CHAPTER 2

AREAS OF MANAGEMNT ADVISORY

SERVICES –PART 1

Typed 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 then
determining the preferable course of action. An example of a corrective problem is the sudden
drop in productivity 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 procedures have remained
unchanged. The firm has continued to employ old 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.

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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 International operations

Within each principal are several narrower areas. For instance, under finance and accounting, the
following may be subject of management advisory services.

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

The analytic process in a consulting engagement includes:

a) Identifying the objectives,

b) Defining the problem,
c) Finding out the facts,

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 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 the 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.

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 large manufacturing firm. It may even involve locations in foreign countries.

Areas of MAS 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,

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when consultants are called in to undertake work on behalf of a business, it is with 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 system consulting
(c) Internal audit services
(d) Management operations audit
(e) Business process improvement/reengineering
(f) Others such as
(1) Marketing research
(2) Marketing strategy development
(3) Developing promotional campaign
(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 team. The first task 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 expectation 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 Part III, Chapters 21 to 26.

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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 collected and organize such information 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, Chapters 27 to 33.

Internal Audit Services

Internal Auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization’s operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control and governance processes.

This definition is key for understanding the role and depth of internal auditing today. It also
depicts the profession’s broadened focus and proactive stance.

This service area is discussed and illustrated more fully in Part V, Chapter 34.

Management/Operations Audit

Operational audits also known as management 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, Chapter 35.

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 (1) 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.

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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 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 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 conductive 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, 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 competitive strength to
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 terms of resources, is crucial to successful implementation.
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

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 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 employee’s a continual opportunity to retain and adapt their skills to
the rapidly changing work environment. If the employee’s recognize a commitment by their
organization to ensure that their skills are current and useful, they will in turn be more likely to
commit o 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.

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 answer 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.

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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 customer’s 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 customer’s expected or willing to pay?
 What channels 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

product, stimulating their interest and encouraging purchase. Examples include advertising and
public relations campaigns, sales drives, direct mailing, exhibitions and in-store demonstrations.

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 forced 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
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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 costumer’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.

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 which dedicated consultants operate.
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Exporting and International Marketing

Most large firm have an international if nit 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.

In particular the consultant can supply:

 an overall insight into regional, social and macroeconomics development;

 an analysis of the growth and evolution of specific markets;
 an evolution 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 competitor’s present;
 an investigation into distribution channels and possible partners;
 information on advertising and promotional opportunities.

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