Modern consulting is a huge industry that can be useful for any business. However, in the current conditions of an increasingly globalized and complicated market, increased competition and unpredictable macroeconomic factors, large businesses simply cannot do without the consulting industry
Classics of the genre
A business Manager is like a sailor. Once he got into the boat and he was rowing. But business was growing, and now he was on the bridge of a huge ocean liner. Well, or not very large. And not a liner, but, say, a cargo ship — that’s not the point. The bottom line is that he is no longer on the oars and not at the shore, but in a stormy sea of market competition. This requires very serious navigation. Of course, you can only rely on a full-time Navigator. But in some situations, it is better to contact a professional Navigator, that is, a business consultant.
The consulting industry was born at the end of the last century. In 1886, American Professor Arthur little founded the company Arthur D. Little, which provided consulting services in accounting and management. The rapid growth of the industry revealed an acute lack of knowledge and skills in the field of personnel management and product promotion. This area did not fit well into the economic activities of companies, and a separate industry began to form, the Foundation of which was scientific research on labor organization and production efficiency.
Economist and psychologist Edwin Booz, who proclaimed the motto “Train the mind for professional use”, created the Booz Allen Hamilton Bureau of business research in Chicago in 1914. “Companies could be more successful if they turned to external experts for help and received qualified and objective advice from them,” he said, and they listened to him. In 1926, University of Chicago Professor James McKinsey opened the McKinsey & Company consulting Agency, combining engineering and financial consulting.
The issues that consulting companies were dealing with at that time were mainly limited to human resources management and product sales, and the consulting market itself was, of course, small. But after the Second world war, the situation changed. Managers ‘ dissatisfaction with doing business and the activity of the state and military sectors of the economy led to a sharp increase in demand for management consulting services. New concepts replaced each other. The number of employees in consulting companies increased exponentially, and by the 70s in the United States, there was one consultant for every 100 managers in the industrial sector.
Knowledge is power
The European Federation of management consulting identifies eight main areas in its industry: management, administration, Finance, human resources, marketing, production, information technology, and special services. But the debate about what is meant by management consulting continues. In the most General form, we can say that consulting is paid consulting professional services provided to organizations to improve the efficiency of their work.
Geoffrey Cottler quipped that consulting was invented by people who couldn’t even agree on what to call themselves. Irony in relation to consulting is generated by difficulties in evaluating the result of consultants ‘ work.
This result is usually delayed (and at the moment it rather worsens the company’s financial performance), it is difficult to separate it from other activities in the organization, and it is not always quantitative. Lyudmila Mamet, an employee of PricewaterhouseCoopers, points out that the effectiveness of consulting does not always have a monetary value. Dmitry Matsenov, Managing Director of NIKOIL IBG, believes that the evaluation of the consultants ‘ work can be done based on the customer’s desire to continue cooperation. But in any case, if the client received knowledge from the consultant that is used in practice, the cost of consulting was not wasted.
There are many examples of successful implementations of the innovations proposed by consultants. For example, the CRM project at Antares Bank increased the efficiency of planning and conducting customer service activities by 30-40%, and Procter & gamble Prestige products LLC received a transparent organizational structure and reliable data for making management decisions as a result of automation, which reduced the number of errors and, as a result, increased the efficiency of the enterprise.
Don’t expect a miracle from a business consultant. Only you can handle your problems. Remember: even the wisest consultant does not make decisions. He offers them, and you decide whether to follow the advice or not.
The desired and actual
Of course, you can’t completely rely on the results of consultants ‘ effective use of their methods. In reality, everything is more complicated. In at least half of the cases, company managers do not share the high self-esteem of consultants. According to statistics, only 10% of projects implementing new customer relationship management techniques are considered successful. “In Siberia, about 300 attempts were made to implement a balanced scorecard system, and only about 40% of companies achieved the expected result —” says the Director of the consulting office of the Siberian certification center TPU S. Pogrebnyak. — In budgeting, 16% of implementations are successful, the implementation of automated planning systems is suspended in 30% of cases, and in 54% the budget is significantly revised and deadlines are pushed back.”
Strategic planning has been promoted for decades. And now one of the management gurus, G. minzberg, says: “All this steam has gone into the hooter-despite the greenhouse conditions created for strategic planning.”
The main reasons for non-compliance of the result with expectations are the lack of a common understanding of the project’s goals by consultants and performers, as well as the discrepancy of opportunities to desires. Implement the product often simply cannot be used by the organization — because of the skill level of customer personnel, resistance to change, lack of knowledge of the customer about the introduced product… consultants Sometimes sell a package of services that do not meet the needs of the organization, and the reason for this lack of analysis of the organization or the lack of it. Difficulties in communicating productively with consultants are also caused by common myths among managers that need to be eliminated. Here are some of these myths.
1. The consultant will solve our problems.
It is assumed that a know-it-all with Golden hands will come and instead of the company’s employees will do all the work on cleaning the Augean stables. This is not possible, because even the wisest consultant does not make decisions. He only offers them, and the Manager, based on his experience and knowledge of the business, decides whether to follow the advice or not.
2. The consultant will learn as much about our company as we want to tell him.
In principle, a fair statement. But if there is a desire to get a real effect from cooperation, the business consultant will have to learn a little more about the company than the customers would like. And you have to accept that.
3. Recommendations and reviews from other companies are a guarantee of the consultant’s success in our company.
For this to true, you need to match a lot between the customer and the review: the internal and external environment, the age of company and business, nature of problems etc. It’s unlikely. In addition, do not forget that the Director of a company who has spent a certain amount on consulting services, it is difficult to admit failure to owners and colleagues. And sometimes, with the help of consultants, problems are solved that do not correspond to the implementation goals at all.
4. There is a ready-made method, scheme, program, suitable for all occasions.
Having read in the magazine about the technology for solving the problem that has arisen in the company, the head hopes that with its help he will immediately cut the Gordian knot. But there are no universal methods, just as there are no standard companies.
5. The tender guarantees the selection of the right consultant.
This is true in so far as the company’s employees understand the issues that are solved by the consultant.
6. Consultants will try their best to do the job perfectly, because they are afraid of ruining their reputation.
It sounds logical in terms of classical, book competition. But when negative advertising contributes to the name’s volume, the statement is not relevant.
The consulting services sector is developing rapidly. This is due to increased competition, Informatization of society, narrow specialization in the global world, and an increase in the cost of knowledge. Revenues from management consulting have increased by two orders of magnitude over the past ten years. In the next decade, the consulting services market is expected to grow by 15-20% per year.
Ernst & Young defines the current volume of the Russian consulting market as $ 1 billion, of which $ 300-500 million is accounted for by audit services, but the share of related services is growing rapidly and already exceeds 50% of the total revenues of audit and consulting companies.
The Russian consulting market is at an early stage of development, which sets its own rules and affects the quality of services. According to RBC, about 60% of consulting firms ‘ employees are young people under the age of 30. But there is already a tendency to improve the quality and level of responsibility of consultants for services rendered. This is largely due to the strengthening of management: since the result of consulting depends on two active parties, the quality of services depends on both. And given that new knowledge and technologies are a tool that can be used to work more effectively, the need for consulting services is increasing. On the one hand, in modern conditions, managers who prefer to do business the old-fashioned way “with a shovel and bills” are becoming less and less. On the other hand, the rapidly changing world constantly requires new tools. In such circumstances, the value of consulting services increases dramatically. Consulting is the link in the business that accumulates unique theoretical knowledge and practical skills and shares them with other companies, implementing the latest management technologies.