all about management consultancy

8/9/2019 All About Management Consultancy

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Management Consultancy

"The services provided by an independent

and qualified person or persons inidentifying and investigating problems

concerned with policy, organization,

procedures and methods, recommending

appropriate action and assistance inimplementation".


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Management Consultants

Known as Evolutionary rather than

Revolutionary. Application must be Collaborative and

Authoritarian.

Doctors of Management.


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Management Practices & Outsourcing

What is Outsourcing? What is being Outsourced?

Core Expertise need to be retained,

nurtured and stretched.


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Why to hire Management Consultants

Client require the skills of the

Management Consultants for twopurposes:

Identification of the Problem.

Problem

Identification(s),

Achieving theobjectives and effective performance.


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Why to hire Management Consultants

Need for fresh ideas from EntrepreneurialPerspective.

Need for improved performance from theperspective of Operations, Distribution andLogistics, 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.


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Clients Expectations

Independent Viewpoint Special Qualifications

Realistic Gains not just moving the

wheels.


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Attributes of Successful Consultants

Powerful Negotiator

Effective

Communicator

Reservoir ofSelfControl

Understanding ofIndividual Psychology

Understanding of Group Psychology

Understanding of Organizational Psychology

Complete mastery of the given area.


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Barriers common to Consultants

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


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Barriers common to Consultants

10. Lack of credibility

11. Inability to understand Non-Verbal

Communication12. Hostile attitude

13. Lack of feedback

14. Differences in status or position

15.

Information Overload16. Too many Gatekeepers

17. Overly Competitive Attitude


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As long as we have hope, we have

direction, the energy to move and the

map to move by, we have a hundredalternatives, a thousand paths, and an

infinity of dreams."


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Organizational Appraisal Organizational

Capability Factors

Financial Capability Factors

Marketing Capability Factors

Operations Capability Factors

Human Capability Factors

Information Management Capability Factors General Management Capability Factors


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Financial Capability Factors

Factors related to sources of funds: Capital structure, Procurementof capital, Financing pattern, Working capital availability,Borrowings, Capital and Credit availability, Reserves and Surplus,and relationship with lenders, banks and financial institutions.

Factors related to usage of funds: Capital investment, fixed assetacquisitions, current assets, loans and advances, dividenddistribution, and relationship with shareholders.

Factors related to Management of funds: Financial, accounting, andbudgeting systems, management control system, state of financialhealth, cash, inflation, credit, return and risk management, costreduction and control, and tax planning and advantages.


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Check Point: Financial Capability

Access to financial resources.

Relationship with financial institutions.

Level of credit worthiness.

Capital budgeting system.

Cost of capital as compared to competitors.

Level of shareholders confidence.

Management control system.

Tax benefits due to various government policies.


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Marketing Capability Factors

Product-related factors: variety, differentiation, mixquality, positioning, packaging and others.

Price-related factors: pricing objectives, policies,

changes, protection, advantages, among others. Place-related factors: distribution, transportation and

logistics, marketing channels, marketing intermediaries,and so on.

Promotion-related factors: promotional tools, salespromotion, advertising, public-relations, and so on.

Integrative and systems factors: marketing mix, marketstanding, company image, marketing organizations,marketing management information systems and so on.


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Check Point: Marketing Capability

Wide variety of products.

Quality of products.

Sharply-focused positioning.

Low prices as compared to similar products in the market. Price protection due to Government policies.

High quality customer services.

Effective distribution system.

Effective sales promotion.

High profile advertising.

Favorable company and product image. Effective marketing management information system


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Operations Capability Factors

Factors related to production system: capacity, location,layout, product or service design, work systems, degreeof automation, extent of vertical integration, and others.

Factors related to the operations and control system:aggregate production planning, material supply,inventory, cost and quality control, maintenance systemand procedures, and so on.

Factors related to R & D system:personnel, facilities,product development, patent rights, level of technologyused, technical collaboration and support, and so on.


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Check Point: Operations Capability

Level of capacity utilization.

Plant location.

Degree of vertical integration.

Sources of supply.

Effective control of operation costs.

Inventory control system.

Level of R & D personnel.

Technical collaboration


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Human Capability Factors

Factors related to the HR system: system for manpower planning,selection, development, compensation, communication, appraisal,position of the personnel development within the organization,procedures and standards and so on.

Factors related to organization and employees: type of system,corporate image, quality of managers, staff and workers, perceptionabout the image of the organization as an employer, availability ofdevelopmental opportunities for employees, working condition andso on.

Factors related to industrial relations: Union managementrelationships, collective bargaining, safety, welfare and security,

morale, employee satisfaction and so on.


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Check Point: Human Capability

Genuine concern for HR and development or facade.

Efficient and effective personnel system.

The organization is perceived as a fair and modelemployer.

Training opportunities and facilities.

Congenial working environment.

Motivation level of workforce.

Level of organizational commitment not loyalty. Level of absenteeism.

Safe and salutary working conditions.


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Information Management CapabilityFactors

Factors related to acquisition and retentionof information: Sources, quantity, quality,and timeliness of information, retentioncapacity, and security of information

Factors related to the processing andsynthesis of information: Databasemanagement, systems, software capability


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Theres no business like consulting

business

They [Management Consultants] arepeople who borrow your watch to tell you

what time it is and then walk off with it.

R. Townsend, Up the Organization


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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


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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 intouse

To confirm their ideas, concepts, plans and

strategies To facilitate transitions, mergers, takeovers and

downsizing


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The Advantages ofUsing 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 betterquality


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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


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How do Consultants charge for their

services? Per Hour or PerDay basis

Retainer basis

Fixed-price assignments

Performance-based fee (Contingency Fee)


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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 todo it for a contingency fee, responded the consultant.

What is contingency fee? asked the client.

Its very simple. IfI dont deliver what I promised, Ill be left with nomoney 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.


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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 othergatherings attended by both clients and

consultants Word of mouth advertising recommendations

from satisfied clients


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Paradigm Shift in Consulting AccountabilityActivityBasedConsulting

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 implementationResult-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


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ActivityBased Consulting

No efforts to build partnerships with key managers

No measurement of results or cost benefit analysis

Planning and reporting on consulting intervention isfocused on input

Result-Based Consulting

Partnerships established with key managers and clients

Measurement of results and cost-benefit analysis

Planning and reporting on consulting interventions arefocused on output


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Methods of Data Collection

Follow-up surveys measure satisfaction fromstakeholders.

Follow-up questionnaires measure reaction anduncover specific application issues withconsulting interventions.

On-the-Job observation captures actualapplication and use.

Tests and assessment are used to measure theextent of learning (knowledge gained or skillsenhanced).


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Interviews measure reaction and determine the extent towhich the consulting intervention has been implemented.

Focus groups determine the degree of application of theconsulting solution in job situations.

Action plans show progress with implementation of thejob and the impact obtained.

Performance contracts detail specific outcomesexpected or obtained from the consulting intervention.

Business Performance monitoring shows improvement invarious performance records and operational data.


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Methods forIsolating the Effects ofConsulting

A Pilot group with consulting is compared to a controlgroup without consulting to isolate consultingintervention impact.

Trend lines are used to project the values of specificoutput variables, and projection are compared to theactual data after a consulting intervention.

A forecasting is used to isolate the effects of a consultingintervention when mathematical relationships between

input and output variables are known. Participants/stakeholders estimate the amount of

improvement related to a consulting intervention.


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Supervisors and manages estimate the impact of aconsulting intervention on the output measures.

External studies provide input on the impact of aconsulting intervention.

Independent experts provide estimates of the impact of aconsulting intervention on the performance variable.

When feasible, other influencing factors are identifiedand the impact is estimated or calculated, leaving theremaining unexplained improvement attributable to theconsulting intervention.

Customers provide input on the extent to which theconsulting intervention has influenced their decision touse a product or service.


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Reaction to and satisfaction with the consultingintervention from a variety of different stakeholderswithin different time frames.

The extent of learning that has taken place as thoseinvolved in the consulting intervention learn new skills,processes, procedures, and tasks.

The success of the actual application andimplementation of the consulting intervention as the

process is utilized in the work environment. The Score Card Perspective :

Six Balanced Measures


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4. The actual business impact changes in thework unit where the consulting project hasbeen 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 measureshows the monetary return on the cost of theproject.

6 Intangible measures, which are usually softdata items that are not converted to monetaryvalues for use in the ROI formula.


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Methods forConverting Data to Money

Output data are converted to profit contributionor cost savings and reported as a standardvalue.

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 andbenefits.

Historical costs of preventing a measure, suchas customer complaint, are used when they areavailable.


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Internal and External experts estimate a value of ameasure.

External database contain an approximate value or costof a data item.

Participants estimate the cost or value of the data item.

Supervisors or managers provide estimates of costs orvalue when they are both willing and capable ofassigning values.

The consulting of staff estimates a value of a data item.

The measure is linked to other measures for which thecosts are easily developed.


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Recommended Consulting Costs

The Cost of initial analysis and assessment, possiblyprorated 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 theconsulting intervention, allocated in some convenientway


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BCR=

Consulting Benefits_______________

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 thecosts. In formula form, the ROI becomes.


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ROI%=

Net Consulting benefits

_________________ X 100Consulting Costs

This is the same basic formula used in

evaluating other investments where the

ROI is traditionally reported as earningsdivided by investment.


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The BCR and the ROI present the samegeneral information, but from slightlydifferent perspectives. An example will

illustrate the use of these formulas: aconsulting intervention produces benefitsof Rs. 581,000 at a cost of Rs. 229,000.Therefore, the benefit-cost ratio is:

BCR= Rs. 581,000 __________2.54 (2.5:1) Rs. 229,000


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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 _________ X100 = 154%

Rs.229,000

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