Management consulting

Figure 35.2 Professional core of a consulting unit

Matrix management

As suggested in the foregoing discussion, many consulting organizations practise some sort of matrix management. Both operating consultants, and their more senior colleagues who work as team leaders or supervisors, have their “home” units – functional, sectoral or geographical. However, not all assignments remain totally within the province of these home units.

The organizational culture of a consulting firm must provide for considerable flexibility to facilitate the rapid establishment of an effective collaborative relationship and a team spirit in starting new assignments. Any member of an assignment team must accept his or her role in the team, and the coordinating role of the team leader, as soon as the team is constituted and starts tackling the job. If this were not the case, the start would be slow and costly, to the detriment of the client.

However, the role of the home unit extends beyond the function of a pool of specialists from which operating consultants can be drawn. The head of a

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Structuring a consulting firm

marketing consulting unit is also interested in what is happening in the assignments to which he or she has detached marketing consultants, even if these consultants work under the immediate supervision of a team leader from another unit.

The head of the unit is responsible for technical guidance, control and knowledge-sharing of operating consultants in the special field of marketing, and carries out this responsibility in various ways: by organizing technical meetings of marketing consultants, briefing consultants before assignments, reviewing consulting reports, discussing the progress of the work with the team leaders, visiting the marketing consultants on assignments, and so on. Guidance and control have to be exercised in agreement with the team leaders and supervisors, and in a way that does not undermine the operating consultants’ authority in the clients’ eyes.

Flat organizational structure

In addition to matrix management, most consulting firms prefer to use a relatively flat organizational structure. The number of rungs on the management ladder between an operating consultant and the firm’s top manager is usually between none and three, depending on the firm’s size, complexity and service diversification. Such a structure encourages collaboration, interaction with peers and knowledge-sharing within the operating core rather than referring matters upwards through the chain of command.

International operations

Organizational arrangements for international operations reflect the strategy pursued by the firm (section 28.5). They also need to take account of factors such as the frequency, relative importance and predicted future trend of these operations, the institutional and legal setting in countries where work is to be done, the possibility of repatriating earnings, language requirements, and local practice concerning business and professional services.

Consultant missions. If work abroad is irregular and small in volume, consulting firms usually prefer to send their staff on missions from headquarters. This is how foreign operations start in most consulting firms. It can be an expensive arrangement, not only because of the cost of long-distance travel and living and other expenses of operating consultants, but also because of costs incurred in negotiating, preparing and supervising assignments in foreign countries.

Offices in other countries. Having gained some experience with consulting in other countries, a consulting firm may feel that it is more effective to have a permanent presence where the market is. The establishment of a foreign (country or regional) office is often the solution. As with decentralization within the home country, this office may start as a small one, staffed mainly for marketing, liaison with local businesses and government, and as a support for operating teams coming from headquarters to work on specific projects. Legally speaking, a

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Management consulting

foreign office will often take the form of a “branch”, i.e. a registered extension of an existing firm rather than a new entity with a separate legal identity.

Foreign subsidiaries. Fully staffed foreign subsidiaries have been founded by many large consulting firms that regularly undertake a substantial amount of foreign business. Such subsidiaries may be quite independent of the parent company in operational matters, but provision is always made for policy guidance, quality control and maintaining a financial relationship with the parent company. There is a growing tendency to staff foreign subsidiaries with local professionals. The number of consultants from headquarters is gradually reduced, once they have created and developed a foreign operation and recruited and trained local staff. Conversely, foreign subsidiaries are supported from headquarters in various ways (including long-term detachment and shortterm missions of consultants) in new fields.

Association with local consultants. Some countries require foreign consultants to offer and provide services in association with a local consulting firm. For example, this requirement may be stipulated in an invitation to tender for an assignment. Even if there is no such regulation, consulting firms operating abroad often find it useful, for a number of reasons, to negotiate and execute assignments and to organize their foreign operations in association with local consulting firms. This association can have various forms, such as shared ownership of a foreign company (on a fifty-fifty or other basis), or an arrangement whereby the precise scope of collaboration is defined separately for every assignment. There have been cases of abuse, e.g. if the association is established with the sole intention of formally satisfying, but actually bypassing, legislation in order to get contracts, and the local consultant is a “man of straw”. Another form of abuse is using local and considerably lower-paid consultants in executing contracts drawn up on the assumption that the work would be done by foreign consultants, and priced accordingly.

Administration

Many single practitioners and other small consulting units are proud of having minimal administrative expenses because they are able to handle many jobs personally, with the help of a spouse, a part-time assistant or a bookkeeper. However, as the consulting firm grows, its administrative and support services reach a volume that justifies permanent staff and solid organization. Reliability, versatility and initiative are the key qualities required in addition to technical proficiency and discretion. Consultants who are busy with clients, and often absent from their own offices for long periods, must be sure that they can rely on their administrative assistants and other collaborators to handle messages, travel arrangements, contacts by clients, report processing and transmission, search for documents, and many other administrative and housekeeping services that cannot, or should not, be directly handled by the consultants.

Office staff. Because the majority of operating consultants are able to make some use of their clients’ administrative services, and to use their own personal

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