1

CHAPTER

2 AREAS OF MANAGEMENT
ADVISORY SERVICES - PART I

LEARNING OBJECTIVES

After studying Chapter 2, you should be able to:

1. Enumerate and explain the various types of

management advisory services.

2. Understand the areas of MAS.

3. Explain the nature of other types of consultancy

work.
 CHAPTER 2

AREAS OF MANAGEMENT ADVISORY

SERVICES PART I

Types of MAS Engagements

Management consultants in general apply the consulting process to engagements

having widely varying characteristics. It may therefore be useful to classify
management services engagements according to six dimensions. These
dimensions include the following:
(a) nature of the problem,
(b) service delivery area,
(c) phase(s) of the analytic process,
(d) techniques and methodologies applied,
(e) industry (or nature of organization) to which the client belongs. and
(f) geographical area(s) where the engagement take place.

Every engagement involves all six dimensions. Thus, although an engagement

may briefly be described as a management information system engagement (i.e.,
in accordance with the service delivery area), it also takes place at one or more
specific locations, involves a client belonging to a particular industry, or
particular organization and so on. Each dimension and its possible categories
will be discussed briefly in this section.

Nature of the Problem

Classifications of problems according to their situation are as follows:
(a) Corrective
(b) Progressive
(c) Opportunistic

Corrective problem involves a situation in which conditions have worsened.

It usually arises suddenly and demands urgent action. Defying the problem
is often much less difficult than determining the preferable course of action.
An example of a corrective problem is the sudden drop in productivity
18 Chapter 2
within a critical department. A consultant is expected to suggest corrective
action or actions that will return the situation to its previous state.

Progressive problem involves an existing situation that can be improved. For

example, the firm may have been acquired by the firm's competitors but the
firm's procedure have remained unchanged. The firm has continued to employ
aid procedures in spite of significant growth in transactions and
development in computer technology. In such a situation, the consultant
may determine that computer-based transaction processing systems are likely
to provide considerable improvements to the situation.

Opportunistic problem involves a situation in which a future opportunity

exists. For example, a firm might have excessive cash and cash equivalents
available. On the surface, the problem is that the funds are not earning a
desirable rate of return. The consultant's responsibility in this situation is to
search out and recommend opportunities for more effective use of the funds.
Obviously, opportunistic problems are likely to lead to more risky as well as
more potentially rewarding courses of action than are corrective and
progressive problems.

Service Delivery Areas.

Service delivery areas, i.e., the functions or activities in which the problem
situation exists may be classified in a number of ways. One classification plan
for instance, employs the following groupings:
1.0 General management
2.0 Manufacturing
3.0 Personnel
4.0 Finance and accounting
5.0 Marketing
6.0 Procurement
7.0 Research and Development
8.0 Packaging
9.0 Administration
10.0 Internal operations

Within each principal area are several narrower areas. For instance, under
finance and accounting, the following may be the subject of management
advisory services.
 Areas of Management Advisory Services — Pan I 19

4.1 General accounting

4.2 Cost accounting
4.3 Short-term planning, budgeting and control
4.4 Credit and collections
4.5 Long-range financial planning
4.6 Capital investment
4.7 Marginal income analysis
4.8 Financial planning
4.9 Valuation and appraisal
4.10 Taxes
4.11 Financial information and planning

Application of the Analytic Process

he analytic process in a consulting engagement includes:
a) Identifying the objectives,
b) Defining the problem,
c) Finding out the facts,
d) Developing the solution, and
e) Implementing the solution.

An engagement could involve one or more or all of these phases and

generally cannot be totally isolated. For example, defining the problem
situation will probably involve identifying objectives and determining at
least the pertinent facts of the problems. These phases represent the
dynamic aspects of an engagement and are employed in every engagement,
whether it be a routine evaluation of operations or a special research study of
customer attitude. Thus, as the title of the service delivery areas in the
preceding discussion show, the identities of the phases (e.g., selecting,
evaluating) tend to attach to the areas themselves (e.g., marketing
department).

Techniques and Methodologies Applied

Most engagements can be aided by technical models or methodologies. For
example, capital investment planning can be aided by a discounted cash flow
model such as the present value or the internal rate of return model.
Information systems planning and design can be aided by a structured
methodology.
20 Chapter 2

Industry or Nature of Organization

A client who is the subject of an engagement may be a privately owned
business firm, a government agency, or not-for-profit nongovernmental
organization, a professional association or some other type of organization.

Geographical Areas
A consulting engagement may be restricted to a single location, such as the
home office of the client. It may also involve multiple locations such as the
several production plants and warehouses of a large manufacturing firm. It
may even involve locations in foreign countries.

Areas of MS Practice

Management consulting can relate to areas such as:

1. The management functions of analysis, planning, organizing and
controlling.
2. The introduction of new ideas, concepts and methods to management.
3. The improvement of policies, procedures, systems, methods and
organizational relationships.
4. The application and use of managerial accounting, control systems, data
processing, and mathematical techniques and methods, and
5. The conduct of special studies, preparation of recommendation.

The discussion about the role of management consultants and the ways in which
they add value makes it clear that the challenges consultants face are as wide as
management itself. However, when consultants are called in to undertake work
on behalf of a business, it is with a specific project in mind.

The areas of management consultancy are varied and wide-ranging. The most-
sought after types of consultancy work generally include
(a) Business planning and development or project feasibility studies
(b) Information systems consulting
(c) Management / operations audit
(d) Business process improvement / reengineering
(e) Others such as
(1) Marketing research
(2) Marketing strategy development
(3) Developing promotional campaign
 Areas of Management Advisory Services — Part 1 21

(4) Planning sales force activity

(5) New product development
(6) Developing proposal for financial support
(7) Staff recruitment
(8) Exporting and international market

Business Planning and Development (Project Feasibility Studies)

One of the broadest project types is 'business planning' or 'business

development'. This is a phrase often encountered in businesses that have
ambitions to grow and develop. A project of this type is a great opportunity. It
offers the consultant a broad remit to contribute to the development of the
business.

Business development is a very broad term. The first task the consultant faces is
to establish exactly what the client wants from a business development project.
Sometimes the client has something specific in mind. Common outcomes
desired from business development include:
 growth of the business within its core markets by capitalizing on market
growth or market share increase;
 expansion of the business into new market sectors;
 development of new products;
 increasing profits through cost-reduction programs;
 internal structural reorganizations.

The effective consultant can use the project proposal to establish exactly what the
client wants and to manage his or her expectations about what can realistically be
achieved.

The process followed by the consultant and the outcome of his/her investigation is
presented in a project feasibility study report. This is discussed in detail in Part III.

Information Systems Consulting

Managers need information if they are to make good decisions. They need
information on both the business's external situation — its competitive
environment — and its internal state. Information is a corporate resource.
Management information systems aim to collect and organize such information
22 Chapter 2

and present it to managers in a usable form. Nowadays, management

information systems are usually based on computer technology. They therefore
require a good deal of technical expertise to implement. However, even the non-
technical consultant can add value, particularly in developing an understanding
of the information needs of the business, the way in which information flows
around the organization and the competitive advantage that might be gained
through investment in information technology. Such a consulting exercise
provides a sound basis on which to progress the technical implementation and
helps ensure that it will be rewarding.

A more detailed discussion is found in Part IV.

Management / Operations Audit

Operational audits also known as management audits and performance audits,

are conducted to evaluate the effectiveness and/or efficiency of operations.
These are examinations of all or part of an entity to determine the degree of its
operational efficiency, effectiveness, and economy.
A more detailed discussion is found in Part V.

Business Process Improvement / Reengineering

Process reengineering is considered a more radical approach to improvement
than TQM. Process reengineering is more likely to be imposed from above and
to use outside consultants. In process reengineering, a business process is
diagrammed in detail, questioned and then completely redesigned (I) to
eliminate unnecessary steps, (2) to reduce opportunities for errors, and (3) to
reduce costs. A business process is any series of steps that are followed to carry
out some task in a business.

Re-engineering is the complete redesign of a process with an emphasis on

finding creative new ways to accomplish an objective. Re-engineering has
sometimes been described as taking a blank piece of paper and starting from
scratch to design a business process.
Rather than searching continually for minute improvements, re-engineering
involves a radical shift in thinking about how an objective should be met. In
other words, re-engineering prescribes radical, quick and significant change. It
involves developing new ways to perform existing activities and ways to stop
 Areas of Management Advisory Services — Part I 23

performing non-value adding activities. Descriptions of re-engineering efforts

often occupy considerable space in annual reports of business firms.
Admittedly, this can entail high risks but can also bring big rewards. These
benefits are most dramatic when new models are discovered for conducting
business.

(a) Cultural Factors

Organizational culture refers to the mindset of employees, including their
shared beliefs, values and goals. A strong functional culture is a key factor
that can increase the likelihood of successful implementation of business
process improvement or reengineering. This is characterized by clearly
articulated beliefs, values and goals. Such organizational culture usually
exhibits high employee involvement and participation, long -term
employment and a sense of teamwork.

Research in organizational behavior suggests that a strong functional culture

is, in the long run, the most conducive to successful implementation of
programs oriented toward continuous improvement.

(b) Managing Organizational Change

Employee assistance is a recurrent problem in process reengineering. The
cause of much of this resistance is the fear that people may lose their jobs.
Workers reason that if process reengineering succeeds in eliminating non-
value-added activities, there will be less work to do and management may be
tempted to reduce the payroll. Process reengineering, if carried out
insensitively and without regard to such fears, can undermine morale and
will ultimately fail to improve the bottom line (i.e., profits). As with other
improvement projects, employees must be convinced that the end result of
the improvement will be more secure, rather than less secure, jobs. Real
improvement can have this effect if management uses the improvement to
generate more business rather than to cut the workforce. If by improving
processes the company is able to produce a better product at lower cost, the
company will have the competitive strength to prosper. And a prosperous
company is a much more secure employer than a company that is in trouble.

Efforts at continuous business process improvement will not automatically

succeed. Improved systems require significant time and resources to
implement. The support of top management, both in spirit and in terms of
resources, is crucial to successful implementation.
24 Chapter 2

While the general support of top management is necessary; it often is not sufficient
to successfully implement a new process. Almost all successful innovations are
initiated and implemented by a zealous, voluntary, champion. A change
champion is an individual who recognizes the need for change and seeks to bring
it about through his or her own efforts. A successful change champion is
usually at a high level in the organizational hierarchy, has strong entrepreneurial
skills, demonstrates political influence within the organization and has the ability to
persuade and motivate others.

Meaningful change is more likely to occur if there is a well-defined process

-

established for change. A timetable for certain activities, a set of well-

articulated goals and follow up are all important elements of such a process.
-

Involvement by virtually all the employees in an organization is required to

implement successfully any new business process improvement. Each
employee should be made aware of
(a) the goals of the program,
(b) the process by which the program will be implemented and
evaluated, and
(c) the employee's role in making the program a success. •
It is also important to offer employees a continual opportunity to retrain and adapt
their skills to the rapidly changing work environment. If the employees
recognize a commitment by their organization to ensure that their skills are current and
useful, they will in turn be more likely to commit to the organization's continuous
business process improvement.
A more detailed discussion of the steps involved in business process
improvement / reengineering and application are presented in Part V, Chapter
36.
Other Types of Consultancy Work

Marketing Research

Marketing research is the process through which managers discover the nature of the
competitive environment in which they are operating. The objective of marketing
research is to obtain information which managers can use to support their decision-
making, to reduce risk and to enable managers to dedicate valuable resources in a
more reliable way. Marketing research falls into two types.
 Areas of Management Advisory Services — Pan 1 25

A primary research is information collected for the specific project. This is

further subdivided as follows:
 Quantitative research provides answers to questions when those answers
need to be expressed in statistical or numerical form. It aims to answer
the 'how much, how often and how many' questions that managers pose.
 Qualitative research provides answers to questions that do not demand a
quantified answer. It provides the insights that answer managers’ ‘who,
what and why' questions.

Secondary research is based on information that has been collated earlier for
reasons other than the project at hand. It takes the form of existing reports,
articles and commentaries that just prove to be relevant to the project.

Marketing Strategy Development

Marketing research is a powerful approach to identifying business opportunities.
Exploiting them, though, requires a marketing strategy. A marketing strategy
defines the approach the business will take in order to get the customers'
attention and — critically — get them to spend their money on the business's
products or services.

The marketing strategy will be built on the answers to the following questions:
 What products do customers want from a sector's produces?
 In what way are competitors failing to produce these products?
 What prices are customers expected or willing to pay?
 What channels are available for getting the product to the customer?
 Who might be the partners in the distribution process?
 How might they be approached?
 In what ways can customers be informed that the product is available?
 How can the customers' interest be stimulated through promotion?

Developing Promotional Campaigns

A promotional campaign is any program of activities dedicated to informing
customers about a product, stimulating their interest and encouraging purchase.
Examples include advertising and public relations campaigns, sales drives, direct
mailing, exhibitions and in-store demonstrations.
26 Chapter 2

Though each of these approaches is different, the consultant faces a common

profile of tasks when developing such campaigns. The key questions the client
will be asking will be:
 What methods will prove to be cost effective?
 What will be the mechanics of running the campaign?
 How can it be monitored?

Planning Sales Force Activity

For many businesses, especially small and medium-sized ones, the sales team is
the primary promotional tool. Expenditure on sales force activity is one of the
most important investments the firm will make. Detailed and thoughtful
planning of sales force activity is a process which offers real returns. This is an
area in which the consultant can offer valuable support. Some of the key issues
that might be addressed include the following:
 Overall organization of the team
 Sales team training
 Sales team motivation
 Planning sales campaigns

New Product Development

New product development represents a complex project that draws in most, if
not all, of the firm's functions. Research and development, marketing and sales,
production, purchasing and human resources will all be called upon to make a
contribution. New product development is often undertaken by interdisciplinary
teams, which cut across departmental boundaries.
The consultant can offer support to the new product development program in a
number of ways. The most important include:
 understanding the customer's needs through market research;

 technical advice on product development;

 identifying and contacting suppliers of critical components;

 development of marketing and PR campaigns to support the launch;
 developing promotion campaigns to get distributors on board;
 financial planning and evaluation of the return on new product
investment.
 Areas of Management Advisory Services — Part 1 27

Developing Proposals for Financial Support

Businesses often need infusion of capital. Consultants are often called in to
offer advice in four critical areas:
 Evaluation of the business's investment needs;
 Identification of funding providers and how they might be contacted;
 Developing an understanding of the criteria employed by funding
providers and how these might be addressed;
 Developing communications with funding providers, particularly in
relation to proposals and business plans.

Staff Recruitment
A consultant can be of value in this area. Important contributions to recruitment
•
projects might include:
 assessing the firm's human resource requirement and identifying skill
and knowledge gaps, both currently and predicting for the future;
 creating advertisements (with insights into both message and medium) to
attract the right people;
 developing assessment criteria, interview procedures and, possibly,
psychometric testing of candidates;
 advice on the reimbursement packages new recruits will expect.

Successful recruitment can demand a degree of specialist knowledge. As a result

it is often an area in which dedicated consultants operate.

Exporting and International Marketing

Most large firms have an international if not a truly global dimension to their
operations. Many high-growth firms soon recognize the opportunity the
international stage offers them as a route for expansion. For most businesses,
moving into the international arena is a step into the unknown.

The most successful moves into international operations are those which are
based on sound preliminary research and a thorough understanding of what to
expect. The consultant can assist this process of discovery.
28 Chapter 2

In particular the consultant can supply:

 an overall insight into regional, social and macroeconomic development;
 an analysis of the growth and evolution of specific markets;
 an evaluation of consumer needs and requirements and how these are
being satisfied currently;
 information on regulatory and legal issues;
 details of the existing supply structure and competitors present;
 an investigation into distribution channels and possible partners;
 information on advertising and promotional opportunities.