Consulting is not a well-defined field. Definitions of a consultant range from "anyone who is out of work and owns a briefcase" to "a specially trained and experienced person who makes an organized effort to help management solve problems or improve operations through the application of judgment based on knowledge, skill, and systematic analysis of facts."
Consultants are found in many areas of business. The services they provide can be classified into three general categories: technical expertise, project assistance, and appraisal of operations. The earliest efforts in consulting (and still the most frequent) were in providing technical knowledge and skills. Organizations often hire a consultant who has expertise and specialized knowledge and can apply it to the client's situation. Government regulations (e.g., EEOC regulations in personnel and EPA regulations in environmental planning), electronic data processing (EDP), management science, and economics are some technical areas in which consulting is common.
Client firms may also hire consultants for help during fluctuations in work load or when undertaking a project for which they are not appropriately staffed. In this case, the consultant provides a service rather than gives advice and information-through assisting on or independently completing a project: for instance, the design and implementation of a management information system.
The third type of consulting occurs when an organization needs an independent and objective appraisal of its operations. Appraisal areas include identifying organizational strengths and weaknesses for strategic planning, assessment of company financial performance, analysis of markets, and cost reduction.
These three categories of consulting represent broad generalizations. The consulting field is wide-ranging and diverse. While a full treatment of it in all its breadth and diversity is beyond the scope of this chapter, we will describe the major types of firms that make up the field, the activities and functions common to most areas of consulting, and the entry-level opportunities that exist.
The Consulting Industry
The size and structure of the consulting industry is difficult to estimate because the definition and scope of business consulting are so vague. Some recent statistics suggest, however, that its size is considerable. It is a $35 billion industry with over 20,000 firms and 36,000-56,000 full-time consultants. The number of part-time consultants is thought to be double this number. Approximately 2,500 new consultants enter the field each year, and the outlook for the field is positive.
Size And Structure of Firms
Consultants work in a wide range of organizations, from companies of one or two partners to firms with thousands of employees. Consulting divisions exist in many large companies with another primary business, especially large public accounting firms. Consultants are also found in universities and nonprofit research organizations. The majority of consulting firms fall into four major categories:
- Large Consulting Firms: These are firms whose only business is consulting. They typically employ more than fifty consultants; a few of the largest employ more than a thousand consultants. Large firms may either be a "generalist" firm or have many divisions each with its own specialty. Some examples are the well-known management consulting organizations Arthur D. Little; Booz, Allen & Hamilton; McKinsey &Company; and the Boston Consulting Group.
- Small and Medium Consulting Firms: This type of firm employs from two to fifty consultants. It is estimated that 20-30 percent of all consultants work in firms of this size. These are often specialty firms, offering a small range of services or catering to a special type of client.
- Management-Advisory-Services (MAS) Divisions of CPA Accounting Firms: These are divisions within organizations that also offer accounting, auditing, tax, and other financial services. These divisions are typically quite large and operate internationally. The services offered by MAS divisions usually involve information systems, electronic data processing (EDP), financial management, and strategic planning. Although these "firms" are really divisions of larger organizations, Business Week reported that in 1978 six of the Big Eight CPA firms were listed among the top ten management consulting firms in terms of dollars billed.
- Individual Consultants: This group includes individuals who are sole owners of businesses, professionals (e.g., CPAs and engineers) who work as consultants outside their full-time employment, and university-affiliated academics (typically in business schools) who consult part-time. Individual consultants are almost exclusively specialists who provide limited services to a narrow group of clients. Academicians and professionals with expertise in such specialty areas as transportation, productivity, and the behavioral sciences have begun to compete effectively with the larger consulting organizations.
Medium-sized specialty and MAS consulting firms have fairly similar organizational structures. These firms usually have four pyramid-like levels with operating consulting teams made up of members from each level. Such a firm is seldom divided into divisions. Partners and managers may have specialty areas, but working groups are formed for each engagement.
Aside from organizational size and structure, consulting firms are classified along dimensions such as scope, area of concern, approach, and range of services offered. The most important of these classifications is area of concern. A general distinction can be made between firms that are generalists and those that are specialists. The generalist firm can provide a wide range of services and is available to solve any client problem. An example of this type of firm is the Arthur D. Little organization, whose motto is, "Almost nothing is none of our business." Recently, however, there has been a move toward more specialization, with some firms limiting service to one area and others dividing into divisions with different specialties. Specialization can be by management function, the client's industry, size of project, or other criteria. The most common dimension of specialization is management function. The major specialty areas in business consulting are as follows:
- General Management Consulting: This type of consultant frequently works directly with the client's top management team on matters of general concern. Projects in general management might include studying strategic issues (such as allocation of resources or long-term strategies) and advising management on them, evaluating management decision making, and revising organizational structure or management style.
- Financial Management: A financial consultant advises management on issues of financial planning. Projects in financial consulting might include study of and recommendations on capital expenditures, enterprise development, and the design and implementation of an accounting system.
- Marketing Management: Consulting in marketing can take place at three levels. The highest is marketing strategy formulation. The next is marketing activities and operations. Projects at this level include evaluation of sales and advertising, assistance with distribution, and product development. The third level is marketing research. Here the consultant collects data and may advise the client about decisions to make on the basis of the data.
- Production Management: Consulting in production management can focus on the product itself (design, quality, etc.), the methods and organization of production, or the people involved in production. In the second area, a project might involve redesigning the work-flow layout to improve productivity, or assisting in inventory control. A project involving the "people side" of production might be concerned with compliance with government safety rules or development of a program to improve job satisfaction.
- Information Systems and Data Processing: Consulting in information systems is a primary interest of systems analysts and MAS consulting divisions. These consultants deal with issues regarding the kind of information, how much, and in what form it is needed for management decision making and control. They also assist in system development, improvement, and integration. A possible project could include development and implementation of an EDP system for a client, or a feasibility study of computerizing financial control systems.
- Personnel Management. Traditionally, consulting in this area focused on personnel administration, job evaluation, and the development and evaluation of compensation systems. Recently this area has expanded to include more behavioral-science research methods and intervention strategies. Projects range from job analyses and employment-test validity studies to designing and implementing career-planning and organizational development programs. A related area in which consultants practice is labor-management relations. A consultant might work as an advocate for one side or a mediator between union and management.
- Government-related Consulting: Government-related consulting firms specialize in keeping up with current legislation in specific areas in order to advise clients on compliance with government regulations. A firm might advise clients on regulation of packaging and advertising, deregulation of transportation and financial services, and how the client will be affected by and if possible take advantage of changing regulations.
- Strategic Planning. This is one of the fastest-growing areas for management consulting firms. Consultants help management develop and evaluate long-term strategic plans, and advise them on major decisions such as acquisitions and mergers.
The service provided by a consulting firm can be full service or limited. Full service includes studying a problem, making recommendations for change, and implementing and evaluating the change. A limited-service firm might provide only one of these services. For example, a marketing-research consulting firm might collect data and make recommendations, but the client would decide what actions to take.