Should Management Consultancy Be Forced to Become a Stronger Profession - Literature review Example

Should Management Consultancy Be Forced To Become A Stronger Profession? By Should Management Consultancy Be Forced To Become A Stronger Profession? Introduction Management consultancy in this 21st century has become an integral part of the economic environment around the world. The profession has grown over the years and by 2009, the industry had reached $330bn from the $3n of 1980 (OMahoney & Markham, 2013). The management consultancy has over the years attracted a strong debate as to what constitutes professional consultancy. Despite the strong criticism of management consultancy, it’s with no doubt that it has contributed immensely to the shaping the world economies and created value addition both in the private and public sectors. Although the role of management consultancy is poorly understood, the consulting industry has grown over the years with the ratio of the management consultants to managers standing at 1:13 by 2005. The paper analyses the merits and challenges of management consultancy and the factors that can be considered to strengthen management consultancy as well as the constraints that may hinder the development of a stronger management consultancy currently and in the future. Management consultancy should be forced to become a stronger profession in the future. Consultancy as a Type of Profession Management consultancy can be defined as a team of individuals that attempt to find out an organisation’s problem and thus provide a solution to the problem by analysing the situation properly. The first management consultancy was established in 1886 by professor of MIT, Arthur D. Little by converting his technical consultancy business into a management consultant firm. Thus, since then the industry has grown over the years and currently there are over 50 global renowned management consultancy companies operating in human resource management, infrastructural planning Information technology, financial services, strategic management, marketing management, off shore services and among other areas. Some of the renowned world consultancy firms, which controls a significant portion of the revenues in the industry include the following McKinsey, Boston Consulting Group (BCG), the Bain, etc. Role of Management Consultancy However, despite the many merits associated with management consultancy, the impression created by the consultants as being the successful agents of change has greatly drawn a lot of attention from the business press over the last few years (Zenger, 1994). The transaction cost theory tries to explain and put into perspective the existence of the management consultancy. The theory was earlier developed by Ronald H. Coase in 1930s and deals with real cost of resources allocation in the world of the uncertainty. The theory further explains why some products and services are carried out internally and while others are bought externally. According to the transaction cost theory, firms usually incur transactions costs that can either be external or internal. Organisations outsource the services of the external consultants, especially when the cost of carrying out the transaction internally is more than the cost of carrying out the transaction by internal consultants. The transaction theory is bounded by the two behavioural assumptions of opportunism and rationality. According to the Wallis and North (1986), the transaction costs are a significant part of an economy. He goes on to say that transaction costs, for instance, increased from 8-45% between the 1870 and the 1970 in the U.S. Thus, this highlights the need to seek management consultancy and the reason the profession continuous to gain international recognition. Stinchcombe (2002) asserts that many corporations fail to realign their management processes appropriately to internalise the outsourced functions despite the multitude of the opportunities that are present with the information technology revolution. As a business service, the management consultancy remains to be a highly cyclical link for the overall economic development around the globe. For instance, management consultancy is now popular among governments and the not for profit organisations because the need for professional and specialised advice in the allocation of resources has continued to grow tremendously. For instance, the British government spent approximately £20 billion to contract for the management consultant services from 1997 to 2006. This increasing expenditure on the management consultancy is a good indication of the growing need for the management consultancy services both in the service and private sectors. The management consultancy is described as the independent and professional advisory service that aids the organisations in achieving their objectives and purposes through the resolving of the management and business issues, identification of the fresh opportunities, enhancing of learning and the implementation of the changes (Kubr, 2002, p. 10). With the increased roles of the organisational goals and functions, the management consultants streamline organisations by offering competent services that are not available in the organisation, which are beyond the know-how of management. Additionally, the management consultancy offers independent and objective decisions to the management to facilitate organisational decision-making (Canback, 1999). Market surveys indicate that 89 percent of clients perceive management consultants to possess high levels of expertise, experience and knowledge and 92 percent of the surveyed clients indicate they value and are satisfied with the services of management consultants (Muzio et al., 2011). The management consultancy helps in handling the critical long-term issues of the clients and has evolved to become the rational representations of the organisations. Additionally, the management consultancy contributes unanimously to the organisations by dealing with both the content and processes issues with the use of the know-how, methodology, and the wide range of problem-solving proficiencies. The engagement of the external management consultants is sometimes imperative on the account of the legal requirements. The management consultants should be continually involved in the organisational decision making whether or not the regulatory issues are involved (Huczynski, 2012). In addition, the management consultancy ensures that the organisations can obtain greater market insight and market information. However, the extent of the utilisation and the type of the management consultancy services greatly depends on several organizational capabilities and wherewithal and their ability to deliver the required services within the stipulated time (Hu et al., 2014). Therefore, based on the roles above of the management consultancy, it’s evident that it should be forced to become a strong profession in order to steer economic developments (Hu et al., 2014). Challenges Facing Management Consultancy The management consultancy industry has experienced several challenges in the recent past. The Economist (2002) argues that the strategy consulting industry is wasting away as top graduates from the best business schools are taking over top consulting positions in the corporate world because strategy has a become a necessary tool for management lieu of seeking employment with management consultancy firms. The Fortune Magazine (2003) also states that the management consultancy industry is plummeting because clients have minimised their engagement levels by considering other alternative options such as shortening the life cycles of their projects or are demanding tangible, measurable returns on their investments. Von Nordenflycht (2010) argues that the impacts globalisation in the 21st century is also posing significant challenges to the profession of management consultancy. He goes ahead to state that, the time when management consultancy firms organised themselves as neo-PSFs based on local or contextual experience and knowledge is over and firms are now revolutionising themselves into global professional networks (GPNs) because clients have become global. However, Brock (2012) argues that by embracing GPNs, management consultant does not overcome the challenges of globalisation. Thus, using the resource-based view perspective of a firm and institutional theory, Brock argues that, consultants in PSFs are likely to experience organisational and managerial challenges. For instance, the management consultants are likely to experience challenges of governance since they are required to operate in different mature and emerging economies with different legal frameworks and institutional norms. The management consultancy profession also has received strong criticism from different stakeholders in the corporate world. Clark & Fincham, (2002) argues that management consultants often engage in power and politics of their clients’ organisations by colluding with senior management to legitimise their decisions, influence organisational outsourcing choices and to support unpopular actions. A good example where consultants have been portrayed as agents of politics is in the United Kingdom where they have bypassed the civil service to foster new reforms in the management (OMahoney & Markham, 2013). For this reason, this jeopardises the objectivity of the management consultants’ advice concerning the different organisational decisions, thus creating no value for the clients. Clark & Fincham, (2002) also argues that management consultants have often compromised the independence and objectivity of their advice by getting too personal or close with their clients. Moreover, there is a general perception that, for instance, external management consultants can learn and understand the organisation’s politics and leave without leaving anything substantial behind to profit the organisation. According to Alvesson & Johansson (2002), the work done by management consultants is ambiguous and difficult to measure. He goes ahead to argue that it’s difficult to determine the organisational performance that is attributable to the management consultant’s work and that of management. Thus because it is difficult to quantify the work of consultant, management consulting has over the years been viewed as a highly complex political endeavour that is dependent on legitimacy and trust (Alvesson & Johansson, 2002). For instance, the failure of management consultants at Enron, and AT&T is a good example many critics of management consultancy have highlighted in the recent past to portray the profession as a dubious and a power and political tool for management to conceal their weaknesses and illegitimate actions and decisions (Davenport, 1995). Therefore, because management consulting has failed to achieve its intended performance projections, there is need to re-evaluate the profession by taking the following measures. Stronger Management Consultancy Profession To create a stronger management consultancy industry, there is need to institute a couple of measures to regulate the conduct of members of the profession. According to (OMahoney & Markham, 2013), the consultancy profession unlike other industries needs to have bodies that define its practice, represent its interests and provides a centralised point for coordination and communication. This is because representative bodies in the management consultant profession are not institutionalised like other professional bodies such as the accounting profession due to the following reasons. First, it is because of the power possessed by the top consultancies such as McKinsey, Boston Consulting Group (BCG) and the Bain, etc. (OMahoney & Markham, 2013). For instance, it is estimated that the top ten cream companies control about 40% of the industry’s revenue. Thus, these scarcity and power, possessed by these firms’ places them in a position where they do need services of third party institutions to provide them with benchmarks, policy advice or research (OMahoney & Markham, 2013). The second reason is that unlike other professional bodies, the consulting industry does not mandate or require compulsory professional membership from their members implying that to enter into the consultancy industry members do not have to be accredited by external institutions to be allowed to practice (OMahoney & Markham, 2013). For this reason, players and members in the consulting industry operate with no specified rules, policies, procedures and other regulations (OMahoney & Markham, 2013). Therefore, to develop a stronger consultancy profession an industry, there is the need for players in the industry to institute the following bodies and measures: Regulate the power possessed by the top industry players Establish a professional body with at regional levels or countries establish their bodies to regulate players. Elevation and empowerment the International Council of Management Consulting Institute (ICMCI), representative associations such as MCA and AMCF and the procurement associations that help represent buyers of management consultancy services. Aspects of a Stronger Management Consultancy Profession The elevation and empowerment of the International Council of Management Consulting Institute (ICMCI) as a body of the management consultancy profession is the most critical factor for achieving homogeneity and ethical standards in the management consultancy profession both regionally and globally in the following ways. • Establish standards for management consultancy profession • Elevate the management consultant standards worldwide • Elevate the respect and acceptance of management consultancy profession globally • Improve the certification process of management consultancy profession • Elevate the regional and global profile of management consultancy • Establish the ethical code of conduct to regulate the industry and members. Issues There are various factor that are likely to impede the elevation, empowerment development of a strong international body of management consultants. Some of the cited reasons for not accepting ICMCI rules, procedures and code of conduct among the many players in the industry include the following. Saddler (2001) argues that the minimum entry requirements for individual joining the consultancy profession globally is low compared to other professions such as accounting and law. Therefore, this results in in an influx number of individuals joining the industry. Conversely, Ciumara (2009, p. 204) suggests that the establishment of standards in the consulting profession can reduce the quality and variety of services offered by management consultants to clients. He goes on to state that overly standardisation of a service industry such the management consultancy industry with standards, which is rapidly growing can limit the optional lines of development and thus discourage innovation. In addition, it has been argued that standards limit the prompt nature of adaptation to customers’ preferences since the nature of time consuming of standardisation is long and thus costly (Ciumara, 2009., p. 204). Moreover, with the immense powers and scarcity possessed by the top consulting firms may hamper institutionalisation of ICMCI as the sole body mandated to establish standards regulate the industry in preference to their standards. For instance, it is estimated that the top ten cream companies control about 40% of the industry’s revenue. Thus, these scarcity and power, possessed by these firms’ places them in a position where they do need services of third party institutions to provide them with benchmarks, policy advice or research (OMahoney & Markham, 2013). Conclusion Ultimately, it is evident that management consultancy is a critical profession in any economy both in the public and private sector because of the roles that the profession plays in decision-making. Thus, even though there are challenges facing the industry globalisation, power and politics being some of the significant factors affecting the industry, establishment of institutions to lay a framework for the establishment of standards to regulate the players and members joining the profession, the challenges and criticism facing the profession can be reduced or avoided. Indeed, management consultancy should be forced to become a stronger profession in future through these measures to protect and safeguard the profession practices because it is indispensable globally and regionally. Bibliography Alvesson, M., & Johansson, A. W., 2002. Professionalism and politics in management consultancy work. Critical consulting: New perspectives on the management advice industry, 228-246. Brock, D. M., 2012. Building global capabilities: a study of globalizing professional service firms. The Service Industries Journal, 32(10), 1593e1607. Canback, S., 1999. The logic of management consulting, part 2. Journal of Management Consulting, 10(3), 3-12. Ciumara, T., 2009. Standardization In The Field Of Management Consulting Services. Studii Financiare (Financial Studies), 13(4), 200-207. Clark, T., & Fincham, R., 2002. Critical consulting: New perspectives on the management advice industry. Wiley-Blackwell. Fortune Magazine, 2003, May 26. The incredible shrinking consultant: to survive, the big three strategy firms, e McKinsey, Bain and BCG e need to make changes, 49e5 Hu, Q., Found, P., Williams, S., & Mason, R., 2014. The Role of Consultants in Organizational Learning. Journal of Management, 15(4), 29. Huczynski, A., 2012. Management gurus. Routledge. Kubr, M., (Ed.). 2002. Management consulting: A guide to the profession. International Labour Organization. Muzio, D., Hodgson, D., Faulconbridge, J., Beaverstock, J., & Hall, S., 2011. Towards corporate professionalization: The case of project management, management consultancy and executive search. Current Sociology, 59(4), 443-464. OMahoney, J., & Markham, C., 2013. Management consultancy. Oxford University Press. Sadler, P. (Ed.)., 2001. Management Consultancy: a handbook for best practice. Kogan Page Publishers. Stinchcombe, A. L., 2002. Social Structure and Organizations. In Handbook of Organizations, edited by J. G. March. Chicago: Rand McNally. The Economist, 2002, July 8. Management consulting: consultant, heal thyself, 54e62. von Nordenflycht, A., 2010. What is a professional service firm? Toward a theory and taxonomy of knowledge-intensive firms. Academy of Management Review, 35, 155e174. Wallis, J. J., and North, D. C., 1986. Measuring the Transaction Sector in the American Economy, 1870-1970. In Long-Term Factors in American Economic Growth. Studies in Income and Wealth Series, edited by S. L. Engerman and R. E. Gallman. Chicago: University of Chicago Press. Zenger, T. R., 1994. Explaining Organizational Diseconomies of Scale in R&D: Agency Problems and the Allocation of Engineering Talent, Ideas, and Effort by Firm Size. Read More