Management consulting indicates both the industry and practice of helping organizations improve their performance primarily through the analysis of existing organizational problems and development of plans for improvement.
Organizations hire the services of management consultants for a number of reasons, including gaining external (and presumably objective) advice and access to the consultants' specialized expertise.
Because of their exposure to and relationships with numerous organizations, consulting firms are also said to be aware of industry "best practices", although the transferability of such practices from one organization to another may be problematic depending on the situation under consideration.
Consultancies may also provide organizational change management assistance, development of coaching skills, technology implementation, strategy development, or operational improvement services. Management consultants generally bring their own, proprietary methodologies or frameworks to guide the identification of problems, and to serve as the basis for recommendations for more effective or efficient ways of performing work tasks.
- 1 History
- 2 Function
- 3 Approaches
- 4 Current state of the industry
- 5 Trends
- 6 Government consultants
- 7 Criticism
- 8 Professional qualifications
- 9 See also
- 10 References
- 11 Further reading
- 12 External links
Management consulting grew with the rise of management as a unique field of study. The first management consulting firm was Arthur D. Little, founded in 1886 by the MIT professor of the same name and was incorporated in 1909. Though Arthur D. Little later became a general management consultancy, it originally specialized in technical research. Booz Allen Hamilton was founded by Edwin G. Booz, a graduate of the Kellogg School of Management at Northwestern University, in 1914 as a management consultancy and the first to serve both industry and government clients.
The first wave of growth in the consulting industry was triggered by the Glass-Steagall Banking Act in the 1930s, and was driven by demand for advice on finance, strategy, and organisation. From the 1950s onwards consultancies not only expanded their activities considerably in the United States but also opened offices in Europe and later in Asia and South America. After World War II, a number of new management consulting firms formed, bringing a rigorous analytical approach to the study of management and strategy. Work done at McKinsey, Boston Consulting Group, Booz Allen Hamilton, and the Harvard Business School during the 1960s and 1970s developed the tools and approaches that would define the new field of strategic management, setting the groundwork for many consulting firms to follow. In 1983, Harvard Business School's influence on the industry continued with the founding of Monitor Group by six professors.
The industry experienced impressive growth in the 1980s and 1990s, gaining considerable importance in relation to national gross domestic product. In 1980 there were only five consulting firms with more than 1,000 consultants worldwide, whereas by the 1990s there were more than thirty firms of this size.
An earlier wave of growth in the early 1980s was driven by demand for strategy and organisation consultancies. The wave of growth in the 1990s was driven by both strategy and information technology advice. In the second half of the 1980s the big accounting firms entered the IT consulting segment. The then Big Eight, now Big Four, accounting firms (PricewaterhouseCoopers; KPMG; Ernst and Young; Deloitte Touche Tohmatsu) had always offered advice in addition to their traditional services, but from the late 1980s onwards these activities became increasingly important in relation to the maturing market of accounting and auditing. By the mid-1990s these firms had outgrown those service providers focusing on corporate strategy and organization. While three of the Big Four legally divided the different service lines after the Enron scandals and the ensuing breakdown of Arthur Andersen, they are now back in the consulting business.
The industry stagnated in 2001 before recovering after 2003.
The current trend in the market is towards a clear segmentation of management consulting firms.
Functions of consulting
- providing information to a client;
- solving a client's problem;
- making a diagnosis, which may necessitate redefinition of the problem;
- making recommendations based on the diagnosis;
- assisting with the implementation of the recommended actions;
- building a consensus and commitment around the corrective actions;
- facilitating client learning;
- permanently improving organizational effectiveness.