Chapter 1: The Nature of Consultancy

One hundred years ago, the management consultancy industry did not exist; now, consultancy is globally a multi-billion dollar industry, covering many service lines in addition to management. In recent years, consultancy firms have expanded to include thousands of consultants handling large-scale projects and process outsourcing activities, while at the same time there is a horde of sole practitioners and small firms delivering more modest consultancy services to their clients. So, what is this consultancy business? In this chapter we will consider what consultancy is, why consultants are engaged, the nature of the organizations delivering consultancy services, and the skills required of consultants.

WHAT IS CONSULTANCY?

One of my first assignments as a management consultant was with one of the London teaching hospitals. I heard that a colleague was a patient in one of the wards and I wanted to know which one, so I phoned the appropriate department. Information was given only reluctantly over the phone, until I was asked who I was. 'I'm a consultant and she's a member of my firm', I replied, honestly. There was a sound of clicking heels as the person at the other end of the phone came to attention - and I got the information I wanted immediately. 'Consultant' and 'firm' had quite different (and more potent) meanings in a hospital.

The term 'consultant' is now used for a variety of occupations; as well as the senior doctor and the management consultant, it is used to describe anybody who is providing knowledge-based services to an organization on a contractual basis. So 'consultant' can also include solicitor, accountant, architect, engineer or, indeed, any profession.

A simple definition of consultancy is 'delivering specialist skills from outside the organization'. Key concepts in this definition are: 1) specialist skills - the assumption is that the consultant has specific skills, in demand and valued by the client organization, and it is for this reason that the individual consultant has been engaged; 2) outside the organization - the consultant is usually from another organization or, if an internal consultant, from a different department within the organization. Occasionally someone may be called on to exercise a consultancy role within their own business unit, in which case they will need to adopt the behaviours of an internal consultant.

Arguably, any provider of professional services might be regarded as a consultant; indeed, the methods of winning business and handling clients will have much in common. But the matters on which management consultants are engaged involve helping organizations define and implement their development agendas. The development agenda is not only about doing new things, but also about doing existing things better.

The nature of management consultancy interventions has evolved, as shown in Figure 1.1. As the diagram shows, consultants can be involved at a number of levels:

1. Providing advice. This work might answer a question such as: 'What is the reward package needed to attract a good marketing manager?'

2. Project design goes a step further, answering questions such as: 'How do we ensure that our reward packages remain competitive?'

3. Implementation goes a step still further: 'Install a new reward system for this business that gives better value for money.'

4. Functional management takes on running a complete function: 'Please run our reward system on our behalf.'

Figure 1.1: Evolution of activities in a consultancy practice

Each stage represents an increased level of outsourcing and a larger 'footprint' for the consultancy practice in the client organization. For example, an HR manager may be charged with managing a company reward system and decide to initiate a project to ensure that the reward remains competitive, enlisting the help of consultants to design this (level 2), which he or she then implements (level 3). These steps therefore represent an evolving degree towards 'buy' in terms of strategic 'make or buy' decisions.