Report on differences between Employment Trends in Management consulting industry

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This report is an effort to reconcile the differences between employment trends in 'management consulting' industry and my own personal career aspiration.Management consulting practice has its root in the early 1900's and has been ever evolving since, from being scientific management to process reengineering to business strategizing and still changing as I write this report. Though we can't predict the future but we can always have a sense of coming decade from the major events that has happened in the recent past.

The major driving forces in the consulting industry are all encounters in the clients' situation, the increasing competition within the industry and the developments within the areas of IT and communication.The trend for globalisation in many industries drives consultants to globalise as well. Most clients wish to get consistent service from their consultant for all their subsidiaries, wherever they are. That's why we probably call the globe now a 'flat world'.

However, the future of consulting industry depends on changing market and its segment. It is the changing need of the clients that consultants have to address and to be successful in the role they have to identify the problem before a company realise the problem and have a solution ready. Being proactive rather than reactive will always be the most important factor behind successful consultant or the whole firm.

Anyone, who is anybody can call themselves a consultant, there is no governing body in this industry that segregates or restrict anyone's entrance. Therefore, a consultant or consultancy firm is as good as their last assignment, i.e. to grow in this industry you just don't have to be proactive but have far sight of consequences of your advice to the client.

'Intellectual Capital' being the biggest capital owned by the firm, recruitment becomes the most important tool for all the "big players" to get the most knowledgeable graduates of the B-Schools. If you are not from the top B-School of the country your chances to be part of top-tier consulting firms shrink badly, but having said that, by networking and alliances can take you far in this industry.

Critical success factors for a consultant are; knowledge and knowledge management, innovation, reputation and networking. Being the knowledge based industry a successful consultant of tomorrow should incorporate lifelong learning and behave no less than MBA student for life, if not more.

Table of Contents:

Introduction………………………………………………………………………………………...4

Aim and Purpose………………………………………………………………………………….4

The Driving Force…………………………………………………………………………………4

The Historical Development of Consulting……………………………………………………..5

Future Development………………………………………………………………………………6

Changing Knowledge and its Demand……………………………………………………........8

Critical Success for me as a 'management consultant'……………………………………….9

Conclusion………………………………………………………………………………………..10

References…………………………………………………………………..............................11

1.1 Introduction:

It is pointless to try to predict future. But it is possible and faithful to identify major events that have already happened, irrevocably, and that will have predictable effects in the next decade or two. It is possible, in other words, to identify and prepare for the future that has already happened. (Drucker, 1997)

Management Consulting is utmost fascinating professions in the world for me. Wether reformation of organization, employing systems, developing human resource, altering procedure, obtaining new companies, or bringing out innovative products and services, businesses are querying consultants to support in many ways. Companies are enthusiastically seeking consultants for their outside perspectives and expert estimations, anticipating that they will deliver solutions that will expand business.

Many ambitious consultants, like me,embrace visions of high level of career contentment, control over tracking and programing work, and a treasure of free time as an independent worker- and all the acknowledgment and incentives that come with the job. Unfortunately, many consulting companies or individuals don't survive the first two years since their formation.

The consulting business has enjoyed incredible success in the the past two decades, with its growth greater than that of many professions. Mostevaluationsexpect that consulting practices will grow 15-20 per cent annually for the next two decades. (ICPD)

2.Aim and purpose:

The purpose of the report is to identify and reflect on employment trend and the changing work in the field of management consulting, and, how do I prepare myself for the upcoming challenges.

3.The Driving Force:

The main driving forces in the consulting industry are all challenges in the clients' environment, the developments in the areas of communication and IT and the increasing competition within the industry.

Today almost all industries are going through massive changes. IT has the capacity to mould and reshape many of these industries. These developments foster changing the consulting needs at the clients' side:

Advice about their strategic direction according to these changes,

Help in planning and implementing the necessary changes.

For consultants this means that they should be prepared to give these newly needed services. They should be able to adopt all the latest trends in technology and economy even more speedily than their clients. Because of the diversity in clients industries and development therein, the need for consulting services has become very complex and dynamic. Consultancies are steadily forced to respond to these dynamics. (Recklies, 2001)

Globalization across industries has also driven consultants to globalise as well. Most clients wherever they are situated hope to get consistent service for all their subsidiaries from their consultant. The increasing competition forces consultancies to endlessly look out for new business opportunities and rethink about its competitive position with regards to existing and newly entering competitors.

Communication and IT not only changes the client's consulting needs but also changes the processes within the industry. To quote few examples - the use of means for sharing information and knowledge has enabled improved knowledge management and the work in "virtual teams" - people spread in all over the world working on the same project which is linked via companies' intranet. Consultancies which are small in size can overcome the constraints of location and can cooperate in virtual networks.

4. The Historical development of consulting:

Before we move to the future of consulting industry, it is vital to see the past and the emergence of the industry as the problems have changed with time and new entrants have made to the era of consulting.

Phases

Time

Firms

Issues

Origin of Consulting

Before 1900's

Fayol, Taylor

Birth of Scientific Management

The engineering epoch

1900-1925

Arthur D. Little

Scientific Management, Work Design

Birth of Personnel and HR

1925-

Hay, Towers Perrin

Human Relations, Compensation

Emergence of the generalist approach

1930

McKinsey, Booz Allen, PA

General Management

Internationalization/re-entrance of engineering

1950

Cresap

Operation Management/ OR and OM

Rise of computer consultants/ conglomerates

1960

Big 8 Accounting firms

Performance Measurement/ Portfolio Management/ Electronic Data Processing

Business Strategy

1970

BCG, Bain

Planning/ Organizational Structures/ marketing/ competitive advantage

Restructuring and effectiveness

1980

Marsh & McLennan's/ Saatchi & Saatchi/ Ernst& Young/ KPMG

Excellence, mergers and acquisitions/ cultures, globalization

Information Technology and reengineering

1990

Accenture/ PWC/ Monitor/ IBM consulting services

Internet leadership, change, Y2K, BPR, ERP

E Business and Value chain

2000

Cap Gemini/ E&Y/ IBM Global Services

Outsourcing transformation, networks, and alliances.

(Greiner & Poulfelt, 2005)

What's next? What will be other problems that will come out in this century and how will these effects in shaping the future of the consulting industry? The next segment will put light on to the future of consulting industry with focus on the past.

5. Future developments:

The future is generally exposed with the underlying historical trends rather than superficial symptoms, and to me the underlying trends that are emerging in the industry economics and the client's needs will lead to major transformative change within the industry. SEC pressures have encouraged the divestment of consulting divisions from the accounting firms. The computer hardware firms such as IBM and HP and information technology services companies such as EDS and Cap-Gemini are creating major consulting practices, and non-consulting companies are now acquiring consulting firms. "Witness Marsh-McLennan's earlier successful acquisition strategy, which began over two decade ago with William M Mercer, followed by Temple, Barker and Sloan, Data Consulting, National Economic Research Associates, and Lippincott and Margulies. In Europe, ATOS recently acquired KPMG's UK and Netherland consulting group focusing on IT related activities. Just what cash rich Microsoft is likely to do is uncertain, but I predict it will eventually diversify out of lower margin software into higher margin IT consulting and outsourcing". (Greiner & Poulfelt, 2005)

According to me, the future competitive life of the consultancy industry will become challenging and different mainly for large consulting firms and the consultants. At the same time, medium and small size firms will not be much affected by the competition among the "big players" provided these small and medium firms are able to niche their specialized services and provide their personalised attention to their local clients.

5.1 Markets and market segments

A further growth can be expected for the overall market of management consultancy. Political and technological forces lead companies in all industries to evolve continuous change. After initial waves of lean management many companies now do not have sufficient management capacity and expertise to handle the internal change in the corporate processes. This creates an everlasting need for consulting services. There is a possibility that the total market growth might slow down a little bit, but should remain considerably above the GDP-growth. There should be significant shifts within the market segments. (Recklies, 2001)

Traditional management (strategy) consulting will stand still and will almost merge with IT consulting. Besides IT, major areas of growth will be change management, HR management, knowledge management and organisational learning, the development of global strategies.

Overall, there will be a movement from traditional advice to implementation. This would mean that the clients would want their consultants to share more risks of the projects undertaken. Payment structures might also become flexible from the hourly fees and there will be return related payments or can even be equity stakes. In this area, consultancies might learn a lesson from venture capital firms.

The management consultancy market is not very much dependent on the changes in business cycle. Whether it is boom or recession, clients will always thrive for expert advice so that they can manage their growth or to restructure their business in a declining market. As James (1998) stated: "The only thing that could seriously threaten the profession of change is if the world as a whole entered a period of protracted stasis. What if things stopped changing?" (Recklies, 2001)

5.2 The players

With the expected good preconditions that are there in the markets there are good prospects for almost all types of players. According to many experts, the large players will continue to be generalists whereas the small players will try and have their hands on becoming specialised niche players. We will see we will see a progressing concentration to gain market share and market power in case of large players. There might be two options; the few big market leaders might merge each other to form a maximum of big three by the end of the decade. In addition, large but not that big firms may even merge to compete with the really dominant players. On the other hand, every market leader of could seek further growth, mainly in the new and attractive market segments, basically by acquiring small and medium consultancies with good reputation and high specialisation. Both of these possible developments will lead to an enormous concentration in this player group which will be followed by even more intense competition. (Buono, 2001)

The accountancy-based consultancies have already started to detach themselves from the accounting houses, especially the large ones. This trend is enforced by the SEC (United States, Security and Exchange Commission) which requires the total independence of auditors of the companies that are quoted at the stock exchange. Therefore, the strategies of the Big Four's which were to offer a wide range of consulting services to their auditing clients came into conflict with SEC regulations. As a result, the earlier consulting arms of the Big Four will get the freedom to act autonomously from the auditing businesses constraints. This will make them even more competitive and aggressive. (SEC)

Smaller consultancies will ever continue to specialize. This can lead to a stable market position, but as demand evolves it might also leave some of these players unprepared for the new and the rising trends. The result will be the polarisation of large global and small niche players, leaving to serve the SMEs which are not attractive and potential clients for both of these groups. This under-serviced middle segment will create three options in the consulting industry: large consultancies could build up effective ways to work in this sector; small firms could network to satisfy the complex needs of SME-clients forming ad hoc virtual medium-sized consultancy on a project basis; there could be a renaissance of the real medium-sized consultancies.

New entrants can lead to other changes in the field of players. Many non-consultancies will also establish the consulting divisions because they are attracted by the remarkable market growth and chances for cross-selling. IT-firms have already shown their way towards it. Banks are likely to follow.

Some of these non-consulting firms already have such consulting subsidiaries which are mainly for supporting their clients banks, which are in problems. The banking businesses will give outstanding market access to these entrants. Telecommunication companies may also offer professional advice in the area of IT. Almost all companies who have expert knowledge in certain areas can extend this to consulting services for its customers.

This wave of new entries will have a double effect. It will not only increase the competition which will lead to more mergers and acquisitions but will also to cause some breakdowns. Further, as there are no legal regulations for starting the consultancies or calling themselves consultants there will be problems in quality and in some cases it could damage the reputation of the whole industry.

5.3 Other aspects:

Recruitment will remain as a key problem. Mainly the large firms will compete aggressively for the so-called "high-potentials". As a result there will be price war and low loyalty among the staff.

Smaller firms will try to overcome their incapability by hiring good people and will create new working-styles and corporate cultures which are lucrative for more entrepreneurial-minded people. The increasing complexity in the consulting industry and their clients' environment makes the use of knowledge management systems key.(Australian Bureau of Labour)

The large consultants are likely to face some structural issues. "These are rooted in their structure as partnership, which will limit their ability to raise capital and slow down changes and decisions, in their globalization, which causes problems to form a global internal but local external culture, and in the concentration process, which needs enormous management capacities to solve post-merger-integration-problems" (Australian Bureau of Labour). As a result few of the big firms will think about going public. More significant is that they might lose a bit of their market-focus as they will remain too busy with internal problems. This can act as an opportunity for other players to penetrate some poorly serviced fields. (Australian Bureau of Labour)

6. Changing knowledge and its demand:

The task of management consultants has been so far to create and implement strategies for organizations which could be essential success factors for their growth. However, globalization or emerging sense of 'flat world' sets up new challenges and opportunities for consultants. (Spender & Grant, 2001)

6.1 Diversity vs. Homogeneity

To date, many huge consulting firms are global in their operation, yet they still hang on to much of their home country character in their internal cultures. Given that many Gurus' forecast that this current century will be Asia/China/India century and not the American and Western Century, what will this mean for consulting firms and their consultants skills? As much more diverse consulting workforce will be needed.

6.2 Analysis vs. Facilitating

The backbone of consulting firms lies in their intellectual capital, which is reflected in their branded conceptual frameworks, proprietary software, and skills of their consultants. However many clients have become way experienced in their knowledge of management and skills making them rivals to their consultants, if not resistant to consulting help. It is therefore, likely that consulting firms will need to develop new skills at promoting behavioural processes where the consultant act more as facilitators than the expert problem solver.

6.3 EQ and Consulting

Emotional intelligence is defined as an "array of non-cognitive abilities, competencies and skills that influences one's ability to succeed in coping with environmental demands and pressure". The focus is one ten key components self-regard, interpersonal relationships, impulse control, problem solving, emotional self-awareness, flexibility, reality testing, stress tolerance, assertiveness and empathy (Spender & Grant, 2001).

Given the dynamic nature of organisations and growing interest in emotional intelligence as both a scientific and cultural phenomenon, there are many opportunities for consultants to service organization and their member in dealing with emotional adversities in the work place. It could be argued, of-course, that there is nothing really new here. After all consultants have worked with this issues for years under the general banner of human relations and in relatively near future, EQ could join another acronym such as MBO( management by objective) and TQM( total Quality management) as short live fashion. While this danger is ever present, EQ seems to hold a deeper meaning for business, especially as it affects individual and organization performances. There is growing recognition that soft skills- such as ability to listen to new ideas and problem and to act assertively-are important to concluded results and not simply feel good techniques implicative of sensitivity training. Moreover, as EQ can be measured and changed- two facets of the construct that bode well for consultants-organization and its members have a basis to appraise changes and related progress. (Spender & Grant, 2001)

7. Critical success factors for me as a 'management consultant':

Basing on the current and possible future situation of the industry these are the following critical success factors:

Knowledge and knowledge management

The industry is highly dependent on experience and intelligence quotient. In a world of increasing complications it is important to assure acceptable value addition to the knowledge base.

Innovation

Innovation includes the continual audit of the environment. It is important to create solutions for new issues as soon as possible to have them at hand when the clients apprehend the problems. Ongoing acceptance of latest developments in economical science and technology also provides skills and experiences that can be sold to the clients.

Reputation / quality

As a service industry consultants rely much more on the clients' understanding of their work and on their authority. This is the basis for acquiring new clients as well as for the development of ever-lasting relationships with existing clients.

Networking / alliances

Especially smaller consultancies need to create a chain of alliances to develop awareness for themselves and to multiply their range of services offered through cooperation with other consultants.

To be an effective consultant in this rapidly dynamic world, one must be "out front" in both specialised knowledge and in context for the wider world of the consulting industry. Tomorrow's consultant must be able to adjust to widely varying client situation and issues across the globe, which will require that solutions will be unique and increasingly interdisciplinary (Porter, 1995).

8. Conclusion:

Trends in the 'management consulting' industry as of now are in the positive direction, having a growth larger than other in the industry, make this industry an attractive field for employment and career advancement. However, this industry cannot rests on its laurels as the competition is intense with the new entrants, many organizations moving towards having in house consultants, knowledge advancements, changing client needs, new markets, higher public scrutiny, risk sharing, changing roles and many other issues that keep changing as I write this report.

This report has been an effort to co-relate my education and experience with the emerging trends in the management consulting industry. To be successful as a management consultant it is very critical for me to realise emerging trends whether it be demographic shift i.e. a shift from Western world/ America to Asia/ China/ India in terms of emerging economies and source of employment or a shift in the changing needs of the clients. I have to be one step ahead from the rest of the Industries i.e. realising the problem before client realise and have a solution ready, continuously update my knowledge as 'Intellectual Capital' is the biggest capital in the consultancy industry.

Career in 'management consultancy' industry is like being an MBA student for life long, no less than a MBA student if not more.

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