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firm. They should know what is regarded as entrepreneurship: Is it getting new clients? More business from existing clients? Selling more assignments that will be easy to execute? Looking for innovative work methods? Coming up with new ways of tackling old problems? Taking the initiative to develop new fields of consulting?

Consultants need to know, too, who in the firm is supposed to think and act as an entrepreneur. Is this a guarded province of senior partners? Is every member of the firm, including the new recruits, expected to think and act as an entrepreneur?

When consulting is not a business

Not all management consulting units are independent businesses. Internal consulting units within governments and business firms (section 2.5), and consulting services of various not-for-profit organizations, cannot be categorized as businesses. Some of these units provide consulting services free, or for a nominal price, instead of charging the full market rate. Their budgets may be subsidized by their parent body, technical assistance programmes or from other sources. Some of these units may be in competition with other consultants, but their independence tends to be limited in terms of recruiting, remunerating and terminating the appointments of staff, fixing consulting fees, expanding or scaling down activities, changing the service portfolio or finding new clients.

Not all the principles involved in managing a professional business can be applied to such a unit. However, certain principles are applicable. The effectiveness of these units can be enhanced by treating them as “quasi-businesses”, providing them with relative autonomy in decision-making, encouraging them to sell services, and making sure that their business results have a bearing on staff remuneration and motivation, and on the future development of the unit. Internal consulting units may compete with external consultants for work to be done within the parent organization but, at the same time, may be authorized to market and sell their services to other companies.

27.4Achieving excellence professionally and in business

In real life, the professional and business sides of consulting are not separate. Professional decisions are business decisions and business decisions have professional implications. Key professional characteristics of the firm, such as staff competence and integrity, leadership, organizational culture, shared values, and good relations with important clients, have an economic value and are reflected in the value of the firm, fee levels, potential and real earnings, and so on. Managers of consulting firms have to address the two aspects irrespective of their personal background and preference for one or other side. The thrust of their work is sensitive, tactful and subtle balancing both of professional and

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business objectives and concerns, and of the interests of clients, individual consultants, partners and the whole firm. This balancing requires compromises, trade-offs, and anticipation, prevention and resolution of conflicts.

In every firm, there are pressures that can destroy the delicate profession– business equilibrium. Individuals or teams may develop services in which they are personally interested, but for which there is no market, or which are no longer profitable. Some partners will resent leverage because they prefer to do everything themselves rather than relying on junior colleagues and developing these colleagues. The firm may press consultants to increase profitability by lowering quality. Operating consultants may be asked to become more productive by saving on data-gathering and analysis. Juniors may be assigned to jobs that are beyond their competence.

A key task is the balancing of assignment and practice management. Assignments constitute the basic building-blocks in the management system of consulting organizations. Once an assignment has been identified and a contract signed, the organization appoints a consultant or an assignment team and furnishes them with needed resources. A self-contained management cell is thus created within the consulting firm. As assignments normally have a limited life-span, assignment teams cease to exist when the job is completed. Individual team members are regrouped to make up new assignment teams and new management cells, while other resources (e.g. equipment, finance) have been used up or are reallocated.

Managing and coordinating assignments are crucial activities in any consulting firm. In large firms, dozens or hundreds of parallel and overlapping operating assignments may need to be managed simultaneously, while new assignments are in preparation. However, even the best assignment management cannot ensure the functioning and development of the firm as a whole. It can even create conflicts and imbalances by favouring one assignment over others, e.g. by taking resources from one assignment just because another client speaks with a stronger voice. Assignments can also conflict with the firm’s overall strategy. Future development can be jeopardized by favouring lucrative assignments from which the firm learns nothing new. Research and development may be neglected. Here again, a balanced approach is required, caring for global concerns and the needs of the firm in addition to managing specific client projects.

These global concerns and organizational needs include in particular:

●the firm’s professional and business culture;

●strategy for achieving high professional standards and service quality;

●strategy for achieving profitability and growth;

●the development of new capabilities and products;

●development and promotion of the market and client base;

●management, motivation and development of the principal resource – the professional staff;

●sound financial management and control.

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The terms “balancing”, “trade-offs” and “compromise” used in the previous paragraphs truly define what mangers of consulting and other professional firms do for a large portion of their time, but they do not give the whole picture. First, the environment in which consultants operate, and their clients’ needs, are constantly changing. The consulting firm’s management must be flexible and dynamic enough to cope with and adjust to these changes. In other terms, in balancing the professional and business sides of the firm, it is not possible to return to an old equilibrium – a new one must be achieved, consistent with the changes that have taken place in the environment and in the firm itself. Coping with and managing change imply preventing discrepancies and conflicts between the professional and the business side. New markets are developed and new business models adopted, but professional standards are not sacrificed. New staff are recruited and trained but are not assigned to independent client work for which they are not competent.

Secondly, and most importantly, every consulting firm sets its own standards of performance and achievement. An equilibrium between the professional and the commercial side of consulting can be achieved and sustained at various levels of excellence. There are firms with modest ambitions, where consulting is merely a source of income to managers and staff alike; these firms aim to achieve regular income from any, even uninspired and mediocre, service. The leaders in consulting behave differently. They have high standards and pursue ambitious though not unrealistic objectives both professionally and as businesses. They are keen to have excellent business results and earn more than competitors, but never to the detriment of professional performance and quality. They aim to be leaders in every respect. This is what makes these firms attractive to talented and dynamic individuals, and to sophisticated clients seeking professional services of the highest level they can afford. This is the thrust of consulting firm management.

1Cited in H. J. Hagerdorn: “The anatomy of ideas behind a successful consulting firm”, in Journal of Management Consulting (Milwaukee, WI), Vol. 1, No. 1, 1982, pp. 49–59.

2Leading publications on professional firm management are listed in Appendix 3.

3T. Levitt: “Marketing intangible products and product intangibles”, in Harvard Business Review (Boston, MA), May–June 1981, p. 96.

4Useful ideas and learning materials on motivation and leadership in professional service firms are available from the PracticeCoach® service of David Maister and the Edge Group (see www.practicecoach.com.ai/content/what.html, visited on 4 Apr. 2002), and a handbook for managing partners and practice group leaders by P. McKenna, G. A. Riskin and M. J. Anderson: Beyond knowing (Edmonton, The Institute for Best Management Practices). See also P. McKenna and D. Maister: First among equals: How to manage a group of professionals (New York, The Free Press, 2002).

5Ibid.

6T. A. Stewart: Intellectual capital: The new wealth of organizations (New York, Doubleday, 1997), p. 91.

7This section is based on D. Maister: “Profitability: Health and hygiene”, in Managing the professional service firm (New York, The Free Press, 1993), pp. 31–39.

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Many consultants are familiar with the concept of strategy and the techniques of strategic planning and management (see Chapter 12). This chapter looks at how a strategic approach can be useful to consulting firms.

28.1 The strategic approach

A strategic approach is justified if there is a need for it, not because it has become fashionable. In the past, most consultants followed no particular strategy and tried to react to any opportunity and any expression of interest from a potential client. This has changed. More and more consultants realize that they cannot be all things to all clients, and that they stand a better chance of obtaining business by offering a unique service, or by serving a market segment where they can outperform other consultants. Successful consulting firms behave increasingly as strategists even if the term “strategy” is not always used.

Purpose and goals

As in other businesses and organizations, strategy in consulting consists in choosing a path that leads from one condition (the present) to a different one (the future). The starting-point is known, or can be identified by assessing the consultant’s present position, resources and capabilities. This is not difficult if there is a will to see reality as it is and not through rose-coloured spectacles.

The future is a different matter. The basic questions to answer are: What do we want to achieve? What is our basic goal and when do we want to achieve it? Such questions cannot be answered simply by extrapolating past trends. Extrapolation can be misleading if the environment and the markets are changing quickly. What is needed is a vision of the future, which is different from an assessment and projection of demand and opportunities; it is the consultant’s conception of what the firm should look like and what it should achieve in the

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future. This is a reflection not only of ambition and imagination but also of a realistic assessment of opportunities and of the firm’s strengths and weaknesses.

The two dimensions of consulting discussed in Chapter 27 have to be considered in deciding what the consulting firm should be in the future. First, the consulting firm needs to define its purpose and objectives from a professional point of view by seeking answers to questions such as:

●What sort of professional firm do we want to be?

●What will be our culture, our consulting philosophy and our role in solving clients’ problems, in helping clients to achieve high performance levels, and in developing their learning and problem-solving capabilities?

●Do we want to become leaders in technical terms, always at the forefront of progress in technology and management methods, and the first to offer new information and new services to clients?

●Shall we confine ourselves to consulting in management, or widen the range of our service offerings? What services should we add in order to be more useful to clients?

●What new services can we afford to add to our portfolio without losing our identity and entering areas beyond our competence?

The second strategic dimension is that of a business activity. The key questions to ask are:

●What does our consulting firm want to achieve as a business?

●Should our strategy ensure mere survival, moderate growth or rapid expansion?

●What position in the market for consulting services do we want to achieve?

●What earnings and profits should we aim for?

●What should our firm’s financial strength and independence be?

The unity of these two dimensions cannot be overstressed. Focusing only on commercial goals could kill the firm professionally. Ignoring the business side of strategy would undermine the firm’s financial health and could make the proposed professional strategies unattainable.

Competitive edge in consulting

A strategic approach helps a firm to achieve a competitive edge over other providers of consulting services. A starting question is: What is our competitive advantage? Why should a client turn to us rather than to other consultants? The reason could lie in special technical expertise, a product that is unavailable elsewhere, a wide range of multidisciplinary expertise required for complex business problems, an intimate knowledge of an industrial sector, speed and reliability of service delivery, low fees, good reputation and contacts among public sector agencies, or excellent relationships with existing clients.

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The consulting firm’s strategy

Not every consultant can become a guru, and in any case most clients do not need guru consulting. Clients’ needs are at various levels of sophistication, complexity and novelty, and the consulting market offers a wide range of opportunities. However, the number of consultants competing for all these opportunities keeps growing. And clients themselves compete increasingly with consultants by building up internal technical, analytical and change management capabilities.

Thus, a successful consultant who is happy with his or her current achievements and chances of getting good business is probably close to losing competitive advantage. Success can be the consultant’s worst enemy. While you are enjoying your leading position and past successes, another consultant is probably working hard on developing something new and demonstrating that he or she can perform better than you. Privileged relationships with existing clients will not save you. Clients themselves are exposed to competition and cannot afford the luxury of retaining obsolete consultants, even if they have had excellent services from them in past assignments.

In consulting, you should be absolutely honest with yourself in examining whether you have a competitive advantage. You may feel that you are good, even very good, but are you really better than your competitors? If you conclude that you possess a distinct competitive advantage today, the next questions should be: How solid is your advantage and for how long will it last? How can you maintain and enhance it? If you have no competitive advantage, maybe you can think of developing one. How? This will, of course, depend on many factors and there is no blueprint. But there are no limits to imagination and innovation. Not everybody will succeed, but everybody can try. After all, this is how management consulting has been developing – not by grand designs involving the whole profession, but by a myriad of individual efforts by both small and large firms to offer new and better services to clients.

Strategy and operations

There has been a long debate about what the concept of “strategy” means when applied to the behaviour of business organizations. Is strategic equal to long term? Is a strategic choice one that has a major impact on the nature and shape of the business? Can we talk about strategy if choice is limited and there is really only one feasible path?

In our conception, strategic decisions of consulting firms are those that will have a significant impact on the shape or profile of the firm in both professional and business terms. It is plain to see that such decisions cannot be separated from everyday operations. If a consultant who has never worked for the transport sector agrees to do a first assignment for a road transport company, this may be more than a simple operational decision. It will turn out to be a strategic decision if followed by more work from the same client and if other firms from the transport sector come with requests for advice.

If a strategic choice is made by the firm’s management, it is essential to turn it into marketing and operating decisions. New clients, new services, different

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work for existing clients, new intervention methods, significant improvements in quality, changes in the firm’s public image – these are all strategic changes requiring changes in marketing and operations. There is no strategic change without change in operations.

Flexibility in the strategic approach

Only experience can show whether the correct strategy has been chosen. Another consultant, a competitor, may have chosen to offer the same new service, and has performed better in marketing and service delivery. Both your and your competitor’s choices were correct when they were made, but your competitor has been faster and more successful in implementing the strategy. As a result, you will have to revise your strategy, looking for one that takes the competitor’s achievements into account.

However, the main reasons for the need for flexibility in defining and redefining strategy are not management errors, or competitors’ successes, but changes in the business environment. Management consulting needs to reflect developments in technology, markets, finance, legislation, national and international politics, and any other significant factors that affect clients’ businesses. Consulting strategy has to follow, or preferably anticipate, these changes. Once the financial markets have been internationalized and even small firms can think of borrowing on the international money market, a financial consultant’s strategy cannot be restricted to the national financial market. Once the Internet and e-business have become a reality, no consultant can ignore them.

The need for flexibility and imagination in defining and redefining consulting strategy cannot be overemphasized. Strategy must never become a straitjacket inhibiting innovation and entrepreneurship. A consulting firm may have defined its specialization and intervention methods with great care and precision, but this should not prevent the professionals on assignments from being alert to new kinds of problem and opportunity faced by clients. Dynamic consulting firms have always encouraged their staff to think of assignment opportunities in new fields and to come up with new suggestions on how to deal with old problems. The relationship between long-term strategic choices and the need for flexibility and innovation may be delicate and difficult to monitor (remember the “hunters” and “farmers” in box 27.3), but no consulting firm can afford to ignore it.

Furthermore, taking a strategic approach does not mean that the consultant must use a heavy, time-consuming, and probably not very practical methodology for strategic assessment and planning. There is no point in trying to quantify what cannot be quantified and making detailed projections if the future is uncertain. A light and flexible approach to strategic planning and management is not only more effective, but is the only approach that has a chance of being internalized and practised systematically in a professional service firm.

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