8/5/2010
WORK 6111 Management Consulting
Week 2:
Management Consulting:
Historical Dynamics
FACULTY OF
ECONOMICS & BUSINESS
Professor Christopher Wright
WORK6111 Management Consulting
Largest Consulting Firms 1998
Rank Firm Name 1998 Global Annual 1998 Global
Consulting p.a. Consultants
Revenues Growth
$M
1 Andersen Consulting $7,129 25% 53,416
2 PricewaterhouseCoopers $6,000 40% 40,800
3 Ernst & Young $3,870 35% 16,450
4 Deloitte Consulting $3,240 40% 19,560
5 CSC $3,000 17% 20,000
6 KPMG $3,000 30% 14,094
7 McKinsey & Company $2,500 14% 5,184
8 Cap Gemini Group $2,261 37% NA
9 Mercer Consulting Group $1,543 15% 11,304
10 Arthur Andersen $1,368 44% 9,196
11 A.T. Kearney $1,234 17% 2,880
12 Towers Perrin $1,230 12% 8,155
13 Booz-Allen & Hamilton $1,204 12% 6,540
14 IBM Consulting $990 13% 5,060
15 American Management Systems $913 24% 7,398
SOURCE: Consultants News, June 1999, 6-7.
1
8/5/2010
Australian Consulting Market
Business
Strategy
Consultancies
McKinsey & Company
Boston Consulting
Group
HR Consultancies Booz Allen Hamilton 'Big Four'
Bain International Accounting Firms
A.T. Kearney Accenture
Hay Group
Towers Perrin IBM (PwC)
Hewitt Associates Deloitte Consulting
TMP Worldwide Bearingpoint (ex
(ex--KPMG)
Ernst & Young
Operational
Efficiency
Specialists
PA Consulting
Proudfoot Consulting
GPR Dehler
Origins of Consulting & Scientific
Management
› Origins of consulting in the scientific
management movement of the early
1900s
› Focus on shopfloor efficiency - work
measurement, methods study and
wage incentives
• Early pioneers - Frederick Taylor, Frank & Lillian
Gilbreth
• Commercialisation of ‘efficiency engineering’ via
Charles Bedaux. Bedaux system widely used in the
US, Britain & Europe
• Worker and trade union resistance to work
intensification and deskilling
2
8/5/2010
New Influences: Corporate Analysis
› Second ‘wave’ – focus on corporate
organisation, structure and strategy
› Role of banks in assessing the worth of
companies re IPOs, mergers, bankruptcies
› Greater financial regulation during the 1930s
forces merchant banks to outsource this
activity to consulting firms such as McKinsey
& Co.
› “In the 30s and 40s a ‘management consultant’ was
looked on as slightly nefarious. People would say, ‘Oh an
efficiency expert’, but that made all the men at McKinsey
draw up in horror” (http://www.mckinsey.com/firm/history/marvinbower/)
Personnel Consulting and OD
› Third disciplinary influence – the “human
relations” movement and industrial
psychology
› Emphasis on the “human factor” –
management and supervisory training,
personnel management,
communications, selection testing
› Later developed during the 1960s within
the Organizational Development
movement and more recently - HRM
› While not necessarily linked to specific
consulting firms, influential in shaping
consulting offerings
3
8/5/2010
The Latest Wave: IT Consulting
› Fourth stream of influence the
emergence of IT consulting
› Arthur Andersen as the pioneer
from the 1950s
› Diversification from audit work to
advising and designing computer
systems
Massive
M i growth th iin IT segmentt off consulting
lti industry
i d t
during the 1980s and 1990s
Other accounting firms follow this path during the
1980s/1990s, growth of MCS in ‘Big Eight’ audit firms
Historical Evolution of Management
Consulting
› Kipping (2002) – economic
d
development
l t and
d new managementt
concerns underpin changes in
consulting (demand shapes supply)
› Are their limits to consulting firms
adapting to changed circumstance
(‘trapped in their wave’?)
- Importance of reputation
- HR and business models
4
8/5/2010
Global Diffusion of Consulting
› History of consulting a global
phenomenon –
‘Americanisation’
› How has consulting spread
globally over time?
› Are there institutional and
cultural limitations upon the
diffusion of consulting practice?
› Convergence/homogenisation
versus variability/diversity
Historical Development of Australian
Management Consulting
Business Process
OPERATIONAL EFFICIENCY R
Reengineering
i i
Cost cutting
HRM
HUMAN RELATIONS & PERSONNEL Change
Management
Business Strategy
STRATEGY & STRUCTURE Organisational
Restructuring
Systems
INFO TECH integration
ERP (SAP)
Y2K
1950s 1960s 1970s 1980s 1990s
5
8/5/2010
Historical Themes: Promoting
Demand
› How do consultants attract clients and develop
legitimacy?
› Consultancy as discretionary expenditure and
lack of a professional mystique
› Focus on importing international best practice
› Develop links with economic and social elite
› Develop future clients via alumni and ‘up
up or out’
out
promotion
› Develop ‘brand name’ via public policy
interventions, publications and more recently
advertising and sponsorship
Historical Themes: Managing Client
Relations
› Problem of managing
g g client relations -
overcoming managerial and employee
resistance within projects
› Common trend to develop a participatory
approach to client relations given the
threat to a consultancy’s reputation
› Developing change management skills
and joint consultant-client project teams to
reduce conflict and gain client “buy-in”
6
8/5/2010
Historical Themes: Broadening
Expertise
› Problem of remaining
g flexible in service offerings
g and
broadening expertise over time
› Driven by economic and technological change
› Propensity for ‘esoteric’ knowledge to become
standardised over time
› Large
g consultancies offer a range
g of advisory y services
(diversified model). Dangers of a specialist focus in a
period of rapid change
› Limits to diversification - danger of becoming ‘trapped’
within a specific business model
Conclusion
› Debate over the origins of
management consulting – shopfloor
efficiency versus boardroom strategy
› History of the consulting industry a
process of occupational
sedimentation – broadening
expertise and new functional skills
› Common themes in the historical
development of consulting: promoting
demand, managing clients,
broadening expertise
