PROFESSIONAL-IZING MANAGEMENT CONSULTANCY
© ICMCI and Dr. Ilse Ennsfellner, CMC
Ennsfellner Consulting e.U., Austria, Europe
Management consulting is a rapidly changing world where continuously new capabilities and disciplines, new services and new delivery models as well as stakeholders are being integrated. In the past decades the impact of the consulting industry has been remarkable in the actual governance of countries as well as in the economy and society. As government spending on consultants has risen remarkably over the last 10 years often in cooperation with financial institutions, consultancy projects have influenced political agendas and spending strategies as well as transformation of businesses. This influence can also be evidenced in the notable spread of management innovation in the economy that has been invented together with consultants across the globe.
However, the ever-changing environment makes selecting an appropriate consulting firm more complicated. The Corporate Governance movement forces top management to fairly encourage the principle of enhanced performance in order to achieve best practice. Clients aim at setting more ambitious and tangible goals for their consultants with a greater emphasis on reduced “time to solution”. Consulting fees are negotiated with regard to the results of the consultancy assignment. On the other hand clients show a more hesitant behavior when hiring consultants in combination with utilisation of internal knowledge bases. Cost cutting programs in companies are affecting engagements and budgets for external consultants.
Tendencies towards “consulting-bashing” are opposing forces for management consulting success. Moreover, the intangible nature of consultancy services causes high search and marketing costs. Consultancy services are highly specialised, customised and knowledge intensive.
Indeed, with consultancy services, clients are purchasing nothing else but the competency and the skills of the consultants as well as their reputation and personal experience. In practice, it is very difficult for both consultant and client to ensure a consistent quality. “Information asymmetry“ in the client – consultant relationship is the reality. Likewise, consultants rely on co-production by their clients. However, the more standardised the service, the easier it is to gain the information requested, and to reduce the asymmetry in information between clients and consultants.
Thus, the main signals to enhance transparency, reduce uncertainty and help clients to assess the performance of consultants are as follows:
- Professional procurement, and
- Consultancy services standards.
Professionalism in management consultancy has led to an increased quality orientation of the screening and selection of an appropriate consultancy. It also results in a greater emphasis on standardisation in management consultancy. The principle of “fairness”, encourages enhanced performance in consultancy projects in order to achieve best practice as well as a “return-on-consulting” requires contributions not only from the consultancy providers, but also from the client organisations, the professional associations and the stakeholders of the consulting industry.
Consultancies are becoming less likely to be transparent about their offers, as this will reveal confidential information on how they address a certain problem or approach, at what costs and budget, which could possibly benefit their competitors. Thus, selecting a consultancy involves high search costs for client organisations. To reduce search costs and increase the performance and efficiency of selecting and managing consultancy service providers, private and public procurement has become important for the consulting industry. As the interactions between consultants and clients are becoming more complex, clients are establishing new contractual arrangements and procurement governance structures. However, clients are less willing to enter into long-term contractual agreements but prefer to have more flexibility, either due to cost reasons and the desire to get fresh ideas.
Particularly large, international consultancies with highly leveraged projects are faced with stronger purchasing departments. Bigger client firms tend to apply more formal aspects and tenders to identify the best consultancy. Procurement processes and functions offer a centralised control over purchasing consultancy services. Smaller client organisations could use these instruments more often, as well as seek more than one proposal to take the final buying decision. This means less reliance on consultancies and to get more standardised consultancy services. The following table shows a listing of factors for consultancy buyers to ensure successful outcomes from consultancy procurement activities.
Critical Success Factors in Management Consultancy Procurement
Transparent procurement process
Performance related specifications
Availability of management information
Adherence to procurement and consultancy standards
Fig. 1: Pre-requisites for successful consultancy procurements
As a result, consultancies find themselves facing more formal processes for winning work, longer sales cycles and higher business development costs, even for comparatively small-scale projects. “Beauty contests” (i.e. sales pitches against competitors) may become a more dominant selection tool for the client when hiring a consultant.
Nowadays, procurement institutions aim at clarifying procurement processes and produce best-practice guidelines for the buying of consultancy services, provide and promote relevant standards, common practices and rules within the consulting and stakeholder community.
Service Standards for Management Consultancy
Management consulting is developing into a profession with its principles, codes of practice and standards. Management consultancy services are essential to the productivity and sustainability of various other economic activities and sectors. Consultancy organisations and stakeholders invest in the development of professional qualification and standards influencing the reputation and competitive position of their professionals.
This results in the mutual recognition of qualification and consultancy services requirements nationally and globally.
Increasingly, standards for services (respective “service standards”) are emerging as a discrete type of standard and can be viewed as another development in the evolution of the standards concepts. Basically, standards for services are voluntary, market-driven and consensus-based, whereby the needs of the industry and stakeholders directly or indirectly affected by such standards prevail. They are typically developed to ensure a consistent minimum standard of quality in the provision of a service, and to clarify the rights and responsibilities of both the provider and the user of the service. The most widespread benefits of applying service standards relate to the ability to demonstrate service quality to clients.
The first standard for management consultancy services was developed by the European management consulting industry and published in 2011. This European standard EN 16114:2011 “Management consultancy services” explains guiding principles and the consultancy process in three phases, covering all the steps in providing consultancy, from initial inputs from the client until final closure. The application of the standard and principles aims at improving the understanding and transparency between clients and management consultancy service providers (MCSPs), the provision of increased quality of consultancy services with a better value to clients as well as the reduction of risks.
The next level of a service standard for management consultancy is the preparation of the ISO 20700 “Management Consultancy - Guidelines” by the ISO Project Committee PC 280, which is currently under development. The draft ISO 20700 is based on the European standard EN 16114:2011. It covers good practice for the client – consultant relationship in order to ensure the effective, efficient and acceptable provision of management consultancy services, setting out a common basis for preparing and managing the consultancy process as well as defining a common terminology and knowledge throughout the consulting industry. The targeted users are the management consultancy service providers (MCSPs), buyers of management consultancy services and stakeholders of the management consultancy industry.
The following table shows the benefits of ISO 20700 to each target group.
ISO 20700 Management Consultancy - Guidelines Aims at Creating Transparency:
For the MCSPs:
For consultancy buyers:
Fig. 2: Benefits of ISO 20700
However, even if the application of this standard for management consultancy services still may not give a guarantee for a certain quality, and thus only partially reduces the information asymmetry problem; ISO 20700 will set benchmarks against which quality and performance can be measured by the consultants and the clients, thus improving transparency, competitiveness and increasing efficiency.
Management consulting is “people management”. The most decisive factor for clients in consultancy engagements is the competence of the consultants. Thus, professionalism in management consultancy means growth toward greater presence, knowhow and skill.
The development of the consulting profession is a process, not a goal in itself. Management consulting has made gradual progress towards professionalism, especially with support from the professional associations, mainly by providing advanced education and high standards of excellence. It will also take the client organisations and the stakeholders collaborating in pursuit of the goal of improving the quality of the client – consultant relationship and achieving higher standards of professionalism as part of the continuous development of the consulting industry towards a “true” profession.
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