Analysis of McKinsey Consulting Company - Case Study Example

The business world has been evolving at a very rapid pace during the last 80 years. The global economy became interconnected with the rise of internationalization. As the complexity of business issues became a normal phenomena there was need for companies to provide consulting services to multinational firm around the world. Many consulting companies began to appear in the marketplace, one of them was McKinsey Consulting. This firm was founded in 1926 by James “Mac” McKinsey was one of the first major consulting firm that provided businesses with the service and business application the clients desired . The company utilized an organic growth model to become a multinational corporation in the early 1960’s. The firm utilized a centralized decision making system in which the local offices were controlled the corporate headquarters and its profits of local offices. Centralized decision making systems provide the benefit of the company having full control over the affairs of the company particularly when dealing with international subsidiaries (Kotler, 2002). As the company continue to move forward it became apparent that the company needed changes because it growth began to stall as new competitors entered the industry and the firm began to lose a portion of its market share to the new players. Issues McKinsey is a company that has a large staff of employees. These employees were hired as general consultants. The industry has changed and there is need for more specialization. The company has centralized decision making system that is hurting the company meet its objectives. There are professional development initiatives in place that are helping improve the knowledge level. The company has not capitalized on the new knowledge and the growth of the company is stalling as result. There are new competitors in the industry that are threat to the well being of the company. The firm is in need of a new approach to turn the organization around. “While most are dreaming of success, winners wake up and work hard to achieve it.” (Boardofwisdom, 2009). Problem McKinsey company is facing many challenges. It has tried to make organizational changes in the past, but nothing has been really achieved. The company’s growth has stalled and the customers are not satisfied with the level of service they are receiving. A problem statement for the situation occurring at McKinsey is: McKinsey need to find a way to change its organization in order to improve the level of performance of its employees in order to increase its revenues while at the same time the level of satisfaction of its clientele. Alternative Solutions A1 A potential solution to the firm’s problems is to make complete 360 degree philosophical turn around in regards to corporate structure. The firm would have to eliminate its centralized decision making system and give its offices worldwide full autonomy over the decision making and profit generating activities. A decentralized corporate structure would be beneficial because the company consultants would be able to serve the customer better since they would not have the ability to make their own decision which accelerates the implementation of project they are working on. Five advantages of having an organization with a decentralized decision making system are: A decentralized organization when facing scrutiny becomes more open to other possibilities In an open system the need for centralized intelligence does not exists; the intelligence is spread throughout the system A decentralized system is more adaptive which enable the company to mutate to the market changes much faster and easier than in centralized corporate structure When industries or companies become decentralized profits tend to increase A company with a decentralized decision making system achieves overhead savings associated with administrative costs (Shawn, 2008). A2 A second alternative for the company is to offer financial reward incentive to its employees in order to motivate the employees to increase their level of knowledge. One of the advantages of financial rewards is that it increases the speed of work and productivity, but the quality of the work may be hinder as a consequence (Tutor2u, 2009). The company already has in place a virtual learning center system. The system has to be revaluated by an external party in order to eliminate bias. Once the external party evaluates the capabilities and makes the necessary improvement to make the learning system user friendly then the company would rollout its incentive packages in order to motivate the staff to become more competent in different areas of expertise. This solution would help change the corporate culture of having generalists; many of the staff members would achieve specialist type knowledge in different business areas. A3 A third option for McKinsey Consulting Corporation is for the company to hire a brand new executive team. The company over the years have made many changes at the executive branch, but it has never done a radical switch of firing the entire executive staff and replacing them with new personal. The employees would not in reality be fired; they would simply become regular consultants with the same salary and benefits. The new executive team would be composed of professionals from different industries. Another important element to considering in the hiring of the new team is implementing diversity in the selection process. Diversity in the workplace refers to the hiring of employees from different cultural and ethnic backgrounds (Schermerhorn, Hunt, Osborn, 2003). Optimal Solution There are three alternative options to consider in order to turn this organization around. The third option replacing the executive staff may sound like an idea that could bring change, but this solution is too radical and may hurt the corporate culture. Corporate culture can be defined as shared beliefs system, customs, actions, and traditions of an organization (Thorsen, 2009). The option does not guaranteed business success since there is no empirical evidence to support the assumption that the new leaders can implement the changes necessary to turnaround the company. Alternative three has been discarded as the optimal solution. The second solution is an alternative that provides a proven human resource technique that motivates employees. People react well to financial incentives. The alternative would increase the participation of the staff in educational programs which would increase the overall level of knowledge of the staff. The human capital intangible asset of the company would rise in value. Despite the benefits of the alternative the cost associated with the bonus would lower the profitability of the company. Also the alternative does not provide a good implementation plan as far as transferring the new knowledge into the work output of the associated in order to benefit the consumer base. The first solution provides an alternative that can achieve radical organizational change. The company is in dying need of need direction. A decentralized decision benefit system has many advantages as explained in the bullet list earlier in the paper. One of the greatest benefits is that it speeds up the decision making process. This is important and valuable because the consumer would receive their solution in faster manner, the lower implementation time lowers the labor costs of the company, thus the profitability of the company increase while at the same time improving the consumer service at McKinsey. Alternative A is the optimal solution. Recommendations In today’s business world companies can not afford to have inflexible business structures. We are living in knowledge economy. Technological advances such as the internet is allowing the world’s knowledge to accumulate is single database of information. Consulting firm have a great outlook for into the future because there are many developing nation with the need for these types of services. In order for McKinsey to compete as we forward into the 21st they must implement organization change to convert their enterprise into a decentralized organization. References Anthony, S. (2008). Six Principles of Decentralized Business and Organization. Retrieved May 18, 2009 from http://www.lofitribe.com/six-principles-of-decentralized-organization/ Boardofwisdom.com (2009). The Best Competition Quotes. Retrieved May 19, 2009 from http://www.boardofwisdom.com/Default.asp?topic=1005&listname=Competition Kotler, P. (2002). Marketing Management (11th ed.). New Yersey: Prentice Hall. Schermerhorn, J., Hunt, J., Hunt, R. (2003). Organizational Behavior (8th ed.). New York: John Wiley & Sons. Thorsen, D. (2009). Definition of Corporate Culture. Retrieved May 19, 2009 from http://ezinearticles.com/?Definition-of-Corporate-Culture&id=99997 Tutor2u.com (2009). Topic: Motivating Employees: Financial Rewards. Retrieved May 18, 2009 from http://tutor2u.net/business/gcse/people_motivation_financial_rewards.htm Read More