Book Review – An Introduction to Management Consultancy

An Introduction to Management Consultancy by Marc Baaij is a book that really pulls back the curtains and reveals the inner workings of management consultancies. I have never seen a book about management consulting like this before. I actually received a print copy of An Introduction to Management Consultancy to review in late summer 2018 but wasn’t able to find time to do a proper book review so I kept delaying it.

What’s so valuable about this textbook is that its author, Professor Marc G. Baaij, is both an academic (Associate Professor of Strategic Management at the Rotterdam School of Management, Erasmus University Rotterdam) and, perhaps even more importantly, a former management consultant, having worked for over four years at The Boston Consulting Group (2 years as a strategy consultant and 2 years as a manager of research).

As Baaij shared in the book, it is very difficult for outsiders (i.e., those not working in a management consultancy) to understand what management consulting is and what management consultancies do due to the secretive and ambiguous nature of these firms and the management consulting industry as a whole.

I love that Baaij devoted an entire chapter (Chapter 2) to covering the origin and development of management consultancy — from the emergence of the management consultancy industry during the second industrial revolution (the first field of management consultancy: Operations Consultancy), to the emergence of the second field of management consultancy: Organization and Strategy Consultancy, and finally to the emergence of the third field of management consultancy: Information Technology Consultancy.

I wish I had this book years ago when I was still in my doctoral program in industrial and organizational psychology. At the time, I thought I wanted to get a job with one of the well-known management consultancies. I had these grand illusions of the incredible prestige, the superb salary, and the importance of the role in providing management consulting advice to clients. And while many of those things are certainly there, what is not there and what is often unspoken and unshared are the way the management consultancies operate, the extremely high demands on your time to travel and work, and the hyper-competitive nature of the work and the constant competition to be a part of every client project, even after you’re hired.

“Management consultancies primarily compete on intangibles: reputation, relations, knowledge, and staff” (p. 236). And in case anyone forgets, Baaij reminds us that the staff is “the ultimate source of sustainable competitive advantage” (p. 236).

Applying to a Management Consultancy

“If you consider applying for a position at a (top tier) management consultancy firm, you will not be the only one. Management consultancy is very popular among MBA and other business students, as well as more experienced people from industry, that is non-consultancy sectors. The prestigious management consulting firms in particular are seen as attractive employers” (Baaij, 2014, p. 274).

“Management consultants should have at least the basic knowledge and skills with respect to the main business disciplines, such as accounting, HRM, organization, IT, marketing, logistics, finance, and strategy. MBA and other business studies are natural training backgrounds for management consultants. However, a business degree is not always necessary” (Baaij, 2014, p. 289).

In the preface, Baaij wrote:

“This book aims to help outsiders with an interest in management consultancy to develop a better understanding of what management consultancy is in order to make an informed career decision and start their consultancy career with an advantage” (2014, p. xiv).

The textbook takes a multi-level perspective to management consultancy and introduces it using four levels: Level 1 – management consultancy phenomenon; Level 2 – management consultancy industry; Level 3 – management consultancy firm; and Level 4 – management consultancy project.

In line with the four levels, the book is divided into four parts.

Part 1 (Chapter 1-3) introduces readers to the phenomenon of management consultancy. Chapter 1 covers the distinguishing characteristics of management consultancy and which professional services belong to the domain of management consultancy. The author reviews the various roles of management consultants, both formal and informal ones. Chapter 2 looks at the history of the management consultancy industry — the origins and the development of management consultancy. It explores both the rise and decline of management consultancy firms. Chapter 3 examines why clients hire management consultancies, both the formal and the informal reasons.

Part 2 (Chapter 4-6) looks at the management consultancy at the industry level. Chapter 4 provides an overview of the global management consultancy landscape. It explores the range of consultancy services, the various client sectors, and the different client geographies. Chapter 5 analyzes the competitive strategies of consultancy firms, and the competitive forces in the consultancy industry. Chapter 6 examines the relationship between management consultancy and the broader (macro) environment. It looks at how management consultants create and disseminate management knowledge, and investigates the impact of macro-economic (business) cycles, globalization, and technological developments on the management consultancy industry.

Part 3 (Chapter 7-9) looks inside the management consultancy firm. Chapter 7 provides a peek inside the firm’s activities. It talks about the value chain of a management consultancy firm and covers the various primary and support activities. Particular attention is paid to marketing and sales activities. Chapter 8 explores the management of the consultancy firm. It investigates the different types of organization, governance, and culture of the various consultancy firms. Chapter 9 is about people and careers in management consultancy. It discusses in detail how consultancy firms deal with recruitment, training, development, promotion (in particular, the up-or-out model which many consultancies use), (involuntary) turnover, and alumni.

Part 4 (Chapter 10-15) walks the reader through a typical management consultancy project. Chapter 10 takes a comprehensive look at client management and other stakeholders inside and outside the client organization. It outlines the development of a project proposal by consultants. It also discusses the consultants’ contractual and moral obligations to clients. Chapter 11 offers a detailed look at how management consultants set up a client project. It talks about the management and organization of a consultancy project. It provides an overview of the phases of a project: initiation, design, execution, control, and closure. It also covers the selection of the project team and the stages of team development. Chapter 12 explains how the world’s top tier management consultancy firms approach complex client problems and opportunities. It lays out a well-illustrated, step-by-step guide to structured problem diagnosis. Chapter 13 describes how top tier consultancies develop solutions for their clients and outlines, in detail, the process of structured solution development. Chapter 14 is about how top tier consultants communicate their recommended solutions to clients. The book provides a structured approach to the design of client presentations and reports. Chapter 15 presents a structured approach to implementation and examines why implementations may sometimes fail to produce the expected results.

One of the things I really appreciate and, in fact, had been trying to learn about for a while now is the breakdown of what a typical week in the life of a management consultant is like (in Table 9.3 A week in the life of a management consultant, p. 298). I had heard that there is quite a bit of traveling but didn’t realize the time it took to work in the management consultancy industry. For instance, it’s common to attend dinner gatherings with colleagues in the evening.

I also like the discussion about the resistance that management consultants face (p. 99-100) from the client organization and employees working in that particular organization.

One of the more interesting aspects of management consultancy is the consultancy project (Ch. 11, pp. 366-397).

“The product of the management consultancy firm is the project. Consultancy firms sell projects to clients. The consulting staff deliver the project (with the support of the support staff)” (Baaij, 2014, p. 259).

As expected, management consultancies follow the typical project management life cycle that includes:

  • Scoping/Initiating – preliminary planning; defining the problem
  • Planning/Designing – developing the plan & solutions; setting the stage
  • Executing – making it happen; getting it done
  • Monitoring and controlling – tracking progress; keeping on course
  • Closing – closeout; transition

Interestingly, regarding the consultancy project team members, Baaij shared that the up-or-out policy (a fixture of management consultancies in which an employee either gets promoted to the next hierarchical level or they are forced to leave the firm) may cause rivalry between consultants. What’s more, because not every management consultant will be promoted, the up-or-out policy can also lead to pressures to engage in unethical conduct. “Colleagues may use each others’ ideas or work without giving them credit. Even though team work is part of the evaluation, each consultant wants to enhance their promotion chances by excelling” (Baaij, 2014, p. 394).

“Most management consultancy firms have a so-called ‘up-or-out’ career policy for consultants. Consultants are evaluated on a regular basis. Based on these evaluations, and the consultancy firm’s vacancies, consultants either get promotion to a higher level or they have to leave the consultancy firm. At regular intervals, consultants have to face the up-or-out decision. Because of the pyramidal organization structure of most consultancy firms, the up-or-out policy implies a relatively high turnover of consultancy personnel and a steady stream of alumni. Management consultancies with an up-or-out policy typically have (much) more alumni than consultants” (p. 172).

“The consultancy firm will have all kinds of disguising jargon [such as up-or-out or grow or go], but it comes down to a dismissal of those employees who do not meet the firm’s expectations. The policy means that if you are not considered for promotion, you cannot stay with the firm. The up-or-out system is the ultimate consequence of a meritocracy. It is not seniority but performance that matters” (Baaij, 2014, p. 303).

Another thing I really appreciate about this book is its critical, but fair, examination of management consultancy.

For instance, in Chapter 3 (Difficulties in Measuring the Effect of Management Consultancy), Baaij (2014) wrote:

“Critical academic literature . . . argues that management consultancy faces ambiguities over the claimed results. Because of the difficulties of investigating the effectiveness, critical academic studies have not focused on the effect of management consultancy. Popular criticism by some journalists and alumni of management consultancies questions the effect of management consultancy” (p. 76).

Baaij (2014) stated that it’s very challenging to isolate the effect of management consultancy on client performance. Baaij points to three methodological issues that make this difficult:

  1. Difficulties in isolating the effect
  2. Lack of comparison
  3. Bias

“The advice, and implementation assistance, of management consultants are among several factors that will influence the performance of clients. Moreover, the effects of consultancy may only materialize some time after the completion of the consultancy project. The causality between management consultancy and client performance is, therefore, difficult to measure” (p. 77).

Regarding reasons for a deviating performance, Baaij said, “The client may implement the consultants’ solution wrongly or with a delay. The client may also lack sufficient resources and capabilities to implement the solution correctly. Actors within the client organization may shirk. Even worse, actors within the client organization who oppose the solution may sabotage the implementation” (p. 77).

Also, “there is the problem of bias. The stakeholders, clients and consultants have an interest in justifying the consultancy project and will, therefore, overrate the effectiveness of the project. Objective measurement will be difficult to achieve” (p. 78).

Under the section titled “Reasons for Hiring Management Consultants” (in Chapter 3), Baaij explained that the reason why management consultancies are hired are not always related to the improvement of the performance of an organization. Management consultants are sometimes hired “to provide knowledge and capabilities to solve problems in an objective and independent way” (p. 83). However, there are other times when companies will retain management consultants in order “to legitimize clients’ solutions which other stakeholders oppose (legitimator), to support clients in political fights (political weapon), and to take the blame for clients’ solutions that are not in the interests of some other stakeholders (scapegoat)” (p. 84).

Indeed, in the preface, Baaij wrote: “This book also takes a critical perspective on management consultancy. We critically reflect on the practices of management consultancy. Moreover, we broaden our perspective to include consultants’ clients, client employees, consultancy firm employees, other stakeholders, and society in general. We consider the effects that management consultancy may have on all these groups. This book acknowledges various conflicts of interests between consultancy firms and these other actors. We are critical not only about consultants but also about clients. We emphasize that both parties may behave opportunistically and unethically. Such behaviour is not reserved for consultants. Clients may manipulate consultants as well.”

Finally, I found the detailed coverage of the structured problem solving method (in Chapter 12 and 13) to be remarkably informative. The book provides a step-by-step guide (in Chapter 12) to diagnose problems (identify the result gap; decompose the gap by drivers; investigate where the gap is; explain why the gap exists; and formulate the problem in the form of a key question). Then, in Chapter 13, the author shows how top tier management consultants develop solutions for their clients’ problems and opportunities. He provides a step-by-step guide for developing solutions in a structured way.

The structured problem solving approach, used by top management consultancy firms, is a two-stage process consisting of problem diagnosis and solution development. The problem diagnosis (Chapter 12) translates a client problem into a single question, while the solution development (Chapter 13) is about answering that question.

“The structured problem solving method is the hallmark of the world’s top tier management consultancy firms, such as McKinsey & Company, the Boston Consulting Group, Bain & Company, Booz & Co, Roland Berger Strategy Consultants, and A.T. Kearney” (p. 399).

Takeaway: An Introduction to Management Consultancy is a marvelous introduction to the world of management consultancy. Marc Baaij did a masterful job distilling the core essence into a substantive yet digestible textbook, while also critically examining management consultancy from all sides. It’s refreshing to be able to bypass the secrecy and ambiguity of management consulting and learn about what’s really going on behind the scene. If you are considering joining a management consultancy or want to learn more about what management consulting firms do, you HAVE TO read this book!

Written By: Steve Nguyen, Ph.D.
Leadership Development Advisor

Reference

Baaij, M. G. (2014). An Introduction to Management Consultancy. London, UK: Sage Publications.

Disclosure: I received a print copy of An Introduction to Management Consultancy as a complimentary gift, but my book review was written as though I had purchased it.