Management consulting for SMEs Computimes, Thursday, June 24, 2004 THE Asia-Pacific management consulting market is estimated at US$8.9 billion (RM33.8 billion) last year and is projected to grow at an overall compound annual growth rate of 5.3 per cent between 2003 and 2006. Most consumers of management consulting services are large organisations and governments. For most small and medium-sized enterprises (SMEs), management consultants remain an expensive and risky investment that few can afford. Much of this aversion to procuring external advice stem from misconception about management consulting and its role in a firm's affairs. The purpose of this article is to help managers of SMEs understand: What management consulting is (and is not); When should they use the services of a management consultant; and How to tell good advice from the bad. Chua: A need for objectivity. What management consulting is. Let me begin by saying what management consulting is not. Management consulting is not hiring an overpaid outsider to do your work for you. A management consultant complements the manager, not replace him/her. The consultant may offer a set of recommendations to your business issues, but it is you who must act on them. Only the chief executive officer (CEO) has the authority and leverage to drive the kind of change needed for the consultant's recommendations to take effect. Management consulting is also not getting a retired CEO to share war stories with you. One of the great fallacies of the consulting industry is the view that sound business advice consists merely of the 'rich experiences" of industry veterans. And all that one needs to do to is to replicate what the industry veteran has done successfully in the past for other companies. But that kind of thinking is flawed. One person's experiences, no matter how extensive, cannot be the basis on which business advice is given. Sound business advice should be built on a foundation of facts derived from rigorous business research. This is not to exclude the value of personal experiences, which certainly add depth and perspective to any discussion. But business is evolving rapidly. And tired old methods from the past may not be the most appropriate way to face the future. Management consulting. Management consulting is, first and foremost, a profession, much like law, engineering, and medicine are professions. What distinguish a profession from other forms of occupation are the following: The existence of a body of knowledge that is rigorously developed and generally accepted. A code of conduct that governs the behaviour of all members of the profession. A community of practitioners that is responsible for upholding the standards of the profession as well as advancing the state of the practice. What separates management consulting from the other professions is its focus on issues of concern to managers of organisations. A management consultant offers objective advice that addresses one or more business issues of interest to a manager. And she does that by taking an analytical approach to all her speaking, writing, and problem solving. When to employ a management consultant? You should seek the help of a management consultant when deeply ingrained habits of perception inhibit the ability of your organisation to think "out of the box". This is especially true for highly insular industries (like banking, timber, and automotive assembly) where most of its business leaders practically spent their entire career in it. Industries like these are characterised by commoditised products, "me too" strategies, and slow innovation. In this situation, a management consultant, especially one with experience in dissimilar industries, can bring fresh insight and perspective. You should also engage a management consultant when there's a need for objectivity; such as when assessing of your organisation's relative performance against its competitors. Most strategic planning meetings are exercises in self-congratulation. Corporate executives take turn to endorse the CEO's vision and paint rosy pictures about the organisation's future. It's just good politics to make your boss look good. As a business leader, however, you might want to remember that what's good for your ego may be hazardous for your business. So there's value in getting a candid outsider to tell you the truth. Finally, a management consultant is needed when the issues under consideration requires knowledge and skills that are difficult or impractical to acquire in-house. As the global marketplace becomes increasingly complex, organisations are going to find themselves facing issues that require expertise that they simply do not have. The attributes of sound business advice. So how do you tell good business advice from the bad? Although the structure and content of consulting engagements can vary, sound business advice should exhibit at least the following characteristics: Correctness: Good advice should be based on rigorous business research (not anecdotal experiences). Clarity: No advice is useful unless it is clear and understandable to its users. Completeness: Good advice takes a systemic view of your business, avoiding the piecemeal approach that sub-optimises one part at the expense of another. Consistency: Sound business advice is built on unchanging economic principles and not management fads. The general manager of a large metal fabrication plant once told me that he has tried every management fad that came in vogue in recent years only to end up totally confused as to where his business should be heading. Verifiability: There must he explicit value realisation with every consulting engagement. If the consultant cannot measure what the client is trying to improve, then there's no way to verify if improvement has actually occurred. Practicality: Finally, good business advice must be actionable. The consultant must take into account implementation constraints posed by the client organisation's resources and capabilities when formulating his recommendations. BY GEORGE CHUA The writer is a management consultant at KarenSoft Business Consulting Services.