Management Consulting Firms - Research Paper Example

? Individual Client Report U51091 Consultancy Contents Executive Summary 2 Critical Review 2 Competitor Analysis 4 Strategic Benefits and Constraints 7 Conclusion 9 References 11 Executive Summary Management consulting firms came under much scrutiny after the UK elections of 2010, legislator branch and media acted as watch dogs over services procured through management consultants and spent funds. This decreased the once flourishing business and need for more value for money with objectivity was demanded by public entities. In this scenario management consultant firms need to redevelop their models focus on transparency and objectivity of projects aimed towards not only facilitating the public clients but also geared towards results that can be felt by government as well as the general public. The need for consultants with specialized skills, expertise and experience would never seize although a more value based approach should be provided with focus on understanding needs of the client, context they work in and measurable deliverables. Critical Review During the past two decades the role of management consultants has increased dramatically in the public domain. These management consultants, once only famous in the competitive private sector became an important supporting element in the public sector but not without attention paid to the outcomes and costly services offered by them (O'Mahoney, 2006). According to the Central Government’s use of Consultants report (2007) presented by the committee of public accounts – house of commons, the expenditure made by the British government on services procured through management consultancies from 1997 to 2006 is totalled at about GBP 20 Billion. The report highlighted many flaws in procuring consultancy practices by public organizations and their outcomes, although it also emphasizes that consultants if used appropriately can result in enormous benefits to a public initiative. After the elections of 2010 in UK, the government has pledged to decrease consultancy spending in major projects. According to Management Consultancies Association (MCA) these measures resulted in a decrease of 33 percent in consultancy revenues. This drop led to consultancies relying heavily on private sector which is itself heavily burdened due to tough economic times. The shrunk business forced many small consultancies to shut down their operations while big consultancies announced job cuts due to tough economic conditions and unreliable market place (MCA, 2013). Both clients whether public or private in nature criticize management consultants for using big words though using the same old management functions. They are also criticized for creating plans that are impossible to execute by the client or not considering long term impacts of the advice given to the client. Some smaller consultancies are also accused of not providing promised deliverables, charge high fees or stating a low fee initially increased later when the project’s timeline are extended. The blame for this extension is often attributed to the client due to non-availability of resources or prerequisites in form of information not fulfilled by the client. Another area of concern is customer services where consultants try to impose pre-determined frameworks on client’s businesses before understanding the context and nature of client’s business. Furthermore once consultancy on a particular project is over, sustainability of results are not guaranteed and customer support is either poor or charged upon separately (Argyris, 2000). Competitor Analysis After the evolution management consultancies saw in 1980s and 1990s the growth started slowing down during 2001 to 2003. In 1980 there were only five consulting firms in the world and by 1990 thirty similar sized firms were established, the growth witnessed by this industry paved way for new consultancies and countless new consultancies were established across the globe (Canback, 1998). Most consultancies work on the eight step model proposed by Harvard business review in 1982 although frameworks, services and custom models differ between consultancies the basic principles given by HBR remain the same. The practice starts with a request of information made by the client, solutions are provided with in-depth and accurate information followed by a plan that proposes solution to the given problem, changes are implemented after building consensus while facilitating client learning and finally organizational effectiveness occurs (Turner, 1982). Most consultancies working in UK incorporate a huge range of services, firms that begun as financial consultancies / audit firms ended up including information technology area in their portfolio along with other management areas such us organization development, coaching and counselling etc. Similarly information technology consultancies included management areas in their consultancy practices. The eight basic categories of consultancy firms are accountancy firms, BPO companies, economic consulting firms, executive search firms, law firms, political consulting firms, risk management firms and security consulting firms. It is a usual practice that after success in core area of consultancy, firms diversify and start providing services in other consultancy areas (Turner, 1982). The public sector became the focus of consultancy firms when governments burdened with criticism of media and general public committed itself to improving their processes and increasing efficiency in delivering public services. The success of private sector attracted the public offices towards management consultants although the very nature of services provided by these consultants are completely opposite from the bureaucratic practices. According to Tina Hallet (2013) Central Government lead partner at PWC, civil services are not different from private sector as both can fail to deliver, only that civil sector undergoes much scrutiny. In case if a commercial organization fails to deliver the revenues the loss is made by organizations itself while in case of public sector the loss is attributed to tax payer’s money which creates much hue and cry. The public sector is always under the microscope of media and legislators hence consultants supporting public offices must focus on their delivery so failures can be avoided (lord Heseltine, 2012). Kevin P. Coyne (2012), the former director of McKinsey worldwide stressed upon the fact that governments come to consultants with complex problems, ones governments cannot solve themselves. The consultants on their part need to understand how the government works and the domain in which it operates. During the past decade management consultancies have delivered excellent results in public domains, projects like NHS, London Olympics, procurement projects in defence ministry, Information technology and human capital development were all made possible because of the public private partnership with clear objectives and responsibilities (Capgemini consulting, 2010). The scrutiny faced by management consultants becomes obvious when the value for money and benefiting outcomes are not felt by the government. The revenues have declined although management consultants are consistently awarded with public contracts based on their sound business proposals and ability to help public offices achieve their daunting objectives (Leaman, 2011). The management consulting firms in United Kingdom can be divided in to two broader categories; ones that hail from United Kingdom while others that are headquartered outside of UK offering services to the public domain. These consultancies provide support to the public departments in the areas of defence, education and skill development, healthcare, justice, local government, taxation, welfare and pensions etc. In these particular areas the tailored services related to corporate finance, information management and operations management, strategic planning, risk, technology and innovations are provided. However, after the economic downturn areas related to finance and information technology along with human capital development have seen steady revenues in management consultancy (MCA, 2013). The most high spending government departments are Office of government commerce (OGC) with GBP 204m, department of transport with GBP 144m, department of children, schools and families with GBP 70m and above all NHS spending GBP 300m for consultancy services. Although most of these services have borne good results for these departments but the value for money or outcome has always been questioned by the government authorities. The major chunk of business is won by the big four consultancies, PricewaterhouseCoopers (PWC), Deloitte, McKinsey & Co and KPMG while smaller consultancies such as PA Consulting group, Oliver Wyman, KPS, MRL and CapGemini consulting Etc. are left with the remaining 15 – 20 percent (ACCA, 2010). Strategic Benefits and Constraints The public sector utilizes the services of consultants due to three basic reasons; Firstly people, government offices and agencies lack people with specialist skills. This special skill acquired through experience and expertise in a core area is utilized by the public sector. Secondly government offices need efficient processes in place in order to avoid time wasting, hence for acquiring knowledge or infrastructure consultants are given the task to streamline prevailing process and recommend / implement most efficient practice through technology or simpler work processes. Finally, consultants are hired to provide an independent viewpoint over government matters, such us independent surveys and feedback collected impartially from the general public (Barber, 2007). The practice of management consultancy in public sector has its benefits and constraints, known historically as a phenomenon concerned with private sector, the concept of consultancies became popular due to intense international competition, technological advancements and modern management requirements that needed new skills, values and processes. The foremost constraint in providing management consultancy to public sector is the procurement process itself, due to excessive transparency and background checks, reference checks, interviews and investigations the whole process becomes cumbersome. Another primary constraint is the lack of knowledge and skills of public managers along with the prevailing bureaucratic culture and political environment. It is also observed that a significant constraint is faced by the consultants when public department itself does not know what they want and how they want to go about it. There are instances where consultants are too heavily relied upon, with most public officials unaware of the scope and responsibilities of the consultant (Stewart & Walsh, 1992). Unlike private organizations public organizations need more value for money and require an impact that can be witnessed by public and higher authorities, intangible services like training and development programs do not provide immediate results hence the usefulness becomes negligible in the eyes of civil servants. Furthermore due to political reasons even long term projects are plugged off and consultants are relieved of their duties. Besides constraints the obvious benefit is the motivation consultancies gain while working for the general public, also an unaware and rusty group of employees is easily convinced to change their prevailing practices and processes. A consultant by nature tends to improve the prevailing policies and practices, since there is a lot to achieve in the public domain this presents a challenge and an opportunity for the consulting firm. The scope of projects undertaken by public sector are huge resulting in far more monetary returns to the consultants and a good will in the market for management consultancy firm. It is also observed that unlike private organizations who embrace change public organizations are hesitant to it, they resist change and consider management consultants as ineffective change agents who cannot replace traditional bureaucratic systems and approval processes (Stewart & Walsh, 1992). Furthermore it has been observed that performance of public departments are hampered due to lack of decision making powers, lack of skills and increasing public demands. In this scenario, the management consultants must evaluate better the client they are working for and the prevailing culture along with the desired objectives of the client. The results of blurred objectives are often failures that lead to financial losses, hence objectivity of the contract undertaken is very important (Hardaker, 2012). Conclusion The main goal of consultancies is to enhance the performance of the client organization and increase the revenues by adopting new or best practices. The public domain is always criticized for not delivering on the promises made to the citizens and the opposition in the legislative body always criticizes the policies of the ruling party. In these harsh economic times management consultants must emphasize on value addition provided to the client, remodel their approach in order to provide better results. They should also maintain more transparency relation to their cost, project deliverables and transfer of skill. Public entities cannot work in isolation they possess human resources whose skills dissipate rapidly due to exposure of only one or two public departments and also their ability to keep up with rapidly evolving marketplace with increasing public demands is hard to evolve at a similar pace. In such a scenario the need for management consultants with relevant experience and expertise is inevitable. References ACCA. 2010., Management consultants and public sector transformation [Online] Available at: [Accessed 28 February 2013] Argyris, C. 2000., Flawed Advice and the Management Trap. New York: Oxford University Press. Barber, M. 2007., Three paradiagms of Public Sector Global trends effecting public sector [Online] Available at: [Accessed 28 February 2013]. Canback, S. 1998. Transaction Cost Theory and Management Consulting: Why do Management Consultants Exist?, Working Paper 9810002. Henley Management College, Henley-on-Thames. Capgemini Consulting. 2010., What is the future for public sector consulting?, [Online] Available at: [Accessed 28 February 13]. Coyne, K.P. 2012., Consulting Interview. Available at: Hardaker, C. 2012., Interview on What management consultants bring to the public sector [Online] Available at: [Accessed 28 February 2013]. Hallett, T. 2013., Empowering the civil service to deliver [Online] Available at: [Accessed 28 February 2013]. House of Commons Committee of Public Accounts. 2007., Central government's use of consultants Available at: [Accessed 28 February 2013]. Leaman. A., 2011. Despite the government's attacks, management consultancies can be of real value [Online] Available at: [Accessed 28 February 2013]. MCA Consulting. 2013., The MCA Outlook. [Online] Available at: [Accessed 28 February 2013]. O'Mahoney, J. 2006., Management Consultancy. Oxford University Press. Stewart, J. and Walsh, K., 1992. Change in the Management of Public Services. Public Administration, 70, pp. 499–518. The Rt Hon the Lord Heseltine of Thenford. 2012., No Stone Unturned [Online] Available at: [Accessed 28 February 2013]. Turner, A. N. 1982., Consulting Is More Than Giving Advice. Harvard Business Review. Read More