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MASE&EI Evolution of Management Consulting

The first management consulting firm was Arthur D. Little founded in 1886 by an MIT professor of the same name. The firm originally specialized in technology research, although it expanded to general management consultancy in later years. Booz Allen Hamilton was founded in 1914 by Edwin G. Booz a graduate of the Kellogg School of Management at Northwestern University and was the first management firm to serve both private industry and government clients.

Post-war Years
Post World War II saw a significant increase in the field of management consulting with the Boston Consulting Group, founded in 1963, being the most notable firm to emerge during this period. The impetus for this growth was the realization by both company management and board members that senior staff does not generally possess essential competencies in all functional areas of their business and could benefit from external guidance and assistance. The work performed by Boston Consulting Group and others like it (e.g. McKinsey) during the 1960s and 1970s developed the methodology that would define the field of strategic management consulting from this point forward. This methodology may be said to fall along a continuum, with the expert or prescriptive approach at one end and the guide or facilitative approach on the other. As its name implies, the expert consultant provides authoritative advice and assistance to client companies. There is minimum client collaboration as the consultant is perceived as the one who knows best. In a facilitative approach, the focus is less on providing technical expertise than on the process with the consultant taking on the role of coach and advisor. Because of the emphasis on process, this approach has often been referred to as process consulting with Edgar Schein considered the most well-known practitioner of this method.

1980s and 1990s


The growth of management consulting has been rapid over the past 20 years, showing a 20 percent increase during the 1980s and 1990s. Technology consulting has been one of the largest areas of growth. If one looks as the consulting landscape even 20 years ago this specialization was relatively small and untapped. At that time, technology consulting was an add-on service provided by software providers. For example, IBM would provide technical assistance to companies with regard to implementation of its products. As technology has become more advanced and complex, the field of technology consulting has expanded to help companies determine how best to integrate existing and new systems to drive synergy and leverage capacity. During the1990s, a number of the larger consulting firms (e.g. PWC, Andersen, KPMG, etc.) started to change their methodology to what can be considered a future-based approach. This approach places

emphasis on aligning the staff of an organization around a shared vision for future operations. The basic premise is that people behave according to their expectations of future conditions. A future-based approach is commonly employed in those companies undergoing strategic realignment/business transformation and/or a merger that requires alignment of two cultures.

21st Century trends


The consulting industry is cyclical in nature and highly correlated with economic conditions. The industry experienced a period of slow or no growth during the recession periods of 2001-2003 and 2007-2009 but has grown steadily since and has once again stabilized.

New Millennium: New Revenue Model


Traditionally, consulting firms charged for time and materials with billing based on number of hours worked, materials supplied, and such out-of-pocket expenses as travel, lodging and living expenses. During the late 1990s and early 2000s, as companies began to notice a lessening of ROI, many clients have asked consulting firms to accept a results-based pricing (aka benefit-sharing) payment arrangement in which the consulting firm will receive a percentage of the value delivered; i.e. the consultant will receive x dollars if s/he can delivers y value. Deliver more get paid more, deliver less and get paid less. The current trend seems to consist of a hybrid of fixed pricing with benefit-sharing with risks shared between the consultant firm and client company. In a true sense of irony, companies were only able to notice that they were not getting the ROI that was promised because their consultants implemented systems and solutions that provided them with much more robust capability to analyze, spend and track overall performances. The type of services purchased will have a significant impact on the pricing model. For example, if a client purchases business transformation services, they arrange a fixed fee / gain sharing model. If the client purchases staff augmentation work or general project management work, the fee structure will be based on the more traditional time and expense model.

Models of service
Many consulting firms are organized around two primary structures: Functional - Strategy and transformation, information technology, human resources, and sales; and Industry - Oil & Gas, retail, automotive, healthcare, environmental, etc. Both structures form a kind of matrix in which most consulting firms occupy one or more cells. For example, one firm may specialize in technology for healthcare sector while another may focus on strategy within the automotive sector. Then there are staff augmentation firms that are not true consultancies but rather provide supplemental and contract staff and project managers on a temporary basis. They may be compared to traditional temporary employment agencies that provide workers to augment current staff, especially during times of peak work flow. These companies operate very much like a job portal. They establish relationships within a business and try to assess if there is a need for

temporary staff. With the job description in hand (which they typically obtain by looking at the corporate web site), they go to sites like Monster.com or others and filter through the resumes. Resumes that appear to be a fit (typically these firms have very limited knowledge of business advisory activities) would be forwarded to the hiring manager. If the hiring manager indicates interest in the candidate, the staffing firm will coordinate interviews. If a business wishes to hire one of these candidates, the staff augmentation firm will extend the offer to the candidates and arrange the placement fee with the company. In many cases the fee is based on an hourly rate so that if the candidates ask for $120 per hour, the staffing firm will bill the company at a higher rate.

Predicted employment change for the industry


According to the U.S. Bureau of Labor Statistics, employment of management consultants is expected to grow by 24 percent during the period 2008-2018, as both private industry, non-profit organizations, and government agencies rely on outside assistance with strategic planning and to enhance operational efficiencies. Employment opportunities are expected in large consulting firms with international expertise, as well as smaller boutique firms specializing in such areas as biotechnology, healthcare, and information technology. Employment growth will be driven by a number of changes within the business environment that have required firms to more closely review their operational policies. These changes include the implementation of stricter regulatory oversight due to corporate malfeasance, developments in technology, and the rise in ecommerce. In addition, consultants will be called upon to offer guidance and advice as companies attempt to work through the required regulatory changes due to the on-going economic, credit, and housing crises. Firms will also retain consultants who specialize in green issues to help them lower energy consumption and implement environmentally-friendly policies. Startup firms also hire consultants to assist with such tasks as organizational development, pricing and marketing strategy, on-boarding new staff, and talent management.

Skills set required for consultants 1. Technical skills


Consultants need to have a thorough grounding and a broad understanding of the industry or government sector in which they will be working. In addition, they need to be exceptionally proficient in all aspects of the business discipline they are supporting. For example, they may need to have indepth knowledge and experience in sales, finance, manufacturing, customer service, management or information technology. Then they need to focus these skills onto the specifics of a particular client.

2. Interpersonal skills
Personal skills ensure that the consultant works well both independently and with others. Personal skills enable the professional consultant to be both efficient and effective in carrying out his activities and achieving his own objectives and the objectives of the organization that he is supporting.

Personal skills include attributes like integrity and practices like effective time management. The professional consultant must be able to balance personality traits like forcefulness, drive and ambition with other traits like empathy, etiquette and courtesy.

Professional consultants need to be excellent communicators. They need to be able to express themselves clearly and concisely: orally, in writing and through body language. They also need to be masters of the skill of active listening. They have to be able to listen for meaning, with both their ears and with their eyes. Professional consultants need to be able to identify the audience for their communication and adapt the content of the message and the tone of the message to fit.

3. Consulting skills
Professional consultants need to be able to specify the type and level of consulting required for a particular engagement. They need to be able to tailor the normal phases of a consulting engagement to a specific situation. They have to be able to determine and use the appropriate tools and resources to advance from one phase of a consulting engagement to another. Consultants have to be able to judge when to abandon a consulting engagement because it is hopeless and when to move a consulting engagement forward into follow-up business. They need to be able to develop a satisfactory, legal consulting contract and they need to be able to price their work competitively and profitably.

Insider trading case: Who is Rajat Gupta


He joined McKinsey & Company, the elite and secretive management-consulting firm as an earnest, under-stated young man, fresh out of Harvard Business School, and IIT Delhi before that. He rose rapidly through a competitive system, going on to rule boardrooms, chair nonprofit boards, and move with CEOs and heads of state from Bill Gates to Bill Clinton. Rajat Gupta broke through racial glass ceilings in the corporate world in a way that no other Indian and few people of colour had done before.

Upon retiring from McKinsey, in 2007 after nine years as its managing director, Mr Gupta was a sought after figure on corporate and nonprofit boards, and joined those of Goldman Sachs, Procter & Gamble, American Airlines, and Harvard Business School.

Despite his stupendous success in America he never forgot his Indian roots. He created the American India Foundation, which brought in millions of dollars in philanthropic contributions from NRIs to development programs across the country. He founded the Indian School of Business and the Public Health Foundation of India. And he ensured

McKinsey worked, pro bono, with India's leading NGOs, including Sewa and Pratham, to help them learn from international best practices. But Mr. Gupta's philanthropic work did not sway the jury. He has been sentenced to two years in prison for leaking Goldman Sachs boardroom secrets to the hedge fund manager at the centre of the US government's crackdown on insider trading. The judge overseeing the case had warned that "If Mother Teresa was charged with bank robbery, the jury would still have to determine whether or not she committed a bank robbery." Mr Gupta's fall from grace began in April 2010, as part of the investigation into Raj Rajaratnam, a Sri Lankan hedge fund manager accused of insider trading. The government accused Mr Gupta of tipping off Mr Rajaratnam of Warren Buffet's decision to invest $5 billion in Goldman Sachs. Mr Gupta allegedly learned this information on September 23 in 2008 at a board meeting. His tip allegedly allowed Mr Rajaratnam to buy the stock before the news was made public the next day. Mr Rajaratnam made a profit of $800,000 in just 24 hours. Managing Partner of Westwood Capital, LLC Daniel Alpert calls this a "very disappointing episode because Rajat Gupta was an extremely senior guy and clearly was living the life of jealousy of the enormous returns that were being made by the people who did not quite have his CV but nevertheless were making enormous profits" The difficulty for the government is that they don't actually have hard evidence of this. They have proof that Mr Gupta called Mr Rajaratnam after the board meeting. And they have one tape of a separate conversation between Mr Gupta and Mr Rajaratnam where Mr Gupta summarises the discussion in a Goldman board meeting. But that tape did not lead to any trades being made, nor is it clear that it leaked inside information. And the trade that was made a few minutes after a Goldman board meeting concluded cannot be traced to a recorded conversation between the two men. But the tapes are still very embarrassing for Mr. Gupta. First, they showed that he earlier had conversations with Mr Rajaratnam where confidentiality had been compromised, even if securities laws had not been violated. On July 29 in 2009, Mr Gupta discussed the offer Goldman Sachs was thinking of making to purchase Wachovia, another American bank, with Mr Rajaratnam. Second, they showed that Mr Rajaratnam had bragged to someone else that he had inside knowledge of the Buffett deal from someone on the Goldman board.

Third, Mr Rajaratnam, in a conversation with Mr Gupta's former partner at McKinsey, Anil Kumar, who pleaded guilty to leaking confidential information to Mr Rajaratnam in exchange for payments, speculates that Mr Gupta's motivation was financial greed. Mr Rajaratnam can be heard on the tapes talking about Rajat Gupta saying. "I think he wants to be in that circle. That's a billionaire circle, right? Goldman is like the hundreds of millions circle, right? And I think here he sees the opportunity to make $100 million over the next five years or 10 years without doing a lot of work. However, Mr Gupta's friends claim that these leaks are selective and the charges completely without basis. Atul Kanagat a former director at McKinsey himself counters "None of the tapes have a mention of Rajat by name. It is a careful selection of a handful of facts out of a mountain of fact to paint a picture that they want you to see. How many other calls did he made to Rajaratnam? How many calls did he make to other people? Right after a board meeting? Is Rajaratnam the only guy he called after a board meeting? If he calls me after a board meeting does it mean that he is giving me insider information this is all complete conjecture by withholding relevant information that fits your narrative. I think it is all nonsense." Mr. Gupta has been convicted of conspiracy and three counts of securities fraud. A jury acquitted him on two other securities fraud counts. The case had gone on trial on May 21, less than a month ago - an interesting reminder to us in India that it shouldn't take years to decide if someone is innocent or guilty.

ASEAN
ESTABLISHMENT The Association of Southeast Asian Nations, or ASEAN, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam then joined on 8 January 1984, Viet Nam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN. AIMS AND PURPOSES As set out in the ASEAN Declaration, the aims and purposes of ASEAN are: 1. To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations; To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter;

2.

3. 4. 5.

6. 7.

To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields; To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres; To collaborate more effectively for the greater utilisation of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples; To promote Southeast Asian studies; and To maintain close and beneficial cooperation with existing international and regional organisations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves. FUNDAMENTAL PRINCIPLES

In their relations with one another, the ASEAN Member States have adopted the following fundamental principles, as contained in the Treaty of Amity and Cooperation in Southeast Asia (TAC) of 1976: 1. 2. 3. 4. 5. 6. Mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations; The right of every State to lead its national existence free from external interference, subversion or coercion; Non-interference in the internal affairs of one another; Settlement of differences or disputes by peaceful manner; Renunciation of the threat or use of force; and Effective cooperation among themselves.

NAFTA
What Is NAFTA?: NAFTA is short for the North American Free Trade Agreement. NAFTA covers Canada, the U.S. and Mexico making it the worlds largest free trade area (in terms of GDP). NAFTA was launched 20 years ago to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace. As of January 1, 2008, all tariffs between the three countries were eliminated. Between 1993-2009, trade tripled from $297 billion to $1.6 trillion. (Source: USTR, NAFTA) When Was NAFTA Started?: NAFTA was signed by President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney in 1992. It was ratified by the legislatures of the three countries in 1993. The U.S. House of Representatives approved it by 234 to 200 on November 17, 1993. The U.S. Senate approved it by 60 to 38 on November 20, three days later. It was signed into law by President Bill Clinton on December 8, 1993 and entered force January 1, 1994. Although it was signed by President Bush, it was a priority of President Clinton's, and its passage is considered one of his first successes. (Source: History.com, NAFTA Signed into Law, December 8, 1993) How Was NAFTA Started?: The impetus for NAFTA actually began with President Ronald Reagan, who campaigned on a North American common market. In 1984, Congress passed the Trade and Tariff Act. This is important

because it gave the President "fast-track" authority to negotiate free trade agreements, while only allowing Congress the ability to approve or disapprove, not change negotiating points. Canadian Prime Minister Mulroney agreed with Reagan to begin negotiations for the Canada-U.S. Free Trade Agreement, which was signed in 1988, went into effect in 1989 and is now suspended due to NAFTA. (Source: NaFina, NAFTA Timeline) Meanwhile, Mexican President Salinas and President Bush began negotiations for a liberalized trade between the two countries. Prior to NAFTA, Mexican tariffs on U.S. imports were 250% higher than U.S. tariffs on Mexican imports. In 1991, Canada requested a trilateral agreement, which then led to NAFTA. In 1993, concerns about liberalization of labor and environmental regulations led to the adoption of two addendums to NAFTA. (Source: Infoplease.com, NAFTA) Why Was NAFTA Formed?: Article 102 of the NAFTA agreement outlines its purpose:

Grant the signatories Most Favored Nation status. Eliminate barriers to trade and facilitate the cross-border movement of goods and services. Promote conditions of fair competition. Increase investment opportunities. Provide protection and enforcement of intellectual property rights. Create procedures for the resolution of trade disputes. Establish a framework for further trilateral, regional and multilateral cooperation to expand NAFTA's benefits.

(Source: NAFTA Secretariat, "NAFTA FAQ") Has NAFTA Fulfilled Its Purpose?: NAFTA has eliminated trade barriers, increased investment opportunities, and established procedures for resolution of trade disputes. Most important, it has increased the competitiveness of the three countries involved on the global marketplace. This has become especially important with the launch of the European Union and the economic growth of Chinaand other emerging market countries. In 2007, the EU replaced the U.S. as the world's largest economy. NAFTA and Ross Perot: Despite NAFTA's benefits, it has remained highly controversial. NAFTA's disadvantages are usually pointed out during Presidential campaigns. In 1992, before NAFTA was even ratified, Independent Presidential candidate Ross Perot famously warned that "You're going to hear a giant sucking sound of jobs being pulled out of this country." Ross predicted that the U.S. would lose 5 million jobs -- a whopping 4% of total U.S. employment -- to lower-cost Mexican workers. In fact, this never happened as Mexico entered a recession and the U.S. entered a period of prosperity. True, American workers were displaced by low-cost Mexican imports. But research showed it was more like 2,000 per month. (Source: Brad DeLong, "Jobs and NAFTA")

NAFTA and the 2008 Presidential Campaign: NAFTA was attacked from all sides during the 2008 Presidential campaign. Barack Obama blamed NAFTA for growing unemployment. He said it helped businesses at the expense of workers in the U.S. It also did not provide enough protection against exploitation of workers and the environment along the border in Mexico. Hillary Clinton included NAFTA in her pledge to strictly enforce all existing trade agreements, as well as halt any new ones. Both candidates promised to either amend or back out of NAFTA all together. However, Obama hasn't done anything about NAFTA since becoming President. For more, see Has Obama Forgotten NAFTA Promise? In 2008, Republican candidateRon Paul said he would abolish NAFTA. He said it was responsible for a NAFTA Superhighway and compared it to the European Union. However, unlike the EU, NAFTA does not enforce a single currency among its signatories. Paul has maintained this position in his 2012 campaign. Republican nominee John McCain supported NAFTA, as he did all free trade agreements. In fact, he wanted to enforce an existing section within NAFTA that promised to open up the U.S. to the Mexican trucking industry.