Chapter 2 - Origins and Development of Management Consultancy

Question 1

What are the learning objectives for “origin and development of management consultancy”?

Answer 1

Historical perspective of management consultancy industry
Evolution of the industry
Critically reflect upon key changes
Understand technological, regulatory and institutional changes on the industry

Question 2

What are the two conditions for paid advice? Give example?

Answer 2

Paid advice is high-value and complex

Emperors and kings historically would have made high-value and complex decisions

Question 3

Explain the rise of managers?

Answer 3

Industrial revolution - meant that more workers gathered under one firm and needed to be managed
Financial markets - creation of shareholders saw the divorce of ownership and control. Owners were not in charge for the day-to-day operations and needed managing

Question 4

What was “scientific management”? How does it work?

Answer 4

Improve the efficiency of operations by studying and optimising each individual part of an operational task
Disaggregate production into increasingly smaller parts
Measure and compare productivity per part to optimise organisation of production work

Question 5

Who was a seminal figure in disaggregation?

Answer 5

Adam Smith - introduced the division of labour and specialisation to increase labour productivity.

Question 6

What were the early names for management consultants?

Answer 6

Efficiency experts or industrial engineers

Question 7

What was the first piece of codified management consultancy knowledge?

Answer 7

The Principles of Scientific Management
Book by Frederick Winslow Taylor
This important practice of codification facilitated the dissemination of knowledge amongst management consultants

Question 8

What caused scientific managers to decline?

Answer 8

Backlash and negative attitudes from managers and workers grew against the profession

Question 9

What were the three fields of consultancy? Briefly explain them?

Answer 9

Operations - efficiency experts focused on disaggregation and productivity
Strategy consulting - emergence of corporations with increased scale and scope began to experience organisational problems
IT - spread of the mainframe computer required consultancy services to explain features

Question 10

Who were the first strategy consultants?

Answer 10

Bankers used to given advice on corporate management problems 
 Regulatory change (Glass-Steagall Act, 1933) banned bankers from giving this advice

Question 11

What drove the demand for independent management consultants?

Answer 11

Collusive advice given by banks

Regulation now meant that firms required independent advice not part of banks

Question 12

What was financial consulting?

Answer 12

Firms hired scientific managers to improve efficiency and accountants to improve financial efficiencies
Specialised in “industrial and financial investigations”

Question 13

Explain the introduction of management engineers?

Answer 13

Regulatory change meant that accountancy firms could no longer carry out management and financial audits
Cost accounting firms or management engineers emerged

Question 14

What were small cost accountants?

Answer 14

Focused on management audits

These audits focused on the executives

Question 15

Difference between scientific management and management engineering?

Answer 15

SM focused on blue-collar productivity whereas ME focussed on executive management and white-collar productivity

Question 16

Explain how the rise of corporations influenced organisational consulting?

Answer 16

Multi-divisional organisation (m-form) offered an alternative to ineffective centralised models
Many firms wanted this m-form of organisation but lacked the expertise needed to implement it

Question 17

Explain the rise of strategy consulting?

Answer 17

With firms implementing m-form organisation they now had lots of divisions
The diversified corporation needed help managing these divisions
Needed help managing corporate portfolios

Question 18

Explain the link between organisation and strategy consulting?

Answer 18

M-form (first sub-field) induced the strategy (second sub-field)

Question 19

Why was BCG important?

Answer 19

Was the first-mover in the sub field of strategy
Led to many great thinkers that set up own consultancies: Roland Berger, Bill Bain that would dominate strategy consulting

Question 20

What introduced IT consulting?

Answer 20

IBM with their big blue mainframe computer

Led to increase in consultancy demand related to the computers

Question 21

What regulatory change led to the development of the IT consulting industry?

Answer 21

US anti-trust legislation stopped IBM dominating the industry
Opened up work for consultants in terms of installing and operating software

Question 22

Name the business models for different fields of consulting? What implications does this have?

Answer 22

Client relations
Consultancy resources; economics; reputations
Each field has a different clientele and therefore different client relations

Question 23

Why do management consultancy firms decline?

Answer 23

Established in their fields and want to focus on existing business
New fields are risky but by the time they begin to mature it is too late to catch up

Question 24

What is the problem with embryonic fields?

Answer 24

The new field will be small and emerging with a higher degree of risk
By the time a large consultancy becomes interested it may be too large to enter the field

Question 25

What were the roles of efficiency experts and cost accountants?

Answer 25

(a) client relations and (b) influence
EE - increased the productivity of blue collar workers
Cost accountant - increase the financial performance for whole company (blue and white collar workers)

Question 26

Name some key institutional changes that helped the field of management consultancy?

Answer 26

US anti-trust legislation in the 1930s stopped large accountancy and bank firms giving advice
Opened doors to small cost accountants who transformed into management engineers
US anti-trust legislation in the 1950s stopped IBM entering the field of information consultancy
The rise of the manager, rise of corporate form (m-form), the rise of business schools and the global spread of capitalism also helped

Question 27

Explain why there was a demand for advice with operations consulting?

Answer 27

• Managers faced challenges coordinating large organisations
• Revolutionary production technologies were operating at an unprecedented scale and needed sound advice
  Second Industrial revolution put a focus on the efficiency of factory operations