Management in Action Social,

Economic & Ethical Issues

The Genesis
Roots are in Management Consultancy
Emergence from two concept based issues:
Total Quality Management & Business Ethics and
Corporate Governance
Theoretical frameworks were drawn from
Strategy, Finance & HR

Management Consultancy
"The services provided by an independent and
qualified person or persons in identifying and
investigating problems concerned with policy,
organization,
procedures
and
methods,
recommending appropriate action and assistance in
implementation".

Management Consultants
Known as Evolutionary rather than

Revolutionary.
Application must be Collaborative and
Authoritarian.

Doctors of Management.

Management Practices &

Outsourcing
What is Outsourcing?
What is being Outsourced?
Core Expertise need to be
retained, nurtured and stretched.

Why to hire Management

Consultants
Client require the skills of the Management
Consultants for two purposes:
Identification of the Problem.
Problem Identification(s), Achieving the
objectives and effective performance.

Why to hire Management

Consultants
Need for fresh ideas from Entrepreneurial Perspective.
Need for improved performance from the perspective of
Operations, Distribution and Logistics, functional areas of
Marketing, Finance, HR and IT.
Need for Efficiency and Effectiveness.
Need to evaluate performance.
Need to train employees.
Need for total turnaround.

Clients Expectation(S)
Independent Viewpoint
Special Qualifications
Realistic Gains not just moving the
wheels.

Attributes of Successful
Consultants

Powerful Negotiator
Effective Communicator
Reservoir of Self Control
Understanding of Individual Psychology
Understanding of Group Psychology
Understanding of Organizational Psychology
Complete mastery of the given area.

Barriers common to Consultants

1.
2.
3.
4.
5.
6.
7.
8.
9.

Know it all attitude

Inability to understand technical language
Inadequate background or knowledge
Poor organization of ideas
Differences in perception
Prejudice or bias
Personality conflicts
Tendency not to listen
Resistance to change

Barriers common to Consultants

10. Lack of credibility
11. Inability to understand Non-Verbal Communication
12. Hostile attitude
13. Lack of feedback
14. Differences in status or position
15. Information Overload
16. Too many Gatekeepers
17. Overly Competitive Attitude

As long as we have hope, we

have direction, the energy to
move and the map to move by,
we have a hundred alternatives,
a thousand paths, and an
infinity of dreams."

Theres no
business

business

like

consulting

They [Management Consultants] are people who

borrow your watch to tell you what time it is and then
walk off with it.
-R. Townsend, Up the Organization

WHY CLIENTS HIRE CONSULTANTS?

To learn
To save money
To avoid losses
To solve problems
To improve safety
To improve image
To improve efficiency
To hire new employees
To improve performance
To increase sales and profits

To help through busy periods

To introduce, facilitate and sustain change
To open up new markets and opportunities
To comply with laws, standards and regulations
To put new systems, methods and practices into use
To confirm their ideas, concepts, plans and strategies
To facilitate transitions, mergers, takeovers and downsizing

The Advantages of Using Consultants

Getting a second opinion
More flexibility in hiring
Fresh perspective and views
Expertise that is lacking in the organization
Opportunity to learn and train employees
Work is performed faster and is of better quality

The Disadvantages of Using Consultants

It is expensive
Desired results are not guaranteed
It may create bad vibes amongst employees
Projects and issues may blow up out of all proportions

How do Consultants charge for their services?

Per Hour or Per Day basis
Retainer basis
Fixed-price assignments
Performance-based fee (Contingency Fee)

Contingency fees
A client complained that he couldnt afford a consultants hourly fee.
Instead of doing the job on a time and material basis, Im willing to do
it for a contingency fee, responded the consultant.
What is contingency fee? asked the client.
Its very simple. If I dont deliver what I promised, Ill be left with no
money at all, explained the consultant
What if you do deliver what you promised? persisted the client.
Then youll be left with no money at all, said the consultant.

How consultants market their services?

Membership of community organizations and professional
institutions
Publishing books and articles
Networking with other consultants
Speaking at seminars, conferences and other gatherings
attended by both clients and consultants
Word of mouth advertising recommendations from satisfied
clients

Paradigm Shift in Consulting Accountability

ActivityBased Consulting
No business need for the
consulting intervention
No assessment of performance
issues
No specific, measurable
objectives for implementation
and business impact
No effort to prepare
stakeholders/participants to
achieve results
No effort to prepare the work
environment to support
implementation

Result-Based Consulting
Intervention linked to specific
business needs
Assessment of performance
effectiveness
Specific objectives for
implementation and business
impact
Results/expectations
communicated to
stakeholders/participants
Environment prepared to
support implementation

ActivityBased Consulting

Result-Based Consulting

No efforts to build
partnerships with key
managers
No measurement of results
or cost benefit analysis
Planning and reporting on
consulting intervention is
focused on input

Partnerships established
with key managers and
clients
Measurement of results
and cost-benefit analysis
Planning and reporting on
consulting interventions
are focused on output

Methods of Data Collection

Follow-up surveys measure satisfaction from stakeholders.
Follow-up questionnaires measure reaction and uncover specific
application issues with consulting interventions.
On-the-Job observation captures actual application and use.
Tests and assessment are used to measure the extent of learning
(knowledge gained or skills enhanced).

 Interviews measure reaction and determine the extent to which the

consulting intervention has been implemented.
Focus groups determine the degree of application of the consulting
solution in job situations.
Action plans show progress with implementation of the job and the
impact obtained.
Performance contracts detail specific outcomes expected or obtained
from the consulting intervention.
Business Performance monitoring shows improvement in various
performance records and operational data.

Methods for Isolating the Effects of

Consulting
A Pilot group with consulting is compared to a control group without
consulting to isolate consulting intervention impact.
Trend lines are used to project the values of specific output variables,
and projection are compared to the actual data after a consulting
intervention.
A forecasting is used to isolate the effects of a consulting intervention
when mathematical relationships between input and output variables
are known.
Participants/stakeholders estimate the amount of improvement
related to a consulting intervention.

 Supervisors and manages estimate the impact of a consulting

intervention on the output measures.
External studies provide input on the impact of a consulting
intervention.
Independent experts provide estimates of the impact of a consulting
intervention on the performance variable.
When feasible, other influencing factors are identified and the impact
is estimated or calculated, leaving the remaining unexplained
improvement attributable to the consulting intervention.
Customers provide input on the extent to which the consulting
intervention has influenced their decision to use a product or service.

The Score Card Perspective :

Six Balanced Measures
1.
2.
3.

Reaction to and satisfaction with the consulting

intervention from a variety of different stakeholders within
different time frames.
The extent of learning that has taken place as those
involved in the consulting intervention learn new skills,
processes, procedures, and tasks.
The success of the actual application and implementation
of the consulting intervention as the process is utilized in
the work environment.

4. The actual business impact changes in the work

unit where the consulting project has been
initiated. These values include hard data as well
as soft data.
5. The actual return on investment reported as a ratio
or in a percentage format. The measure shows
the monetary return on the cost of the project.
6. Intangible measures, which are usually soft data
items that are not converted to monetary values
for use in the ROI formula.

Methods for Converting Data to Money

Output data are converted to profit contribution or cost savings and
reported as a standard value.
The cost of a quality measure, such as a reject, is calculated and
reported as a standard value.
Employee time saved is converted to wages and benefits.
Historical costs of preventing a measure, such as customer
complaint, are used when they are available.

 Internal and External experts estimate a value of a measure.

External database contain an approximate value or cost of a data
item.
Participants estimate the cost or value of the data item.
Supervisors or managers provide estimates of costs or value when
they are both willing and capable of assigning values.
The consulting of staff estimates a value of a data item.
The measure is linked to other measures for which the costs are
easily developed.

Recommended Consulting Costs

The Cost of initial analysis and assessment, possibly
prorated over the expected life of the intervention.
The cost of developing solutions.
The cost of acquiring solutions.
The cost of application and implementation of the
intervention.
The cost of maintenance and monitoring
The cost of evaluation and reporting
The costs of administration and overhead for the
consulting intervention, allocated in some convenient way

Consulting Benefits
BCR = _______________
Consulting Costs
Sometimes the ratio is stated as a cost-benefit ratio,
although the formula is the same as BCR. The
return on investment uses the net benefits divided
by consulting costs. The net benefits are the
consulting benefits minus the costs. In formula
form, the ROI becomes.

ROI%=

Net Consulting benefits

_________________
Consulting Costs

X 100

This is the same basic formula used in evaluating

other investments where the ROI is traditionally
reported as earnings divided by investment.

The BCR and the ROI present the same general

information, but from slightly different perspectives.
An example will illustrate the use of these formulas:
a consulting intervention produces benefits of Rs.
581,000 at a cost of Rs. 229,000. Therefore, the
benefit-cost ratio is:
Rs. 581,000
BCR =
______
=
2.54 (2.5:1)
Rs. 229,000

As this calculation shows, for every Rs.1

invested, Rs.2.50 in benefits are returned.
In this example, net benefits are
Rs.581,000 - Rs.229,000 = Rs. 352,000.
Thus, The ROI is:
Rs.352,000
ROI% = _______
X100 = 154%
Rs.229,000