Jump to content

Consulting firm

From Wikipedia, the free encyclopedia

Aconsulting firmor simplyconsultancyis aprofessional servicefirmthat provides expertise and specialised labour for afee,through the use ofconsultants.Consulting firms may have one employee or thousands; they may consult in a broad range of domains, for example,management,engineering,and so on.

Management consultants, in particular, typically work with company executives and provide them with generalists and industry-specific specialists, known assubject-matter experts,usually trained in management or in business schools. The deliverable of a management consultant is usually recommendations for achieving a company objective, leading to a company project.

Many consulting firms complement the recommendations with implementation support, either by the consultants or by technicians and other experts.

Consulting services are part of theprofessional servicesand account for several hundred billion dollars in annual revenues. Between 2010 and 2015, the 10 largest consulting firms alone made 170 billion dollars growth revenue and the average annual growth rate is around 4%.

According toThe Economist,the industry’s most important firms are the "Great eight" consulting firms which consist ofBain,BCG,McKinsey,Deloitte,EY,KPMG,PwCandAccenture.[1]

Segments[edit]

The segmentation of advisory services varies widely across organizations and countries. Categorization is unclear, in part because of the upheavals that have occurred in this industry in recent years.[2]

One approach is to separate services into five broad service delivery families, considering the managers they are targeting:

  • Services related to thecompany's overall strategy,which are addressed to theCEO,
  • Services related to marketing, communication, sales and public relations, which are addressed to theCMO,
  • Services related to management,financial management,taxation, accounting, compliance with regulations, for theCFO,
  • Services related to thecompany's operations,intended for operational management, which may be different depending on the industrial sector (technology director, plant managers, operations directors, Research and Development managers), for instanceCOOandCTO,
  • Service related toinformation technology(seeIT consulting) intended for information management, which are addressed to theCIO.

Models of business[edit]

A consulting firm's model of business may be compared tostaffing,wherein the objective is to lower labour costs forclientsfor an intended result, or relative to an intended result or output, in order to charge for aprofit marginfor the consulting firm. Clients are looking to procure or purchase external help and assistance. Consulting firms sustain their revenues from alabour economicpoint of view as a method for distributing labour, where certain positions, roles or fields of expertise within thelabour marketfind it more suitable forcontractwork, as contrasted to in-house employment, for a few conceivable reasons:

  • Client needs being incontinuous, or continuous but otherwise volatile in that they may vary from time to time in nature and scope,
  • A potential scarcity of skilled labour available on the market,[3]
  • The possibility of offering a higherwork level activity,[4]
  • The necessity forlicensedlabour or other qualified labour for tasks not making up the core task assembly of the client organization,
  • Looking to get a hold of or utilize of third partyintellectual property,intangible capital or other types of goodwill belonging to the consulting firm.[5]

Aside from the economic arguments stated above, consulting also acts as acorporate servicesmodel:

  • Where internal consulting solutions (at which the client firm acts as a de-facto employer) may run into issues of scope once projects get too large, external consulting firms may be able to provide a better solution for the larger consulting deals on the market,[6][7]
  • Risk and compliance audits may be suitable for a consulting contract as a means of safeguarding neutrality,[8]
  • Consulting comprises the natural service model for large-scaletransformationprojects in client enterprises,[9]
  • Certain service models, such asfinancial auditingandeconomic consulting,are effectively required to offer their services in the form of consulting agreements due to a lack of industry position outside of thetertiary sector,[10]
  • Some clients may decide to hand over entire assemblies of tasks to consulting firms for a period of time - this is akin to outsourcing agreements, however with the exception of a predestined due date which is atypical in outsourcing,
  • Consulting is also used as athird partyservice model as could be seen in for example contract formations ofb2b-deals,legalconsulting andM&Aactivity,

consequently acting as a source of profit for clients, consulting firms and society as proffered.[11][12][13]The consulting business model can be seen as a result of theknowledge economy,and as a subset of theknowledge industry.[14][15]Today it is not rare for consulting firms to offer what may be consideredturnkeysolutions to clients.[16][17]Knowledge transferis also a prevalent sales argument for consulting services.[18]

Outsourcing[edit]

It is common practice for consulting firms to be involved in the sale ofoutsourcingservices as well. Similarly, outsourcing firms may offer consulting services as a way to helpintegratetheir services with the client. Many consulting firms offer several service packages as part of their businessportfolio.While consulting services and outsourcing services are compatible, issues arise if the clients are not aware of the differences between the two. From anethicalstandpoint, it is important that clients are aware of what type or types of services they areprocuring,as consulting services are meant to be a complementary service to the client firm, whereas outsourcing effectively aims toreplaceparts of the client firm that are imperative to their operational ability.[19][20]

Types[edit]

There are different types of consulting firms serving different sectors. They mainly fall under the following fields:

Some consulting firms also serve niche sectors, such as:

Successful consulting firm cases[edit]

Mexico[edit]

In 2013, there was a randomized trial in Mexico where 432 small and medium enterprises were allowed access to management consulting services for one year.[22]As a result of this trial, there were many positive impacts. Such positive impacts include: increase in entrepreneurial spirit, increases in employment and higher wages for employees. Even after 5 years after the trial, positive impacts are still active.[23]These results were achieved by advertising a consulting program to 432 enterprises and recorded data on the positive effects.

Impact of consulting firms in emerging economies[edit]

Negative impacts[edit]

The impact of consulting firms on local businesses inemerging economiesdo not always have positive effects.[24]One reason for this is that firms in emerging economies suffer from the inferiority of their technologies and innovation capabilities, thus, although they have access to consulting firms, they cannot make the most of the advice given. Advice given by consulting firms to clients may not be used efficiently as clients firms in emerging markets tend to suffer due to a lack of infrastructure, organisation, and education. Another reason firms in emerging economies struggle to effectively use consulting services is that innovation is very costly and risky.

Positive impacts[edit]

As notedabove,consulting firms in emerging economies do also have positive impacts. Positive impacts include: increases in employment, increase in entrepreneurial spirit and higher wages for employees.

Impact of consulting firms in developed economies[edit]

One study shows that there is a significant difference between efficiency between consulting firms in America (developed economy) and consulting firms in Asia Pacific regions (emerging economy).[25]Efficiency scores of consulting firms in America were significantly higher than consulting firms in Asia Pacific regions. This is because firms in developed economies have better infrastructure, organisation and education, thus advice given by consulting firms is used efficiently.

Examples of Consulting Firms[edit]

There are many consulting firms out there that provide services across a range of industries, Notable firms includeKPMG,BCG,Deloitte,PWCandEY.

Worth noting there are also a myriad of other smaller more niche firms includingEcorys,YABX,Westcliffe Strategicand many many more. These firms often offer solutions to smaller businesses than the bigger consulting companies.

See also[edit]

References[edit]

  1. ^"Have McKinsey and its consulting rivals got too big?".The Economist.ISSN0013-0613.Retrieved2024-03-27.
  2. ^"Consulting on the Cusp of Disruption".Harvard Business Review.2013-10-01.Retrieved2017-12-30.
  3. ^Maister, David H. (2004)."The Anatomy of a Consulting Firm".The Advice Business: Essential Tools and Models for Managing Consulting.Retrieved22 May2022.
  4. ^Alvesson, Mats; Robertson, Maxine (2006)."The Best and the Brightest: The Construction, Significance and Effects of Elite Identities in Consulting Firms".Organization.13(2). SAGE Journals: 195–224.doi:10.1177/1350508406061674.S2CID206696349.
  5. ^"Strategy and Organization Consulting"(PDF).Center for Effective Organizations.Retrieved6 April2023.
  6. ^Swartz, Don (1974)."Similarities and Differences of Internal and External Consultants".Academy of Management Proceedings.1974.Academy of Management: 17.doi:10.5465/ambpp.1974.4980555.Retrieved6 April2023.
  7. ^Kelley, R. E. (1979)."Should you have an internal consultant?".Harvard Business Review.57(6). Europe PMC: 110–120.PMID10244211.Retrieved6 April2023.
  8. ^"Caveat Compliance: Can Firms Rely on Advice Received from Compliance Consultants?"(PDF).Retrieved6 April2023.
  9. ^Poulfelt, Flemming; Olson, Thomas H.; Poulfelt, Flemming; Bhambri, Arvind; Greiner, Larry (2017)."The Changing Global Consulting Industry".Management Consulting Today and Tomorrow.Taylor & Francis Group. pp. 5–36.doi:10.4324/9781315648293-2.ISBN9781315648293.Retrieved7 April2023.
  10. ^Munro, Lois; Stewart, Jenny (2009)."External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activities".Accounting & Finance.50(2). Wiley Online Library: 371–387.doi:10.1111/j.1467-629X.2009.00322.x.hdl:10072/29902.S2CID154459504.Retrieved7 April2023.
  11. ^Momparler, Alexander; Carmona, Pedro; Lassala, Carlos (2015)."Quality of consulting services and consulting fees".Journal of Business Research.68(7): 1458–1462.doi:10.1016/j.jbusres.2015.01.033.Retrieved19 May2022.
  12. ^Armbrüster, Thomas (2006).The Economics and Sociology of Management Consulting.Cambridge, UK:Cambridge University Press.ISBN978-0-521-85715-4.
  13. ^Shogun, Steve M. (May 2004)."Editorial: Consulting, Research, and Consulting Research, Volume 23, Issue 2, May 2004".Marketing Science.23(2).INFORMS:173–179.doi:10.1287/mksc.1040.0078.Retrieved19 May2022.
  14. ^Sarvary, Miklos (1999)."Knowledge Management and Competition in the Consulting Industry".California Management Review.41(2): 95–107.doi:10.2307/41165988.JSTOR41165988.S2CID154894228.Retrieved19 May2022.
  15. ^Jacobson, Nora; Butterill, Dale; Goering, Paula (2005)."Consulting as a Strategy for Knowledge Transfer".The Milbank Quarterly.83(2): 299–321.doi:10.1111/j.1468-0009.2005.00348.x.PMC2690143.PMID15960773.
  16. ^Nissen, Volker (2018).Digital Transformation of the Consulting Industry: Extending the Traditional Delivery Model.Progress in IS. Springer Cham.doi:10.1007/978-3-319-70491-3.ISBN978-3-319-70491-3.
  17. ^Sandberg, Robert."Corporate Consulting for Customer Solutions: Bridging Diverging Business Logics"(PDF).ex.hhs.se.Stockholm School of Economics.Retrieved23 May2022.
  18. ^Butterill, Dale; Goering, Paula; Jacobson, Nora (16 June 2005)."Consulting as a Strategy for Knowledge Transfer".The Milbank Quarterly.83(2): 299–321.doi:10.1111/j.1468-0009.2005.00348.x.PMC2690143.PMID15960773.
  19. ^Anderson, Stephen J.; McKenzie, David (January 2022)."Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing".Journal of Political Economy.130(1): 157–209.doi:10.1086/717044.hdl:10986/34979.S2CID240535903.Retrieved21 September2022.
  20. ^Czerniawska, Fiona (June 2006)."Outsourcing: Death Knell for Consulting?".Consulting to Management.17(2): 57–59.Retrieved21 September2022.
  21. ^"Business plan examples".Monday, 25 November 2019
  22. ^Bruhn, Miriam; Karlan, Dean; Schoar, Antoinette (April 2018)."The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico".Journal of Political Economy.126(2): 635–687.doi:10.1086/696154.hdl:1721.1/121090.ISSN0022-3808.S2CID5814460.
  23. ^"Why Big Data is becoming so Important in Supply Chain | Big Supply-Chain Analytics – Assuras – Providing Assurance & Confidence For Today's Leading Businesses".2022-10-01.Retrieved2022-10-24.
  24. ^Back, Yujin; Praveen Parboteeah, K.; Nam, Dae-il (2014-12-01)."Innovation in Emerging Markets: The Role of Management Consulting Firms".Journal of International Management.20(4): 390–405.doi:10.1016/j.intman.2014.07.001.ISSN1075-4253.
  25. ^Park, Gowangwoo; Lee, Seok-Kee; Choi, Kanghwa (January 2021)."Evaluating the Service Operating Efficiency and Its Determinants in Global Consulting Firms: A Metafrontier Analysis".Sustainability.13(18): 10352.doi:10.3390/su131810352.
Retrieved from "https://en.wikipedia.org/w/index.php?title=Consulting_firm&oldid=1226308766"