Management Consulting Q & A
Management Consulting is a new profession with its roots going back no more than a century. Frederick Winslow Taylor coined the term “Scientific Management,” in his monograph The Principles of Scientific Management published in 1911. He was perhaps the first at describing management as a true science with clearly defined laws, rules and principles governing the foundation of the work-place. His methods to improve industrial efficiency, highly popular at the time, created what became known as the “efficiency expert,” the precursor to today’s management consultant. After a century of evolving the profession today, though undergoing several transitions of management theories and philosophies, still contends an efficient organization is critical for business success.
Nonetheless Taylor’s vision of systematized management has been greatly “water-downed,” as modern theorists have both trivialized and rationalized its relevance for today’s modern work-place and work-force. Computer technology, which clearly serves our information needs, is often cited by today’s management consultant searching for self protection as a substitute for old fashioned efficiency, even though people determine organizational output not computers. Thus, management must manage technology as well as persons. Like a stop-watch, a slide-rule, or a calculator, computer technology is a tool, not a solution. Compass Park believes the management consulting industry should go back to its basics or suffer the consequences of its irrelevance.
What is the difference between strategy consulting and management consulting?
At Compass Park there is really no difference. That is because strategy, and the management of an organization, or operations, or finance and accounting, or human capital, or information technology, or sales and marketing are all connected. Strategy does not exist in a vacuum. The use of the term “strategy” originated from the military as opposed to tactics. But the sum total of military tactics was in fact the strategy. It is the same in business. In other words, a strategy consultant cannot properly strategize without understanding the many components of a business and a management consultant cannot properly advise management without understanding the company’s strategy.
But there are those who claim to be one or the other. Compass Park advises businesses to avoid such “soothsayers,” with their fancy jargon and faddish techniques. For example, in a recent book on managing global operations published in 2012, the Forward was authored by the CEO of a global strategy consulting firm. This leading firm founded in 1914, must have had its consulting roots with Taylor and scientific management, but you can hardly identify it in the following introduction to the book:
“This book explains how to conceive, build, and hone a global innovation capability that is enduring, practical, and rooted in the realities of both global competition and a company’s particular approach to its market. [The authors] have brought their considerable expertise to bear on a subject of fundamental strategic importance, both rich in promise and perilous in its potential for misinterpretation and misapplication. Innovation has become such an all-encompassing concept and powerful driver of modern business strategy that company leaders lose focus when asked to define innovation and how they intend to achieve it. Globalization only adds to the challenge…”
“Just as we do at [the strategy consulting firm], the authors start with focus. It is our shared belief that companies create long term competitive advantage by recognizing, developing, and continuously improving a limited set of interrelated winning capabilities. Assets and market positions are transient. In contrast core capabilities are sustainable and defensible in the long term. In a new world context of open market access and dispersed knowledge, managing global innovation will become an integral component in many companies’ systems for growing winning capabilities. To continuously create and capture value, companies must not only know how to design and develop a valuable and flexible innovation footprint, but also learn to integrate worldwide knowledge and experience through effective processes and systems driven by strong leadership.”
“The notion that [the authors] are onto something is not news to us – [the strategy consulting firm] has worked with both authors for almost a decade, developing insights on innovation and how it has taken shape around the world, market by market. In 2004 we undertook a study of global innovation networks with [the authors’ university] that provided a preview of some of the trends explored in this book, and we have continued to participate in their work on innovation regimes and global innovation in specific industries…”
“All of these companies now face the challenge of managing innovation on a truly global basis – identifying, assessing, stimulating, and integrating the best ideas and capabilities from around the world into innovations that will serve world markets while at the same time pioneering new ways of collaborating both inside and outside company walls. It’s a daunting challenge, and few companies have found a winning formula.”
“Senior leaders need practical suggestions to find the proper architecture for implementing global innovation networks and meeting the day-to-day challenges of crossing borders in the development of ideas into products and services. This book is for corporate leaders but also for frontline innovators, and not only in developed economies, but also in China, India, Brazil, Indonesia, and other developing economies now spreading their wings on the global stage. It combines an understanding of the fundamental drivers of success in managing global innovation with practical strategies for building a productive and enduring innovation capability. It describes a long journey that requires a set of guiding concepts and principles, as well as an architecture of systems and processes.”
After, over two decades of providing strategy and management consulting, we have no idea what this CEO was saying. Sadly, the book itself is no more enlightening.
Why retain a management consulting firm?
Today it seems that most management personnel have an MBA, yesterday that was not so. In Frederick Taylor’s day not only was management consulting an emerging profession, but business schools were just beginning to take shape. The first U.S. business school was founded in 1881 at the University of Pennsylvania and Harvard Business School was founded in 1908. Back then business and management was just starting to be viewed as an academic disciplines. Therefore, to the majority of businesses and their management teams, all business knowledge was obtained through experience. The Great Depression provided the first opportunity for many consulting start-ups to assist struggling businesses that would not have normally retained their services. Management consultants provided a new science and new solutions to vexing business problems brought about because of the depression; as such the industry gained credibility and by the 1960’s working as a management consultant was a sought after career.
With the complexities of modern commerce and industry, management consulting firms thrived. Those start-ups during the 1920’s and 1930’s were now global consulting giants by the 1980’s, and when personal computers started changing the business landscape for both large and small companies, the management consulting industry was one of the first to exploit the emerging technologies. Many consulting firms even changed their focus from strategy and management consulting to technology consulting; some even supplying computer hardware and software solutions instead of advisory services. And while the past twenty years has seen the personal computer evolve into hand-held mobile devices with access to the internet, another factor was emerging; the number of business schools and their graduates had grown exponentially since the days of Taylor.
With the Great Recession in full swing consultants who once were in demand during the depression of the 1930’s were now struggling themselves. The science of giving management advice had evolved so many times that any new idea was seen as a fad, and many of the old standard solutions and procedures that the management consulting industry touted over the past several decades were now found on the internet. Moreover, prospect client management teams were far more business sophisticated and educated. Lastly, computers in general provided much of the information that once was only the scientific domain of management consultants. Some of the industry giants did not survive. In an August 2007 article entitled “Is it time for an Outside Opinion,” in Retailing Magazine, they showcased a former client of the firm and his glowing opinions of CSC Capital. Later, in the article another business owner lambasted one the industry giants that later become a casualty of the recent recession.
Despite advancements in technology and better educated management teams, management consulting continues to be wildly successful and sought after profession, though firms today must be much more client driven and oriented. The following are seven reasons why to retain a management consulting firm.
- Objectivity. Objectivity in providing business advice and solutions is the number one reason why a business owner or CEO should retain a consulting firm. In-house management no matter how educated and business savvy, can never conduct an objective and critical assessment of themselves or their departments. Management teams also tend to bond, thus they collectively lose critical objectivity regarding team members. In most instances management teams are not even willing to throw one of their own “under the bus,” even when his/her performance is negatively affecting the entire company. Under these situations “group think,” becomes institutionalized and management teams are paralyzed in their ability to make tough personnel decisions.At Compass Park our objectivity does not end with the management team and employees, but also is directed toward our client as well. In many engagements over the years, it was our client that had to change his/her management style, or his/her preference of suppliers, or favorable pricing for certain customers, or unwillingness to put collection pressure on certain customers. We have seen clients that preferred to collect inventory rather than turn inventory, stating incorrectly that the discounts outweigh the carry costs, not to mention the lack of cash flow. Sometimes clients like to hire incompetent family members or friends, or like to procure more equipment than necessary, or worse had personally expanded operations unwisely and now needs to spin-off these assets. A management consultant must be objective in all situations and to all people.
- Expertise. Having expertise is the second most important reason to retain a management consultant. Management members tend to be an “inch wide and a mile deep” in functional and industry knowledge. That is because they know one function and one industry very well. Consultants in general tend to be the opposite; they know many industries and many functions but very superficially. But knowing many industries and many functions is preferred in the profession of management consulting. Even industry experts in consulting firms, have gained their expertise consulting rather than doing, and is often the same for functional experts. However, there are on occasion industry experts who have gained their expertise actually working in several industries, and at the same time developed deep functional expertise working in these industries – these are true consulting experts.This ability of using best practices across industries and functions allows very experienced consultants to recognize common attributes of effective solutions to a wide range of business problems. By applying past lessons learned in similar applicable situations consultants become a never ending “learning specialist.” This knowledge is partially institutionalized within each consulting firm, through the form of standard procedures, white papers, data bases, post-engagement reviews, and standard financial packages which can be customized for each client.
However, much knowledge from past experiences is retained in the collective minds of a firm’s senior personnel.
Thus, one cannot be a newly minted MBA and qualify as an expert in anything. A consulting expert should have at least ten years working in a function and have multiple industry experiences. Intervention and interim top management consultants should also have several years in leadership positions, as management and leadership traits are profoundly different. Further, an industry expert and functional expert rolled up in one person does not necessarily make a leader.
The above paragraph has largely disqualified most management consultants as being experts, as well as leaders but still clients deserve expertise when retaining a management consultant. In fact, that is what clients are paying for; they just assume objectivity in a consultant. Expert management consultants paint with a broad brush at first, then address specific details, they never use boilerplate reports and procedures and offer impractical advice, and finally they always are goal specific stressing an aggressive time-line for completion. Compass Park has a reputation of client-oriented expertise in seven interrelated practices grounded in corporate restructuring. Never steering away from the firm’s roots.
- Fresh Perspective. Third on our list is that management consultants bring a fresh perspective to the client. Having a “fresh set of eyes” is a subtle but very powerful added value to retaining a consultant. Often companies get so used to their way of doing things that management and employees forget to see the “forest from the trees” the big picture, or they lose sight of small details in day-to-day routine matters, from measurement techniques, analysis of critical data, and the improvement of standard operating procedures. With businesses in general the “devil” always lies in the details, the small picture. Even the most mundane observations and insights can provide immediate and positive quantitative results.Interviews with management and especially employees can unlock enormous value and cost savings. Often front-line employees, sometimes far beneath the management ranks have a better perspective on such things customer service, warehouse and delivery procedures, administrative paper-work and so on. Consultants can retrieve and apply their insights for increased effectiveness and efficiency on matters that simply get lost in the confusion of daily events. Typically the larger and more bureaucratic an organization the more such value added observations and insights are exposed.
Compass Park uses the phrase “no stone left unturned” to illustrate the powerful inventive for companies to retain our services. Our approach is systematic and detailed. For example, in a one typical financial and budgetary engagement we found some ill-regularities in how the bank statements were being posted, which led to an analysis of the line items of the statements themselves. This exposed numerous vendor payments over the past several years that did not match the purchasing department’s standard vendor list. The president of this global marine products manufacture wrote in a letter, “further number crunching showed inconsistencies in the computer financial statements, CPA year-end numbers and the number the in-house controller was using. These discoveries alone have saved the company several times the fees paid to CSC Capital.” In the end, over a $ 1 million embezzlement was discovered, the prominent regional CPA firm was discharged, and the controller was imprisoned.
- Analytical Talent and Depth. Though fourth in importance, analytical talent and depth is actually a corollary of expertise. Consulting firms have, or should have the analytical horsepower that few businesses have on staff. From the creation of specialized financial spreadsheets and financial modeling to data base analysis and mining, to industry and market research, management consulting firms are staffed and equipped to tackle the most complex of analytical and technical designs. Though analytical depth varies from firm to firm, Compass Park utilizes the synergistic resources of CSC Capital. Since the firm’s founding we have always had a strong “back office” of analytical talent.Especially in conducting financial modeling and reformations, the firm’s proprietary financial structure, based upon profit and cost centers is developed exclusively for each finance and budgetary control client. Further, industry benchmarking and up-to-date research through CSC Capital’s Industry Practices Division aids clients in forecasting and competitive advantage matters.
To Compass Park having an “deep analytical bench” to rely upon is an absolute necessity in providing a maximum return on investment for client services. Small boutique consulting firms often cannot provide such critical resources and therefore may be either unqualified to provide and solve complex financial problems, or may rely on the on-site consultant to perform such analytical tasks, which could become very expensive and time-consuming; perhaps even non-productive as well. It is the combination of consulting expertise and analytical support that produces the most cost-effective and results-oriented client experience.
- Training and Implementation. Though number five in importance, Compass Park believes that without the training of management and employees on select solutions and in the implementation of solutions, most management consulting engagements are a waste of client’s money. A mountain of paper-work neatly arranged in pretty volumes and a list of recommendations provided for the management team to implement is an exercise in futility. Even if all the recommendations are thoughtful, correct and objective, the management team will either not find the time to implement the solutions or simply refuse to do so. This has more to do with human nature than with a lazy or self-serving management team. It is still however, a undisputable fact.Compass Park integrates training and implementation through all client service packages. All of our practices has heavy client interaction, no matter how large or small the company. It is through this interaction that we educate through on-the-job training the management team members and employees on all related matters. From supervising budget meetings to outlining compensation plans an introducing job descriptions, we not only “chart the course” but we also “sail the course.” Clients will not find another management consulting firm that takes the training and implementation role more seriously.
Importantly, we establish a new mind-set throughout our client’s company. The training and educating on new knowledge and skills through our implementation process is in fact an institutionalization of a new corporate culture which supports the organizational and financial changes. This institutionalization is company-wide and cements the new mind-set. A concern for many consulting clients is that over time, the company will slowly drift back to its old ways of operating and thinking. This is never a concern with clients of Compass Park.
- The Black Knight (aka: political cover). Number six on our list is that sometimes management consultants are bought in to conduct an implementation of something that the client or the management team cannot or will not do. By retaining the “black knight” consultant, the client or his/her team are taking political cover for events that they do not want to be associated with, such as lay-offs, salary and benefit reductions, a strategic shift in operations, or the individual firing of a key manager. In these cases, retaining a consultant produces the desired result without having to be held personally responsible whether or not reaching the desired result was organizationally painful. In some instances consulting firms are retained unaware of their “black knight” status. Through providing objective advice and solutions, the client patiently waits until the desired recommendation is brought forth.Compass Park has been retained on several occasions as a “black knight,” both knowingly and unknowingly. In all instances the client’s desired result was achieved and with little organizational turmoil. Lay-offs are never desired by employees but may be necessary for survival; salary and benefits can be off-set with pay-for-performance incentives, a strategic shift can be welcomed as an opportunity; and the firing of a key manager can be what most employees wanted in the first place. The goal of Compass Park in such circumstances is to turn the “black knight” into a “white knight,” thus making our client look like the wise hero and savvy corporate leader.
- Interim management and staff augmentation. Last on our list is interim management and staff augmentation. Though, perhaps the least likely reason a management consulting firm would be retained it is still an option for clients who seek special needs interim management and/or staffing. Compass Park has been retained on several occasions to fill-in for interim management roles such as CFO, and VP’s of most functional departments, such as operations, sales, human resources, and even IT. If an interim CEO role is desired by the client it is usually a restructuring or turnaround situation handled by CSC Capital’s restructuring group.Also we have brought in on several occasions one of our specialists, normally technical and accounting to augment our client’s staff on special occasions. Though rare these days, in the early years of the firm staff augmentation was more necessary due to the lack of available and talented human resources in the client’s company. After fulfilling the necessary interim management and/or staff positions, Compass Park conducts the necessary executive or staff recruiting and selection for the open positions.
Though management consulting firms are not normally retained for interim management and staff augmentation, the long-term benefits do outweigh the up-front costs. This is because unlike temporary staff or even a solo interim manager, a management consulting firm can at least suggest other solution oriented measures that can be of great benefit both organizational and financially. Also most independent interim managers rarely want to ever leave, preferring to either stay in the position permanently or eventually be put on retainer as an outside advisor. In both instances a very unproductive and expensive proposition.
Explain the benefits of retaining the services of Compass Park Consulting Partners?
It seems everyone has heard the old saw; that a management consultant steals your watch to tell you what time it is! This is largely because some advice may appear at first to be “glorified common sense.” Other times consulting advice seems to only “re-invent the wheel” rather than explore creative and innovative solutions. Worse yet, at times consultants may provide advice in matters already known to the client. In all three instances above, the client may have difficulty in finding value in the consulting services. Unless circumstances change fast the consulting engagement will end prematurely.
Today clients want to know that the consulting services will be worth the cost, the advice given and solutions provided are practical and will work in their company, and that during the engagement day-to-day operations are not disrupted. Besides the above, clients also want to be reinsured that there will be positive monetary advantages, either immediately or in the very short-term. CSC Capital’s founding credo in 1992 was short and simple:
“CSC Capital’s mission is to ensure that the professional service provided leads to measurable improvements in our client’s effectiveness, efficiency, profitability and sustainable growth, committed strongly to a worldwide free enterprise system.”
To obtain the firm’s mission, Compass Park pursues eight policies:
- Selection. We conduct management consulting services to only those clients that will monetarily benefit. By benefiting we aim to increase all less favorable operating margins, increase unsatisfactory volume levels, and improve all other critically important financial performance criteria, including the overall worth of the client’s organization.
- Service. We conduct management consulting services in a manner that promotes necessary changes to a client’s organization in an orderly fashion thereby ensuring the client’s employees that we are sincerely concerned with efficiency, productivity and morale.
- Quality. We conduct management consulting services through assigning personnel of the highest professional talent, as well as striving for and maintaining the highest quality control standards, ensuring that all solutions are sound and practical.
- Investment. We conduct management consulting services that balances our fees with the monetary results provided to clients, not only achieving a long-term investment but also immediate cost savings, aiming to return in some form a substantial investment and savings to our clients.
- Satisfaction. We conduct management consulting services with the greatest emphasis upon client satisfaction, as well aim to create widespread satisfaction at all levels of the client organization.
- Responsibility. We conduct management consulting services seeking a reasonably shared risk of responsibility of our services, as well as for any recommendations and intervention decisions regarding employee relations.
- Partnership. We conduct management consulting services providing clients the opportunity for a long-term partnership through the satisfaction of knowing we are always available as your trusted advisor.
- Free Enterprise. We conduct management consulting services to promote the handling of business affairs through productive and ethical free enterprise techniques and oppose the encroachment upon the free enterprise system of any unreasonable regulatory interference.