Management Consultancy Services Essay
Management Consultancy Services
Following the Enron case and others, the place and role of professional advisers within corporate governance was thrown into public focus and as a result the professional management bodies across the world revisited their policies on various regulatory mechanisms. The policies formulated by ‘Institute of Management Consultancy’, United Kingdom is taken as a reference in the discussions below. The general principles are summarized.
– Self-regulation is best delivered through a modern, professional approach, i.e. through standards backed by disciplinary arrangements that are supported by external validation and a Code of Professional Conduct and Ethical Guidelines that apply to all members.
– A framework is required at the organizational and individual level to ensure that clients are able to make an informed decision about their choice of consultancy advice.
– A sector-wide definition of management consultancy should be developed that will assist in a number of ways, including the debate around self-regulation, and be sufficiently flexible to accommodate new providers of consultancy.
– The sector-wide definition should be “Management consultancy is the provision to management of objective advice and assistance relating to the strategy, structure, management and operations of an organization in pursuit of its long-term purposes and objectives. Such assistance may include the identification of options with recommendations; the provision of an additional resource and/or the implementation of solutions.”
– The definition of a management consultant should be “Management consultants are those organisations and/or individuals that participate in the process of management consultancy within a framework of appropriate and relevant professional disciplines and ethics designed for the activity of management consultancy.”
– The principle of detailed technical regulation of management consultancy should be rejected and that the essential skills of consulting are primarily behavioral, stressing the importance of competences and ethical standards.
– Any regulatory regime requires a significant element of independence from the profession in terms of membership and operation.
– The option of a regulatory system that provides easily accessible information from clients on the performance of firms and individuals should be considered carefully.
– The global nature of consultancy means that the complexities of jurisdiction and applicable law need to be taken into account and the dangers of regulatory systems being used as restraints on trade or for the furtherance of the interests of trade blocs recognized.
– The question of the interaction of parallel regulatory systems needs to be explored thoroughly with a wide range of professional and trade bodies.
– Management consultancy is immensely competitive. Any self-regulatory regime must not fetter the ability of management consultants to compete for business, with the opportunities for other companies that they may bring.
– The Government does not have a formal role in regulating the profession of management consultancy. Its role is to encourage and support stakeholders in management consultancy, including clients and other institutes, to develop a system that protects users and enables the UK profession to compete in a global market.
PROFESSIONAL CONSULTANCY ORGANIZATIONS & CHALLENGES
“Traditionally the state has awarded associations of professionals the privilege of self-regulation in return for an assurance that members abide by a set of standards and an ethical code of conduct to ensure protection of the public interest. As increasing levels of education and social awareness give rise to greater expectations… traditional structures, rules and regulations are challenged and justification for privilege is questioned”. The position of trade and professional bodies is also made more complex by the increasing demand from members for such bodies to defend them from these pressures. This representational role has to be balanced carefully against the public protection responsibility. The regulatory function itself is not without its pitfalls. They are cent red on “…ensuring that everyone in the market is covered, how any regulations are to be enforced and also possibly ensuring that restrictive trade practices legislation is not used against them. All such arrangements are potentially unstable and perhaps are held together predominantly by the fear of more onerous statutory regulation”.
But these difficulties are compounded in an international environment. The increasing globalization that result in emergence of a single market mean that “…the developments of rules and regulations concerning two issues – competition amongst professionals and standardization of qualifications – are of particular concern”. But the profession is also global in nature and regulation has also to be seen in against a shifting pattern of international trading and political structures. One driver for change is seen as “..deregulation and privatization, combined with a gradual shifting of policy-making to the global level”.
If regulation is the key, what form should it take? It can be introduced at a number of levels, i.e. the activity (technical regulation); individuals (standards and qualifications); firms (the trade association model) or the profession as a whole (ethics and principles). All of them have their difficulties. Some believe that the accounting profession in the USA had the wrong approach, i.e. “Based on strict adherence to rules, it inadvertently encouraged innovations of the worst kind; creative accounting”.
3. SHOULD MANAGEMENT CONSULTANCY BE REGULATED?
There is, equally, the view that regulation is not needed at all. The market will regulate itself. This, of course, ignores that fact that business takes place within a societal framework and the view that the market is the ultimate regulator is, surely, flawed. It is based on the notion, sound in theory but questionable in practice, that the market is a perfect mechanism. Others suggest that the secret lies in the education of the client to make it an informed marketplace. It also has to balanced with the view that, if management consultancy wishes to be seen as professional, “Professional awareness and behavior come when the early juggling with a little knowledge gives way to skilled application of a generally accepted body of knowledge according to accepted standards of integrity”. It is also the case that the development of partnerships between clients and professional service firms (including investment by the latter in the former) may well limit the willingness of clients to ‘shop around’.
The key question then is what is regulation for. In essence of course it is to ensure that the customers or stakeholders receive the goods and services that they need and that the suppliers claim to provide. In the case of management consultancy this must mean that clients receive the best possible advice to help them in taking their organizations forward. In a market dominated by a few global brands, it is about extending the transparency and extent of choice to enable clients to choose on the basis of expertise, quality of delivery and cost. It is also about balancing the need to extend these principles down from the firm to the individual and the costs of any system.
The government view has been that good self-regulation coupled with demanding industry and people standards help companies compete in a global marketplace. When combined with effective self-regulatory systems and where appropriate supporting mechanisms exist to encourage good practice and resolve cross-border disputes, this development will reduce barriers and realize a single market worldwide.
4. STEP 1 IN REGULATAION – WHO ARE MANAGEMENT CONSULTANTS?
A number of definitions have been developed in recent years. The following is a small selection:
Management consultants are used first to provide wider additional expertise than is available within a single organization. Thus a change in production or marketing may require expertise in designing and implementing a new system. Secondly, management consultants are used to provide objective appraisals where it is often easier for the expert outsider to see the broader picture and recognize the long-term requirements. Thirdly, the management consultant may be needed to provide additional assistance where there is a temporary increase in the management workload. This may be to cope with a major change or new development in any area of management responsibility.”
The rendering of independent advice and assistance on management issues. This typically includes identifying and investigating problems and/or opportunities, recommending appropriate action and helping to implement those solutions.
Management consulting is an independent professional advisory service assisting mangers and organizations in achieving organizational purposes and objectives by solving management and business problems, identifying and seizing new opportunities, enhancing learning and implementing changes.
The term “Management Consultancy” applies when a firm is engaged for a definitive duration to undertake specific enquiries, conduct studies, identify options and make recommendations or give advice of a strategic nature relating to the organization, management and operation of [the organization] for consideration/implementation.
These definitions or descriptions have a number of threads in common. They are concerned with management issues of a significant, although not necessarily strategic, importance. Secondly, they are concerned with the role of the expert outsider. Finally, they extend the role of management consultants beyond advice and into implementation.
Taking these threads into account the Institute believes that the sector-wide definition should be “Management consultancy is the provision to management of objective advice and assistance relating to the strategy, structure, management and operations of an organization in pursuit of its long-term purposes and objectives. Such assistance may include the identification of options with recommendations; the provision of an additional resource and/or the implementation of solutions.”
Some have raised the issue of whether, if the professional activity is defined, the role of the individual management consultant also needs to be placed within a definitional framework.
REGULATION – WIDER ISSUES
Conversely, it is likely to be the case that others, even if introduced for the best of reasons, may see any system of regulation, as a restraint of trade. The danger is that the introduction of any self-regulatory system may also require an accompanying increase in bureaucracy and industry overheads and that the perceived failure of any such system may provoke a call for statutory intervention.
The potential costs of any regulatory regime, however light its touch, are also of concern when Government does not seem to appreciate the costs, whether financial or opportunity, that may arise. Additional administration for practices and activity by professional bodies require resourcing and, in many cases, it is practitioners who have to bear the burden.
The reality is that management consultancy, like every other business, is immensely competitive. Any regulatory proposals must take into account the need for the consulting profession to retain flexibility to adapt to a new global and technology-driven world. While global practices dominate the market, internal consultancies within domestic companies are turning to external – and, hence, foreign – markets, for business and small practices in niche markets are also competing on a global stage. The key is responding to the needs of clients rather than a regulatory regime that will always be behind developments in the marketplace.
CODE OF ETHICS – INSTITUTE OF MGMT CONSULTANTS, USA
All IMC USA members pledge in writing to abide by the Institute’s Code of Ethics. Their adherence to the Code signifies voluntary assumption of self-discipline. The Code specifies:
* Members will serve their clients with integrity, competence, and objectivity, using a professional approach at all times, and placing the best interests of the client above all others.
* Members will establish realistic expectations of the benefits and results of their services.
* Members will treat all client information that is not public knowledge as confidential, will prevent it from access by unauthorized people, and will not take advantage of proprietary or privileged information, either for use by them, their firm or another client, without the client’s permission.
* Members will avoid conflicts of interest, or the appearance of such, and will disclose to a client any circumstances or interests that might influence their judgment and objectivity.
* Members will refrain from inviting an employee of an current or previous client to consider alternative employment without prior discussion with the client.
* Members will only accept assignments which they possess the expertise to perform, and will only assign staff with the requisite expertise.
* Members will ensure that before accepting any engagement a mutual understanding of the objectives, scope, work plan, and fee arrangements has been established.
* Members will offer to withdraw from a consulting engagement when their objectivity or integrity may be impaired.
* Members will agree in advance with a client on the basis for fees and expenses, and will charge fees and expenses that are reasonable, legitimate and commensurate with the services delivered and the responsibility accepted.
* Members will disclose to their clients in advance any fees or commissions that they receive for equipment, supplies or services they could recommend to their clients.
* Members will respect the individual and corporate rights of clients and consulting colleagues, and will not use proprietary information or methodologies without permission.
* Members will represent the profession with integrity and professionalism in their relations with their clients, colleagues and the general public.
* Members will report violations of this Code to the Institute, and will ensure that other consultants working on behalf of the member abide by this Code.
The Institute of Management Consultants USA, Inc. (IMC USA) adopted its first Code of Ethics in 1968. Since that time IMC USA has modified the wording of the Code for additional clarity and relevance to clients. The current Code was approved February 22, 2002. It is consistent with the International Code of Professional Conduct published by the International Council of Management Consulting Institute (ICMCI) of which IMC USA is a founding member.
Members who apply for the CMC (Certified Management Consultant) designation must pass a written examination on the application of the IMC USA Code of Ethics to client service. The CMC mark is awarded to consultants who have met high standards of education, experience, competence and professionalism.
CODE OF ETHICS – THE GROUND REALITY
This paper is based on an Ethics Survey conducted by the Institute of Management Consultants among American business consulting clients of IMC members who are Certified Management Consultants (CMCs).
* Over-promising expected results and/or benefits (Nearly half of the respondents-46%)
* Not serving the best interest of the client (32%)
* Under-delivering results vs. commitment (31%)
A high percentage of respondents–40%–indicated that they believe professional service firms would lie to protect themselves. Thirty-nine percent (39%) also indicated that they think employees would lie to protect themselves. Counterbalancing this, however, was the expression of 54% of the respondents who indicted that in a difficult situation, they believe employees will behave honorably. Half of the respondents also believe that professional service firms do place a high value on the welfare of the client’s organization. It can therefore be concluded that while business executives believe that both employees and professional service firms do have an interest in the success and welfare of the organization/enterprise, they also feel that both groups would be inclined to act to protect their own interest or enhance their own position-an action which could inevitably be to the detriment of the enterprise.
Two additional issues in which professional service firms can be faulted by business executives included:
* Allowing the project’s scope to expand/creep. (One-fourth of the respondents indicated this was happening frequently.)
* Being imprecise or non-specific when setting expectations. (Only 19% indicated that this happens frequently, yet 68% indicated this occasionally happens.)