Sedimento

The charity sector (one of the smallest markets for consultancies) has a traditional image of being run on a more informal basis than many other sectors. However, some years ago, many charities realised that by paying experts in management and marketing to enhance the charity’s operations, the improvements would at least cover the costs of the fees. It is for this reason, for example, that charities are using increasingly sophisticated (and aggressive) fund-raising techniques and management strategies.

The needs of charities are much the same as any business: cost reduction, income maximisation, and powerful sales and marketing processes. However, charities are a special case, not simply because their governance and accountability structures are more rigid than other fi rms, but also because their guiding principle cannot be “profi t at any cost”. Ethical treatment of employees, service providers, and the environment have to be (and have to be seen to be) crucial for charitable operations.

Environmental

Environmental consulting, whilst a tiny market for consultancies (£57m in the UK in 2007), is one of the fastest growing sectors and covers a myriad of different skill-sets and activities including carbon-trading, energy management, impact assessment, and PR.

During the period 2006–7, the consulting services for this sector grew by 186 per cent (MCA 2008).

However, despite increasing discourse about the environment, there are, as yet, few rig-orous products for consultancies to sell in this fi eld. Much of the money in this area is spent on engineering and energy consultancies who reduce, manage, and trade energy use. The market for management consultants is still quite undefi ned.

Chapter Summary

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This chapter has described the different segmentations of the consulting industry and out-lined some of the trends which have affected these sectors over recent years. Some key facts to note are:

The move to the “middle”: strategy consultancies are moving downstream and doing

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management work, whilst IT and outsourcing consultancies are trying to move upstream into the same area.

Consulting with everything: many companies have added consulting divisions in an

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attempt to maximise economies of scope, help setting a client’s purchasing agendas, and lever more business. Thus, increasingly IT, fi nance, and manufacturing companies are offering consultancy services to boost their revenues.

Under pressure from the public, the government has encouraged procurement

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departments to negotiate down consultancy expenditure. This trend has been copied

by the private sector and is responsible for driving down both consulting fees and profi t margins.

Banking and fi nance account for most of the income in private sector consulting, but

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public sector has grown enormously over the last ten years, especially in IT consulting.

A key skill of consultants is to be able to perform a strategic analysis. Often this involves forecasting what the future will bring to a sector or an industry based on specifi c assumptions and giving advice on the basis of those scenarios.

Based upon what you know of existing trends in the consultancy industry what forecasts can you make about the next ten years? If you were leading KPMG’s advisory business:

1 What trends would be central to their strategic planning?

2 What are the key opportunities and threats in the market and amongst competitors?

3 What are the top three business scenarios that you would plan for? What would your plans be for each?

Student Exercise: Forecasting the Future

Discussion Questions

What different business models can you identify in the consulting world? Which do you

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think makes the most money, both per consultant and in total?

What issues do different forms of defi nitions and classifi cations present to the researcher of

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consultancy? What could be done to ameliorate the situation?

What sectors and services would you be most interested in becoming involved with and

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why? What do you think the main growth areas will be over the next fi ve years?

BallCo’s Internal Consultancy

In common with many UK manufacturing companies, BallCo, a manufacturer of precision ball-bearings for machine parts, was facing external pressures. It had grown to a profi table company employing 200 people in the 1980s, primarily by serving the local markets around Birmingham. However, in the 1990s, manufacturing began to decline in the UK, the market shrank, and increasingly, foreign rivals began to undercut BallCo on price.

In 2000, BallCo called in an external consultancy in to help train the manufacturing staff in “lean” Japanese working techniques. This training included continuous improvement, quality management, process re-engineering, and waste reduction techniques. The consul-tancy decided the best way to achieve this on an ongoing basis was to train some of the staff up to train any new recruits that might join the company.

The change programme was a huge success, reducing costs and improving the products, so when the consultancy left, the internal training team decided to spread the “lean” message to other departments. Over a couple of years the fi ve-man team created their own materials

Case

and methods, which they believed were an improvement on those taught to them by the consultancy. The team successfully spread the training to other parts of the company.

Whilst this was happening, another manufacturing company in the area, Wharton, heard about BallCo’s team and approached the MD of BallCo to see if they could hire the team to train their own manufacturing staff. Wharton preferred this arrangement because, in the past, they had had bad experiences with external consultants and their MD refused to use them. The MD of BallCo sent his internal team into Wharton and their down-to-earth attitude and practical manner made them a big hit there.

However, around this time, three things happened. First, the BallCo team approached their MD and suggested that as they were now being charged out to external companies, they wanted to get signifi cant pay rises. Second, the MD of Wharton was so impressed with the team that he made three of them job offers. Finally, the original external consultancy which trained BallCo’s team contacted the MD of BallCo and said that he was in breach of contract for selling their techniques to other companies.

What ethical issues are raised in this case? Who do you think is “right” in each issue?

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What would you do if you were BallCo’s MD?

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Could this situation have been handled better by any of the parties? How?

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The UK Government’s Use of Management Consultants 1999–2008

In 1999, facing spiralling costs in the public sector, the UK government spending reviews (HMT 1999) noted the savings that the private sector had made through e-commerce and BPR, and pushed its own departments for similar savings through e-government. A number of large projects aimed at automating, outsourcing, and streamlining were initiated in the early 2000s which used consultancy expertise to design, implement, and often run these systems. This trend was exacerbated by the Gershon Review (2004) which set the target of

£6.45bn in effi ciency savings though the introduction of e-business, devolution of decision-making, the use of best-practice processes, and a reduction in bureaucratic headcount.

Much of this work involved the use of consultants, brought in to implement IT systems and re-engineer government departments.

However, many projects, such as the ID Database, the Passport Offi ce, and the NHS database, resulted in high-profi le failures, overruns, and spiralling costs which led to criticisms from the government watchdogs such as the National Audit Offi ce (2006) and the Public Accounts Committee (PAC 2007). The result has been a government effort to regulate and control expenditure on consultants through the use of several mechanisms including greater rigour in procurement. More and more government departments are turning to recruiting ex-management consultants to their procurement departments to batter down consultancy fees.

A corresponding tightening up of the procedures governing the use of consultancies by government procurers led by the Offi ce of Government Commerce (OGC) has ostensibly resulted in improvements in the selection and control of consultants. The double-digit per-centage increases in income from this sector fi nally fell away in 2005–8 and, whilst signifi cant projects still exist, this trend looks likely to continue for the foreseeable future.

Case

The biggest and most important survey of consultancies in the world is routinely undertaken by Kennedy Information. However, their reports are prohibitively expensive for all but the wealthiest companies. For a cheaper overview of the industry one can fi nd reports by Datamonitor, IBISworld, and Forrester. However, if you are a student or a government researcher, there is considerable free information available on the web. I would refer readers to the links available on the OUP on-line resource centre for this book.

In the UK the best report is conducted annually by the MCA and it available from their website www.mca.org.uk. The report, usually written by Fiona Czerniawska and her colleagues, can be obtained for around £300 for members. Both the MCA and the IBC offer signifi cant amounts of free information on their website. If a paid-for report is out of your price range then there is a plethora of information available on-line. However, it should be noted that the MCA report excludes consultancies that have less than ten employees.

The European Federation of Management Consultancies Associations (FEACO) provides an annual survey which can be purchased for around £80, but provides previous years’ surveys free of charge (www.feaco.org). Similarly, for the UK, International Financial Services also do an annual survey in their City Business Series, which is free of charge (www.ifsl.org.uk). Other sites, such as www.top-consultant.com offer a searchable discussion forum where consultants, MBAs, and graduates discuss everything from working as a female consultant in Dubai to advice on getting into McKinsey.

There are virtually no books on consultancy which provide a detailed, up-to-date guide to industry segmentation. However, the two below are worth a look:

Curnow, B., and Reuvid, J. (2003).

• The International Guide to Management Consultancy.

London: Kogan Page.

Sadler, P. (2007). Management Consultancy. London: Kogan Page.

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Further Reading

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Armbrüster, T. (2006). The Economics and Sociology of Management Consulting. Cambridge:

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Biswas, S., and Twitchell, D. (2002). Management Consulting: A Complete Guide to the Industry. New York: John Wiley & Sons.

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Craig, D., and Brooks, R. (2006). Plundering the Public Sector. London: Constable.

Datamonitor (2008). Global Management and Marketing Consultancy. October.

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