Management Consultants and influencing of organisational decisions

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The objective of this short study is to discuss the role of management consultants in influencing of decision-making in their client organisations.

Canback (1998, p 4) perceives management consulting to be an advisory service that is contracted by and thereafter provided to organisations by trained and qualified experts who help client organisations with independence and objectivity to identify and analyse management problems, recommend solutions to such problems, and assisted, when called upon to do so, in implementation of solutions (Canback, 1998, p4). Another popular management saying that describes a consultant as a person who borrows your watch to tell you the time provides a tellingly different perspective of such individuals and organisations.

Management consulting has over the course of the 20th century become an integral part of the economic environment of the western economies. Recent market surveys reveal that approximately 92 percent of surveyed management consulting clients were favourably impressed by the quality of consultancy work and 89 percent of appointed consultants were felt by users to possess high levels of knowledge and expertise. The work of management consultants, researchers found, benefits many public and private sector client organisations and helps the British economy in no uncertain manner (MCA, 2008, p2).

Management consultants are well positioned to offer valuable advice and support to business firms to overcome their various challenges and difficulties in the current environment of global economic volatility and insecurity. They can also help in the realisation of organisational changes and in the transfer of important skills to their clients. Such advice and support can help organisations to cope with difficult contemporary challenges and prepare for the future (MCA, 2008, p2).

Their role in organisational decision making however frequently attracts debate and discussion. Wickham (1999, p230) states that "it is the consultant's responsibility to facilitate client decision-making, not change the decisions the client would have made anyway". This study attempts to understand the role of management consultants in organisational decision-making processes in light of this statement and assesses their possible role in such activity.

Role of Management Consultants

The growth of large industrial organisations in the United States at the turn of the nineteenth century generated a market for professional firms of lawyers, engineers and accountants that offered independent corporate guidance. These experts were often engaged by merchant bankers, who then coordinated a broad array of services that were similar in some ways to contemporary management consulting services (McKenna, 1995, p53). Business managers retained American subsidiaries of British accounting firms like Price Waterhouse to establish financial controls and carry out external audits for their growing organisations (McKenna, 1995, p53).

Management consultants have since the 1930s helped in the restructuring of large and important organisations in the advanced western economies and in the developing nations. The US government engaged numerous consultants, through the Second World War, to help in the reorganisation of civilian production, the military and the Federal Administration (McKenna, 1995, p53-55). McKinsey and Company were successful, by the 1970s, in decentralising a quarter of the hundred largest British organisations. Whether restructuring the Bank of England, the World Bank, Royal Dutch Shell or even the Government of Tanzania, management consultants ensured the dissemination of American management techniques worldwide (McKenna, 1995, p57).

A large part of the literature on management consultants is descriptive and categorises them in different ways. It is thus not easy to understand the essence of management consulting from the different perspectives in which the term is used. The contemporary categorisation of management consultants however brings about three important areas of concern for business firms that call for their involvement in organisational decision making (Nippa & Petzold, 2002, p1-3).

The first concern relates to the capacities of organisational managements for collection and analysis of relevant data and their motivation to outsource such activities to external consultants. Such concerns largely arise from (a) the limited availability of time with senior managements to access and examine important data and (b) the absence of know-how with them that is available with consultants. The knowhow and expertise available with consultants is another reason for their involvement in decision making. Such knowhow and domain specific knowledge helps clients to know where they stand, transfer know-how from other industries, avoid wheel reinvention and focus on organisational issues. The third and final issue concerns the acknowledgement that management consultants may help decision making in intensely political issues, where meaningful accord cannot be reached without external intercession (Nippa & Petzold, 2002, p1-3).

These concerns, according to Kubr, (1996), highlight the criticality of meaningful exchange between consultants and clients. Research reveals numerous ways in which organisations can profit from meaningful utilisation of management consultants. These include (a) legitimisation and confirmation of reorganisation decisions that have already been made, (b) reassurance by specialists, (c) insight into modern management methods and (d) the initiation of placebo-effects. The transfer of objectivity, know-how and legitimisation by management consultants to organisational managers has also been empirically established (Nippa & Petzold, 2002, p1-3).

3. Organisational Benefits in Making Decisions with use of Consultants

Marvin Bower, who led McKinsey and Company for five decades, advocated six reasons for engagement of external consultants, namely because they (a) offer competence that is not available within the organisation, (b) possess diverse know-how beyond the client's domain, (c) can allocate time to examine the problems, (d) are experts, (5) are independent and objective, and (6) have the capability to facilitate actions that are envisaged by their recommendations (Canback, 1998, p16).

Bower's reasons for engagement of managing consultants lead to a number of propositions. Management consultants, it is seen, are increasingly dealing with critical long-term issues of their clients and have become important to executives of such organisations for rational representation and analysis of these issues. They contribute to client organisations by dealing with both process and content issues with the use of their methodology, know-how, and wide-ranging problem-solving proficiencies. Management consultants also work jointly with client organisations in fluid and complicated relationships that are typified by huge mutual trust (Canback, 1998, p18).

It is further observed that external consultants can lend fresh perspectives to complex organisational issues. Management consultants by and large do not have vested interests, which can lead to organisational politics and complications, since they are outsiders in the eyes of organisational personnel. These two factors help in effective and unbiased advice and lend urgency to the decision-making process (Lancaster, 2005, p39).

The engagement of external consultants sometimes becomes imperative on account of legal or regulatory requirements, like for example for examination of allegations of malpractices or wrongdoing on the part of the members of the management. Whilst engagement external consultants is good practice or even obligatory in such circumstances, it is advisable to engage consultants to address such organisational problems or issues, even when legal or regulatory issues are not involved, for the sake of objective and impartial investigation and assessment (Lancaster, 2005, p40).

4. The Need and Importance for Companies to take their Own Decisions

It is important for organisations in both the public and private sector to develop independent decision-making capabilities. Not doing so has its limitations and recent market research has evidenced the same. It needs to be examined, in this context, whether decision-making should be a function of internal management and be dependent on their know-how, skills and processes, or whether it should be subject to the expertise and domain knowledge of external management consultancies.

With regard to the issue of organisational knowledge, the function of management consultancy firms in influencing, rather than facilitating, decisions on development of information systems needs examination (Westrup & Knight, 2009, p7). Recent research shows that organisational experience with ERP systems has likenesses with earlier approaches to information systems like Business Process Reengineering systems.

Decisions on ERP systems, it appears from conducted research, are taken on the basis of limited scrutiny of business processes, which in turn give rise to various issues that are central to unsuccessful implementation and subsequent use of ERP systems (Westrup & Knight, 2009, p7). The expected failure of ERP systems in future will lead to the promotion of other systems, which can be expected to be founded, either on a re-look at the interpretation of functions of ERP systems to engage with Business-to-Business systems, or on other more elastic middle-ware methodologies operated by skilled workforces that seek to preserve efficiency and flexibility. These are specialty spheres that can be addressed by consultancy firms, are commoditised and are open to comparatively short-term intercession (Westrup & Knight, 2009, p7).

Organisations are likely to see sustained cycles of novel and technological 'solutions' that result in re-evaluation and ultimate substitution of existing processes by a sequence of solutions. Management consultant induced changes can become common as well as disruptive of other forms of organisational know-how. Organisations that desist from many consultant-mediated and technologically driven changes and instead muddle through and settle for bricolage may possibly end up being very successful (Westrup & Knight, 2009, p7).

It is seen that much of the increase in state spending on account of management consultancy services has been misdirected and wasteful. It is also observed that a large proportion of the state's expenditure on management consultancy services in Britain has happened during periods of recession. Such spending on consultancy services is likened by some to traditional expenditure on public works, which was in the past done to uphold levels of employment and economic activity (De Burgundy, 1998, p204).

Many organisations have learnt to their disappointment that engagement of external management consultants or even the adoption of an approach bordering on consultancy methodologies with employees has not proven to be a remedy for all organisational problems and issues, especially with regard to making of decisions (Lancaster, 2005, p41).

The advantages of fresh perspectives and lack of vested interests that arise from engagement of consultants is often offset by their lack of familiarity with client organisations. Consultants must therefore initially go through learning processes before they are able to render effective research and consultancy services. Such learning invariably stretches the time frame of consultancy projects, delays decision making and frequently results in becoming major sources of irritation for client organisations, which require issues to be resolved with swiftness (Lancaster, 2005, p41).

External consultants rarely have real responsibility for results. Indeed, in many instances their responsibilities cease with the making of recommendations to client organisations and post-recommendation follow-up and implementation becomes the responsibility of client organisations. It is thus often argued that external consultants manage to stay away from any responsibility for the success or failure of the recommended courses of action (Lancaster, 2005, p41).

The introduction of external consultants into an organisation can occasionally turn into a major cause of resentment amongst existing personnel. Such resentment is sometimes caused by inferences that internal teams are incapable in many respects, with the introduction of consultants being viewed as an affront to present members of the management team. Such resentment occasionally occurs out of apprehensions that consultants might recommend disciplinary action or job cuts. Such organisational resistance sometimes works against satisfactory outcomes of management consultancy and results in flawed decision-making (Lancaster, 2005, p 43).

The high outlays required for engagement of consultancy firms also needs to be considered by managements. Whilst engagement of consultants can lead to improvement of productivity and good value for money, organisations need to be careful in evaluation and monitoring of costs of consultancy firms and exercises. Cost effectiveness can be realised if organisations are careful in choosing consultancy teams and in the planning and management of consultancy and research projects (Lancaster, 2005, p 43).

5. Importance for Companies to use Consultants as Advisors

Management consulting is described as a professional and independent advisory service that aids organisations and their managers to achieve organisational objectives and purposes by resolving business and management issues, identifying and seizing fresh opportunities, implementing changes and enhancing learning (Kubr, 2002, p10).

The importance of engaging management consultants lies in their capability to render independent advisory services that facilitate decision-making rather than in the assumption of decision-making roles. As advisors they can contribute significant value in terms of idea validation, benchmarking data, professionalism and industry best practices, and it follows that they should in the regular course of business be engaged for these purposes instead of for facilitation of decision-making.

External consultants can help in development of internal know-how and learning and in deciding upon outsourcing of services, particularly in organisations that are heavily dependent on third-party providers for services in various functional areas like Information Technology, procurement, finance, human resources and facilities (Lindstrom, M., 2011, p1).

The use of external consultants over internal managements in marketing enables organisations to obtain greater market insight and market information. The extent of utilisation and type of consultancy services depends upon their organisational wherewithal and capabilities and their abilities to deliver required services within given time-frames (Lindstrom, M., 2011, p1).

6. Conclusions and Recommendations

This study examines various aspects of the roles played by management consultants in client organisations, with specific regard to their participation and influencing of organisational decisions.

It is evident from the investigation that the utilisation of management consultants has both advantages and limitations in areas of organisational decision making. The role of management consultants is largely seen to be advisory in nature in facilitation of decision-making by client organisations. Their lack of comprehensive familiarity with client organisations, as also their lack of final responsibility for organisational performance, works against their assumption of roles of decision makers or of changers of decisions taken by organisational managements.

The use of management consultants should be limited to advisory and facilitation purposes, rather than in the making or changing of decisions. Organisational managements must in the final run assume full responsibilities for organisational decisions and take such decisions on their own, albeit supported by the advice and expertise of management consultants.