1. The Management Consultancy Industry:
Issues in Consultant-Client Relationships
James Hunt
Trimester 1, 2012
GSBS6120: Managing Organisational Change

2. A Review of Our Last Lecture
Organisational Development
Intervention Processes
1. Three criteria of an effective OD intervention:
1. Diagnosis – obtain valid and useful information
2. Provide client organisation with alternatives for action
3. Build internal commitment
2. Importance of determining the client’s readiness for change
3. Choosing the depth of intervention: system-wide intra-personal
4. The OD Cube:
1. Focus of attention: whole organisation or sub-system
2. Diagnosed problems
3. Modes of intervention

3. Primary Distinguishing Characteristics of OD
1. OD focuses on organisational culture and processes
2. OD encourages collaboration between organisational members of
different levels.
3. Teams are considered to be vital to an organisation.
4. OD focuses on the human, social, technological and structural aspects
of organisations.
5. Participation and involvement in problem-solving efforts.
6. OD focuses on total system change.
7. OD practitioners are facilitators, practitioners and co-learners.

4. W. Warner Burke

5. Data gathering is an important element in
OD Interventions.

6. WHAT IS ORGANSATIONAL DEVELOPMENT?
Organizational development is an ongoing, systematic process to implement
effective change in an organization.
Organizational development is known as both a field of applied behavioral
science focused on understanding and managing organizational change and
as a field of scientific study and inquiry.
It is interdisciplinary in nature and draws on sociology, psychology, and
theories of motivation, learning, and personality.

7. HISTORY OF ORGANISATIONAL DEVELOPMENT
In the late 1960s organisational development was implemented in organizations via
consultants, but was relatively unknown as a theory of practice and had no common
definition among its practitioners.
Kurt Lewin (1898–1947) is widely recognised as the founding father of OD, although he died
before the concept became current in the mid-1950s.
From Lewin came the ideas of group dynamics and action research which underpin the basic
OD process as well as providing its collaborative consultant/client ethos.
Lewin founded the "Research Center for Group Dynamics" at MIT (Massachusetts Institute of
Technology), which moved to Michigan after his death.
Lewin’s colleagues were among those who founded the National Training Laboratories
(NTL), from which the T-group and group-based OD emerged.
In the UK, the Tavistock Institute of Human Relations was important in developing systems
theories.
The joint TIHR journal Human Relations was an early journal in the field.
The Journal of Applied Behavioral Sciences is now the leading journal in the field

8. HISTORY OF ORGANISATIONAL DEVELOPMENT
Richard Beckhard (1969), an authority on organisational development and change
management, defined organisational development as:
“An effort, planned, organisation-wide, and managed from the top, to increase
organization effectiveness and health through planned interventions in the
organisation's processes, using behavioral-science knowledge" (Beckhard 1969).
Throughout the 1970s and 1980s organisational development became a more
established field with courses and programs being offered in business, education,
and administration curricula.

9. HISTORY OF ORGANISATIONAL DEVELOPMENT
Between 1990 and 2010 organisational development has continued to grow and
evolve and its influences can be seen in theories and strategies such as:
Total quality management (TQM)
Team building
Job enrichment
Re-engineering
Knowledge management
The intellectual capital movement
Semi-autonomous working teams
Empowered work groups
Participative employee practices generally such as those at Walmart and Semco.

10. THE FUTURE OF ORGANIZATIONAL DEVELOPMENT
There are contradictory opinions about the status and future prospects of
organizational development.
• Is it a theory whose time has come and gone?
• Does its basis in behavioral science, a "soft" science, make it unappealing?
• What are the challenges for the future?
Bunker, Alban, and Lewicki (2004) propose six areas that could revitalize the field
of organizational development in the future: virtual teams, conflict resolution, work
group effectiveness, social network analysis, trust, and intractable conflict.
These authors suggest that focusing on these areas will help bridge the gap
between research theory (i.e., academics) and practice (i.e., consultants).
Getting these two groups to communicate with each other will benefit both groups
and promote organizational development efforts.
Reference: Bunker, B.B., B.T. Alban, and R.J. Lewicki (2004) "Ideas in Currency and OD Practice:
Has the Well Gone Dry?" Journal of Applied Behavioral Science 40, no. 4 (December): 403–22.

11. THE FUTURE OF ORGANISATIONAL DEVELOPMENT
In a survey conducted by Church, Waclawski, and Berr (2002), twenty
individuals involved in the study and practice of organisational
development were questioned about their perspectives and predictions on
the future of the field. The most in-demand services at the beginning of the
new century, according to those polled, were:
• executive coaching and development
• team building and team effectiveness
• facilitating strategic organizational change
• systemic integration
• diversity and multiculturalism.
Reference: Church, A. H., Waclawski, J., & Berr, S. A. (2002). Voices from the field: Future
directions for organization development. In J. Waclawski & A. H. Church (Eds.), Organization
development: A data-driven approach to organizational change (pp. 320–336). San Francisco:
Jossey-Bass.

12. THE FUTURE OF ORGANIZATIONAL DEVELOPMENT
They list the daily challenges in the field as the need for speed, resistance to
change, interpersonal skills and awareness, and differentiating organizational
development, which refers to the variety of definitions of organizational
development among practitioners and how this impacts consultants, clients, and
the clients' needs.
The opinions on the future direction of the field vary among its practitioners.
Nevertheless, the continuing interest in and value of optimizing an organization's
needs and goals with the needs, wants, and personal satisfaction of its employees
indicate that organizational development will continue to be relevant to and vital for
organizational reform in the future, either in its present form or through evolution
into other theories and practices.
Reference: Beckhard, Richard. Organization Development: Strategies and Models. Reading, MA:
Addison-Wesley, 1969.

13. The Growth of the Modern Management Consultancy Industry
and
Issues in Consultant-Client Relationships

14. The Modern Management Consultancy Industry
Consulting firms usually fall under three broad categories:
1. Strategy consultants work with senior management to assess such big-picture
issues as whether to merge with another company or enter new markets.
2. Operations consultants examine the internal workings of an organization and
ways a client can reach operational goals by cutting costs, restructuring
departments or allocating resources differently, raising product quality or
other methods.
3. Information-technology consultants help clients use or adopt new
technologies. Information technology and operations consultants often
remain on site to ensure their recommendations and changes are enacted,
which produces a steady income stream for their firms.

15. Major Management Consultancy Firms
1. McKinsey & Co
2. Bain & Co.
3. The Boston Consulting Group
4. Monitor Co.
5. Arthur D. Little
6. Booz Allen and Hamilton
7. Mercer Management Consulting
8. AT Kearney
9. Mitchell Madison Group
1. Accenture (formerly Andersen
Consulting)
2. LEK Consulting
3. Saville & Holdsworth
4. Deloitte Touche Tohmatsu
5. Ernst & Young

16. McKinsey and Co.
McKinsey is the most powerful consulting firm in the world. In boardrooms
and corporate offices around the world, it is known simply as “The
Firm,” and is often the first recourse for advice when business woes
strike.
Such a reputation makes McKinsey consultants highly sought after and
expensive to hire; its 4,500 consultants, citizens of 81 countries,
generate an estimated $450,000 per person annually.
Customers include some of the bluest-chip companies in the world, such
as PepsiCo, AT&T, GE, IBM and General Motors Corps.
Since many ex-McKinsey consultants serve on company boards (up to a
third of all boards in the USA, according to some estimates), the firm
has long-term ties and relationships with CEOs at many major
organizations.

17. McKinsey and Co.
Specialties: McKinsey is known as a strategy firm; its consultants are usually are
engaged to help create long-term strategic plans for a company, product or
operation. In most cases, consultants work with senior-level executives at client
companies.
Good: McKinsey tops most consulting firms for prestige and name-recognition; the
firm is in a class of its own. The firm is consistently tapped for world-wide
assignments, which means peerless opportunities for diverse experience and
travel (65% of the firm’s revenues are generated overseas). Because of great
connections, ex-consultants have excellent career prospects.
Bad: Allegations of sexual discrimination have created unwanted publicity. Former
McKinsey associate Suzanne Porter claimed the firm discriminated against her
by not promoting her to partner despite outstanding reviews. McKinsey has
since settled the suit.

18. McKinsey and Co.
McKinsey & Co. is one of the oldest of the major
management consultancy firms.
McKinsey consultants have strong reputations as
intelligent and highly effective executives.
McKinsey has its own management journal; The
McKinsey Quarterly.
McKinsey has taken a strong lead in the area of
strategic management consulting, leadership
and executive development.

19. Bain and Company
After being plagued by lawsuits, layoffs and near-bankruptcy in the early 1990s,
Bain has leaped back to the top of its game.
Bain is ranked among the world’s most prestigious consultants, along with
McKinsey and the Boston Consulting Group — which once employed founder
William Bain.
Bain is rare among major consulting firms for having a woman, Chairman of the
Board, Orit Gadiesh, at the top.
The firm employs 1,500 consultants.

20. Bain and Company
Specialties: Bain is a world leader in strategy consulting and has a strong
international bent. Unlike some other strategy firms, Bain stresses that all its
strategy recommendations must be immediately useful. Everything “comes
down to what the client will do differently Monday morning,” says Ms. Gadiesh.
Good: Equal in prestige to its close competitors, Bain has a smaller, more
congenial feel than larger rivals and views encouraging a friendly environment
as a worthwhile expense.
Bad: Bain employees must embrace conservative dress codes and travel
extensively. Work hours are long as well — consultants can expect to spend at
least one day per weekend working or at the airport.

21. The Boston Consulting Group
The Boston Consulting Group is also one of the ‘elite’ worldwide
consultancy groups, with a reputation for excellence, and successful
innovation.
It charges high-end fees for its services, but spends a lot of time
diagnosing the organisation’s needs, before suggesting a change
initiative.
BCG solutions are often highly individualised, and make use of the latest
innovations in management thinking.

22. Accenture
Accenture typically works in organisations using a team-based structure consisting
of 8 -12 consultants (or a variation of this).
Problems and issues are broken down into specialist areas, and individual
consultants are assigned specific tasks: accounting, org. structure, executive
leadership profiles, corporate culture, information technology.
Detailed reports are generated from the investigations.
Many consultants are learning on the job, and include some fresh graduates.
The team leader is usually highly experienced.

23. Saville and Holdsworth
Saville & Holdsworth typically works with organisations to conduct meaningful
research into their strengths and weaknesses.
They use various forms of psychometric profiling and competency analysis, to
diagnose current skills levels.
Their corporate knowledge reservoirs consist of extensive profile-maps of high
performance managers, leaders and teams at various levels.
These profiles are used as benchmarks, for comparative purposes.
Change initiatives are sometimes suggested, but are generally driven by internal
managers.

24. The Growth of the Management Consultancy Industry
Deregulation around the world means that many once-safe industries are facing
new competitors.
Increased competitiveness has driven the pace of change within organisations,
creating additional pressure on managers and employees.
Increasingly, managers around the world are sensing that they are inadequately
equipped to manage change.
The Kennedy Research Group (1996) predicted an average growth rate of more
than 16% for the global management consultancy services market.
The United Nations Conference on Trade & Development (1993) noted a similarly
rapid growth trend.
These growth rates levelled off in 2001, and more modest global growth rates of
around 6% (estimate) have occurred over the past 9 years.
Much of the continued growth over this period has been fuelled by public sector
demand for consultancy services and advice.

25. 0
50
100
150
200
$US (billions)
Figure One: Global Revenue Growth in the Management Consultancy Industry
UNCTD 25 30 36 43.2 51.84 62 73 84.75 98.39 114.24 132.63 152.98
Kennedy 25 30 36 43.2 51.84 62 71.982 83.57 97.02 112.64 130.78 151.83
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

26. Dangerous Company - Major Contention
The decision to hire management consultants can place at
stake the careers of the very people who bring them in,
the jobs of thousands of employees, millions of
shareholder dollars, and long-term relationships with
customers. A corporation’s reputation can be put on the
line.
Authors: James O’Shea and Charles Madigan

27. Dangerous Company - Quotes: page 5
The one characteristic in all of these engagements is weak
management. You don’t go out and spend all that money if you
are in a position of strength.”
To have a situation where there is chronic dependence on
consultants is an implicit admission of ineptitude in
management. This is absolutely very worrisome.
The other thing is that because of this mutual dependence of the
consultant and the customer, it is often not to the consultant’s
advantage to come up with some delicate issues which should
be addressed.

28. A Blueprint for Successful Consultancy Intervention
1. Acknowledge and agree upon the relationship between client &
consultant:
• Who is responsible for the diagnosis?
• Who will drive the change?
• What is the intended timeframe for the change process?
• Are the external consultants merely facilitators or are they diagnostic
specialists?
• Are the consultants drivers of the change process, and if so do they
have authority over line managers?

29. A Blueprint for Successful Consultancy Intervention
2. Agree upon the fee structure for the entire intervention up-front.
• Determine the number of external consultants to be involved in the
intervention.
• Determine the level of expertise of each external consultant (you don’t
really want to pay novices).
• Determine the expected timeframe for the intervention.
• Make fees contingent upon verifiable results, and agree upon these
results at the outset.

30. A Blueprint for Successful Consultancy Intervention
3. Determine precisely the scope of the
intervention:
• Is this merely a definitive diagnosis?
• Is the diagnosis to be followed by consensual (two-
party) analysis?
• Has the protocol for feedback been clearly
established?
• Are there clear guidelines for the transfer of
ownership of expertise relating to the change
process?
• Is there a definitive disengagement plan?

31. The Vault Reports
Up-to-date information on the management consultancy industry through
Vault.com - career intelligence
http://www.vault.com
Top Six Professions listed on Vault.com:
1. Analyst – consulting
2. Accounting
3. Management Consultant
4. Analyst – Private Equity
5. Investment Banking
6. Management and Strategy Consulting

32. Concluding Comments
• The management consultancy industry has continued to grow and diversify both
domestically and internationally over the last 20 years.
• More and more medium and large organisations have become reliant on external
expert advice, as a result of the move toward leaner organisational configurations,
heightened competition, and outsourcing.
• The vast majority of management consultants are able to utilise their expertise to bring
noticeable improvements to modern organistions.
• The success of any consultancy intervention depends upon the health and viability of
the consultant-client relationship.
• The responsibility for managing this relationship effectively, lies with the client.
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