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Amity Business SchoolClass of 2011, Semester IV

Management in Action Social, Economic & Ethical Issues

Dr. Sanjay Srivastava

The Genesis• Roots are in Management Consultancy• Emergence from two concept based issues:1.Total Quality Management & Business Ethics

and Corporate Governance2.Theoretical frameworks were drawn from

Strategy, Finance & HR

Management Consultancy• "The services provided by an independent and

qualified person or persons in identifying and investigating problems concerned with policy, organization, procedures and methods, recommending appropriate action and assistance in implementation".

Management Consultants• Known as Evolutionary rather than

Revolutionary.• Application must be Collaborative and

Authoritarian.

• Doctors of Management.

Management Practices & Outsourcing

• What is Outsourcing?• What is being Outsourced?• Core Expertise need to be

retained, nurtured and stretched.

Why to hire Management Consultants

Client require the skills of the Management Consultants for two purposes:

• Identification of the “Problem”.• Achieving the objectives and effective

performance.

Why to hire Management Consultants

• Need for fresh ideas from Entrepreneurial Perspective.• Need for improved performance from the perspective

of Operations, Distribution and Logistics, functional areas of Marketing, Finance, HR and IT.

• Need for Efficiency and Effectiveness.• Need to evaluate performance.• Need to train employees.• Need for total turnaround.

Client’s Expectation(S)• Independent Viewpoint

• Special Qualifications

• Realistic Gains not just moving the wheels.

Attributes of Successful Consultants

• Powerful Negotiator• Effective Communicator• Reservoir of Self Control• Understanding of Individual Psychology• Understanding of Group Psychology• Understanding of Organizational Psychology• Complete mastery of the given “area”.

Barriers common to Consultants…1. Know – it – all attitude2. Inability to understand technical language3. Inadequate background or knowledge4. Poor organization of ideas5. Differences in perception6. Prejudice or bias7. Personality conflicts8. Tendency not to listen9. Resistance to change10. Lack of credibility

…Barriers common to Consultants

11. Inability to understand Non-Verbal Communication12. Hostile attitude13. Lack of feedback14. Differences in status or position15. Information Overload16. Too many Gatekeepers17. Overly Competitive Attitude

“As long as we have hope, we have direction, the energy to

move and the map to move by, we have a hundred alternatives,

a thousand paths, and an infinity of dreams."

Organizational AppraisalOrganizational Capability Factors

• Financial Capability Factors• Marketing Capability Factors• Operations Capability Factors• Human Capability Factors• Information Management Capability Factors• General Management Capability Factors

There’s no business like consulting business…

They [Management Consultants] are people who borrow your watch to tell you what time it is and then walk off with it.

-R. Townsend, Up the Organization

WHY CLIENTS HIRE CONSULTANTS?To learn

To save moneyTo avoid losses

To solve problemsTo improve safetyTo improve image

To improve efficiencyTo hire new employees

To improve performanceTo increase sales and profits

To help through busy periodsTo introduce, facilitate and sustain changeTo open up new markets and opportunities

To comply with laws, standards and regulationsTo put new systems, methods and practices into use

To confirm their ideas, concepts, plans and strategies To facilitate transitions, mergers, takeovers and

downsizing

The Advantages of Using Consultants

•Getting a second opinion•More flexibility in hiring•Fresh perspective and views•Expertise that is lacking in the organization•Opportunity to learn and train employees•Work is performed faster and is of better quality

The Disadvantages of Using Consultants

•It is expensive•Desired results are not guaranteed•It may create bad vibes amongst employees•Projects and issues may blow up out of all proportions

How do Consultants charge for their services?

Per Hour or Per Day basisRetainer basis Fixed-price assignmentsPerformance-based fee (Contingency Fee)

Contingency feesA client complained that he couldn’t afford a consultant’s hourly fee. ‘Instead of doing the job on a time and material basis, I’m willing to do it for a contingency fee,’ responded the consultant.‘What is contingency fee?’ asked the client.‘It’s very simple. If I don’t deliver what I promised, I’ll be left with no money at all,’ explained the consultant‘What if you do deliver what you promised?’ persisted the client.‘Then you’ll be left with no money at all,’ said the consultant.

How consultants market their services?

Membership of community organizations and professional institutions Publishing books and articlesNetworking with other consultantsSpeaking at seminars, conferences and other gatherings attended by both clients and consultantsWord of mouth advertising – recommendations from satisfied clients

Paradigm Shift in Consulting AccountabilityActivity–Based Consulting• No business need for the

consulting intervention• No assessment of

performance issues• No specific, measurable

objectives for implementation and business impact

• No effort to prepare stakeholders/participants to achieve results

• No effort to prepare the work environment to support implementation

Result-Based Consulting• Intervention linked to

specific business needs• Assessment of performance

effectiveness• Specific objectives for

implementation and business impact

• Results/expectations communicated to stakeholders/participants

• Environment prepared to support implementation

Activity–Based Consulting

• No efforts to build partnerships with key managers

• No measurement of results or cost benefit analysis

• Planning and reporting on consulting intervention is focused on input

Result-Based Consulting

• Partnerships established with key managers and clients

• Measurement of results and cost-benefit analysis

• Planning and reporting on consulting interventions are focused on output

Methods of Data Collection• Follow-up surveys measure satisfaction from stakeholders.

• Follow-up questionnaires measure reaction and uncover specific application issues with consulting interventions.

• On-the-Job observation captures actual application and use.• Tests and assessment are used to measure the extent of

learning (knowledge gained or skills enhanced).

• Interviews measure reaction and determine the extent to which the consulting intervention has been implemented.

• Focus groups determine the degree of application of the consulting solution in job situations.

• Action plans show progress with implementation of the job and the impact obtained.

• Performance contracts detail specific outcomes expected or obtained from the consulting intervention.

• Business Performance monitoring shows improvement in various performance records and operational data.

Methods for Isolating the Effects of Consulting

• A Pilot group with consulting is compared to a control group without consulting to isolate consulting intervention impact.

• Trend lines are used to project the values of specific output variables, and projection are compared to the actual data after a consulting intervention.

• A forecasting is used to isolate the effects of a consulting intervention when mathematical relationships between input and output variables are known.

• Participants/stakeholders estimate the amount of improvement related to a consulting intervention.

• Supervisors and manages estimate the impact of a consulting intervention on the output measures.

• External studies provide input on the impact of a consulting intervention.

• Independent experts provide estimates of the impact of a consulting intervention on the performance variable.

• When feasible, other influencing factors are identified and the impact is estimated or calculated, leaving the remaining unexplained improvement attributable to the consulting intervention.

• Customers provide input on the extent to which the consulting intervention has influenced their decision to use a product or service.

1. Reaction to and satisfaction with the consulting intervention from a variety of different stakeholders within different time frames.

2. The extent of learning that has taken place as those involved in the consulting intervention learn new skills, processes, procedures, and tasks.

3. The success of the actual application and implementation of the consulting intervention as the process is utilized in the work environment.

The Score Card Perspective : Six Balanced Measures

4. The actual business impact changes in the work unit where the consulting project has been initiated. These values include hard data as well as soft data.

5. The actual return on investment reported as a ratio or in a percentage format. The measure shows the monetary return on the cost of the project.

6. Intangible measures, which are usually soft data items that are not converted to monetary values for use in the ROI formula.

Methods for Converting Data to Money• Output data are converted to profit contribution or cost savings

and reported as a standard value.

• The cost of a quality measure, such as a reject, is calculated and reported as a standard value.

• Employee time saved is converted to wages and benefits.

• Historical costs of preventing a measure, such as customer complaint, are used when they are available.

• Internal and External experts estimate a value of a measure.

• External database contain an approximate value or cost of a data item.

• Participants estimate the cost or value of the data item.

• Supervisors or managers provide estimates of costs or value when they are both willing and capable of assigning values.

• The consulting of staff estimates a value of a data item.

• The measure is linked to other measures for which the costs are easily developed.

Recommended Consulting Costs• The Cost of initial analysis and assessment, possibly

prorated over the expected life of the intervention.• The cost of developing solutions.• The cost of acquiring solutions.• The cost of application and implementation of the

intervention.• The cost of maintenance and monitoring• The cost of evaluation and reporting• The costs of administration and overhead for the

consulting intervention, allocated in some convenient way

Consulting BenefitsBCR = _______________

Consulting CostsSometimes the ratio is stated as a cost-benefit ratio, although the formula is the same as BCR. The return on investment uses the net benefits divided by consulting costs. The net benefits are the consulting benefits minus the costs. In formula form, the ROI becomes.

Net Consulting benefitsROI% = _________________ X 100

Consulting Costs

This is the same basic formula used in evaluating other investments where the ROI is traditionally reported as earnings divided by investment.

The BCR and the ROI present the same general information, but from slightly different perspectives. An example will illustrate the use of these formulas: a consulting intervention produces benefits of Rs. 581,000 at a cost of Rs. 229,000. Therefore, the benefit-cost ratio is:Rs. 581,000

BCR = __________ = 2.54 (2.5:1)Rs. 229,000

As this calculation shows, for every Rs.1 invested, Rs.2.50 in benefits are returned. In this example, net benefits are Rs.581,000 - Rs.229,000 = Rs. 352,000. Thus, The ROI is:

Rs.352,000ROI% = _________ X100 = 154%

Rs.229,000