:
A. The knowledge that management consultants claim
B. What management consultants claim to do with that knowledge
C. The claimed results of management consultants
Characteristics of management consultancy:
1. Management consultancy is a service
2. Management consultancy is directed at managers
3. Management consultancy is about decisions
4. Management consultancy is knowledge-intensive
5. Management consultancy is based on independence (to give impartial advice)
6. Management consultancy is a business (project is a business transaction with client)
7. Management consultancy is about projects
8. Management consultancy can be full-time and part-time
Definitions of management consultancy:
1. Recommendation and implementation
2. Objectivity and independence
3. Support decision making
4. Change implementation
5. Any form of help
Narrow definition:
Management consultancy = a knowledge-intensive service which independent business professionals provide
to managers of client organizations, and consist of objective advice on management’s decisions regarding the
solution to the client organization’s problems and opportunities
● Concentrates on giving advice
● Not involved in implementation
Broad definition :
Management consultancy = a knowledge-intensive service which independent
business professionals provide to managers of client organizations, and consists of objective advice on
management’s decisions regarding the solutions to the client organization’s problems and opportunities, and
may, in some cases, also consist of assistance with the management’s tasks regarding the
implementation of these solutions
● Includes both advising and assisting clients on implementation of the solution
○ = Assistance in management tasks of the implementation
● 3 Categories of implementation tasks:
A. Tasks involving the organization units as a whole
■ Acquire/ integrate/ divest an organization,
B. Tasks involving an individual primary activity of the organization
■ Build logistics system/ withdraw from distribution channel
C. Tasks involving an individual support activity of the organization
■ Negotiate terms with suppliers/ develop skills through training
1
,Business consultancy = combination of giving advice to management with providing assistance on
non-management tasks of implementing management solutions
Business services = only providing assistance, without giving advice
4 Main criteria for determining whether a service qualifies as management consultancy:
1. Advice on management decision
2. Decision on management problem regarding the business
3. Assistance in managerial tasks of implementation
4. Independence of client management
Roles of management consultants:
● Formal roles
1. Expert = provide knowledge to solve a problem defined by the client
■ Purchase of expertise consultation
2. Doctor = identify and solve a problem for the client
■ Doctor-patient consultation
3. Facilitator = provide process which the client can use to identify and solve a problem
■ Process consultation
● Informal roles
1. Hired hand = provide temporary capacity for the client, not related to the specific topic
2. Legitimator = provide legitimacy to a client’s solution which other stakeholders oppose
3. Political weapon = provide arguments for a client’s position in a political fight
4. Scapegoat = take blame for a client’s solution that is not in the interest of other stakeholders
→ Accepting informal roles erode the consultancy’s reputation (ethical issues and negative commercial
effects)
5 Sub-processes of the management consultancy process:
1. Identifying the problem (opportunity)
2. Diagnosing of the problem
3. Developing one or more alternative solutions
4. Making a decision
5. Implementing the decision
→ Management substitute (responsible or all processes) vs. bogus consultancy (no responsibility)
Internal management consultants = permanent employees of an organization and that will typically only
consult for this single ‘client’
→ Lower fees, better client understanding, subject to hierarchy
External management consultants = owners or permanent employees of an independent consultancy firm
with temporary consultancy engagements at varying client organizations.
→ More impartial, broader knowledge, strong public reputation
2
,Chapter 2: Origin and Development of Management Consultancy
2 Characteristics of clients of management consultants:
● High-value decisions
● Wealth and power
The emergence of management consultancy fields:
3 Types of changes that shaped the development of consultancy fields:
1. Technological change
2. Regulatory change
3. Institutional change
Second industrial revolution (1870):
● Production of steel became cheaper
● More infrastructure (bridges, railroad)
● Urbanization
● Huge growth of firms
● High capital requirements
First field of management consultancy: Operations Consultancy
● Industrial revolution gave rise to separation of ownership and management which to the professional
manager
● Challenged by new technologies and large scale operations, these managers sought to increase
efficiency (ROI)
● Frederick W. Taylor developed scientific management: decompositions into simple tasks and optimize
each task
● Prominent firms: Arthur D. Little, Bedaux Consultancy
3
, Wall street crash and regulatory change:
● Wall Street crash 1929: overproduction of agricultural products, excessive speculation, and consumer
debt
● 1933: Glass-Steagall Banking Act forced independent advice from banking activities
● 1933: Securities Act: due diligence by independent consultants before financing
● 1936: legislation forbade accountants and lawyers to advise while performing financial audits
Second field of management consultancy: Organization and Strategy Consultancy
● 1940-50s: as companies grew larger, they wanted to adopt the M-form
● Organization consultancy focused on implementing this form at clients
● By 1940 there were 400 firms, with numbers growing with 15% per year
● Prominent firms: Booz Allen Hamilton, McKinsey & Company
● 1960s: diversified organizations struggled with coordination
● Demand for portfolio management, or corporate strategy advice
○ Where should we compete and how do we coordinate?
● Prominent firms: BCG, Roland Berger, Bain & Company
Third field of management consultancy: IT Consultancy
● 1950s: mainframe computing became popular
● IBM is the first to mass-produce mainframes
● IBM and a few others were under anti-monopoly legislation until 1982
● Accounting firms entered IT consultancy
● Prominent firms: Arthur Anderson, CapGemini
4 Factors the 3 fields of management consultancy differ in:
4
