Management and Practice of Consulting
Week 1:
Emergence of the industry: the first wave
o 2nd industrial revolution – why at this time?
o Big corporations started to emergework becomes more complex, is divided and needs to
be integrated, coordinated, in other word “organised” and “managed”
o Emergence of first business schools (Harvard – 1908; HEC – 1881)
Emergence of the industry: the first wave
o Managers becoming key actor and require advice
o Initial advice comes from lawyers, bankers accountants
Chandler argues that in the nineteenth century, Adam Smith's
famous invisible hand of the market was supplanted by the "visible hand" of
middle management, which became "the most powerful institution in the
American economy".
Emergence of the industry: the first wave
o Development of Scientific Management (Taylor, 1911). Frederick Taylor is often named
as the «first» consultant
o Main Principles:
o «one best way» (observation of workers, identification of the best steps, measure of time,
elimination of useless gestures);
o vertical division of labour (this ideal sequence is defined by engineers, workers are heavily
supervised)
o «the right man in the right place» (selection of workers + can get a lot of extra money for
working above the standard)
Emergence of the industry: the first wave
o elaboration of similar payment-by-result methods by other engineers (Emerson, Bedaux,
1
,etc.) who set up the first consultancies in the US and Europe
o refinement of methods, growth of existing firms, rise in the number of consultancies up
until the 1960s
What were they replaced by?
Organization and Strategy Consulting
o Growth of corporations, adoption of the «M-form» (multidivisional structure) spread by
consultants (Chandler, 1962).
o Start of a decentralisation trend, especially around the 50s: companies were so big that
some of the power needed to be transferred back to smaller/more local entities
o Rise of Multidivisional form spread by consultants themselves
o Example of a typical Mc Kinsey project in the 60s:
Does management fashion emerge from client needs or do consultatns sell this fashion to the
clients?
2
,First consultants
Organization and Strategy Consulting
o Opportunity to offer other advice to top managers (e.g. accounting & business surveys)
o Early movers: Arthur D. Little and Booz Allen & Hamilton
o Increase in environmental complexity and turbulence + need for long term vision to
convince investors o Introduction of the «up or out» career system by Martin Bower at
McKinsey (Mc Kenna, 2006)
None of the previous actors managed to «catch this wave», only new and diverse actors did.
HOW CAN YOU EXPLAIN IT?
Because their skills are very different.
3rd wave:
IT-based Consultancies
o In the 1970/80s, large diversified organisations under pressure, repeated economic crises,
Internationalisation trends: new competitors → need for efficency → cost control is higher
o Evolution of the role of managers (from a focus on organization and strategy) towards the
management of the value chain and of internal/external relationships;
o Development of information technology: implementation of company wide software (ERP /
SAP)
o An opportunity for the big accountancies (emergence of multidisciplinary practices
including law, tax, and management advice) – why?
o They were followed by hardware manufacturers (like IBM) as well as computer and
software services firms (Cap Gemini for ex.)
o Organisational consequences: higher leverage, bureaucratisation
3
, Difficulty for consultancies to move from one wave toto the next (Kipping, 2002)
o Intangibility of consulting services and role of
Source: Kipping (2002: p.38)
reputation
o Need to match consultant skills with client
expectations
o Different leverage structures required for different types of services
What is changing at the moment in the consulting industry?
o Sophistication of clients’ demands
o Pressure on cost ( effect of digitalization, reach to cheaper resources)
o Demands for more flexible work and more autonomy from consultants
o Automation of consulting services
Sources: Birkinshaw & Lancefield (2023)
4
Week 1:
Emergence of the industry: the first wave
o 2nd industrial revolution – why at this time?
o Big corporations started to emergework becomes more complex, is divided and needs to
be integrated, coordinated, in other word “organised” and “managed”
o Emergence of first business schools (Harvard – 1908; HEC – 1881)
Emergence of the industry: the first wave
o Managers becoming key actor and require advice
o Initial advice comes from lawyers, bankers accountants
Chandler argues that in the nineteenth century, Adam Smith's
famous invisible hand of the market was supplanted by the "visible hand" of
middle management, which became "the most powerful institution in the
American economy".
Emergence of the industry: the first wave
o Development of Scientific Management (Taylor, 1911). Frederick Taylor is often named
as the «first» consultant
o Main Principles:
o «one best way» (observation of workers, identification of the best steps, measure of time,
elimination of useless gestures);
o vertical division of labour (this ideal sequence is defined by engineers, workers are heavily
supervised)
o «the right man in the right place» (selection of workers + can get a lot of extra money for
working above the standard)
Emergence of the industry: the first wave
o elaboration of similar payment-by-result methods by other engineers (Emerson, Bedaux,
1
,etc.) who set up the first consultancies in the US and Europe
o refinement of methods, growth of existing firms, rise in the number of consultancies up
until the 1960s
What were they replaced by?
Organization and Strategy Consulting
o Growth of corporations, adoption of the «M-form» (multidivisional structure) spread by
consultants (Chandler, 1962).
o Start of a decentralisation trend, especially around the 50s: companies were so big that
some of the power needed to be transferred back to smaller/more local entities
o Rise of Multidivisional form spread by consultants themselves
o Example of a typical Mc Kinsey project in the 60s:
Does management fashion emerge from client needs or do consultatns sell this fashion to the
clients?
2
,First consultants
Organization and Strategy Consulting
o Opportunity to offer other advice to top managers (e.g. accounting & business surveys)
o Early movers: Arthur D. Little and Booz Allen & Hamilton
o Increase in environmental complexity and turbulence + need for long term vision to
convince investors o Introduction of the «up or out» career system by Martin Bower at
McKinsey (Mc Kenna, 2006)
None of the previous actors managed to «catch this wave», only new and diverse actors did.
HOW CAN YOU EXPLAIN IT?
Because their skills are very different.
3rd wave:
IT-based Consultancies
o In the 1970/80s, large diversified organisations under pressure, repeated economic crises,
Internationalisation trends: new competitors → need for efficency → cost control is higher
o Evolution of the role of managers (from a focus on organization and strategy) towards the
management of the value chain and of internal/external relationships;
o Development of information technology: implementation of company wide software (ERP /
SAP)
o An opportunity for the big accountancies (emergence of multidisciplinary practices
including law, tax, and management advice) – why?
o They were followed by hardware manufacturers (like IBM) as well as computer and
software services firms (Cap Gemini for ex.)
o Organisational consequences: higher leverage, bureaucratisation
3
, Difficulty for consultancies to move from one wave toto the next (Kipping, 2002)
o Intangibility of consulting services and role of
Source: Kipping (2002: p.38)
reputation
o Need to match consultant skills with client
expectations
o Different leverage structures required for different types of services
What is changing at the moment in the consulting industry?
o Sophistication of clients’ demands
o Pressure on cost ( effect of digitalization, reach to cheaper resources)
o Demands for more flexible work and more autonomy from consultants
o Automation of consulting services
Sources: Birkinshaw & Lancefield (2023)
4
