The management consultancy industry is big business, driving company behaviour and influencing government agendas and financial institutions, but it only works well when client and consultant are on the same page. Clarity and transparency are the key. A new ISO committee has taken on the challenge.
Management consultancy is a phenomenon of our time. From its humble beginnings in the late 1900s, the industry has ballooned most dramatically since the 1980s, with revenues growing to some USD 450 billion today, according to Plunkett Research. This growth has been accelerated by the increase in companies such as accounting and IT firms diversifying into offering management consultancy services. Not just the preserve of big business, government spending on consultants has increased 1 000 % in recent years (IPSOS Mori, 2007) while small companies also form a significant part of the clientele. It is no wonder, then, that it is one of the most sought after career choices of top graduates.
What is management consulting?
Management consultants help organizations improve their business through analysing their systems and processes and developing programmes for improvement. These can include everything from change management schemes to get them through a transition period or the implementation of new technology, right through to a complete overhaul of the whole business.
The vast majority of consultancies are SMEs or sole-practitioners, but a number of large multinationals, such as McKinsey & Company and Boston Consulting, employ in the tens of thousands of staff, boasting billions of dollars in revenue every year.
Continuously evolving, the industry features many different specializations, from human resources management to mergers and acquisitions, technology and innovation, training, risk and security management, and more. It offers expertise in research with academic management courses; strategy, such as helping companies bring their products to markets; organizational design and optimization; cost reduction through redeveloping systems and processes; IT design, delivery and support; and ecosystems with bundled product and services packages that give customers a better overall deal 1). Management consultancy has also created its own wide range of new concepts and programmes designed to help organizations improve their performance, such as business process re-engineering, core competences and growth share market.
While large organizations and government are key clients, businesses of all sizes are increasingly seeing the value of management consulting, and their requirements and expectations are mounting up as a result.
For example, Plunkett Research shows that a wave of highly stringent and complex government regulations in banking and investment industries across the USA and the European Union have increased the demand for consultants, as well as the desire of organizations to reduce operating costs and improve profits.
Add to that the challenges of globalization, rapid advances in technology and population booms, and itʼs no surprise consultants are finding favour with businesses seeking to outperform their competitors and keep on top of the game.
A recent report showed that 80 % of companies believe their customers are changing how they access goods and services and organizations have little choice but to try and keep up. In addition, up to 47 % of occupations we know today are likely to be automated within the next 20 years 2) and by 2020 more than 50 % of the workforce will come from “Generations Y and Z”, having grown up “connected, collaborative and mobile”.
The challenge of growth
The sector has not been without its challenges. The failure of high-profile companies and the downfall of the dotcom industry have put the spotlight on consulting companies and their role in such events, tarnishing reputations with accusations of corruption and conflicts of interest and drawing the attention and greater scrutiny of watchdogs and regulatory bodies.
Economic recessions have also hit the industry hard and increased competition, combined with growing expectations and greater know-how of managers, have forced fees down, making it in turn harder to attract top talent.
Kelvin Chang Keng Chuen, Director and Principal Consultant at Teian Consulting International Pte Ltd, one of Singaporeʼs leading consultancies operating throughout Asia, said the ease of acquiring knowledge and the proliferation of information and DIY packages on the Internet are putting pressure on the competitivity of consultancies that cost substantially more.
“Clients want tangible results, and a clear return on their investment, and are understandably tempted by easy, cheap options they find on the Internet,” he explained. “This makes it harder to convince them that they would be better off getting the assistance from experienced professionals who can help them avoid costly mistakes and achieve their objectives much more quickly.”
The industry has ballooned most dramatically with revenues around USD 450 billion.
But according to Sunil Abrol, President of the Institute for Consultancy and Productivity Research in India, itʼs not cheap DIY options that are putting pressure on the industry, but increasingly business-savvy clients. “Clients know a lot more about business processes and improvement than ever before, so they are looking for consultants that can really add value in a way that they canʼt themselves,” he says.
“So naturally, they want to see what they are getting, and be assured that their money is well spent. But this can only occur if there is transparency at every level. And it can only result in better outcomes, because it helps the client choose the right consultant in the first place, everyone is clear on roles and expectations, and the results can be measured effectively.”
Where standards can help
Improving transparency through clear guidelines and best practice is at the heart of ISO standards, and thus the ISO project committee ISO/PC 280, Management consultancy, was born. Its aim is to improve transparency and understanding between management consultancy service providers and their clients, ultimately leading to better outcomes from consultancy work. In order to do this, the committee is moving full steam ahead with its first standard – ISO 20700 for management consultancies – due to be published early next year.
Based on the European standard EN 16114:2011, ISO 20700 will be the first International Standard of its kind. Its arrival is much anticipated. The experts working in the committee feel it is long overdue and believe it will make a significant mark on the consulting industry.
Robert Bodenstein, Chair of ISO/PC 280, said the standard will help both parties clarify the terms of service at the beginning of the project, thereby avoiding costly disappointments and leading to better results all round.
“ISO 20700 will not only help consultancies to deliver their services in a transparent and internationally recognized way, it can also help organizations seeking a consultant to find the right one in the first place. The incorporation of worldwide best practices and clear criteria will improve the way clients and consultants work together, thereby improving the quality of the industry in general.”
Dr Ilse Ennsfellner, Leader of the committeeʼs task group that helped develop the standard, wholeheartedly agrees. She feels that ISO 20700 will mark a turning point in the industry by adding a new layer of credibility and confidence, with international recognition.
Management consultants, she believes, can make a substantial contribution to the world economy by using their specialized knowledge to innovate, improve and enhance organizations at every level. Standards in this field can help them do that even more effectively by ensuring a consistent minimum quality in the provision of a service, clarifying the rights and responsibilities of both the provider and the user of the service.
“They can also help consultancies really demonstrate their expertise,” says Ennsfellner, “because the standard will set benchmarks against which quality and performance can be measured by the consultants and the clients.”
So will we see the likes of McKinsey & Co growing ever bigger? Or will there be a burst of new players on the scene? Or a new wave of business-savvy clients putting even greater pressure on their consultants? Whatever happens, the consultancy industry is in for change, and change can only be good, right?
1) “Evolution of Business Consulting”, Troy Gautier, Alliances Progress, post 19 October 2014
2) Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How susceptible are jobs to computerization?”, Oxford Martin School, 17 September 2013