PROVIDING THE CUTTING EDGE
The Times of India, Tuesday May 3, 1994

The ratio of management consultants to business and industry in India is a very poor one, as compared to that of most developed countries. Attitudes to management consultants are not particularly positive either, with the catalytic role of a consultant yet to be fully understood or appreciated.

This is equally prevalent in the various areas of Indian business and industry, whether it is the family-owned business segment, vis-a-vis the professional technocrat turned businessman, or in the multinational business arena.

Management consultancy, nevertheless, is an exciting and creative professional activity for well educated and experienced business managers. And while the actual process of setting up an individual consultancy practice may be an arduous one, the challenges involved are not without their rewards. These rewards may be counted not only in financial terms, but also in terms of the exposure and experience gained across the spectrum of business and industry that consultants also benefit from a sense of independence and flexibility, and can simultaneously pursue other related activities, such as writing or teaching.

What are the areas then that need to be considered in the process of setting up a management consultancy practice?

Individual consultancy versus a firm

The very first question that arises is whether to operate individually, or set up a consultancy firm offering a range of services. This decision depends on the educational and professional background of the prospective consultant, as well as his/her level of specialisation and financial standing.

Operating independently means that one can run the practice from home, but this option has limitations both in terms of scope and credibility. Setting up a firm, on the other hand, requires office space, rented or bought, and other infrastructural facilities, which mean investment. In large cities like Bombay, which have maximum potential on the client front, the investment for space and infrastructure is also the highest.

Generalisation versus Specialisation

If one is setting up a firm, then having located the space and established the infrastructure, the decision is to be made whether to work in a range of areas in business and industry or whether to specialise in one field.

Identity, image and name

Given the route selected, individual or organisational and the nature of consultancy proposed, general or specialised, the name and logo follow together with the requisite stationery.

Developing the practice

Here one is faced with a bit of a dilemma in the case of offering a range of services. To offer such a range, one needs a team of persons and to have a team of persons, one needs to establish a practice. The team has to be paid, after all, and a regular flow of work needs to be ensured as well, so as to generate the revenue to pay the team. The only solution here is to build up both the practice and the team gradually.

Having taken the plunge into management consultancy oneself, so to speak, does not mean that it is not easy to get other professionals to share the risks of a consulting practice. The team-building process is therefore a slow and laborious one, unless one has the fortune at the outset to get together with a team of persons who have both the requisite professional backgrounds and the necessary financial standing.

Clients also expect consultants to have previous experience in the field. Attempting to get clients who are completely unknown to one is difficult until one has gained a certain degree of market standing based on success. The best source of clients for a fledgling consultancy practice, therefore, is people in industry or business previously known to the aspiring consultant.

Dealing with client business cultures

A variety of cultures, as mentioned above, typify the Indian business scene. For management consultants, each pose problems peculiar to their own type, over and above the difficulties all categories have in common.

In dealing with multinationals, for example, management consultants are often faced with having to play an ego game. Managers in multinational corporations are usually professionally well-qualified both in-terms of education and experience, and tend to perceive that inputs from a consultant implies that the consultant is in some way superior. If someone 'superior' is to be accepted, therefore, it is necessary that their qualifications and experience follow suit, which is not always the case.

What is not understood is that a management consultant, (even one with a lower education and experience) being an agent from the outside, brings in a different, and more objective view, thus playing the role of an external catalyst. In practice, easing this situation sometimes means that the consultant has to declare loud and clear, that should the roles be reversed, the managers concerned may well be better consultants than the consultant in question!

The other problem faced by management consultants in the area of interaction with multinationals, is that the higher echelons in the corporate hierarchy need to be convinced of the need for consultancy, particularly since the appointment of a consultant is generally made at these levels. Senior managers often perceive that the need for the services of a consultant is an acknowledgement of inadequacy, inefficiency and incompetence on their part, resulting in resistance.

In the cultural environment that typifies the Indian family-owned business segment, the services of a consultant, not being tangible in nature, are often viewed with suspicion. What a management consultant is able to contribute, particularly in the apparently nebulous realm of say marketing strategy or human resource development, is not comprehended. Such businessmen often feel that they can manage everything themselves. And what they cannot should be taken care of by the managers they have in their employ. There is no perceived contributory role, therefore, that a consultant may play over and above the existent management infrastructure.

Of the broad business categories under consideration, the technocrat businessman is most likely to be appreciative of the professional services of a consultant. However, the technocrat's very background often precludes him from understanding or acknowledging his own limitations. Having turned a successful businessman, he is at a loss to understand that he may lack not only in the professional objectivity that is the consultant's strength, but also that his basic functional knowledge in non-technical areas may need supplementing.

In fact, in the Indian context, the very concept of management consultancy as an input in business over and above the traditional four Ms of Men, Materials, Machines and Money remains to be understood, particularly in the categories of family/technocrat owned business.

Registration of Consultants

This is another area that is touched by the chicken-and-egg syndrome. Consultants need to be registered with financial institutions to be eligible for loans, etc. Financial institutions, on their part, which to know of the consultant's experience.

In this area too, the process involved is a slow one, whereby a consultant establishes personal credibility in business and industry, building up from there with institutions.

Professional Affiliations

Joining and registering with professional bodies such as the Institute of Management Consultants of India is a good idea. This also facilitates contact and interaction with other consultants, and makes for a more professional approach.

Appearance

While established consultants may be in a position to dress as they please, an aspiring consultant is expected to be appropriately (read conventionally) dressed. As in most professions, a consultant tends to be judged by his/her appearance and dress, and it is usually felt that if a consultant is well dressed, he/she is prospering, and therefore a good consultant!

Allied activities

One route to recognition as a consultant is to write on one's area of specialisation for the business press / professional publications. Another is to teach one's subject in management institutions.

Management and control of time

In certain types of consulting work clients expect that compensation to consultants will be made on the basis of results. This can be a risky approach, in areas such a placement, for example, where head-hunting may be assigned to several consultants and the client may well end up making an internal promotion.

There is also the kind of client that uses consultants as information banks for, say, project profiles, business ideas or statistical data for no fees whatsoever or at nominal fee levels.

A consultant must therefore, control use of his/her time, guarding against unfair client practices, and carefully evaluating assignments and charging accordingly for his/her services.

Billing and fees

One area to be considered here is the basic rates applicable. Often, from the client's point of view, management and owners see no reason to pay consultants at a rate higher than that of a manager's remuneration. Neither are the consultant's overheads or his/her idle time considered in this equation, nor is the fact that corporate managers are not only remunerated by way of salary, but also come with their own overheads. Managerial overheads do not only cover perquisites such as 'house and car' but also include hidden costs such as space and infrastructure, and take into account under-utilisation of time, rendering managerial mantime rates relatively unproductive when compared to the fine-tuned qualitative inputs of management consultants.

It is also difficult at times for consultants to keep track of time spent on assignments, since time may be taken up not only by organized activities such as data collection or proposal writing, but also on internal discussions and "thinking".

The percentage method of billing is usually most advantageous to the consultant because most Indian clients are comfortable with the concept of percentage fees, and since this method accounts for the consultant's level of input. Here the entire scope of services say for a new project is broken up into various stages from initial study to implementaton, and percentages of the project const (amounts differ with the stages) are agreed upon as fees.

As regards investment may by consultants in office space and infrastructure, it is impossible to actually take into account interest rates applicable to prevalent property prices and aim to earn a reasonable return on investment, especially in cities like Bombay.

This is particularly true given the fact that existing management consultancy rates in India are low. Indian consultants charge anywhere between Rs.2,000 to Rs.15,000 a day, whereas international rates are between five to ten times higher.

Therefore it seems logical that Indian consultants, and there are many of the required caliber, seek overseas consulting assignments, to ensure higher revenues for their services.

International Consultancy

If the path to successful consultancy in India is strewn with obstacles, it is an even more difficult one internationally.

Additional problems are largely in the following areas :

  • High cost of sourcing international clients, in terms of communication costs and travel expenses etc.
  • Obtaining foreign exchange for preliminary promotional work in the absence of earlier foreign exchange earnings, though this situation has eased in recent times.
  • Difficulty in registering consulting individuals / firms with international institutions such as World Bank, Asian Development World Bank, Asian Development Bank etc. in the absence of adequate experience.

The key to international consultancy lies in gradually building up a client list that sustains one's expenses, on which basis one then develops an international consultancy practice.

International consulting, needless to add, is an exciting area of work, full of challenges and therefore more satisfying. One does need staying power, previous professional experience on the international front and a yen for this form of consulting with its inherent difficulties (and rewards) to succeed in this field.

Whether in India, where it is a relatively new profession, or abroad, management consulting has a vital role to play in business and industry in assisting and developing a client's competitive edge and helping him make technological breakthroughs. This optimizes resource utilization, thus leading to the enhancement of the quality of life, the underlying endeavour of all economic activity.

(The writer is a management consultant).
 

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