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Distance Learning Programme

M M S S P PR RO OG GR RA AM MM ME E I IN N C CO ON NS SU UL LT TA AN NC CY Y M MA AN NA AG GE EM ME EN NT T

India Habitat Centre
Core - IV B, 2nd Floor, Lodhi Road
New Delhi 110003
June, 2009

MSCM : Consultancy Practice
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CONSULTANCY
PRACTICE
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Contents

S.NO INDEX PARTICULARS

1. Chapter 1 Introduction to Consultancy-Evolution, Growth, present
Status, Types of consulting services, Firms and Role of
Consultants

2. Chapter 2 Consulting Opportunities and Method of Selection of
Consultants

3. Chapter 3 Management Consulting (MC) & Professionalism

4. Chapter 4 Consulting Process/ Stages

5. Chapter 5 Consulting Agreements/ Contract - Preparation and Format

6. Chapter 6 Legal Aspects of Consultancy

7. Chapter 7 Marketing of Management Consulting

8. Chapter 8 Proposal Preparation & Presentation

9. Chapter 9 Consulting Costs and Fees

10. Chapter 10 Consultant Client Relationship

11. Chapter 11 Data collection and data analysis

12.
Chapter 12
Quality Management in Consulting

13. Chapter 13 Report Writing

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Chapter I

Introduction to Consultancy-Evolution, Growth, present
Status, Types of consulting services, Firms and Role of
Consultants

Objectives:

After going through this section you will be able to :
To understand what consultancy means
To have a glimpse into the evolution and growth of consultancy
To know the present consulting scenario
To understand the various consultancy services and consulting firms
To understand the role played by the consultants

1.1 Introduction to Consultancy:

Consulting is essentially an advisory service and consultants are often referred to as
Change Agent. There are basically two approaches to consultancy: First approach is the
broad functional view while second approach, is as a special professional service which
also emphasizes a number of characteristics that such a service must possess. The two
approaches are complementary rather than conflicting.

On first view, Fritz Steele defines Consultancy as practice of giving expert advice or help
on the content, process, or structure of a task or series of tasks, where the consultant is not
actually responsible for doing the task itself but is helping those who are.

The second approach as defined by Larry Greiner and Robert Metzger defines,
management consulting is an advisory service contracted for and provided to
organizations by specially trained and qualified persons who assist, in an objective and
independent manner, the client organizations to identify management problems, analyze
such problems, recommend solutions to these problems, and help, when requested, in the
implementation of solutions.

Few more definitions of consultancy are as below:

A contract to provide services which meet all the following criteria expert analysis and
advice which facilitates decision making a specific, one-off task or set of tasks, a task
involving skills or perspectives which would not normally be expected to reside within the
department.
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Practice of helping Companies to improve performance through analysis of existing
business problems and development of future plans, as well as to the firms that specialize
in consulting.

1.1.1 Difference between Consultants and Managers: Consultants give while
Managers take which also means that in principle, consultants are not used to run
organizations or to take decisions on behalf of the managers. Further, they do not have any
direct authority to decide on or implement changes, which is whole & sole responsibility of
the client.

The various traits required for Consultants are:

Consultants must have two critical dimensions Human dimension and Technical
dimension. These are not separate but always interwoven. The various traits which
constitute above dimensions are as below:

- He must possess passion for Life & Self,
- Passion for giving more than 100% all the time,
- Passion for acquiring knowledge and technical competence,
- Highly developed, motivated and Intellect,
- Genuine concern and compassion for others,
- Vision,
- Courage,
- Sincerity,
- Ethics,
- Willingness to change and adapt new ideas,
- Recognize present paradigm and shift to new paradigm.

To bring home the above point, especially related to intellect and technical competence,
heres is a wonderful anecdote told about Charles Steinmetz, the Chief Engineer at General
Electric who retired in 1920 to become a Consultant. A year later, Steinmetz was recalled
by his old company to try to locate a breakdown in a complex system of machines. The
cause of the breakdown baffled every GE expert. Steinmetz spent the better part of a day
testing the system and its many components. Finally, he took a pencil out of his pocket,
marked an X on particular sub-assembly, and recommended that part be replaced. GEs
engineer were amazed to discover that Steinmetz had in fact pinpointed the problem.. A
month later they received the consultants bill - $1,000, a sizable sum back then. The
accounting department was aghast and demanded an itemized invoice.
Steinmetzs invoice read: Making one pencil mark, $1. Knowing where to place it, $999

1.1.2 Various purposes why Consultants are used or hired?

There are various purposes why Consultants are hired or used. However, here we would
describe five broad purposes pursued by clients in using consultants, irrespective of the
field of intervention and the specific intervention method used:
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1. To help client add value and achieve Organizational purposes, objectives &
personal and professional goals;
2. To help identify, diagnose and solve management and business problems;
3. To achieve client their real potential;
4. To identify and seize new opportunities as consulting firms are regarded as source
of valuable information and ideas that could be turned into a wide range of
initiatives, innovations and improvements including developing new markets etc;
5. To enhance learning, not only for the client but also for the consultants;
6. To implement changes needed to survive and be successful in an environment
where continuous change is the only constant.

1.2 EVOLUTION AND GROWTH OF CONSULTANCY:

Management consulting mostly started at latter part of the nineteenth century, during
Industrial Revolution, when modern factories started its operation and there were
institutional and social transformations which also saw the birth of the scientific
management movement

Frederick Taylor, Frank and Lillian Gilberth, Henry Gantt and Harrington Emerson are
considered pioneers of Scientific management who gave major impetus to the
development of consulting. They simplified various work processes and raised productivity
of workers and plants by using their technical and methodological approaches. They gave
lectures, carried out studies, wrote books and articles, organized practical demonstrations,
and provided advice in every possible way.

These efforts gave rise to consulting from the scientific management movement focused
mainly on factory and shop floor productivity and efficiency, rational work organization,
time and motion study, elimination of waste and reduction of production costs. This whole
area was given the name of Industrial Engineering and the practitioners were often called
efficiency experts. They were admired for their drive and methodical approach and for
the spectacular improvements they achieved. However, their interventions were also feared
by workers and trade unions because of their often ruthless approach to work
intensification.

Industrial engineering and efficient expert approach always had its own limitations which
led to a broadened interest in other aspects and dimensions of business organizations, and
to the birth of new areas of consulting. One of the first consulting firms under the name of
Business Research Services was started by Edwin Booz in 1914 in Chicago. Later on, a
number of consulting firms were established during the 1920s which were able to diagnose
business organizations in their totality, treating manufacturing and productivity problems in
a wider perspective of sales and business-expansion opportunities. One of the first firm
started was by James O. McKinsey who established his own consulting firm in 1925. He
was a protagonist of the general management and comprehensive diagnostic approach to a
business enterprise which is today recognized as one of the founders of the consulting
profession.

In late 1920s and 1930s, consulting firms started gaining ground in most of the Industrial
countries like United States, Great Britain, France, Germany etc. However, its volume and
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scope remained limited as there were very few firms, prestigious but rather small, and their
services were used mainly by the larger organizations. This led to a situation where
consultants remained unknown to the majority of the small and medium-sized firms.

However, during Second World War, consulting for major governments as well as army
became a major business and opportunity as government realized that best management
practices was essential to winning on the battlefield. Further, operations research and
various analytical techniques, applied first for military purposes, rapidly found their way
into business and public management, adding a new dimension to the services offered by
consultants.

After the end of Second World War, reconstruction as well as rapid expansion of business
including acceleration of technological change started occurring which led to emergence of
new developing economies and growth of various Multinational companies and industries.
This led to opportunities and demand for management consulting in various fields. This
was the period when major and most consulting organizations that exist today were
established and in which consulting business attained the power and the technical
reputation it enjoys today. The expansion of consulting firms has been impressive and
various changes have also occurred to meet the changing requirement of clients as below:

- More diversified and wider service offerings: Management consultants have
developed strategies, new services, specializing in particular sectors or, even
providing broad comprehensive packages of services.
- Understand the importance of Intellectual Capital: Nothing is more important
for the future well-being of consulting than highly developed, motivate and
renewable intellectual capital base. It what they have, sell and they are.
- Association with the latest development and progress in technology,
management etc.
- Inclusiveness and Collaboration will be the keys to success: Partnering and
strategic alliances with key technology players is key element in consulting as the
intellectual capital base could be extended and leveraged.
- Predominance of Global Footprint and Internalization: Consulting firms have
internalize their operations in search of new markets, and changing economic
scenario and taking advantage of new opportunities
- Competition in consulting services leading to improvement in service quality
and offering new services.
- Development in methodology of consulting with great emphasis placed on clients
active participation in problem-solving.
- Increased client competence in using consultants.

1.3 PRESENT CONSULTING SCENARIO :

Due to continued globalization stimulated by ongoing rise of the emerging markets; the
introduction of the new financial and investment models; dramatic demographic shifts; and
innovative technologies has led to numerous challenges faced by business worldwide,
leading to more and more opportunities for consulting organizations. Management
consultancy has become an important and highly visible professional service sector in
terms of size, structure, sophistication, range of services offered, standards applied, results
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produced and overall influence. They have become indispensable advisers in major
business decisions and transactions and have been acknowledged for their contributions to
the growth and success. They have gained respect because of their broad knowledge base,
diversified resources, innovative spirit and capacity to cope with complex and novel
situations.

Sector growth: Consulting sector has been growing at an average rate of 20 to 25% which
also reflects the high and steady demand in future.

Sector restructuring: With globalization and emergence of developed, developing and
emerging nations, sector restructuring has been significant and impressive where World is
becoming flat. Mergers, acquisitions, new type of alliances and vigorous new
developments with the firms own resources have swept away the division between
management and IT consulting, especially in large consulting firms which have become
providers of integrated and multidisciplinary services able to respond to virtually any
demand from their client base. Concentration among the top firms continued through large-
scale operations such as the merger and acquisition. For example, merger of Price
Waterhouse and Coopers & Lybrand in year 1998, acquisition of consulting wing of Ernst
& Young by Cap Gemini. Further, another form of restructuring carried out has been the
separation of management and business consulting from accounting and audit services in
the large firms as a result of evolving perceptions of conflict of interest and other reasons.

E-business consulting: One of the most significant developments in recent years has been
the emergence and spectacular growth of e-commerce and e-business consulting which was
virtually non-existent until the mid-nineties. This led to major consulting as well as IT
consulting companies entering into e-business consulting, offering software and advisory
services for doing and promoting business through internet. Internet has generated
unprecedented opportunities for consulting services and that the information and
knowledge-based economy will constitute an excellent market for consultants for many
years in future.

Accelerated service standardization and commoditization: Most large consultancies,
and even some small ones, are now offering standard offerings off the shelf diagnostic
instruments, change and project management programmes, training and self development
packages, production control systems, enterprise resource planning (ERP) or customer
relationship management (CRM) systems, ebusiness or knowledge management software
etc.

1.4 TYPES OF SERVICES OFFERED BY CONSULTANTS:

In todays fast changing world, consultants may be asked to assist with any type of
management or business problem in any sort and size of organization, virtually in any
sector and part of the world & beyond. The consultants service portfolio is extremely wide
and diversified, and is evolving fast. The services offered by consulting firms are changing
fast, partly due to pressure from clients changing requirement, but also as a result of the
consulting firms own research and innovation aiming to anticipate clients needs and offer
new and better services to them. The various types of services offered by consulting firms
are listed below:
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1.4.1 Offer advise on business strategy and transformation: Consulting firms help
companies in addressing the very purpose and future of business and
organization by bringing changes in the areas of corporate strategy, strategic
planning and decision-making, business alliances and partnerships, major
business restructuring, mergers and acquisitions, total reorganizations, e-
business strategies, divestment etc.

1.4.2 Management functions, processes and systems: Traditionally, management
consulting services were structured in accordance with the prevailing structures
of management functions and processes. Information technology, however, has
transformed this area of consulting radically. Currently many consultants assist
their clients in implementing IT systems, including assessing needs and
feasibility; selecting, developing, adapting, introducing and debugging a system;
training staff; and modifying procedures, documentation and work methods
accordingly. The general trend has been away from separate systems for each
area (production, personnel etc.) to system coordination and integration, a
dominant and promising approach at present.

1.4.3 Resolve specific management problems and challenges: usually cutting
across several management functions and processes, reflecting new business
opportunities and constraints that require a creative and innovative approach, ie.
Business expansion to a new territory, technology transfer, licensing
agreements, investment project design, structuring and management, e-business,
exploring new business opportunities due to market liberalization etc.

1.4.4 Human resource consulting services: The various types of services offered
under human resource are as below:
Related to employee benefits like social insurance, pension, salaries etc.
Personnel recruitment services and executive search;
Personnel administration;
Human resource and human capital management and development, including
training, and strategies and activities.

1.4.5 Sector-specific specialized services like services in banking, insurance,
utilities, telecommunication, e-business and IT, education, central and state
government administration, health care etc. This type of specific sector has its
advantages. However, full sector specialization may lead to conflict of interest
in serving clients who compete with each other within the same sector.

1.4.6 Outsourcing and other emerging lines of services: Many consulting firms are
now performing outsourced IT, administrative, commercial, financial or other
activities for and on behalf of clients. By doing this, the consulting industry is
becoming a wider business-service sector, where consulting remains important,
but other services are also offered. For example, IBM a leading supplier of
office and computer hardware sold its business to Lenovo and decided in early
1990s to position itself as a provider of system and services to clients. This
included management consulting along with IT services. Similarly, Accenture
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has five broad headings under its portfolio: consulting, technology, outsourcing,
alliances and venture capital. Consulting firm have also moved in other areas
such as technical and managerial training, production and distribution of
training packages, book publishing, opinion polls for market research transfer of
technology. Patents and licenses, auctions, venture capital and others.

1.5 TYPES OF CONSULTING FIRMS:

Various types of management consulting could be classified and grouped under different
categories depending upon the diversity of the clients as well as markets served, services
rendered, approaches taken and personalities involved as below:

1.5.1 Large multifunctional consulting firms: Currently, the market is dominated
by large multifunctional and multi service consulting firms which are able to
provide total service packages. Most of these giants operate in 20 or more
countries and prefer to serve large and multinational clients. They mostly
provide consulting in corporate strategy, company organization, business
restructuring and other general management issues. Examples include Ernst &
Young, Accenture, and Price Waterhouse Coopers etc.

1.5.2 Medium sized generalist and specialist firms: They employ 50-100
consultants and have been able to find new niches and maintain their firms
reputation with certain client groups despite the growing power of large firms.
They are also viewed as attractive acquisition targets by larger consultancies,
especially if they possess specialist expertise sought by a larger service provider
or if their acquisition permits entry to new markets. The technical profile of a
medium sized consultancies include:

- General management, strategy and business development consulting for
medium as well as small businesses, often in a limited geographical area;
- Consulting in one or few technical areas, such as personnel, maintenance,
quality management, marketing, sales management etc.
- Sectoral specialization, e.g. in urban transport, hospital management, textile,
insurance and banking etc.

1.5.3 Strategy and General Management consultancies: Some firms are
particularly focused on consulting in corporate strategy, company organization,
business restructuring as well as other general management issues, and position
themselves as advisers to management on key issues of strategy and total
business development. Consultancies with distinct expertise in strategy and
general business development include McKinsey, Boston Consulting group,
Bain, Booz-Allen & Hamilton, A.T. Kerney etc.

1.5.4 Information technology and e-business consultancies: Most of the large
consulting firms offering multifunctional and integrated management and
business consultancies also offer IT as well as e-business consultancy. As
information technology and systems become better integrated, both among
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themselves and with management functions and processes, consulting services
are following this trend. It appears that the future will belong to service
providers that can fully and cost-effectively integrate management and IT
services, including e-business consulting services.

1.5.5 Sole consulting practitioners and small partnerships: There are still demand
for sole practitioners and small partnerships of 2-5 consultants as they offer
highly personalized and flexible approach, which is more difficult to achieve
and apply consistently in a large consulting firm. This service is also cheaper
because of the many overhead costs of a large organization are avoided.

1.5.6 The consulting professors: Those professors, lecturers, trainers and researchers
in management who are involved in consulting on part-time basis and provide
ad-hoc advice on issues that may be very important from clients perspective,
but that do not require extensive consulting time.

1.5.7 Consulting services of management schools: Few management schools with
the involvement of experienced consultancy firms to carry out assignments.

1.6 ROLE OF CONSULTANTS:

The various roles of consultants are given below:
1. To provide better, more complete and more relevant information so that right
decision could be made,
2. To provide special resources in areas where client is looking for short term
expertise, or wants to avoid hiring a new employee,
3. Establishing new business contacts, linkages, merger and acquisitions, strategic
alliance or to enter in to new market etc.,
4. To provide expert opinion so that decision making is easier,
5. To carry out diagnostic tasks concerning the organizations strength and
weaknesses, positive and negative trends, potential for improvement etc.
6. Developing system and methods in areas such as management information, business
planning, operations scheduling and control business process integration and
management etc.
7. To plan and manage organizational changes through change management in
identifying need for change, developing a change strategy and plan, choosing the
right approach to change and monitoring and evaluating the progress made and
results obtained etc.
8. Training and developing management and staff in new methods and techniques,
9. Counselling and coaching to managers and entrepreneurs who need counselling and
coaching to improve their leadership style, work habits etc.

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1.7 Conclusion

Over the years, consulting has evolved and grown and performing a great role for smooth
functioning of the economy. Thousands of individuals and organizations have adopted
consulting as their full time occupation and a wide range of consulting approaches,
techniques and methods are being employed for various management and business
problems. Consulting has been not only moving into new service areas but also the areas
outside the management consulting field. It has become an important and highly visible
professional service sector in terms of size, structure, sophistication, range of services
offered, standards applied, results produced and overall influence.

Management ConsultancyHistorical Evolution

( An extract from the article Management Consultancy Profession in Indiaby Sharu
S Rangnekar published in Consulting Ahead, a journal of Consultancy Development
Centre,New Delhi,January 2007 issue.)

An enterprise starts with the entrepreneur. The process started about ten thousand years
ago when man got his first two technologies; agriculture and animal husbandry. As his
enterprise grew he got assistance from his family members. Thereafter he bought slaves
and / or hired servants for further help. At this stage his expertise in managing his
resources including his manpower resource became vital to the success of the enterprise.
So the owner had to inculcate discipline and productivity. He did this by himself or
occasionally used his experienced friends giving rise to the concept of consultancy.

Prior to the advent of organized industry, the craftsman could carry out his work according
to his whim and fancy without being subjected to industrial discipline. A typical handicraft
worker collected materials and distributed them among the family members. About two
hundred years ago the Industrial Revolution made a drastic change I this system of
working. The worker had to work in factory and had to carry out specific tasks. So
systems had to be introduced to create time discipline and task discipline. And this created
the basic function for management consultants.

The industrial management had to face another challenge method discipline. It was
demonstrated that the workers productivity could be dramatically increased if the worker
is made to follow a specific method. This one best method was shown minimize his
effort and fatigue and maximize his productivity. The acceptance of this finding involved
an additional role for management instituting method discipline.

While the industrial engineers were thinking that they have got the success of productivity
and management, they were shaken by the Hawthorn experiment. In this experiment, the
effect of intensity of light on productivity was being studied. As they intensity of light
increased, the productivity went up and it went further up when the intensity of light went
down. It was then discovered that discipline regarding time, task and methods do not
decide productivity by themselves. The motivation of workers is also an important factor.
It is not only the skill, but also the will that determine productivity.

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This expanded the role of management consultants. The management consultant helped the
management to establish time discipline, task discipline and method discipline and
suggested schemes to inculcate motivation. The incentive system was the hallmark of the
first generation management consultants.

After the Second World War, computers came in the picture. It was possible to carry out
millions of computations very reliably and promptly. Even the manufacturing processes
were automated and there was a feeling that all problems of productivity were sorted out
and productivity need not depend on human beings any longer. Consequently the
management consultants concentrated their efforts to apply automation to improve the
efficiency.

As the tempo of technological change increased, it became clear that productivity or
efficiency did not determine the ultimate prospects of an industrial organization. It is not
efficiency but innovation that counts. It is not the company that makes a product at the
least possible cost that makes good profit; it is the company that is first with an innovative
product that make good profits.

Thus, over a period, the management consultants role has developed into helping the
management to:-

Institute time-discipline and task-discipline
Institute efficiency through method-discipline
Improve efficiency through computers
Mobilise full human potential through motivation and innovation.

Persons having experience in formulating and implementing systems became valuable for
those who were interested in improving their productivity, quality and innovation. As it is
stated in Sanskrit; Siddhanam Lakshana, Sadhakanam Sadhanam (The symptoms of
those who have reached are good guidelines for those who want to reach). As the
complexities and competition in industry increased, so did the use of management
consultants.

Back

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Chapter - 2

Consulting Opportunites and Method of Selection of
Consultants

2.0 OBJECTIVE

To understand the consulting scenario historically and the opportunities the consulting
profession offers in various sectors currently and in the future. To also understand the
methods of selection of consultants.

2.1 HISTORICAL BACKGROUND

During the later part of the 19th century, engineering, accounting and law firms started
offering independent corporate counsel to fast-growing and increasingly complex
industrial organisations in the US. Arthur D. Little was the first external consultant to
bring operational effectiveness to its manufacturing clients.

It was not until the 1930s and the Great Depression that management consulting firms
grew beyond a few founding partners, with the notable examples of McKinsey and A.T.
Kearney.

A few years later, Marvin Bower was to transform McKinsey and the industry when he
started developing the firm after the model of the law firms into the first strategy
consultancy, dedicated to solve the problems of the CEOs

The 70s saw the real explosion of the industry of the industry with the rapid growth of
new competitors: BCG as a BOOZ ALLEN spin-off, BAIN as a BCG Spin-off etc.

Big audit firms like Andersen started to capture part of the strategy market through
their consulting arms, to retreat a few years ago.

The latest development is the rapid emergence and growth of networks of independent
consultants like Candesic, more closely aligned to the model of law partnerships.

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2.2 CONSULTING OPPORTUNITIES

WHAT DO WE MEAN BY OPPORTUNITY?

Opportunity word in the Oxford Dictionary has been expressed as :

1. A good chance, a favourable occasion.
2. A chance or opening offered by circumstances.
3. Good fortune.

CONSULTING OPPORTUNITIES
2
ND
DEFINITION SUITS MORE TO CONSULTING PROFESSION
BECAUSE
Opportunities for consulting are created by circumstances
prevailing in
Market
(Competition)
Stakeholders Organization

Opportunities for consulting are created by the circumstances

.prevailing in the Market due to the Competitive conditions
prevailing in the Organization
prevailing due to the specific requirements of the Stakeholders.

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2.3 Areas & Roles in Consulting

Areas & Roles in Consulting
Areas of Consulting
Organizational Policy
/regulations that are increasing
the pressure on implementing
knowledge.
Product Competition
(Domestic & International),
development threats.
Methodologies / Process
focus on Quality &
Productivity, need for systems
& models.
Roles in Consulting
Future based consulting
Clients seek long term
development commitment.
Committed Client
portfolios Scale between
International & Domestic
standard & practices.
Trainer / Institutionalize
Capacity & Capability building
is the focus.

2.4 Broadly classifying, consulting opportunities for management consultants may
exist in following areas :

Consulting in Small Business Management
Consulting for Informal sector
Consulting for the Public sector
Consulting in Privatization
Consulting in Education & Knowledge management
Consulting for Productivity and Performance improvement
Consulting in General and Strategic management
Consulting in Financial management
Consulting in Marketing and distribution management
Consulting in Production management
Consulting in Human Resource Management
Consulting in Information Technology

2.5 IPR Consulting
IPR and Technology transfer can be seen as a major component of various
Technology Management Services.

Reasons
Essentially requires an expertise in two waywardly distinct areas of knowledge
i.e. Technology & Law. Therefore not many professionals of one area would
delve into the other, rendering the field relatively less competitive India.

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Indias accession to WTO, TRIPS, GATS, Paris convention & PCT being
complete and apparently irreversible, the consulting opportunities in the area of
WTO and related technology management fields are immense

Large size of Indian market & its growing capability in high-tech services &
manufacturing ensures that it will remain an attractive destination for most major
MNCs

The sluggish legal system in India is a blessing in disguise for any legal consultant
because it ensures a long consultancy life cycle

All other advantages of India, say low cost labor, high english speaking population ,
commonwealth membership, multi cultural society etc are as much valid for this
area as fro any other servicing industry.

2.6 IT Consulting
IT Infrastructure providing consulting to build enterprises & corporation in
software application.
Software design consultancy providing consultancy for software design
Software Project consultancy complete project based consultancy.
Software Quality consultancy software quality, efficiency and testing.
IT application on web based enterprise advised to harness the growth potential
from the Internet & its application.
Database consultancy consultancy for implementation (database for a project).
IT security consultancy already in demand, expert opinion is being seek.
IT automation process consultancy automating a particular work area (manual
work to be automated.
Determining & knowledge Mgmt consultancy work is being outsourced.
Storage / Disaster Mgmt consultancy how digital data can be preserved?

2.7 Consulting in Financial Sectors

2.7.1 Banking sector
Customer services on retail banking for various facilities.
Efficiency of processes in transaction.
Skill set of people.
Various facilities on banking for the daily customer web banking, phone banking,
etc.

2.7.2 Insurance sector
Design & develop insurance packages for mass consumption.
development of health care sector facility for easy access on medical consultation
& services.
Case handling on Life or Non life claim policies.
Efficacy in process of internal resources.

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2.8 Construction Consulting

Process Consultancy Water and water treatment is the central point for the
costing of any contract. Alternate technologies which are available now can be
used.

Engineering Consultancy Design, Implementation and Risk analysis consultancy.

Maturity in Architectural Design Recycling of building materials, Climatic
responsive techniques, logistics, distribution channels (building materials).

Prefabricated mode of construction faster / better quality construction .

Financial Consultancy Feasibility reports, cost evaluation for transmission and
distribution of water..

2.9 Education Consulting

Planning for Basic Infrastructure:

Number of classes
Student per class
Proper ventilation
Safety measures for student
Student-Teacher ratio in class
Play fields Number of fields

Planning for Teaching Aids:

Whiteboard
Laptops (to replace HW notebooks)
Labs (PCM, Bio, Geog etc)

Safety measures for students:

Firefighting equipments
Lifts & staircase
Big windows
Smartcards (entry & exit)
Medical check-up
Drafting a curriculum:

What type ?
Academic oriented
Overall personality
Mix of both
International Curriculum for students who want to study abroad

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Drafting the job profile / Salaries:

Principle
Vice principle/HODs etc
Their rights & duties

Playfields:

Outdoor games
Debates/Drama/Dance etc

2.10 Architecture Consulting

The consultancies on offer:

Architecture
Plumbing
Electrical
Structural
Acoustic
Landscape
HVAC
Mechanical
Interior
Conservation
Planning

The topologies for design services:

Residential -Housings, Apartments,
Townships
Commercial- Office buildings, Malls etc
Industrial Factories
Recreational Hotels, Restaurants, complex
Religions Temples, Churches etc
Airports
Roads / Highways

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2.11 HR based consulting for organization

Role / Cell
Deliverables /
Outcome
Metaphor Activity
Management of
strategic human
resources
Executing
strategy
Strategic
partner
Aligning HR and
business
strategy:"Organisatioan
l diagnosis"
Management of
firm
infrastructure
Building an
efficient
infrastructure
Administrative
expert
Reengineering
organisation
process:"Shared
services"
Management of
employee
contribution
Increasing
employee
commitment and
capability
Empoyee
champion
Listening and
responding to
employees:"Providing
resources to employees"
Management of
transformation
and change
Creating a
renewed
organization
Change agent
Managing
transformation and
change:"Ensuring
capacity for chane"

Increasing
competition
Change
Demanding
customers
Demanding
shareholders
Developing
technology
Forces shaping change Forces shaping change
HR based consulting on change for organization

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20

2.12 Public sector - Railways Consulting

Privatization of Railways:
Preparation of schemes for privatization
Asset construction / maintenance / replacement
Rolling stock leasing

Project Management:
International Banks prefer third party supervision
Private parties do not have railway expertise
Execution, monitoring and operation of Railway assets

Technological services:
Systems to be customer friendly (Reservation system, use of smart cards
etc)
GPS for monitoring of movement of different kinds of stocks / trains
Anti collision devices
Warning Systems

Rolling Stock:
Increase throughput of trains (passengers / goods)
Specially designed coaches, wagons required for high speed routes
Improvement in bogies, its suspensions / bearings to reduce failures
and maintenance cost.
Detention times are high due to locomotive failures. Asset hours and
man-hours are wasted.
Reliability needs to be improved.
Higher power locomotives required to pull longer trains
Motor design, Body design, Fuel efficiency

Unused Land:
Consultancy services for using unutilized land and air spaces

Enhancing Revenues by:
Curbing pilferage
Attracting more customers
Better pricing
Improving staff efficiency

Human Resources:
Training of manpower
Optimum utilization of man power

_______________________________________________________________________________________
21

2.13 Some Consulting opportunities studies

2.13.1 Consultancy opportunities in HRM

With opening up of countrys economy, and in face of challenges of globalization, it is
becoming imperative for Industry as well as Commercial entities to build competent teams
to face ever changing environment with suitable strategy to survive!

HRM is acquisition, development, motivation and maintenance of Human resources and is
supposed to be measured by productivity, turnout, absentism, job satisfaction and more.

All organizations shall not have access to sufficient competence in-house to bring about all
these changes and shall have to rely upon experts. Ability to afford in-house specialized
teams, with a process to keep it updated, in face of changing profile, shall be a daunting
task, apart from being uneconomical.

With this kind of emerging needs at a rapid pace, tremendous opportunities are there to be
capitalized upon for Consultants in area of HRM. Areas could be in:

Staffing and recruitment management

Training & development management
i) Skill development/Quality Improvement programme
ii) Career development programme to match long term individual and
organizational needs
iii) Potential talent search programmes
iv) Communication skill development programmes

H R Information systems management
i) Time, cost & energy saving methods
ii) Best utilization and scheduling of man power and resources

H R performance management
i) right nos, right kind, right place, right time

H R contracts Management

H R health & safety management

H R strategic planning & succession planning management

H R administration management

And Improving efficiency

_______________________________________________________________________________________
22

2.13.2 Consulting opportunity in Marketing and distribution management

Defining marketing for the 21
st
century.

Shifting the focus from old economy marketing practices to new economy
marketing practices using digital, Internet and mobile media.

Some of ways of achieving these:

Marketing through Internet

The Web is a very good spawning ground for new brands. Amazon.com, America
Online, eBay, Monster.com, Yahoonew brands that were created specifically for
this new medium. Cisco now does 90 percent of its business on the Web; Dell
Computer does 60 percent. Cisco, Dell etc are moving to the Web and in a sense are
becoming Web brands much like Amazon and Monster.com.

Marketing through Mobile
Mobile commerce is a emerging opportunity which has been thrown upon with the
dramatic growth of mobile users. In order to compete in the M-commerce segment
mobile marketing shall play a key role.

Defining Core marketing strategies

Identifying target markets & segmentation.
Identifying market place, market space.
Various marketers.
Need, Wants & Demands.
Products, Offering & Brand.
Exchange & Transaction.
Marketing channels.

Consultancy in corporate and division Strategic planning

1. Defining the corporate vision and mission

2. Identifying new businesses and prospective, untapped customer segments.

Creating marketing research system.

Dealing with the competition

1. Identifying competitive forces.
2. Identifying competitors.
3. Analyzing competitors. Like their strategies, Objectives, strength and weakness.
4. Designing competitive strategies.

_______________________________________________________________________________________
23

Global Marketing Avenues

1. Deciding whether to go abroad.
2. Deciding which market to enter.
3. Deciding how to enter.

Brand Decisions

Developing Price strategies

1. Setting the Price. like Selecting the price, Determining the demand,
Estimating costs & Analyzing competition costs, price and offering.
2. Initiating and responding to price change. Like price cuts, Price increase, Price
changes, responding to competitors price changes.

Advertising Company Name and Its Products.

Managing and delivering marketing program.

Designing and managing distribution network and marketing channels.
SCM (Supply Chain Management Program)
Packaging (Size and Specification)
Managing Retailing, Wholesaling, and market logistics.
(1) Retailing.
a. Types of retailers
b. Trends in retailing.

(2) Wholesaling
a. The growth and types of wholesaling.
b. Wholesaler marketing decision
c. Trends

(3) Market Logistics.
Planning the infrastructure to meet demand , then implementing and
controlling the physical flows of materials and final goods from points
of origin to points of use, to meet customer requirements at a profit.

Implementing
Market logistics objectives :
Getting right goods to the right places at the right time for the
least costs.
Taking market logistics decision.
Like (1). How orders to be handled.
(2). Where stocks be located.
(3). How much stocks should be held.
(4). How goods should be shipped.
_______________________________________________________________________________________
24

2.13.3 Consultancy Opportunities in Financial Management:
This is one of the very important area in Consultancy. The term Financial Management is a
very wide term. It encompasses Treasury, Securitisation of Debt, Foreign Exchange, Risk
Analysis, Mutual Funds, Stock Brokers, Derivatives, Accounting specially with reference
to US GAAP compliance with International / National Accounting Standards, preparation
of project reports, feasibility studies, acquisition / merger / demerger, Investment Advisor
etc., Its related field also include secretarial practices relating to Company Law, Tax Laws
viz., Income Tax, Sales Tax, Excise etc. Exchange control regulations etc.

In fact, the scope for Consultancy in Financial Management and its allied services are very
vast. Hence, it is advisable that one gains expertise knowledge in two or three special fields
/ areas. This will help in establishing oneself and having a niche in the Consultancy field /
market. Opportunities galore in this area, the need is to tap them.

After the discovery of Enron and World com frauds / irregularities involving
mismanagement, role of auditors / accountants, it has become paramount importance to
focus on transparency in dealing and reporting in order to rebuild investor confidence in
corporate governance.

We dont have much data / statistics to support the claim in regard to existence of
Consultancy practice in India and abroad but widespread awareness, keenness and
recognition towards professionals working in this area is a definite indication of its growth
and future potential.

2.13.4 Opportunities in Information Technology
What is IT ?
IT (Information Technology) is a term that encompasses all forms of technology used to
create, store, exchange, and use information in its various forms (business data, voice
conversations, still images, motion pictures, multimedia presentations, and other forms,
including those not yet conceived). It's a convenient term for including both telephony
and computer technology in the same word. It is the technology that is driving what has
often been called "the Information Revolution."

"IT is a powerful tool with diverse applications. Our challenge is to put that power at
the service of all humankind."

Kofi Annan

UN Secretary General
Current IT trends in India

_______________________________________________________________________________________
25

The Indian software industry has grown from a mere US $ 150 million in 1991-92 to a
staggering US $ 5.7 billion (including over $4 billion worth of software exports) in
1999-2000. No other Indian industry has performed so well against the global
competition.
The annual growth rate of Indias software exports has been consistently over 50
percent since 1991. As per the projections made by the National Association of
Software and Services Companies (NASSCOM) for 2000-2001 (April 1, 2000 - March
31, 2001), Indias software exports would be around $ 6.3 billion, in addition to $ 2.5
billion in domestic sale.

Indian Software Industry 1995-2000 (US $ million)

Today, India exports software and services to nearly 95 countries around the world. The
share of North America (U.S. & Canada) in Indias software exports is about 61 per
cent. In 1999-2000, more than a third of Fortune 500 companies outsourced their
software requirements to India
NASSCOMs survey during 1999-2000 indicates a reversal in the mode of services
offered by India. In 1991-92, offshore services accounted 5 per cent and on-site services
95 % of the total exports. However, during 1999-2000 offshore services contributed
over 40 percent of the total exports.

Adding More to it..
Indian Software Industry 1995-2000 (US $ million)
Today, India exports software and services to nearly 95 count ries around t he
world. The share of Nort h America (U.S. & Canada) in India s software exports is
about 61 per cent. In 1999-2000, more than a third of Fortune 500 companies
outsourced their software requirements to India
NASSCOMs survey during 1999-2000 indicates a reversal in the mode of
services offered by India. In 1991-92, offshore services accounted 5 per cent
and on-site services 95 % of the total exports. However, during 1999-2000
offshore services contributed over 40 percent of the total exports
8750 5700 3900 2670 1775 1224 Indian S/w
Industry
6300 4000 2650 1750 1085 734 Software
Exports
2450 1700 1250 920 670 490 Domestic s/w
Market
2000-
01*
1999-
2000
1998-
99
1997-98 1996-
97
1995-96
(* Source: NASSCOM Report)

The NASSCOM - McKinsey report on India's IT industry

Projected Revenues 2008 ($ US billion)

According to a NASSCOM-McKinsey report, annual revenue projections for Indias IT
industry in 2008 are US $ 87 billion and market openings are emerging across four
broad sectors, IT services, software products, IT enabled services, and e-businesses thus
_______________________________________________________________________________________
26

creating a number of opportunities for Indian companies. Other key findings of this
report are:
Software & Services will contribute over 7.5 % of the overall GDP growth of India .IT
Exports will account for 35% of the total exports from India
Potential for 2.2 million jobs in IT by 2008 .IT industry will attract Foreign Direct
Investment (FDI) of U.S. $ 4-5 billion.Market capitalization of IT shares will be around
U.S. $ 225 billion

Adding More to it..
The NASSCOM - McKinsey report on India's IT industry
Projected Revenues - 2008
($ US billion)
According to a NASSCOM-McKinsey report, annual revenue proj ections for Indias IT industry
in 2008 are US $ 87 billion and market openings are emerging across four broad sectors, IT
services, software products, IT enabled services, and e-businesses thus creati ng a number of
opport unities for Indi an companies. Ot her key findings of this report are:
Software & Services will contri bute over 7.5 % of the overal l GDP growth of India .IT
Exports will account for 35% of the total exports from Indi a
Potenti al for 2.2 mil lion j obs i n IT by 2008 .IT industry will attract Forei gn Direct
Investment (FDI) of U.S. $ 4-5 billion.Market capital ization of IT shares will be around
U.S. $ 225 billion
3.3 87 25 62 12 50 Total
0.2 10 5 5 1 4 E busi ness
0.4 19 2 17 2 15 IT-enabl ed
Service
0.6 19.5 9.5 10 2 8 S/w Products
2.1 38.5 8.5 30 7 23 IT Services
1998 Total Domestic Sub total
(Internatio
nal)
India
Centric
India
Based

Current trends of IT in US
Current Trends in US w.r.t. IT and IT Enabled services Development and its Economic
Effect
_______________________________________________________________________________________
27

Current trends of IT in US
Current Trends i n US w.r.t. IT and IT Enabled services Development and its Economic
Effect

IT Expenditure and Production(Percent of GDP)
Spending of IT(as a share of GDP) has spread even across countries while
IT Production sectors are only in a few economies.
IT Expenditure and Production(Percent of GDP)
Spendi ng of IT(as a share of GDP) has spread even across countri es while IT
Producti on sectors are only i n a few economies.

IT Consultancy makes its way.
The key features of an IT Consultancy practice are of two kinds :--
_______________________________________________________________________________________
28

1. Market Facing features:- these include
- the strong business drivers that underpin all IT consultancy services focus on
markets,sectors and clients.
- knowledge of the IT technologies that exist in the marketplace and the trends for
existing & new technologies that may evolve.
- they have alliances with key technology suppliers in order to gain a full understanding
of particular products and potentially to combine forces to provide a full range of IT
consultancy and systems services to clients and markets.
2. Inward facing Features rest on the fact that IT consultancy practices are nothing
without their people. So managing the resources, knowledge mgmt., people skills etc.
consultants offer to the market.

Main Influences on IT Consulting Practices
People skil ls and competence expected of modern-day IT consultants, such as
credi bility, integrity, imagination, i nnovati on, influence, facilitation and ent husiasm.
IT Consultancy
People Skills Services Products
Clients Technologies Suppliers
Sectors
Markets

Main Influences on IT Consulting Practices
People skills and competence expected of modern-day IT consultants, such as
credibility, integrity, imagination, innovation, influence, facilitation and enthusiasm.
_______________________________________________________________________________________
29

Generic Model of an IT consultancys services and
the Opportunities vested in it
The services provided by IT consultancy which in turn leads to various Various
opportunities in IT sector are as follows:-
Strategy and Direct ion
IT Sol ut ions
Solut ion Del ivery
Benef its Real ization
Review, Audit and Advisory
Now lets see these services leading to opportunities in detail.

Generic Model of an IT consultancys services and the Opportunities vested in it

The services provided by IT consultancy which in turn leads to various
Various opportunities in IT sector are as follows:-

Strategy and Direction
IT Solutions
Solution Delivery
Benefits Realization
Review, Audit and Advisory

Now lets see these services leading to opportunities in detail.

1. Strategy and Direction
Strategy and direction consultancy services embrace the organization
as a whole and involve development of both current and future state
models in the business and IT terms.
_______________________________________________________________________________________
30

Typical deliverables from this area may include:
- Business vision
- Market analysis
- Competitor analysis
- Business and technical principles
- Business case
- Plan for action
- Stakeholder identification and engagement
2. IT Solutions
IT Solutions involves providing consultancy and other support in the
development of technical and application architecture solutions for an
enterprise or business.
3. Solution Delivery
Solution delivery provides consultancy and advice on development,
implementation and roll-out strategies. Solution delivery would draw on
the principles developed within the IT solutions services, say, and
supplement this information by providing, for example:

Detailed architectures
Development approach and methods, such as rapid application development (RAD) and
joint application development(JAD).
Testing plans and principles
Production support standards and tools
Service-level agreements and production running.
4. Benefits Realization
All consultancy assignments presuppose benefits to a business. Inherent in all the IT
consultancy services is the process of gathering information and making projections that
support the benefits case over and above the actual proposed solution. The benefits
realization service develops a more detailed and rigorous approach within a set of proposed
consultancy solutions solutions and plans. It would also define processes and procedures
that the business could use to actively capture and monitor performance data. The benefits
realization consultancy service is especially useful where business process outsourcing
(BPO) is being considered as a contribution towards both costs of running that service and
the means of measuring the performance.

_______________________________________________________________________________________
31

5. Review,Audit and Advisory
These are some stand-alone services which include:-
Reviewing current IT investment and investment and systems in the context of
technical refreshment and efficiency, for example

Auditing IT systems and infrastructures in line with regulatory requirements, such
as safety critical systems for railway companies.

Advisory and executive briefings on current and up-and coming technologies and
their application within a business or sector.

Future Ahead

The larger Consultancies have recognized that they are, in essence, knowledge
industries, and most are enthusiastic early adopters of knowledge management
techniques.

Consultants are increasingly recognizing the need to use their intellectual assets in a
more proactive way, rather than merely passively responding to customer needs.

With the tremendous opportunities in IT, Consultants are also experimenting with new
ways of working to increase their effectiveness. This can range from simple expedients
such as hot-designing to more complicated solutions design to accommodate different
lifestyles.

2.14 Methods of Selection of Consultants
CRITERIA & METHODS OF CRITERIA & METHODS OF
CONSULTANTS CONSULTANTS SELECTION SELECTION

_______________________________________________________________________________________
32

1. Qualities / Attributes of the prospective candidate
2. Academic & Professional Qualification/Education
3. Practical Experience
4. Age at which candidates are recruited.
CONSULTANTS SELECTION IS BASED ON FOLLOWING CRITERIA :

QUALITIES / ATTRIBUTES OF CONSULTANTS
INTELLECTUAL ABILITY
ABILITY TO UNDERSTAND PEOPLE & WORK WITH THEM
ABILITY TO COMMUNICATE, PURSUADE & WORK WITH THEM
INTELLECTUAL & EMOTIONAL MATURITY
PERSONAL DRIVE & INITIATIVE
ETHICS
PHYSICAL & MENTAL HEALTH

_______________________________________________________________________________________
33

OTHER ESSENTIAL INDICATORS FOR SELECTING RIGHT CANDIDATE AS
CONSULTANT
DILEMMA ANALYSIS ABILITY (because mostly consultants are hired in situations
where organizations cannot find solution on their own).
INTUITION OR SENSING OF ORGANISATIONAL CLIMATE
INTEGRITIY
SENSE OF TIMING
INTERPERSONAL SKILLS
PROFESSIONAL / ACADEMIC QUALIFICATIONS OR EDUCATION
GRADUATION
POST GRADUATION
A DOCTORATE DEGREE (preferable but not essential)
PROFESSIONAL COURSES IN RELATED AREAS
SCANNING OF PROJECTS/ASSIGNMENTS DURING
ABOVE STUDIES
OTHER RECOGNITIONS/AWARDS DURING STUDY
PERIOD
_______________________________________________________________________________________
34

PRACTICAL EXPERIENCE
Earlier trend was min. 5-10 yrs. Industry experience. But recently, organizations
have started taking fresh, dynamic & talented MBAs.
AGE
Depends on specialized field, individuals and various nations :
Usually lower age limit - 25-30 Yrs.
Upper Age Limit - 36-40 Yrs.
But one can start his/her own consultancy even at 55-60.
Recruitment Sources
Interviewing and Testing
Medical Examination
METHODS OF SELECTION FOR CONSULTANTS :

Back

_______________________________________________________________________________________
35

Chapter 3

Management Consulting (MC) & Professionalism

Objectives

After going through this section you will be able to
Understand Management Consulting
Know the various steps which are there in the management consulting process.
Understand the requirements of each step from consultant and client side
Devise a methodology to plan steps of consultancy as process

3.1 Introduction to Management Consulting

Consulting and its application in different managerial situations and problems, i.e.
management consulting has several definitions. If one approaches consulting from a
functional point of view, consulting is meant to give help in the content, process or
structure of a particular task. According to Peter Blocks generally accepted definition
(1981), people do consulting always when they want to change or improve a situation, but
they do not have direct power to realize the given advice. That is, consulting is an attempt
to change a situation in such circumstances where the consultants have no direct influence
on to what degree their suggestions will be considered in practice (obviously, if there was a
chance for acting or carrying out changes directly, the people in question would be called
heads or managers and not consultants).
Management consulting is the practice or business of helping other companies improve
their performances and accountability through efficiency analysis, IT analysis, studying
existing and potential business problems, and helping develop corporate goals. It involves
the leveraging of best practices across the companies, as well as identifying and controlling
risk. Management consulting uses rigid frameworks or methodologies in order to identify
problems and suggest better ways of performing business tasks.
Management consulting overlaps in many other areas of business consulting, including IT
consulting, risk management consulting, and change management consulting. It provides a
bridge between the academic and philosophical ideas of management and the practical,
day-to-day application of these ideas. Their tools and techniques approach business
problems in both a practical and an analytical manner, and are therefore often superior to
previous forms of management.
Unfortunately, the methodologies of management consulting, since they are so close to the
cutting edge and sometimes use untried ideas, have also gotten the reputation of being
impractical and farfetched. No doubt, for some management consulting ideas, this is true.
But a seasoned management consultant, used to working in the real world with
philosophical business practice ideas, will not only be well-versed in cutting edge methods
_______________________________________________________________________________________
36

but will also have an understanding of what will and what will not work in todays business
world.
3.2 Management consulting today
Today, three main types of consulting firms exist. The first is the large multiple-service
firm like IBM, who provide not only management consulting but also IT, accounting, or
risk management consulting, among other things. Large management and consulting firms
like McKinsey offer pure management consulting, but are not specialized in any industry;
they provide generalized management consulting for a variety of industries. Finally,
smaller boutique firms like First Manhattan provide management consulting in very
specific industries, such as banking, healthcare, or IT.
3.3 The Management Consulting : Process and Tools
There are three elements in Management consulting:
The human factors:
o

Intra-personal factors and skills (confidence, assertiveness, personality)
o

Interpersonal factors and skills (relationship building, group dynamics, cultural
impact, team building, performance management)
3.3.1 The Consulting Process
o

Methodology for Consulting Assignments (entry, client brief, diagnosis, data
collection, developing solutions and evaluating alternatives, implementation,
termination)
o

Types of consulting, internal and external consulting, objectives of consulting,
consulting styles
o

Proposals and assignment management (planning, preparation of the assignment,
diagnosis, evaluation of the existing situation, choice of methodology, presentation
of the process),
o

Report writing, presentations,
o

Reporting to the client and to the consulting firm, measuring results and formulating
proposals, implementation, control over time and how they should/can adapt to the
surrounding business environment whilst taking into account their own strategy and
constraints.
3.3.2 Consulting Tools
o

Diagnostic Tools
o

Data Processing
o

Software for questionnaire Analysis
o

Customer Relationship Management
In this unit, we will concentrate on the Consulting process only:

_______________________________________________________________________________________
37

3.4 Various Phases in Consulting

First phase in consulting is the Entry phase when the consultant starts working with a
client. This phase includes contacts, discussions on what the client would like to achieve or
change in their organization and how the consultant might help, the clarification of
objective roles, the preparation of an assignment plan based on preliminary analysis, and
the negotiation and agreement of a consulting contract.

It can also happen that an assignment proposal is not to the clients satisfaction and no
contract is agreed, or that several consultants are contacted and invited to present proposals
but only one of them is selected for the assignment.

In the second Phase called Diagnosis phase, an in-depth diagnosis of the problem to be
solved is carried out. During this phase, the consultant and the client cooperate in
identifying the sort of change in defining in detail the purposes to be achieved by the
assignment and the clients performance, resources, needs and perspectives. Is the
change problem technological, organizational, information, technological or other?

Fact-finding and fact diagnosis often receive the least attention. Yet decisions on what data
to look for, what data to omit, what aspects of the problem to examine in depth and what
facts to skip predetermine the relevance and quality of the solutions will be proposed.
Also, by collecting data and talking to people the consultant is already influencing the
client system, and people already start changing as a results of the consultants presence in
the organization. Conversely, fact-finding has to be kept within reasonable limits,
determined by the nature and purpose of the consultancy.

The third phase aims at finding the solution to the problem. It includes work on one or
several alternative solutions, the evaluation of alternatives, the elaboration of a plan for
implementing changes and the presentation of proposals to the client for decision. The
consultant can choose from a wide range of techniques, in particular if the client actively
participates in this phase. Action planning requires imagination and creativity, as well as a
rigorous and systematic approach in identifying and exploring feasible alternatives,
eliminating proposals that could lead to trivial and unnecessary changes and deciding what
solution will be adopted. A significant dimension of action planning is developing strategy
and tactics for implementing changes, in particular dealing with the human problems that
can be anticipated, and for overcoming resistance to, and gaining support for, change.

Implementation, the fourth phase of the consulting process, provides an acid test for the
relevance and feasibility of the proposals developed by the consultant in collaboration with
the client. The changes proposed start turning into reality. Things begin happening, either
as planned or differently. Unforeseen new problems and obstacles may arise and false
assumptions or planning errors may be uncovered. Resistance to change may be quite
different from what was assumed at the diagnostic and planning stages. The original
design and action plan may be corrected. As it is not possible to foresee exactly and in
detail every relationship, event or attitude, and the reality of implementation often differs
from the plan, monitoring and managing implementation are very important. This is also
why professional consultants prefer to be associated with the implementation of changes
that they have helped to identify and plan.
_______________________________________________________________________________________
38

Final phase in the consulting process includes several activities. Clients performance
during the assignment, the approach taken and results achieved have to be evaluated by
both the client and consulting firm. Final reports are presented and discussed. Mutual
differences are settled. If there is an interest in pursuing the collaborative arrangement, an
agreement on follow-up and future contracts may be negotiated. These activities are
completed, the consulting assignment or project is terminated by mutual agreement and the
consultant withdraws from the client decision.

3.4.1 Sections of the proposal

In most cases, the proposal to the client will include the following four sections:

- technical aspects:
- staffing;
- consultant background
- financial and other terms

3.4.2 The consulting contract

The entry phase of the consulting process can be regarded as successfully completed if the
consultant and the client conclude a contract whereby they agree to work together on an
assignment or project.

3.4.3 What to cover in a contract checklist

1. Contracting parties (the consultant and the client)
2. Scope of the assignment, objectives, results, description of work, starting date,
timetable, volume of work
3. Work outputs, including reports (documentation and reports to be handed over to the
client)
4. Consultant and client inputs (expert and staff time and other inputs)
5. Fees and expenses (fees to be billed, expenses reimbursed to the consultant)
6. Billing and payment procedure.
7. Professional. Responsibilities (consultants standard of care, avoiding conflict of
interest , and other aspects as appropriate)
8. Representations (by the consultant)
9. Handling of confidential information
10. Protection of intellectual property and copyright in consultants work product
11. Liability (the consultants liability for damages caused to the client, limitation of
liability)
_______________________________________________________________________________________
39

12. Use of subcontractors (by the consultant)
13. Termination or revision (when and how to be suggested by either party)
14. Dispute resolution (resolution of disputes in court or through an alternative
mechanism such as arbitration)
15. Signatures and dates.
- the consultant and the client are well versed in professional practices; they trust
each other totally;
- they are familiar with each others terms of business (the client knows the terms
applied by the consultant and the consultant knows what to expect from the client
e.g. if the client is able to make an advance payment, or can accept monthly
billing, how long it takes to approve a payment, etc.);
- the assignment is not very big or complex (if this is the case, it may be difficult to
manage the relationship on both sides without any formal document.
Built in flexibility
The purpose of contracting is to provide a clear orientation for joint work and to protect the
interests of both parties. This implies a certain degree of imagination and flexibility,
3.4.4 Implementation
Implementation, the fourth phase of the consulting process, is the culmination of the
consultants and the clients joint effort. To implement changes that are real improvements
from the clients point of view is the basis purpose of a consulting assignment.
If there is no implementation, the consulting process cannot be regarded as completed. If
the client does not accept the consultants proposal at the end of the action planning
phase, the assignment has been poorly managed by both parties. If the consultant and the
client collaborate closely during the diagnostic and action-planning phases, the client
cannot really reject proposals that are the product of point work. If there is any doubt about
the focus of the consultants work during action planning, or about the feasibility of the
proposals that are emerging, corrective measures should be taken immediately, without
waiting until the proposals have been finalized.
In planning an assignment and negotiating a contract, the client and the consultant should
not forget to define what they mean by implementation and results.
The general trend in consulting is to involve consultants in implementation, give them
responsibility for achieving results and made their remuneration dependent on results.
Thus, implementation is increasingly regarded and managed as a crucial element of the
consulting process.

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40

The consultants role in implementation
The ultimate responsibility for implementation is with the client. It is the client, not the
consultant, who makes all the management decisions and sees to it that they are put into
effect. This, of course, is more easily said than done. The more complex the assignment,
the higher the probability that implementation will be at least as difficult as diagnosis and
action planning. The plan or project presented by the consultant is a model of future
conditions and relationships, assuming certain behaviour on the part of the client, as well as
particular environmental and other conditions affecting the client organization. The
consultant may have made mistakes in developing the model. In addition, many conditions
may change after the proposal has been presented and accepted. The consultants
responsibility for implementation can help to overcome these difficulties.
The issue of consultants participation in implementation should never be underestimated,
but should be thoroughly examined and discussed whenever a consulting project is being
designed. Both the consultant and the client should give their argument for and against this
participation and consider various alternatives.
The consultant does not have to be involved in implementation:
If the problem is relatively straightforward and no technical or other difficulties with
implementation are anticipated;
If joint work during the diagnostic and action-planning phases shows that the client has
developed a good understanding of the problem and a capability to implement the solutions
proposed without further assistance.
The client may be reluctant to involve the consultant for financial reasons.
By the end of action-planning phase, the cost of the assignment may be high and the budget
may be exhausted. Or the manager who has to approve the contract may feel that involving
the consultant in implementation implies expenditure that can be avoided. Here again a
frank discussion can be helpful. The consultant can suggest a more economical design for
the assignment in order to free resources that will allow him or her to be involved in
implementation.
Finding a suitable arrangement
- the size of the consulting team present at the clients premises will be gradually reduced
during the implementation phase.
- only one consultant will stay during the whole implementation phase, providing advice
and bringing in additional expertise from the consulting firm if appropriate;
- the consultant will deal only with the more difficult tasks in implementation, leaving all
other work to the client;
- the consultant will visit the client periodically, or at agreed points during
implementation , to check progress and provide guidance;
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41

- the consultant will intervene only at the clients special request.
Training for new methods and techniques
- on-the-job training by the consultant;
- training of in-company trainers by the consultant;
- training of experimental groups whose members will then train the remaining staff;
- formal in-company training courses (run by the consultant, by special trainers brought
in for this purpose, or by the organizations internal trainers);
- participation of selected staff in external training courses;
- appreciation programmes for those who are not directly involved, but should be
informed.
Staff development in complex assignments
The more sophisticated and complex the problems tackled by the consultant, the more
difficult it is to design and organize related training and development of staff. This is the
case, for example, in assignments aimed at major changes, such as extensive reorganization
and restructuring, important changes in product and market strategies, or the establishment
of a new plant including the installation of a new management system. In addition to
specific training in new techniques which may be needed, there is a case for a collective
development effort to bring about substantial changes in management concepts, strategies,
communication and styles.
In these situations, training in particular work techniques and systems may have to be
supplemented by programmes aimed at behavioural change. These may include seminars,
working groups, discussion groups, special project teams, individual project work,
exchange of roles, counseling by the consultant.
Maintenance and control of the new practice;
If a new scheme is to survive and yield more in benefits that it costs, it has to be protected
against a number of more or less natural hazards. Standards, systems, procedures are as
prone to deterioration through wear and tear and neglect as are machines. Like machines,
their performance may eventually be reduced to zero.
Further improvement
Conversely, it would be unrealistic and totally wrong to assume that the implementation of
the consultants proposals will make the clients business perfect and that for a long time
no further changes will be required. Improvements may be suggested by the managers,
specialists and workers involved in a new scheme, by customers, by the consultant
personally or by other professional working for the same client. Improvements may
become feasible and necessary due to developments in information technology and other
changes that could not be fully considered in the course of the current assignment. Any
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42

such improvements may be suggested and become necessary surprisingly soon, much
sooner that the consultant imagined when submitting a new scheme to the client.
3.4.5 Termination
Termination is the fifth and final phase of the consulting process. Every assignment or
project has to be brought to an end once its purpose has been achieved and the consultants
help is no longer needed.
It is not enough to execute the assignment in a professional manner. The disengagement
also has to be fully professional, its timing and form have to be properly chosen and all
commitments settled to the mutual satisfaction of the client and the consultant.
Termination applies to two equally important aspects of the consulting process: the job for
which the consultant was brought in, and the consultant-client relationship.
First, the consultants withdrawal means that the job in which he or she has participated:
has been completed; or
will be discontinued; or
will be pursued, but without further help from the consultant
In deciding to terminate the assignment, the consultant and the client should be clear which
of these three applies in their particular case. There should be no ambiguity about this.
Second, the consultants withdrawal terminates the consultant-client relationship. The
atmosphere and the way in which this relationship is discontinued will influence the
clients motivation to pursue the project, and his or her attitude to possible future use of the
same consulting organization. Here, too, the assignment should not be terminated with
uncertain and mixed feelings. Ideally, there should be satisfaction on both sides about the
relations that existed during the assignment. The client should be convinced that he has
had a good consultant, to whom he would gladly turn again. The consultant should feel
that he has been trusted and respected, and that working again for the same client would be
another stimulating experience. The relationship has a financial dimension too; both parties
should feel that a proper price was paid for the professional service provided.
Professional consultants attach great important to the way in which they terminate
assignments. The last impressions are very significant, and an excellent performance at the
end of an assignment leaves the door open for future work. Repeat business is important to
management consultants, and is available only to those whose performance remains
flawless until the very end of every assignment.
3.4.6 Evaluation
Evaluation is the most important part of the termination phase in any consulting process.
Without evaluation, it is impossible to assess whether the assignment has met its objective
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43

and whether the results obtained justify the resources used. Neither the client nor the
consultant can draw lessons from the assignment if there is no evaluation.
Evaluation can be the most delicate part of the consultant-client relationship and it may be
more comfortable to avoid it, in particular if the client is not happy with the consultants
performance and it is unlikely that they would collaborate again.
In certain cases, evaluation by an independent third party may be a requirement of the bank
or agency that provided funds for the assignment. Independent evaluation may be the best
way of preventing conflict and litigation when the client and the consultant cannot agree on
the quantity and quality of results achieved and if fee payments are related to results.
Evaluation will focus on two basic aspects of the assignment : the benefits to the client and
the consulting process.
Evaluating the benefits to the client.
Evaluation will seek answers to the following questions:
- Has the assignment achieved its purpose?
- What specific results and benefits to the client have been achieved?
- What expected results could not be achieved?
- Has the assignment achieved some unexpected and supplementary results?
In typical management consulting assignments there are six kinds of benefit or result.
o New capabilities;
o New systems;
o New relationships;
o New opportunities;
o New behaviour;
o New performance.
The design of the assignment (the contract)
- How and by whom was the need for the consultant established?
- How was the consultant chosen? What criteria and procedures were used?
- Was the purpose of the consultancy clear? Was it unduly narrow or vague?
- Was the design of the assignment clear, realistic and appropriate with regard to the
clients needs and particular condition?
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44

- Did the original definition of purposes, objectives, results and inputs provide a good
framework and guidance for the assignment plan? Were the objectives sufficiently
demanding but not impossibly so? Was the definition of expected results clear, detailed
and precise?
- Was the consulting style properly defined, discussed and understood? Were people
briefed at the outset about their roles and responsibilities?
Independent evaluation by the consultant
Client will have their own policies and practices for evaluating the use of consulting and
other professional services. A client may even choose not to evaluate a completed
assignment. To a consultant, assignment evaluation is one of the basic tools for managing
quality, controlling and developing staff, and building excellent relations with existing
clients. Evaluation of completed assignment is a part of the consultants knowledge
management. As a matter of principle, a consultant should evaluate every assignment for
his or her own benefit, even if the client has decided not to evaluate.
It is difficult to be objective and unbiased in self-evaluation. Some consulting firms
therefore seek feedback from clients, using various data gathering and evaluation
instruments. Questionnaires submitted to the clients are the preferred instruments. The
questions should invite the client to be frank about every aspect of the relationship and the
work performed, including the competence and attitude of the consulting staff, their
flexibility, behaviour, creativity, availability, helpfulness and other qualities that make the
difference between mediocre and excellent assignments. If the client takes the trouble to
answer, the consultant should in turn provide feedback to thank the client and tell him or
her what action will be taken on the answers and suggestions.
Other frequently used instruments include interviews, discussions with senior personnel in
the client firm, follow-up visits, study of the clients internal evaluation reports (if made
available to the consultant) and similar.

There is this classical article on Management Consulting, without which this section will
not be complete.

Management Consulting..... for your review !

Management consulting (sometimes also called strategy consulting) refers to both the
practice of helping companies to improve performance through analysis of existing
business problems and development of future plans, as well as to the firms that specialize
in this sort of consulting.

Management consulting may involve the identification and cross-fertilization of best
practices, analytical techniques, change management and coaching skills, technology
implementations, strategy development or even the simple advantage of an outsider's
perspective.

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45

Management consultants generally bring formal frameworks or methodologies to identify
problems or suggest more effective or efficient ways of performing business tasks.

Management Consulting is becoming more prevalent in non-business related fields as well.
As the need for professional and specialized advice grows, other industries such as
government, quasi-government and not-for-profit agencies are turning to the same
managerial principles that have helped the private sector for years.

There is a relatively unclear line between management consulting and other consulting
practices, such as Information technology consulting.

History

Management consulting grew with the rise of management as a unique field of study.

The first management consulting firm was Arthur D. Little, founded in the late 1890s by
the MIT professor of the same name. Though Arthur D. Little later became a general
management consultancy, it originally specialized in technical research.

Booz Allen Hamilton was founded by Edwin G.
Booz , a graduate of the Kellogg School of Management at Northwestern University , in
1914 as a management consultancy and the first to serve both industry and government
clients.

The first pure management and strategy consulting company was McKinsey & Company,
considered the current leader in the field. McKinsey was founded in Chicago during 1926
by James O. McKinsey, but the modern McKinsey was shaped by Marvin Bower, who
believed that management consultancies should adhere to the same high professional
standards as lawyers and. McKinsey is credited with being the first to hire newly minted
MBAs from top schools to staff its projects vs. hiring older industry personnel.

Andrew T. Kearney, an original McKinsey partner broke off and started A.T. Kearney.

After World War II, a number of new management consulting firms formed, most notably
Boston Consulting Group, founded in 1963, which brought a vigorous analytical approach
to the study of management and strategy.

Work done at Booz Allen, McKinsey, BCG, and Harvard Business School during the
1960s and 70s developed the tools and approaches that would define the new field of
strategic management, setting the groundwork for many consulting firms to follow.

Another major player of more recent fame is Bain & Company, whose innovative focus on
shareholder wealth (including its successful private equity business) set it apart from its
older brethren.

Also significant was the development of consulting arms by both accounting firms (such as
Arthur Andersen) and global IT services companies (such as IBM ). Though not as focused
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46

on strategy or the executive agenda, these consulting businesses were well-funded and
often arrived on client sites in force.

Current state of the industry

Management consulting has grown rapidly, with growth rates of the industry exceeding
20% in the 1980s and 1990s.

As a business service, consulting remains highly cyclical and linked to overall economic
conditions. The consulting industry shrank during the 2001-2003 period, but had been
experiencing slowly increasing growth since.

In 2004, revenues were up 3% over the previous year, yielding a market size of just under
$125 billion.

Currently, there are three main types of consulting firms.

First, there are large, diversified organizations, such as IBM 's Global Services that offer a
range of services, including information technology consulting, in addition to a
management consulting practice.

Second are the large management and strategic consulting specialists that offer purely
management consulting but are not specialized in any specific industry, like McKinsey &
Company.

Finally, there are boutique firms, often quite small, which have focused areas of consulting
expertise in specific industries or technologies.

The Rise of Internal Corporate Consulting Groups

Added to these approaches are corporations that set up their own internal consulting
groups, hiring internal management consultants either from within the corporation or from
external firms whose employees have tired of the road warrior lifestyle.

Corporations such as SunLife, IBM , Fidelity , Siemens , Chevron Texaco, Metlife and
Bristol Myer Squibb have found these groups to be particularly helpful. Many of these
corporations have internal groups of as many as 25 to 30 full-time consultants.

The internal consultant approach is chosen for three reasons.

First, the corporation does not want to pay the large fees typically associated with external
consulting firms.

Second, they want to keep certain corporate information private.

Finally, they want a group that more closely works with, and monitors, consulting firm
relationships. Often, the internal consultant has less ramp up time on a project due to
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familiarity with the corporation, and is able to guide a project through to implementation -
a step that would be too costly if an external consultant was used.

Internal consulting groups are often formed around a number of practice areas.

The more common areas are:

organizational development,
process management,
information technology,
training and development.

There are three potential problems.

First, the internal consultant may not bring objectivity to the consulting relationship that an
external firm can.

Second, when the external consulting industry is strong it is increasingly difficult to find
the required high calibre of consultant provided by consulting firms.

Finally, when financial times get tough, often the internal consulting group is the first to
face layoffs.

Despite these problems there is a clear advantage.

External consultants may pose more conflicts of interest and bias in favor of one client
company over another. This is especially in economies that are experiencing high degrees
of consolidation, which results in industry and product overlap among client companies.

Approaches

Management consulting has become the primary source for innovation in the practice of
management, forming a bridge between academia, firms, and thought leaders in other
fields. As a result, management consulting firms use a variety of tools and techniques to
approach business problems. See strategic management, operations management
, and industrial engineering

Criticism

Management consultants are often criticized for overuse of buzzwords, reliance on
management fads and a failure to develop executable plans that can be followed through. A
number of highly critical books about management consulting argue that the mismatch
between management consulting advice and the ability of business executives to actually
create the change suggested results in substantial damages to existing businesses, see, for
example Dangerous Company by James O'Shea

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Further criticisms include:

analysis reports only,
junior consultants charging senior rates,
reselling similar reports to multiple clients as "custom work", total lack of innovation,
over billing for days not worked,
speed at cost of quality,
unresponsive large firms & lack of (small) client focus,
lack of clarity of deliverables in contracts, and more.

Not surprisingly, management consulting is also the butt of many business-related jokes,
such as:

"Question: What is the difference between a management consultant and a used-car
salesman. Answer: A used car salesman knows when he is lying."

Extract of the article Enhancing Competitiveness in Management Consultancy By SA
Khader, Consulting Ahead , January 2007 issue,The journal Of Consultancy Development
Centre , New Delhi

Enhancing Competitiveness in Management Consultancy

The growth of the management consulting industry bears a close relationship to that of the
overall economy. In the 1980s, relatively high economic growth of 3.6% in Europe and the
U.S.A. was followed by 20-30% annual expansion in the consulting industry. With slower
economic growth in 1990s (1-2 percent), the growth in consultancy has alos come down
somewhat, notching increases of 15-20 percent. The positive relationship between the
growths of the management consulting industry is found is Singapore. From 1989 to 1992,
the high growth of the industry (25 percent) coincided with a 7 percent growth in Gross
Domestic Product (DGP). Turnover from management consulting and public relations
services doubled from US $ 183 million in 1987 to reach US $ 425 in 1991. The total
turnover from information technology, public relations, management and engineering
consultancy services in 1991 was almost US $ 1 billion. Expressed in relation to GDP, the
total turnover of consulting services was 0.3 per cent in 1990, comparable to that in the US
and Europe. Given the positive correlation between the growth of the consulting industry
and economic performance, it is evident that there is a vast potential for a greater role to be
played by professional service organizations. The global market for management
consulting is growing at more than 10% per annum. The global market for management
consulting was estimated at more than US $40 billion in 1996. By shear extrapolation even
at a conservative rate, it would leas us to staggering figure of US $ 160 billion by 2006.

Within the Asia Pacific region significant management consulting opportunities are
emerging in the area of infrastructure, private sector development and capacity building.
The largest growth in consulting services is currently taking place in Asia Pacific and Latin
American regions and the growth areas being Information Technology, Corporate Strategy
and OD, Facilities Management & Production and Services Management. The key sectors
are Banking and Financial Services, Government Services, Utilities and
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49

Telecommunications. The major trends affecting the management consultancy industry in
the region are rapid growth in the Asia-Pacific, regionalization leap frogging growth of
indigenous companies, new concerns in human resource development (HRD) productivity,
quality, and lean production systems. A seize emerging opportunities the consultancy firms
in the Asia-Pacific are adopting certain strategies for organizational changes like mergers
alliances, franchising, consortiums etc.

Competitiveness in Consultancy

Engineering & Consulting Services in generation like the general service sector also fall
across continuum (spectrum) ranging from management consultancy at one end and
Technical/Project consultancy on the other. Across the continuum, the degree of
interaction between the client personnel and the consultant undergoes a radical change, e.g.
continuous interaction becomes very essential with the client or clients representatives
(employees at different levels in the organization) throughout the total process of extending
management consultancy, i.e. establishment of terms of reference, fact finding through
structured questionnaires and interviews, idea-generation and selling as well as well as
implementing the recommendations. On the contrary, in the technical/project consultancy,
the interface between the clients personnel and the consultant is intermittent and to a
smaller degree, due to the perceived superior knowledge level of the consultant-engineer.

Management consulting is an intricate process of knowledge / know-how transfer through a
client-consultant relationship, where professionalism is vital to providing quality services.
The broad parameters that specify the quality (expectations of the customers) in
management consultancy in general include:

1. Provision of service as per schedule / time target

2. Adherence to agreed cost / fee and terms of reference.

3. Degree of fulfillment of the intended need of the client.

4. Degree of participative approach adopted by associating the client personnel during
different stages of providing the services.

5. The extent of development of client personnel to pursue and improve upon the system
implemented / installed.

These can be accomplished by maintaining high productivity of technical staff as well as
professionalism and adhering to professional ethics. The key factors that promote
professionalism is consultancy that emerged during APO Symposia on MC Skills 1990 in
New Delhi, 1993 in Seoul 2001 in Lahore are:-

i) Continuous knowledge up-gradation supported by innovative approaches to develop
standardized methodologies of consulting and sound business practices (Values and
ethos of the consulting Organization)

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50

ii) Keeping consultants motivated to enhance their specialized knowledge and consulting
skills, (Consultant Development)

iii) Commitment to involve / associate clients with the problem solving endeavors.
(Clients-Maturity to tap the consultants capability)

The basic commitment to professionalism stems from the background values, ethos and
business ethics imbibed and built in by the promoters of the consulting organization. The
long-term success of the enterprise and its focus on ethics will drive its outlook to invest in
consultant development, developing proper infrastructure and knowledge management,
establishing associates, joint ventures etc. to provide the services that the company is truly
needs. It is well recognized by the consulting fraternity that it is easy to work with a well-
informed client who understands what the consultant can do and what he cannot. The
clients maturity to understand and to go along with the consultant, results in better
utilization the potential of consultant team for the benefit of the organization. It is also
imperative on the part of the consultant to appraise and educate the client in the right
manner to strengthen professionalism in the service.

Further, it is recognized that consultant development has to be self-motivated and the skills
can be sharpened more by experience and working with seniors in diverse projects. To
accomplish fruitful interaction between the consultant and the client system, the consultant
must have basic education and training to hone those skills, in addition to the vital
personality traits of an effective change agent. The integrated skill attributes of a
management consulting evolved by a committee constituted by Planning Commission of
India on Consultant Education & Development during 1992 is delineated in this structure.

i) Marketing skills to diagnose the needs of clients and sell the type of services.

ii) Conceptual and professional skills to be able to diagnose problem areas and apply
knowledge and experience in evolving viable solutions.

iii) Aptitude for interacting with drivers individuals ability to size up situations and
related personality characteristics.

In addition, management consultant should have a national perspective and abilities to
integrate broader socio-economic and cultural dimensions as well as macro-micro linkages,
while tackling productivity problems, both at national and cross cultural global levels.

The socio-economic and socio-cultural scenario is undergoing a phenomenal change due to
globalization of national economics; increased exposures as well as enhanced expectations
for higher quality of life and commensurate awareness for better quality of goods and
service by the public in general. The societies and enterprises have already gone through
various movements namely the technology, management, productivity and human resource
movements. Presently, it is the quality and environment and broader stakeholder
satisfaction movement that have overtaken all the others, further overshadowed by fast
emerging knowledge society well supported by fast emerging knowledge society well
supported by Information Technology. Unless the service and consultancy sectors too
realize and recognize these aspects and prepare themselves to serve their clientele with
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customer and stakeholder satisfaction in focu7s, they will be be able to meet the challenge
of growing expectations of the people in general. In this process, one factor that stands out
is the continuous renewal of knowledge and attitudes of the human resource. The
competitiveness of consultancy can be sustained continuously only through these measures.

IT & Competitiveness

It is possible to gain competitive advantage through the use of IT. Porter and Millar
identified three ways, how IT can influence the competitive advantage, viz.

1. Change the industry structure
2. Create competitive advantage
3. Spawn new business

Across the value chain of a company, it is possible to influence the processes by utilizing
Information Technology to optimize the customer value and thus enhance competitiveness
of the enterprise. According to Manzil of Lotus The key to productivity lies not in the
computers themselves, but in, how they are used. Use in this instance refers to how IT
fits into the overall structure of the organization and how it helps achieve organizational
goals. The potential of Information Technology can be realized only when that technology
is integrated into the strategic vision of the organization and when it is used to redefine job
structures, processes and lines of authority. Information Technology has an all pervasive
impact in the total performance of a consulting organization. Information Technology can
provide an easy access to global database and also to in-house experience and expertise
through better knowledge management, apart from enhancing the speed of operations in
general. A consulting organization without IT integration is bound to loose its competitive
edge.

Management Consultancy in India

The economic reforms in 1991 along with dilution of MRTP and FERA regulations
resulted stimulating competition in the large sectors of the industry. This led to a large
demand for consulting in the field of strategy as the Indian industry was suddenly exposed
to the globalization process. This brought in major international consulting firms where
interventions helped in exposing industry to the realities of the globalization, and thus in
changing attitudes. Consequently one sees many changes in the conglomerates, leading to
mergers and acquisitions (M&A) and a focus on developing core competencies and
economies of scale internationally. During the last about 10 years, a large number of
foreign consultants have set up their operations in India through collaborative arrangements
or otherwise. These collaborations are mostly from advanced countries and in technology
intensive or specific sectors. This shows that the FDI in consultancy services alone has
increased from Rs.122 million in 1992 to Rs.6362 million during 1998.

Almost unrestricted entry of foreign consultants in India is a matter of serious concern to
recognized that in the market driven policy environment, the Indian consultancy companies
should prepared to face competition from foreign companies in their own domestic
markets, strengthening of domestic consultancy capabilities would be in the national
interest on long term basis. The Indian consultants perhaps need to adopt and approach of
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cooperation and competition, depending upon the situation. Majority of the Indian
consultancy companies have low equity base and inadequate financial and marketing
muscle compared to international consultancy companies. The committees constituted by
Consultancy Development centre (CDC) have estimated roughly that 100,000 consultants
working in India spread over 25,000 consulting entities. The numbers will expand if
consultancy in information technology area is included. Of the consulting entities some
80% are individual consultants. While it is not possible to disaggregate the number in
terms of management, technical and other consultants, it is estimated that over 40% of the
consultants are management consultants of varying types, sizes and configurations.
Correspondingly, they represent highly divergent standards, specializations and practices.

Consultants continuously move with the changing environment and are here to facilitate
better management in all areas where demands arise. Hence the major areas of
forthcoming new economy are changes (knowledge) in the corporate sectors and changes
in social sectors that would determine the emerging areas for consultancy. Indian corporate
houses, however, will have a large requirement for consulting in areas of;

Customer Care Management

Information Technology

Knowledge Management

A political structure mindset and leadership that belongs to the 19
th
century can hardly be
counted for capturing the opportunities that circumstance have brought before us. A nation
that does not somehow accept the idea that high quality universal education is the primary
task before it, is capable of missing the information revolution. Thus, consulting in the
social and education sector is bound to be in greater demand and in fact it is expanding
leaps and bounds with MNC consultants flourishing through international funding
institutions and through Non Governmental Organizations (NGOs).

It has been often said that India is an over administered and under-manned country, which
is why, Indian human resources can only give their best in foreign countries that provide a
better environment. Improving the management of the nation will help to realize the thru
potential and consultants have a role in both stimulating and meeting this critical and vital
need of our country in terms of providing consulting service to government and
institutional framework.

A massive investment in infrastructure is in the offing in India both through the domestic
savings as well as foreign direct investment. For example, an astounding amount of
Rs.766000 million investment is anticipated during the tenth Five Year Plan. In developed
economies, the share of consultancy in the total project cost goes up to 10% in
infrastructure related projects and 5% in soft sectors. Considering the lower level of
awareness and perception of consultancy in India, it is expected of range only between 0.5
to 3% according to a recent survey undertaken in this regard. As per the opinion of survey
and analysis, it is estimated that, private sector apportions about 2-3% and the state public
sector 0.5 - % of the total investment towards consulting services. Accordingly the overall
size of consulting business in India, as a wild guesstimate, subject to the definition one
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adopts, would be around 10,000 crores. The exports are very limited and most of them
form part of project exports. The export of consultancy services is estimated at around 200
to 50 crores. While the industrial consultancy is basically domestic, Indian business is
getting highly globalized. Global consulting firms are recruiting Indian in thousands.
Hence, the growth opportunities in the consultancy are bound to tbe very good, considering
the economic perspectives of India during the first decade of this millennium.

User Perception of Management Consultancy

Despite the continuous growth and a wide range of industries served the number of
qualified management consultants is still insufficient to meet the need for professional
management consultancy services in India. This seems to be the result of many potential
clients reluctance to use such services, their lack of knowledge of when to use such
services, how to choose a consultant, or how to use consultancy; insufficient marketing and
public relations effort by the profession itself as well as unprofessional services from some
individuals and firms that harm the reputation of the entire profession. An opinion survey
under taken by National Productivity Council on behalf of APO during 2003, results into
this SWOT analysis of the consulting profession in India.

Strengths

Availability of skilled manpower

Cost-based advantage

Experience relevant to developing economies

Adaptive towards technology

Sector specific

Weakness

Weak image

Lack of international experience

Inability to arrange competitive funding

Weak consultancy association

Industry awareness is low

No linkage between consultants and academics

No consortium approach for large overseas projects

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54

Opportunities

Large domestic and diverse sectoral market

Rising opportunities in international markets.

Technology competitiveness

Sub-contracting by larger international consultants

Threats

Entry of foreign consultants

Extremely price sensitive domestic market

Loss of manpower

Technology absorption is slow

The clients agree, Management consulting is more than making recommendations or
giving advice. It requires working with the client on implementing solutions, solving
problems, and managing change, not just discovering what management ought to do, but
helping the management to do it better. Thus the management consulting approach should
change basically from providing advice to implementing and demonstrating results. From
discipline oriented, it should become integrated and holistic. The approach should be to
provide total solution to enable the client to reap the benefits promised through the
investment in consulting. That is how it should become performance consulting through
its process-approach.

Many clients feel that, in consulting on organization and management development, there
ghas been insufficient adaptation of western approaches to Indian realities. This call sfor
investment in local R&D, database development, and suitable adaptations of western
approaches integrating with Indian ethos, values, attitudes and culture and work ethics.
Most Indian consulting firms do need to adapt the 3-D model of enhancing professionalism
leading to higher competencies in the consultants comparable to MNCs. Then they will be
able to effectively use the cost-based competitive advantage to their benefit.

Best Practices in Consulting Profession

A survey conducted in USA during late nineties revealed that the best practices for success
or key success factors are quire different from those of the manufacturing sector, mainly
due to special characteristics of the consulting profession particularly with respect to the
outlook of consultants. Consultants have to be self-motivated to continuously learn and
update their knowledge, while being result-oriented with clients, which in itself is very
challenging. They have to be highly analytical and creative and put in hard-work to
accomplish their time targets under conditions of high level of uncertainty, and be
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powerless (little authority) as against their counterparts in the clients environment.
Consultants have to follow rigorous professional code of ethics while extending the
knowledge-based services as change agents.

The best practices that are likely to enhance the success in the consulting profession could
be grouped in the following three domains / dimension of the model.

a) Ethical & Professional Behavior of the Firm

i) Extremely professional and ethical

ii) Give clients a true picture of the capabilities

iii) Offer services only in the field of your specialization

iv) Say /I do not know when you are not same

v) Walk away from the assignment that you cant handle

vi) When appropriate, do not hasten to make unpopular recommendations

b) Technical & Analytical Prudence

i) Clearly define the objectives

ii) Provide effectively Prod & Cons of project

iii) Train & develop people (Consultants)

iv) Develop open-mind and create thinking in consultants

v) Flexibility to get along with all level management

vi) Good market knowledge and marketability of your services

vii) Stay with core competency

viii) Measure success and try to exceed the set objectives

ix) Always present it when the job is completed

x) Make such recommendations that the client can implement

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56

c) Consultant Client Partnership

i) Build strong long-term relationship with decision makers

ii) Strike empathy with clients

iii) Train and develop clients people

iv) Regularly contribute to a cause bigger than yourself

v) Surprise clients with more competence and better than expected results.

It is worth noting the subtle aspects of strengthening the consultant-client relationship by
adapting the above best practices, as these are applicable to Indian situations as well may
be with some suitable adaptation.

Conclusion

Indian management consultancy has come of age and is in position to complete with MNCs
not only on its own soil, but also abroad, as one hears from a number of professional and
newspaper reports. As such, to continue to contribute effectively to the profession and
economy, it needs to focus on its professionalism and competitiveness of its services,
leveraging the cost advantages. In this regards, the 3-dimensional model discussed earlier
with its six strategic interventions of enhancing the professional excellence is worth
pursuing by the consulting forms.

Back

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Chapter 4

Consulting Process/Stages

Objectives

To understand consulting as a process
Steps which are there in the process
Understand the requirements of each step from consultant and client side
To be able to device a methodology to plan any step of consultancy as process

4.1 Introduction

A manufacturing process has a complete chain of events where there are defined resources
as inputs and products the manifestation as output. In such processes we also have defined
specifications for input, output inter alia intermediate steps. In manufacturing we can
monitor progress and even predict the quality of output as well. There are defined
parameters for each step which can be visualized, monitored, transferred, and exchanged.
The steps under manufacturing process gives us a feeling of time effect and also can
impact the customer or the client about the endevours done on the part of labour or
manager. The simplest e.g. can be say an architecture plan or a floor plan given by interior
decorator. But if one tries to visualize the work of consultant the output can be a say a
report, an advice, a solution or may be an action plan. You may have experienced such
reports in your daily works.

You will agree that there are no criteria by which you can measure the work done. If you
are giving consultancy you know how much effort you have done. But if your client asks
for this you can not put on the paper what is the effort you have put. There are no
specifications defined unlike a tangible product as in manufacturing process.

Often consultants and clients fail to visualize consultancy as a process. In the forth coming
pages we will be discussing the consulting as a series of steps which we call as a
consulting process.

But you must be able to distinguish between the manufacturing process and consultancy
process. Whereas the manufacturing process has clear specifications tangible inputs and
output the consultancy has intangible inputs, output. In fact by taking consultancy as a
methodical process you will be able to excel in the consultancy profession is the objective
of lesson.

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Defining the consulting process

What you feel or believe or experienced a consulting is? You will agree that a consultant
and client exist together i.e. whenever consultancy is there it needs to have a consultant and
a client. So we can say a

It is also necessary that solution must be acceptable to the client.

So we can define consulting process as a set of activities preformed by consultant and
client to achieve the desired purpose or objective.

You must give emphasis that task is to achieve the desired and task is to be performed
jointly. You must take a note that a consultant does not work in isolation. There has to be
synchronization between client and consultant.

4.2.1 Describing steps of the process

There can be enormous ways to define the consulting process or consulting cycle or phases.
Various authors or consulting firms take different forms but we will classify the
consultancy in two ways one as a classical way and other as specific way. The classical
way here means that all other specific ways can be grouped according to this category. The
specific is because it will differ in various firms or it will be depending on type of
consultancy or the work taken be a consultant.

4.3 Classical consulting process

If you once again refer to the above diagram you will find it has following elements
Need
Consultancy
Consultant
Client
Advice

You will agree that need has to be communicated from client to consultant. The
consultant has to understand the client and its need. The consultant in order to fulfill
needs of client has to know certain details and finally he has to propose/advice a
solution which the client may say to implement. Finally the client will reward the
consultant after all the services offered are not for charity.

Consultant

Client
Needs
Solution
Consultancy
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59

This clearly depicts the phases of consultancy. So the process of consultancy comprises
of

Entry
Diagnose
Action plan
Implement
Terminate/evaluate

By entry we mean when client feels a need of consultant and consultant tries to understand
requirements.

Diagnose is where he make a deep inspection of the needs of client.

By action plan we mean the activities which consultant proposes as a solution to needs of
client.

This action plan when is required to be implemented we call as implementation plan.
And finally when the client feels his needs are fulfilled and consultant fulfills the assigned
commitments the process is terminated.

The details of these process steps we will take in subsequent units.

But important things for you to remember are what are being asked by one i.e. consultant
or client and what are being given by other.

Say for e.g. in the entry phase the client briefs his problem or requirements now this can be
the problem perceived by client. Say for e.g. he may say my employees are not putting
efforts the way I desire or he may say I want to increase my profit by 10%.

Here only intangible things which are being exchanged. The whole process has qualitative
aspects and may not have many times the tangible out come.

We will be discussing the specific process in the end as some case studies.

Questions for review

Q1. What is the difference between manufacturing process and consultancy process?

Q2. What are the five phases of consultancy?

Q3. Visualize yourself as a consultant and devise an activity plan which you will prepare
on receiving a call from NIIT manager for providing them consultancy on business
expansion plan.

Q4. Supposing you are NIIT manager and want to go for business expansion plan then
what at all you will ask a consultant before taking his services.
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4.3.1 Building the sub process steps

There can not be a fixed model for all consultancies i.e. which can be applied to all
situations blindly but by and large the consultancy can be divided in to above five major
steps. There can be omissions or merging of steps or there can be all together
implementation missing. Often the government consultancy works or world bank studies or
some sort of feasibility studies are with out any implementation plan and have only up to
action plan or even up to a suggested model solution. We call this consultancy as a
Resource consultancy and consultant as resource consultant. As a e.g. say Bajaj to go for a
small car or not will be resource consultant. Or devising a strategy for Maruti to challenge
Tata Nona will be a resource consultant. But with stiffer competition the resource
consultancy is extending into all five phases.

Diagrammatically it can be represented as

There can be variations across firms consultancy cycle and also time period of consultancy
cycle.

Now taking phase by phase

4.4 Entry phase

In this phase the consultant starts working with a client. This phase includes
Initial contacts
Discussions on what the client would like to achieve or change their organization
How the consultant might help
The clarification of objective roles
The preparation of an assignment plan based on preliminary analysis
The negotiation
Agreement of a consulting contract

Here uncertainty is highest and it may happen that client may not be satisfied and no
contract is initiated.

Or as in Governments firms it may be one of several invited consultants to present
proposals or tenders received but only one of them qualify for the assignment.
Birth
Growth
Maturity
Decline
End
Consultancy Life Cycle
(Different nations may be at different stages of
life cycle of consultancy at the same the period of
time).
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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61

But here important to remember is First impression is the last impression. Nevertheless
you or your firm may not get a consultancy contract a relation building has initiated.

Often consulting firm take entry phase as opportunity and they believe that they will be
able to get some consultancy assignment in future. They after entry phase failure do not
stop in exchanging views with client but keep on building relations.

4.5 Diagnosis

This phase is an in-depth diagnosis of the problem to be solved. During this phase the
consultant and the client cooperate in identifying the sort of change in defining in detail
The purposes to be achieved by the assignment

The clients performance
Resources needs
Perspectives

Here basically the problem or the needs of client are interpreted by consultant and informed
to client. It is imperative on your part to know here what is meant by perception of
problem.

Say for e.g. the Delhi government calls you for a consultancy on how to tackle Mass
transport problem. Now Delhi government may say there is very large crowd on the buses
how to tackle this problem. The consultant may inform the Delhi government the crowd
which you see as a problem is actually potential customer and we collectively can turn this
problem into a profitable solution. The consultant has to diagnose this in depth and tell
actually what the problem is. It can be result of diagnosis that whether the problem is
The change problem
Technological
Organizational
Information
or any other

Any other includes decisions on what data to look for, what data to omit, what aspects of
the problem to examine in depth and what facts to skip predetermine the relevance and
quality of the solutions that will be proposed all form part of diagnosis phase .

Fact-finding and fact diagonals often receive the least attention as a consultant you must
take care it is the basic foundation of future work i.e. seeds for future crops so remember so
you sow shall you reap. The deeper you go into diagnosis of the problem the better you will
be able to deliver.

4.6 Action planning

The third phase aims at finding the solution to the problem which you have diagnosed in
above phase.
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62

It includes work on one or several alternative solutions followed by the evaluation of
alternatives.

Here consultant experience matters a lot. He normally works for this in his office and
discusses among fellow members. Consultant elaborates his plan for implementing
changes and subsequently presents the proposals to the client for decision.

(Sometimes consultant often takes this and discusses with top management from client
side. Here he briefs various options and get a nod for the choice from top management or
CEO. This some times becomes inevitable because it may require major changes and the
one who actually deals with action plan may like to modify plans.) Here it is important to
understand that consultant has to propose action plans as alternatives and it should be
unbiased. More we will cover about this when we will discuss ethical issues. It should be
clear that action plan is final deliverable of all thought process till now. This is part from
client will get a clear view of the solution.

Remember prior to this point client was main source of input i.e. when a consultant was
dependent on client but from this point onwards client is receiving inputs from consultant.

Action planning requires imagination and creativity, as well as a rigorous and systematic
approach in identifying and exploring feasible alternatives, eliminating proposals that could
lead to trivial and unnecessary changes and deciding what solution will be adopted. A
significant dimension of action planning is developing strategy and tactics for implement
changes, in particular dealing with the human problems that can be anticipated, and for
overcoming resistance to, and gaining support for, change.

5.1 Implementation

The fourth phase of the consulting process is Implementation. It provides an acid test for
the relevance and feasibility of the proposals developed by the consultant in collaboration
with the client. The changes proposed by consultant start turning into reality.

It is from here that things begin happening, either as planned or differently. During this it
may happen that unforeseen new problems and obstacles may arise and false assumptions
or planning errors may be uncovered. Moreover resistance to change may be quite different
from what was assumed at the diagnostic and planning stages.

It may be some times requirement to change the original design and action plan may have
to be modified. As it is not possible to foresee exactly and in detail every relationship,
event or attitude, and the reality of implementation often differs from the plan, monitoring
and managing implementation are very important.

We have earlier pointed out that Resource consulting is now getting phased out with
complete consulting. This is basic reason. Companies or clients prefer to go for end to end
consulting rather than merely resource consultant and implementation consultant. More
over the professional consultants prefer to be associated with the implementation of
changes that they have helped to identify and plan and avoid resource consultancy.
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63

5.2 Termination/evaluation

Final phase in the consulting process includes several activities. Clients performance
during the assignment, the methodology adopted, results achieved have to be evaluated by
both the client and consulting firm.

In this phase final reports are presented and discussed.

Mutual disputes are settled.

If there is an interest in pursuing the collaborative program further an agreement on
follow-up and future contracts may be negotiated. These activities are completed, the
consulting assignment or project is by mutual agreement and the consultant withdraws
from the client decision. Here it very pertinent to remember that consultant expertise lies in
getting amicable closing of assignment. IN fact the agreement should be designed in the
manner that the consulting contract closes and relationship is extended. But this is often far
from reality. Consulting contracts do land into unsatisfactory ends.

It is because of this evaluation is most important for consultant and client both.

5.3 Specific phases of consultancy

Let us see a specific case for six sigma consulting firm

The Six Sigma approach is an improvement system for existing processes falling below
desired performance and requiring an incremental improvement. At MphasiS,( firm ) the
fundamental objective of the Six Sigma methodology is the implementation of a
measurement-based strategy that focuses on process improvement and variation reduction.

The four steps indicated clearly matches with our step only evaluation or terminations have
not been indicated.

Consider another e.g.
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64

What
you do
What
firm
does

1 Register interest

Enters your details and areas of interest on its
database to match against companies
2 Identify Company

Isis identifies companies with consulting needs
and matches them with University researcher.
3 Agree Programme
of work/scope

facilitates the discussion between you and the
company, clarifying the work to be done
4 Negotiate Price

has substantial experience in negotiating realistic
commercial fees
5 Conflict of Interest
check
works with Research Services to avoid conflicts
which may damage current research activities
I.e. research sponsor obligations, licences
6 Negotiate Contract

works to reduce your liabilities and protect
academic freedom and intellectual property
rights
7 Arrange
Professional
Indemnity Insurance

ensures the consulting contracts are covered by
the policy.
8 Notify your research
sponsor/funder
If alerted by Research Services that you need to
get research sponsor approval for consulting, we
may be able to help you.
9 Completion of
Appropriate Forms

Firm will assist you completing the University's
OA1 Form for Head of Department Approval.
The DEC2 is an Isis form which confirms your
agreement to undertake the specific work.
10 Exchange contracts firm arranges signature by the company
11 Project manage the
work
firm will help co-ordinate the work and manage
the production of reports and arrange meetings
where appropriate
12 Invoice company

firm will invoice the company promptly in line
with the contract
13 Chase payment from
company

Where appropriate firm will chase prompt
payment by the company.
14 Organise payment
(nb Tax)

After the charge of 15% is accounted Isis
processes payments through the University
payroll, thereby removing the need for you to
make a separate tax return.

Here it is important to see that for company the initial steps are elaborate but the action and
implementation is just in two steps.
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65

Can you anticipate the problems associated with this? This process or method is only from
consultant perspective. It has not been made from client perspective.

But company view or experience says

The process from first contact to final contract can be managed within days. However,
generally, negotiations can take longer depending on the nature of the requests made and
will need to be seen by our lawyers and agreed with Research Services in line with the
relevant Statues and Regulations.

5.4 Taking another e.g

Here the firm has added action plan and implementation and devided into two parts viz
initiation and execution Initiation means making relationship gathering information,
building plans while the execution is action oriented and means getting the job done.

5.5 Lets sum up

We have discussed the consulting as a process and seen that it consists of five basic phases.
There can be different stage or way the consulting company can divide whole process. By
and large the process consists of entry, diagnosis, action plan, implementation, evaluation.
We have also discussed the peculiarities of each phase and what and how should consultant
plan his activities for each phase.

5.6 Check your progress

Q1 assume your self a management consultant and you are called by Maruti MD for a
propose assignment how to tackle TATA Nano challenge. How will you devide the
whole consulting process ?

Q2 why resource consulting is phased out?

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66

Q3 why evolution is considered necessary for client and consultant both?

5.7 As a recap lets look at some of the slides on the points discussed in this
chapter
THE CONSULTING PROCESS
Entry
Diagnosis
Planning

CONSULTING PROCESS
WHAT IS THE SIMPLEST DEFINITION OF CONSULTING PROCESS?
CONSULTING PROCESS IS THE PROCESS IN WHICH THE CONSULTANT/S AND THE CLIENT/S UNDERTAK
SET OF ACTIVITIES REQUIRED FOR ACHIEVING THE DESIRED PURPOSES AND CHANGES.
WHAT IS LIFE CYCLE?
WHAT IS PRODUCT LIFE CYCLE?
WHAT IS CONSULTANCY LIFE CYCLE?

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67

CONSULTING LIFE CYLE
WHY STUDY LIFE CYLCE? PRODUCT LIFE CYCLE & THEN CONSULTANCY LIFE CYCLE?
BECAUSE STUDY OF CONSULTANCY LIFE CYCLE WITH RESPECT TO
CLIENT/CUSTOMER HELPS IN GAINING INSIGHTS INTO THE CONSULTANCY
PROCESS.
Lets See How?
Birth
Growth
Maturity
Decline
End
Consultancy Life Cycle
(Different nations may be at different stages of life
cycle of consultancy at the same the period of time.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

CONSULTANCY PROCESS
BROADLY CLASSIFIED PHASES OF CONSULTANCY PROCESS
REMEMBER, CONSULTANT A WITH 3 CLENTS X,Y&Z CAN BE AT DIFFERENT PROCESS CYLE OR
CONSULTANCY LIFE CYCLE STAGES WITH THEM AT THE SAME TIME.
E.g Consultant A can be at Diagnosis stage with Client X, at Termination Stage with Client Y and at
Implementation stage with Client Z
Entry
Diagnosis
Implementation
Action Planning
Consultancy Process with respect to client
1995 January 1995 March 1995 April 1995 MaySeptember 1995 September -November
T
e
r
m
i
n
a
t
i
o
n

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68

First contacts with the clients
Preliminary problem diagnosis
Assignment Planning
Assignment Proposals to Client
Consulting Contract
ENTRY PHASE

ENTRY PHASE INITIAL CONTACTS
INITIAL CONTACT -- CONSULTANT MAY MAKE CONTACT WITH POTENTIAL
PROSPECTS/CLIENTS BUT MOSTLY CLIENT MAKES CONTACT WITH CONSULTANT
INITIAL MEETINGS & AGREEMENT ON HOW TO PROCEED
PRELIMINARY PROBLEM DIAGNOSIS CAN BE DONE THROUGH MANAGEMENT SURVEYES,
USING COMPARISON, CLIENTS INVOLVEMENT, SOURCES OF INFORMATION OR OTHER
CUSTOMISED ALTERNATIVE APPROACHES
TERMS OF REFERENCE
PROPOSAL TO THE CLIENT & NEGOTIATING THE PROPOSAL
ASSIGNMENT STRATEGY & PLAN SUMMARY OF PROBLEM IDENTIFICAITON, OBJECTIVES TO
ACHIEVE AND ACTION TO TAKE, PHASES OF THE ASSIGNMENT & TIMETABLE, ROLE
DEFINITION
FINAL CONSULTING CONTRACT

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69

Purpose Analysis
Problem Analysis
Fact Finding
Fact Analysis and Synthesis
Feedback to Client
DIAGNOSIS PHASE

Developing Solutions
Evaluating Alternatives
Proposals to Clients
Planning for Implementation
ACTION PLANNING

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70

Assisting with implementation
Adjusting Proposals
Training
IMPLEMENTATION

Evaluation
Final Report
Setting Commitments
Plans for follow-up
Withdrawal
TERMINATION

Back

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71

Chapter - 5

CONSULTING AGREEMENTS/CONTRACT
- Preparation and Format

5.1 Objective

After going through this section you will be able to

Develop an understanding about the consulting agreements
Understand how consulting agreements are prepared
Format a consulting agreement /contract

5.2 Introduction

The consultant-client relationship is bound by a contract agreement. The success of
relationship, business depends on contract conditions. Often it has been noticed that a
weak contract agreement leads to dispute, termination of relationship and damage to
profession. It is, therefore, utmost essential that contract agreement takes care of
intricacies and is well understood.

Before going for a consulting contract, the specific rules and procedures to be followed for
employing Consultants depend on the circumstances of the particular case. However,
following main considerations would guide the need and the selection process:-

a) Absence of required expertise in-house;
b) The need for high quality services;
c) The need for economy and efficiency;
d) The need to have qualified Consultants for providing the specific services;
e) The importance of transparency in the selection process;
f) The identification of scope of work and the time frame for which services are to be
availed of.

The above mentioned things are to be seen by consultant and client both. Consultant should
see whether he actually possesses such requirement/qualification to deliver services and
client should introspect that his needs/requirements meet one of the above criteria.

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72

5.3 Selection of Consultants

After having finalized the requirement, client decides to explore who are consultants in the
field. For selection of the consultants, normally the client adopts a two stage procedure. In
the first stage, the client shall identify the likely sources on the basis of formal or informal
enquiries and by inviting Expression of Interest (EOI) normally through advertisement. On
the basis of responses received, Consultants meeting the requirement will be short listed for
further consideration.

In the second stage, the short-listed consultants will be invited to submit their Technical
and Financial Proposals (Request for Proposals or RFP). The consultant shall be selected
based on evaluation of their Technical and Financial bids.

Normally the selection of consultant can be with any of the following methods; as
considered appropriate:

1. Quality and Cost Based Selection (QCBS): Under normal circumstances, this
method of evaluation shall be used.
2. Combined Quality Cum Cost Based System (CQCCBS) : This method of
selection shall be used for highly technical projects where weightage needs to
be given to higher technical standards, while finalizing the prices.
3. Quality Based Selection (QBS)_ : This method of selection may be used under
the following circumstances : i) the outcome of the assignment will have high
impact and hence it is essential to engage most qualified consultant. Examples
are nation policy formulation; capacity building programme, etc. and ii) the
assignment is very complex or highly specialized where it is difficult to define
scope of work with accuracy. Examples are country specific study; reforms
related studies, high precision scientific work etc.
4. Cost Based Selection (CBS): This method of selection may be used for the
assignments of following nature: (i) assignment where any experienced
consultant can deliver the services without requirement of specific expertise.
Examples are traffic surveys, market surveys, etc.
5. Selection by direct negotiations : the selection by direct
negotiations/nomination is also done in practice which normally is done for
any assignment such as (a) for tasks that represent a natural continuation of
previous work carried out by the firm, (b) in case of emergency situation,
situation arising after natural disasters, situations where timely completion of
the assignment is of utmost importance, (c) situations where the execution of
assignment may involve use of proprietary techniques or only the consultant
has requisite expertise. Such selection may normally be restricted to a
financial ceiling. In case of PSU since it is single tender, however in
private/corporate such is a practice rather then exception. Once the consultant
is selected after evaluation of contracts it is essential that a agreement is
formed.

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5.4 The consulting contract

The entry phase of the consulting process can be regarded as successfully completed if the
consultant and the client conclude a contract whereby they agree to work together on an
assignment or project.

5.4.1 What to cover in a contract checklist

1. Contracting parties (the consultant and the client)
2. Scope of the assignment, objectives, results, description of work, starting date,
timetable, volume of work
3. Work outputs, including reports (documentation and reports to be handed over to
the client)
4. Consultant and client inputs (expert and staff time and other inputs)
5. Fees and expenses (fees to be billed, expenses reimbursed to the consultant)
6. Billing and payment procedure.
7. Professional. Responsibilities (consultants standard of care, avoiding conflict of
interest , and other aspects as appropriate)
8. Representations (by the consultant)
9. Handling of confidential information
10. Protection of intellectual property and copyright in consultants work product
11. Liability (the consultants liability for damages caused to the client, limitation of
liability)
12. Use of subcontractors (by the consultant)
13. Termination or revision (when and how to be suggested by either party)
14. Dispute resolution (resolution of disputes in court or through an alternative
mechanism such as arbitration)

5.5 Forms of Contracts: There can be various forms of the contracts as may be entered
into by the client with the consultant depending upon the nature of the assignment.
Following are various forms of contracts:

i) Lump sum contract;
ii) Time based contract;
iii) Success fee based contract;
iv) Percentage contract;
v) Indefinite delivery contract.
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74

The Lump sum contract is the preferred form of contract used by the employers under
normal circumstances. The other forms of contracts shall only be used under special
circumstances.

5.5.1 Lump Sum (Firm Fixed Price) Contract: Lump sum consultancy contracts are used
mainly for assignments in which the content and the duration of the services and the
required output of the consultants are clearly defined. They are widely used for simple
planning and feasibility studies, environmental studies, detailed design of standard or
common structures, preparation of data processing systems, and so forth, Payments are
linked to outputs (deliverables), such as reports, drawings, bills of qualities, bidding
documents, and software programs. While lump sum consultancy contracts are east to
administer because payments are due on clearly specified outputs, it is essential that the
terms of payments for these consultancy contracts are linked with the output and the time
frame within which each of the defined activities are to be completed.

5.5.2 Time Based Contract : This type of contract is appropriate when it is difficult to
define the scope and the length of services, because the services are related to activities by
others for which the completion period may vary, or because the input of the completion
period may vary, or because the input of the consultants required to attain the objectives of
the assignment is difficult to assess. This type of contract is widely used for complex
studies, supervision of construction, advisory services, etc. Payments are based on agreed
hourly, daily, weekly or monthly rates for staff and on reimbursable items using actual
expenses and/or agreed unit prices. The rates for staff include salary, social costs,
overhead, fee (or profit), and appropriate special allowances. This type of contract shall
include a maximum amount of total payments to be made to the consultants. This ceiling
amount should include a contingency allowance for unforeseen work and duration, and
provision for price adjustments, where appropriate. Time-based contract need to be closely
monitored and administered by the Ministry or Department to ensure that the assignment
is progressing satisfactorily and the payments claimed by the consultants are appropriate.

5.5.3 Retainer and/or Contingency (Success) Fee Contract : Retainer and contingency
fee contracts are widely used when consultants (Banks or financial firms) are preparing
companies for sales or mergers of firms, notably in privatization operations. The
remuneration of the consultant includes a retainer and a success fee, the latter being
normally expressed as a percentage of the sale price of the assets.

5.5.4 Percentage Contract : These contracts are commonly used for architectural services.
They may be also used for procurement and inspection agents. Percentage contracts
directly relate the fee paid to the consultant to the estimated or actual project construction
cost, or the cost of the goods procured or inspected. The selection is made based on two
stage bidding. The final selection is made among the technically qualified consultants who
have quoted the lowest percentage while the notional value of assets is fixed. It should be
borne in mind that in the case of architectural or engineering services, percentage contracts
implicitly lack incentive or economic design and are hence discouraged. Therefore, the use
of such a contact for architectural services is recommended only if it is based on a fixed
target cost and covers precisely defined services.

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75

5.5.5 Indefinite Delivery Contract (Price Agreement) : These contracts are used when
Ministry or Department need to have on call specialized services to provide advice on a
particular activity, the extent and timing of which cannot be defined in advance. These are
commonly used to retain advisers for implementation of complex projects (for example,
dam panel), expert adjudicators for dispute resolution panels, institutional reforms,
procurement advice, technical troubleshooting, and so forth, normally for a period of year
or more. The client and the consultant agree on the unit rates to be paid for the experts, and
payments are made on the basis of the time actually used. The consultant shall be selected
based on the unit rate quoted by him for providing services.

5.6 Lets now do a recap on the chapter.

PREPARATION & FORMAT OF CONSULTANCY AGREEMENTS

5.6.1 WHY AGREEMENTS

Statement of understanding between Parties
Reference for
Execution
Payment
Adjudication

5.6.2 INDIAN CONTRACT ACT

Provides a framework of rules and regulations which govern formation and
performance of contract
Rights & Duties of parties and terms of contract to be decided by parties themselves
Prevails over any custom, usage or trade

5.6.3 CONTRACT

When one person signifies to another his willingness to do or abstain from doing
anything with a view to obtaining the assent of the other to such act or abstinence, he is
said to make a proposal.
When the person to whom the proposal is made signifies his assent thereto, the
proposal is said to be accepted.

5.6.4 CONTRACT ESSENTIALS

Offer and its acceptance
Free consent of both parties
Mutual and lawful consideration
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Enforceable by law
Parties should be competent to contract
Object should be lawful
Certainty and possibility of performance

5.6.5 WHO CAN ENTER INTO CONTRACT

Should be of the age of majority
Should be of sound mind. A person is said to be of sound mind for the purpose of
making a contract, if, at the time when he makes it, he is capable of understanding it
and of forming a rational judgment as to its effect upon his interests.
Should not be disqualified from contracting by any law to which he is subject

5.6.6 FREE CONSENT

Not caused by:
Coercion
Undue Influence
Fraud
Misrepresentation
Mistake

5.6.7 LAWFUL CONSIDERATION

Consideration is unlawful if:
It is forbidden by law
Is of such a nature if permitted it would defeat the provisions of any law
It is fraudulent
The court regards it immoral
The court regards it opposed to public policy

5.6.8 VOID AGREEMENTS

Agreements void if considerations and objects unlawful in parts.
Agreement without consideration
Agreement in restraint of marriage.
Agreement in restraint of trade
Agreement in restraint of legal proceedings
Agreements for uncertainty
Agreements by way of wager/ Bet

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5.6.9 BREACH OF CONTRACT

Compensation
For damage caused by non performance
Where penalty stipulated in contract
Specific Performance
When there exists no standard for ascertaining actual damage
Where compensation is no adequate relief

5.6.10 OTHER ISSUES

Need not be in writing
Express and Implied Acceptance
Acceptance must be absolute
Time issues
Contingent contracts e.g. insurance

5.6.11 A WINNING PROPOSAL

You are a credible professional
You understand their business and needs
How your products and/or services meet their needs
How you have served the needs of others in similar situations
Who you are with the references and portfolio to back it up
Why you are the right choice
How you stand out from your competition

5.6.12 WHO MAKES IT

Service Provider
Customer
Third Party

5.6.13 ELEMENTS OF A CONSULTANCY CONTRACT

Recitals
Definitions
Scope
Commencement/ Completion/ Alteration/ Termination
Rights & Duties of Consultant
Rights & Duties of Customer
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Liability of Consultant
Settlement of Disputes
Financial Arrangements
Copyrights
Performance Guarantees
General Provisions

5.6.14 CONTRACT STIPULATIONS

Method of Fee Determination
Frequency & Mode of Payment
Currencies & Basis of conversion
Time period for validity
Tax Liability if applicable
Invoicing
Authorized Signatories
Contingent Clauses
Fee exclusions & Reimbursables

5.6.15 MODEL CONTRACTS
MODEL CONTRACTS
International Development Banks
STANDARD
CONTRACT
PROFORMAS
ACE
FIDIC
Clients Govt Agencies

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5.6. 16 CHECKLIST OF PROVISIONS

Date of Agreement
Identification
Background
Scope of Work
Effective Date
Duration
Nomination of Personnel

Responsibilities of Consultant
Services
Schedule
Personnel
Availability
Reporting
Ownership of Documents
Confidentiality
Performance

Responsibilities of Customer
Information
Availability
Facilities to be provided

Effectiveness/ Amendment Provisions
Provision for Amendment in

Scope

Schedule
Provision for Termination by either party
Provision for Force Majeure

5.6.17 GOOD PRACTICES

Communicate clearly
Assign direct responsibilities
Meet personally to clarify salient points
Incorporate appropriate contingencies
Include pre-dispute mechanisms

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5.6.18 IN CONCLUSION

Balanced (Fair to both parties)
Industry Practices
Performance Guarantees

5.6.19 If all goes well, the agreement is just a piece of paper.

If something goes wrong, it could well be the only thing that may save you from
disaster

( Content for 6.6 provided by Mr Shrinath Savoor)

5.7 Let us now look at a sample consulting contract

SAMPLE CONSULTING AGREEMENT

CONSULTING AGREEMENT

This Consulting Agreement (the "Agreement") is dated as of May 17, 2007 (the "Effective
Date"), and is made by and between M & C Company, Incorporated in .India, ("M &C"),
and The Publishing Company of North India, PCNI co. ("Client") with respect to certain
services provided by M & C as described herein. The parties hereby agree to the following
terms and conditions in connection with such services.

1. Services. M & C agrees to assist the Client in connection with its development of a
business plan, launch program and financing negotiations for Attorneys.com, as
more fully described in Exhibit A (the "Project"). In the event the Client requests
additional services related to the Project, the scope of such additional services shall
be as agreed by the parties and shall be governed by this agreement.

2. Compensation. The parties agree that M & C will be compensated by Client for
its professional fees in connection with the Project as provided on Exhibit B. In
addition, Client will reimburse M & C for expenses incurred, which expenses will
include external costs such as travel and courier, and other costs such as
administrative support, report reproduction and computer support as provided in
Exhibit B. Compensation for any additional services provided by M & C relating to
the Project shall be as agreed by the parties.

3. Term. McKinsey's services in connection with the Project shall begin on or about
July 10, 2007, and are expected to be completed approximately by Nov 15, 2006.
This agreement shall govern all services provided by M & C in connection with the
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Project and any additional services related to the Project as agreed by the parties.
Either party may terminate the Project by giving ten (10) days' prior written notice
to the other. In the event of any such termination, M & C shall be compensated pro
rata for professional fees and expenses incurred with respect to services performed
through the effective date of termination in accordance with Section 2, but will not
be entitled to any additional compensation.

4. Confidentiality. M & C recognizes that certain confidential information concerning
the Client will be furnished by the Client to M & C in connection with the Project
("Confidential Information").

M & C agrees that it will disclose Confidential Information only to those of its
directors, officers, employees, advisors or agents who have a need to know such
information, or to advisors to the Client. Confidential Information shall not include
information that (i) is in the possession of M & C prior to its receipt of such
information from the Client, (ii) is or becomes publicly available other than as a
result of a breach of this agreement by M & C , or (iii) is or can be independently
acquired or developed by M & C without violating any of its obligations under this
agreement.

The Client recognizes and confirms that M & C (a) will use and rely primarily on
the Confidential Information and on information available from public sources in
performing the services contemplated by this agreement without having
independently verified the same, and (b) does not assume responsibility for the
accuracy or completeness of the Confidential Information or such other publicly
available information.

In the event that M & C receives a request to disclose all or any part of any
Confidential Information under the terms of a valid and effective subpoena or order
issued by a court of competent jurisdiction, judicial or administrative agency or by a
legislative body or committee, such disclosure by M & C shall not constitute a
violation of this Agreement provided that M & C (a) promptly notifies Client of the
existence, terms and circumstances surrounding such request, (b) consults with
Client on the advisability of taking available legal steps to resist or narrow such
request, and (c) if disclosure of such Confidential Information is required or deemed
advisable, exercises its best efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the Confidential
Information to be disclosed which Client designates.

5. Use of M & C Name and Work Products. In connection with the Project, M & C
may furnish the Client with reports, analyses or other such materials (the
"Materials"). The Client understands and agrees that any such Materials will be
furnished solely for its internal use and may not be furnished in whole or in part to
any other person other than its directors, officers and employees without the prior
written consent of M &C.

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82

The Client may furnish Materials to its legal counsel, accountants or investment
bankers who have been retained by the Client to provide services in connection with
the Project and who need to know such information in the performance of such
services if (i) the Client informs each such person of the confidential nature of the
Materials, (ii) each such person agrees not to disclose the Materials to any other
person and to use the Materials solely in connection with the performance of its
services to the Client, and (iii) each such person agrees that in connection with
discussions with or disclosures to other third parties, it will not attribute any
information contained in the Materials to M& C .

The Client further agrees not to refer to M & C or attribute any information to M &
C (i) in the press, (ii) for advertising or promotional purposes, or (iii) for the
purpose of informing or influencing any third party, including the investment
community, without the prior written consent of M & C .

In the event that the Client receives a request to disclose all or any part of any
Materials under the terms of a valid and effective subpoena or order issued by a
court of competent jurisdiction, judicial or administrative agency or by a legislative
body or committee, such disclosure by the Client shall not constitute a violation of
this Agreement provided that the Client (a) promptly notifies M & C of the
existence, terms and circumstances surrounding such request, (b) consults with M &
C on the advisability of taking available legal steps to resist or narrow such request,
and (c) if disclosure of such Materials is required or deemed advisable, exercises its
best efforts to obtain an order or other reliable assurance that confidential treatment
will be accorded to such portion of the Materials to be disclosed which M & C
designates.

6. Work Product. Client shall have a perpetual, irrevocable, nontransferable, paid-up
right and license to use and copy the Materials and prepare derivative works based
on the Materials for its internal use, subject to the terms of Section 5. All other
rights in the Materials, subject to the terms of Section 4, remain in and/or are
assigned to M & C . The parties will cooperate with each other and execute such
other documents as may be appropriate to achieve the objectives of this Section.

Client acknowledges that M & C may develop for itself, or for others, problem
solving approaches, frameworks or other tools or information similar to the
Materials and processes developed in performing the Project and any additional
Services, and nothing contained herein precludes M & C from developing or
disclosing such materials and information provided that the same do not contain or
reflect Confidential Information.

7. Indemnification. The Client hereby agrees to indemnify and hold harmless (i) M &
C , (ii) any entity directly or indirectly controlling, controlled by, or under common
control with, M & C , or any other affiliates of M & C or such entities (collectively
"M & C Affiliates"), and (iii) the respective directors, officers, stockholders, agents
and employees of M & C and such entities (collectively, "Indemnified Persons"),
from and against all claims, liabilities, losses, damages, and expenses as incurred
(including reasonable legal fees and disbursements of counsel and the costs of M &
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83

C professional time), joint or several (including actions or proceedings in respect
thereof) (collectively "Losses"), relating to or arising out of: (i) the Project
(including without limitation the provision of consulting services), or (ii) any
transaction or matter which is related to the subject matter of the Project. The Client
shall not, however, be liable under the foregoing indemnity agreement to the extent
that any such Losses are determined by an arbitration pursuant to Section 14 or are
otherwise finally determined, as the case may be, to have resulted primarily from
the gross negligence, willful misconduct or bad faith of any Indemnified Person in
connection with the Project. The Client also agrees that no Indemnified Person shall
have any liability (whether direct or indirect, in contract or in tort or otherwise) to
the Client or any person claiming through the Client, including without limitation
its owners, parents, affiliates, security holders or creditors, for any Losses suffered
by the Client or any such other person relating to or arising out of (i) the Project
(including without limitation the provision of consulting services), or (ii) any
transaction or matter which is related to the subject matter of the Project, and
further agrees that M & C shall be reimbursed for any expenses as incurred by any
Indemnified Persons relating to the foregoing (including reasonable legal fees and
disbursements of counsel and the costs of M & C professional time), except to the
extent that any such Losses are determined by an arbitration pursuant to Section 14
or are otherwise finally determined, as the case may be, to have resulted primarily
from the gross negligence, willful misconduct or bad faith of any Indemnified
Person in connection with the Project. The Client further agrees that it will not
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or potential
party to such claim, action or proceeding) unless the Client has given M& C
reasonable prior written notice thereof and obtained an unconditional release of
each Indemnified Person from all liability arising therefrom, which unconditional
release shall not place any non-financial obligations on any Indemnified Person.

The Client acknowledges and agrees that its obligations hereunder shall be in
addition to any rights that any Indemnified Person may have at law or otherwise.
Upon receipt by M & C of notice of a claim, action or proceeding in respect of
which indemnity may be sought hereunder, M & C shall promptly notify the Client
with respect thereto. If in M & C's reasonable judgment there is no conflict of
interest between M & C (or any Indemnified Person) and the Client, the Client may
at its option assume and control the defense of any litigation or proceeding in
respect of which indemnity is sought hereunder with counsel reasonably acceptable
to M & C . If in M & C's reasonable judgment there is a conflict of interest between
M & C (or any Indemnified Person) and the Client, M & C shall assume and control
the defense of any litigation or proceeding (as it relates to M & C or any such
Indemnified Person) in respect of which indemnity is sought hereunder with
counsel reasonably acceptable to the Client. The Client shall not be liable hereunder
or otherwise for any settlement of any claim, action or proceeding effected without
its written consent, which shall not be unreasonably withheld. Nothing contained
herein shall prevent M & C from retaining, at its own expense, legal counsel of its
choice.

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84

8. Client Acknowledgment. It is the long-standing practice of M & C to serve
multiple clients within industries, including those with opposing economic interests,
as well as counter-parties in potential and actual merger, acquisition and alliance
transactions. M & C is committed to maintaining the confidentiality of each client's
information (generally as described in this agreement) in all such situations.
Accordingly, the Client acknowledges the possibility and agrees that M & C may
have served, may currently be serving or may in the future serve other companies
whose interests are adverse to those of the Client, including parties with whom the
Client (i) competes; (ii) has a commercial relationship or potential commercial
relationship (e.g., suppliers, distributors); (iii) enters into competitive bidding
situations; and (iv) enters into or considers entering into merger, acquisition,
divestiture, alliance or joint venture transactions.

9. Independent Contractor. The parties agree that M & C is an independent
contractor to Client and will not be deemed an employee of Client for any purpose
whatsoever. Without limiting the foregoing, all income taxes arising from or in
connection with professional fees paid by Client to M& C for the services provided
under this Agreement shall be borne by M & C . Neither party nor such party's
directors, officers, employees or agents, shall bind or make any commitment on
behalf of the other party.

10. Survival and Succession. This agreement shall survive the completion or
termination of the Project and any related services provided by M & C . Further,
this agreement, in its entirety, shall inure to the benefit of and be binding on the
successors and assigns of the Client and M & C .

11. Assignment. Neither of the parties hereto shall assign or transfer its interest in this
Agreement or any portion thereof without the prior written consent of the other
party except that (i) Client may assign or transfer its rights and obligations under
this Agreement to a subsidiary or entity controlling, controlled by or under common
control with Client (an "Affiliate") or to any entity that acquires all or substantially
all of the assets of Client or more than 50% of the current outstanding voting stock
of Client and (ii) M & C shall be entitled to assign the right to receive any
compensation received hereunder to a third party without the prior written consent
of Client, subject to restrictions of applicable law.

12. Severability. The various provisions and sub provisions of this Agreement are
severable and if any provision or sub provision or part thereof is held to be
unenforceable by any court of competent jurisdiction, then such enforceability shall
not affect the validity or enforceability of the remaining provisions or sub
provisions or parts thereof in this Agreement.

13. Entire Agreement / Governing Law. This Agreement (including Exhibit A)
constitutes the entire agreement between the parties and supersedes all prior
agreements and understandings, oral and written, and may not be modified or
amended except in writing signed by both parties. The laws of the State of New
York, excluding that body of law controlling conflicts of law, will govern all
disputes arising out of or relating to this Agreement.
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85

14. Arbitration. Any dispute, controversy or claim arising out of or in connection with,
or relating to, this agreement, or the breach, termination or validity thereof, shall be
finally settled by arbitration. The arbitration shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association (the
"AAA") in effect at the time of the arbitration except as they may be modified by
mutual agreement of the parties. The seat of the arbitration shall be New York, New
York, and the arbitration shall be conducted in English.

The arbitration shall be conducted by three arbitrators. The party initiating
arbitration (the "Claimant") shall appoint an arbitrator in its request for arbitration
(the "Request"). The other party (the "Respondent") shall appoint an arbitrator
within 30 days of receipt of the Request. If by that date either party has not
appointed an arbitrator, then that arbitrator shall be appointed promptly by the
AAA. The first two arbitrators appointed shall appoint a third arbitrator within 30
days after the Respondent has notified Claimant of the appointment of Respondent's
arbitrator or, in the event of a failure by a party to appoint, within 30 days after the
AAA has notified the parties of its appointment of an arbitrator on behalf of the
party failing to appoint. If the first two arbitrators appointed fail to appoint a third
arbitrator within the time period prescribed above, then the AAA shall appoint the
third arbitrator.

The arbitral award shall be in writing, state the reasons for the award, and be final
and binding on the parties. The award may include an award of costs, including
reasonable attorneys' fees and disbursements. Judgment upon the award may be
entered by any court having jurisdiction thereof or having jurisdiction over the
relevant party or its assets.

15. Notices. Any notices under this Agreement will be sent by certified or registered
mail, return receipt requested, or by facsimile (provided that the sender received
electronic confirmation of receipt by recipient) to the address specified below or
such other address as the party specifies in writing. Such notice will be effective
upon being sent as specified in this Section.

The Publishing Company of
North India ,PCNI

By: A B John
---------------------

Title: President
------------------

Date: May 17, 2007
------------------

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M & C co., India

By: C K Singh
---------------------

Title: Principal
------------------

Date: May 17, 2007
-------------------

EXHIBIT A

SCOPE OF SERVICES

The scope of M & C's services shall be as described in M& C's letter of proposal to the
Client dated March 20, 2007, attached hereto and incorporated herein by reference, subject
to any changes as mutually agreed by the parties.

EXHIBIT B

PROFESSIONAL FEES AND EXPENSES

M & C 's professional fees for the Project shall be Rs 800,000 per month, 40% of which
shall be paid by the Client in cash and 60% of which shall accrue and be paid in restricted
common stock of The Publishing Company of North India ., ("PCNI") as described further
below. The cash and equity portions of the professional fees shall be earned on a weekly
basis; the cash portions shall be billed and paid monthly and the equity shall be issued as
described below. In addition, the Client agrees to reimburse M & C in cash on a monthly
basis for expenses incurred in connection with the Project. The common stock shall be
valued at the end of each week at a 20% discount to the average closing price of PCNI
common stock for such week.

o The Client shall grant to M& C piggy-back registration rights relating to the
shares of common stock issued to M& C in connection herewith.

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87

o The Client shall issue the common stock payable to M & C
hereunder in 2 tranches as follows: on 5/31/07 the Client shall issue all
equity earned by M & C prior to such date, and on 6/30/07 the Client shall
issue to M & C all equity earned after 5/31/07, unless otherwise agreed by
the parties.

o The shares shall be issued to and held in the name of ABC Associates.,
which is a M & C affiliate.

Back

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Chapter 6

6.1 LEGAL ASPECTS OF CONSULTANCY

6.2 LEGAL BASIS - INDIAN CONTRACTS ACT HOW DOES IT WORK?

a framework of rules and regulations which govern formation and performance of
contract.

The rights and duties of parties and terms of agreement are decided by the contracting
parties themselves.
The court of law acts to enforce agreement, in case of non-performance.

6.3 DEFINITION OF TERMS PROPOSAL
When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he is
said to make a proposal. [section 2(a)].
Thus, a proposal can be to do a positive act or abstinence from act (i.e. negative act).
[English Act uses the word offer, while Indian Contract Act uses the word proposal.

6.4 DEFINITION OF TERMS PROMISE
When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted.
A proposal, when accepted, becomes a promise. [section 2(b)].
Thus, when a proposal (offer) is accepted, it becomes a promise.
As is clear from the definition, only person to whom proposal is made can signify his
assent. Other person cannot accept a proposal.

6.5 PROMISOR AND PROMISEE

The person making the proposal is called the promisor
The person accepting the proposal is called the promisee. [section 2(c)].
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6.6 CONSIDERATION FOR PROMISE

The definition of agreement itself states that the mutual promises should form
consideration of each other. Thus, consideration is essential for an agreement. A
promise without consideration is not agreement and hence naturally, it is not a
contract.

When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise is called a consideration for
the promise.

6.7 WHAT IS A CONTRACT

need not be in writing, unless there is specific provision in law that the contract should
be in writing. e.g.

* contract for sale of immovable property must be in writing, stamped and
registered.
* Contracts which need registration should be in writing.
* Bill of Exchange or Promissory Note must be in writing.
* Trust should be created in writing
* Promise to pay a time barred loan should be in writing, as per Limitation Act
* Contract made without consideration on account of natural love and affection
should be in writing.

A verbal contract is equally enforceable, if it can be proved.

A contract can be enforced or compensation/damages for breach of contract can be
obtained through Civil Court

6.8 STEPS INVOLVED IN A CONTRACT
The steps involved in the contract are
proposal and its communication
acceptance of proposal and its communication
Agreement by mutual promises Contract
Performance of Contract.
All agreements are not contract. Only those agreements which are enforceable by law are
contracts.

6.9 ESSENTIAL INGREDIENTS OF A CONTRACT

As per Contract Act, an agreement enforceable by law is a contract. [section 2(h)].
Hence, we have to understand first what is agreement.
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90

Every promise and every set of promises, forming the consideration for each other, is an
agreement. [section 2(e)]. - - A person makes a proposal (offer). When it is accepted by
other, it becomes a promise.

promise cannot be one sided. Only a mutual promise forming consideration for each
other is agreement
the term agreement as defined in Contract Act requires mutual consideration.

6.10 ESSENTIAL INGREDIENTS OF A CONTRACT

Offer and its acceptance

Free consent of both parties

Mutual and lawful consideration for agreement

It should be enforceable by law. Hence, intention should be to create legal relationship.
Agreements of social or domestic nature are not contracts

Parties should be competent to contract

Object should be lawful

Certainty and possibility of performance

Contract should not have been declared as void under Contract Act or any other law

6.11 PROPOSAL BASICS

COMMUNICATION

ACCEPTANCE

REVOCATION

6.12 COMMUNICATION OF PROPOSALS
A communication is complete only when other party receives it.

6.13 ACCEPTANCE

Acceptance must be absolute In order to convert a proposal into a promise, the
acceptance must:
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91

be absolute and unqualified

be expressed in some usual and reasonable manner, unless the proposal prescribed
the manner in which it is to be accepted. If the proposal prescribes a manner in which
it is to be accepted, and the acceptance is not made in such a manner, the proposer
may, within a reasonable time after the acceptance is communicated to him, insist
that his proposal shall be accepted in the prescribed manner, and not otherwise; but if
he fails to do so, he accepts the acceptance.

Acceptance of offer is complete only when it is absolute and unconditional.
Conditional acceptance or qualified acceptance is no acceptance. (Section 7)

6.14 PROMISES, EXPRESS OR IMPLIED

Insofar as the proposal or acceptance of any promise is made in words, the promise is said
to be express. Insofar as such proposal or acceptance is made otherwise than in words, the
promise is said to be implied. Eg., if a person enters a bus, there is implied promise that he
will pay the bus fair. (section 9)

6.15 VOIDABLE CONTRACT

An agreement which is enforceable by law at the option of one or more of the parties
thereto, but not at the option of the other or others, is a voidable contract. [section 2(i)].

When consent is obtained by coercion, undue influence, misrepresentation or fraud is
voidable at the option of aggrieved party i.e. party whose consent was obtained by
coercion/fraud etc. However, other party cannot avoid the contract.

When a contract contains reciprocal promises and one party to contract prevents the
other from performing his promise, the contract becomes voidable at the option of the
party to prevented. (section 53). Obvious principle is that a person cannot take
advantage of his own wrong.

When time is essence of contract and party fails to perform in time, it is voidable at the
option of other party (section 55). A person who himself delayed the contract cannot
avoid the contract on account of (his own) delay.

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92

6.16 VOID CONTRACT
A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable. [section 2(j)].
Thus, initially a contract cannot be void, i.e. a contract cannot be void ab initio. The
simple reason is that in such a case, it is not a contract at all to begin with. Hence,
only a valid contract can become void contract due to some subsequent events. e.g.
the person dies or property is destroyed or Government imposes a ban etc.

A void agreement is void ab initio. It never becomes a contract. It is nullity and
cannot create any legal rights.

6.17 AGREEMENTS ARE CONTRACTS
All agreements are contracts if

they are made by the free consent of parties competent to contract
for a lawful consideration and with a lawful object
are not expressly declared to be void
It should not effect any law in force in India and not expressly repealed
by which any contract is required to be made in writing or in the presence of
witnesses, or any law relating to the registration of documents. [section 10].

6.18 WHO CAN CONTRACT
Every person is competent to contract
who is of the age of majority according to the law to which he is subject
who is of sound mind,
is not disqualified from contracting by any law to which he is subject. [section 11].

6.19 FREE CONSENT
Consent of both parties must be free. Consent obtained through coercion, undue influence,
fraud, misrepresentation or mistake is not a free consent.
Two or more persons are said to consent when they agree upon the same thing in the same
sense. [section 13].
Consent is said to be free when it is not caused by

coercion, as defined in section 15,
-or (2) undue influence, as defined in section 16,
-or (3) fraud, as defined in section 17,

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93

-or (4) misrepresentation, as defined in section 18,
or (5) mistake, subject to the provisions of sections 20, 21 and 22.
Consent is said to be so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud, misrepresentation or mistake. [section 14].

6.20 CONSEQUENCES OF BREACH OF CONTRACT

Compensation is payable for breach of contract. Penalty is also payable if provided in
contract. Breach of contract may be actual or anticipatory.

Summary of principles of compensation and damages. Following points are important

Compensation for loss or damage is payable. Since the word used is compensation,
punitive damages cannot be awarded.
These should be in usual course or known to parties i.e. both parties must be aware
No compensation for remote and indirect loss or damage

6.21 GENERAL DAMAGES

General damages are those which result from direct and proximate consequences from
breach of contract.

Normally, what can be awarded is compensation for loss or damage which can be
directly or proximately attributed to the breach of contract.

One way of assessing damages is the difference between the contract price and the
market price on date of breach of contract, plus reasonable expenses incurred by him on
account of the breach plus cost of suit in court of law.

6.22 CONSEQUENTIAL LOSS OR SPECIAL DAMAGE

Special damages or consequential damages arise due to existence of special
circumstances. Such damages can be awarded only in cases where the special
circumstances were foreseeable by the party committing the breach or were specifically
known to the party.

Consequential losses like loss of profit due to breach, which may occur indirectly due to
breach cannot be normally awarded unless there are special circumstances which parties
were aware.

Loss of profit can be awarded only in cases where seller could have foreseen those
losses and arose directly as result of breach.
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6.23 SPECIAL CONTRACTS

A contract of guarantee is a contract to perform the promise, or discharge the liability,
of a third person in case of his default.

Bailment is another type of special contract. Since it is a contract, naturally all basic
requirements of contract are applicable. Bailment means act of delivering goods for a
specified purpose on trust. The goods are to be returned after the purpose is over. In
bailment, possession of goods is transferred, but property i.e. ownership is not transferred.
A bailment is the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them.

Pledge is special kind of bailment, where delivery of goods is for purpose of security for
payment of a debt or performance of a promise. Pledge is bailment for security. Common
example is keeping gold with bank/money lender to obtain loan. Since pledge is bailment,
all provisions applicable to bailment apply to pledge also. In addition, some specific
provisions apply to pledge. The bailment of goods as security for payment of a debt or
performance of a promise is called pledge.

6.24 SPECIAL CONTRACTS

Contract of Agency - Agency is a special type of contract. The concept of agency was
developed as one man cannot possibly do every transaction himself. Hence, he should
have opportunity or facility to transact business through others like an agent. The
principles of contract of agency are

Excepting matters of a personal nature, what a person can do himself, he can also do
it through agent

A person acting through an agent is acting himself, i.e. act of agent is act of
Principal.

Since agency is a contract, all usual requirements of a valid contract are applicable to
agency contract also, except to the extent excluded in the Act. One important distinction
is that as per section 185, no consideration is necessary to create an agency.

Back

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Chapter - 7

Marketing of Management Consulting

Objective

To understand the marketing aspects of Management Consulting.
To Learn ,how consulting companies , market their services
To learn various approaches to successful marketing

7.1 Introduction

Marketing is the most important management function of a consultancy organization,
particularly in the current economic scenario, when the Indian companies are exposed to
severe competition from large foreign consulting companies. To meet this threat we need
to strengthen our marketing skills and overcome this chronic weakness.

This chapter aims at exposing you to the various marketing principles with practical
examples from practicing Indian Consulting companies.

7.2 Whom should consultancy firm market?

Consultancy firm market the following:

Itself
Its employees (SME)
Both i.e. itself (its services) & its employees as well

A consultancy firm promotes its own product & services offerings as well as its niche; also
consultancy firms market its key employees / consultants, who are having fair skills in a
particular domain; an individual can be also a Subject Matter Expert (SME). These SMEs
are required to advice clients for a particular domain to firms existing and prospective
client(s). Firm can market services in various domains such as Management Consulting, IT
Consulting, Audit, Technical Advisory, Architecture, Security, etc; whereas SME can be
CA, ISO 27001 LA, SCM, Business Analyst, etc.

7.3 Principles of Consultancy Marketing

There are 7 fundamental Principles of Consultancy Marketing, which are being summed in
the bullets here under:

Regard the clients needs & requirements as the focal point of all the marketing
On the basis of clients particular requirement, consulting firms need to market /
offer the respective services which can fulfill the requirement of the client.
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Remember that every client is unique Every client deserves unique end product
or services; the nature of services can be similar to consulting activities provide
earlier for different client / assignment, but end product will vary.

Dont misinterpret yourself importantly, consulting firm should not misinterpret
the requirements of the client vis--vis the services which can be offered to client.
The services which cannot be offered directly by the consulting firm, should be
carefully planned to be marketed and then offered / proposed to client.

Dont oversell if certain services which the consulting firm would not be position
to deliver, which is a requirement of the client, should not be accepted or oversold
by the firm.

Refrain from denigrating other consultants all the consultants / consulting firms
should be given respect and refrain from denigrating others.

Never forget that you are marketing a professional service consultancy is one of
the highest professions and the marketing of the services should be of highest
quality.

Aim at an equally high professional performance in marketing and in execution

7.4 Marketing Strategies for Consulting

The Marketing Strategies to be formed, keeping in view the clients criteria for selection of
consultants. It depends on the client to client basis, what they desire in the consultants, so
accordingly marketing the consulting services should be strategies. Some of the typical
used strategies targeting the following:

Professional Integrity
Technical Competence
Rapport with the consultant
Assignment Design
Capability to deliver
Ability to mobilize further resources
Cost of services
Certification of competency and / or quality
Professional image of the consultants

7.5 Techniques for marketing the consultancy firm

There are various techniques which can be used by the consultancy firm for marketing.
Some of the following are described here:

Working the referrals One of the most widely used and effective is using the
reference of the consulting services which are being carried out in past or currently
for reference clients.
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Professional Publications Another way of marketing is to create awareness of
firms consulting strength is write & publish journals, news letter, books for
managers, articles on management & industry topics, occasional papers &
pamphlets, etc. such publications are also circulated to various CEOs, decision
makers, key management, board of directors, etc. Write for trade journals, technical
publications, newspapers, magazines, or other media where Consultancy firms
words will be seen, read, and absorbed by decision-makers / CEOs.

Relations with public information media Another effective mode is using the
media (print / electronic) for reaching out to the masses which cannot be accessible
on one to one basis.

Seminar & Workshops Consulting firms often conduct Seminar & workshop to
appraise new innovations for business operations & support, future trends,
explanation of some concept which audience is interested. Showcase the firm,
yourself as consultant, consultancy skills, and your results at workshops, exhibits,
trade shows, and other places where you have an opportunity to talk to decision-
makers informally.

Management & Business Research one of the ways to attract new clients is get
into new research (targeting business & management) to attracts new or existing
customers.

Advertising Consulting firms can publicize their capabilities & services using
various advertising modes.

Mailing Publicity Materials Consulting firms send its latest brochure,
capabilities, services offered, special schemes, etc, to (prospective) clients.

Exhibitions another way to market or reach out to the clients is to participate in
the various exhibitions organized by consulting firm itself, national commerce /
economic / social bodies, regulatory bodies of Government, industry sector entities,
international forum, etc. this is one of the well know forum to market ones
capability and services. Join service clubs, professional organizations, trade
associations, and other groups where Consultancy firms initiatives, ideas, and skills
can be seen and observed by people able to make decisions about retaining firm to
do work for them.

Consultants Professional & Social Activities Consultants can also participate in
professional forums and in social activities; which can also boost the image of the
consultant / or its firm itself. Speak before groups where there is a high probability
that potential decision-makers will see and hear you in an authoritative role. Look
for opportunities to present before seminars, conferences, meetings, and other
forums.

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Directories another way to register with various Directories, which are subscribed
by various households / businesses / individual; such directories lists the details of
Consultants, etc. such Directories can also be similar to Yellow Pages, etc.

Other Issues there can be other issues of marketing such as:
o Responding to enquires it remain one of the considerable challenge in
attending or responding to the enquiries being received by the consulting
firms. Consultancy firms should make sure such enquiries are being
properly handled enquirer is well tackled & satisfied.
o Name & Logo it remains a challenge for a start up consultancy firm to
have a suitable name & logo of the firm, which should gel with the
consultancy firms image and also attract the clients.
o Location & Standing Of Office Facilities another challenge remain with
the location of consulting firms office and its facility; as it helps in
influencing the client.

7.6 Techniques for marketing Consulting Assignments

This section is typically provides the typical techniques required for consulting assignment
or services. Some of them are described briefly hereunder:

7.6.1 Cold Contacts / Cold Calls there are many forms of carrying out such activities.
Cold Visits visiting the prospective clients office without appointment and
describe about the services consultant can offer, which would be useful and
interesting for the client.
Cold Mailing sending the mails or e-mails to the prospective clients and
provide information related to consultancy services which can be offered,
along with the capability of the consulting firm; such communication should
have good representation, well defined communication which helps in
winning the client using mailing. This mode is more frequently used these
days.
Cold Telephone Calls used to be mostly used communication, but such
calls are these days not be accepted or termed as spasm, etc. such mode is
more fast in reaching out to prospective client more cost effectively.

7.6.2 Contacts Based On Referrals & Leads another more effective marketing
technique is using the referrals of existing clients for future prospects. Decision-
makers (from client side) are far, far more likely to see Consultancy firm if
someone else has validated firm independently. Referrals can come from anyone
suppliers, colleagues, bankers, accountants, lawyers, other consultants in different
fields, personal friends, investors, and just about anyone you come in contact with.
Also leads (where client required certain services, which consultancy firm can
offer), generated though certain references or sources. Such leads often needs be
closely monitored and tracked for effective project winning. Collect business cards,
names, leads, information, and other data need to build the prospect list, and to
refine prospects into people with whom of having a growing professional
relationship.
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7.6.3 Responding In Invitations To Submit Proposals Client often use this technique /
process to select the suitable consultant using the RFP / Bid process, for their
requirement. As per the clients requirement, consultancy firms are required to
submit their proposal comprising of the technical memorandum (which is a gist of
services which consultancy firm can offer and which using which the client can be
benefited) and / or technical proposal. The technical proposal comprises of the
solution which client has sought in the RFP or the support / services they desired in
the RFP document.
Technical memorandum
Technical proposals

7.6.4 Marketing during the entry phase Consultancy firm uses this effectively to
provide information regarding various consultancy services offerings, its
credentials, key profile of the individual consultants, their background, skills &
strength, presenting the proposal is one of the main critical factors in closing the
client.

7.6.5 Marketing during assignments this is one of the main and underlying marketing
technique used by the Consultancy firms, while working on the consultancy
assignments itself. While working on the assignment for Client, firms tries to
market the other services which would be relevant for the client for their business &
management needs. Firms explain to the client about their credibility in future
consultancy assignments while working on existing assignments. If the client is
already impressed or satisfied by the performance during the delivery of the
consultancy assignments, the chances of closing the future assignments increases
along with clients expectations.

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7.7 The Marketing Plan

Most MBA programs teach a pretty good marketing course and its usually a compulsory
course but few teach students how to write an effective marketing plan. A professional
services firm of any size and in any industry needs to keep its marketing plan as up-to-date
as its statement of qualifications, its brochures, and its professional development training.

7.7.1 Marketing Analysis Overview

Your market analysis is the who, what, when, where, why, and how document that
describes as best you can the clients you serve.

7.7.1.5 Market Description
a. The environment: On what events, decisions, or things does the market
depend? For example, the demand for new computer operating systems is a
direct function of the number of new computers sold each year, plus a
declining percentage of older systems on the market that are upgraded.
These environmental factors exist more or less outside the markets ability
to control.
b. Market size: How many estimated clients? Annual project volume?
c. Market value: Annual estimated gross revenues from this market or
segment.
d. Location: Breakdown by geographic area, relative to your firms ability to
service it.
e. Growth: Is the market expanding, shrinking, or stable? If changing, how fast
and in what areas?
f. What services and projects is the market consuming now?

7.7.1.5 Market Share

a. Major firms in the market.
b. Percentage of the estimated market (or its estimated value) held by the firms
that are significant competitors to yours.
c. Are some types of projects in the market growing faster than others? If so,
which ones? Similar analysis for types or classes of projects whose number,
value, or proportion may be shrinking in that market.

7.7.1.5 Competition

a. Names and profiles of the major firms competing in any market.
b. Unique core competencies and attributes of each competitor.
c. A SWOT (Strength-Weakness-Opportunity-Threat) analysis on each major
player in the market, generally relative to your firm.

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7.7.1.4 Buyer behavior

a. The rituals and patterns by which clients seek and engage consultants.
Governments and large corporations often have formal bidding rules, for example,
and policies that require tenders for certain classes of work, or for projects greater
than a set threshold figure.

b. Decision-making patterns: What role or type of person makes decisions? What
roles, people, organizations, entities, or others influence the decision, and how?
How long does it typically take to get a decision?

c. Client-acquisition costs: What is the markets normal hit rate in terms of the
number of successes compared to the number of attempted proposals? What
absolute cost, or percentage of the gross revenues from the market, is required to
acquire clients and remain a serious competitor?

7.7.1.5 Strategy

a. A qualitative assessment of the position that a new product or a new firm must
occupy within the clients decision-making process.

b. The wedge projects or issues those are likely to cause a client to either undertake a
new project initiative, or to switch consultants when doing a class of work again.

c. A quantitative description of emerging issues, trends, and needs that must eventually be
filled by firms competing for that class of project within that specific market segment.

d. What blend of project, location, price, and promotions will constitute a sustainable
competitive advantage (however temporarily) to enter a market, or to expand a firms
relative share of that market?

e. What resources of mandate, people, money, and time are needed to achieve a specific
goal within the market being studied?

f. What organizational changes (new staff, new or different locations, different structure,
upgraded or new skills) are needed to make the firms marketing strategy work?

Like any other discipline, writing a marketing plan is an art and a science that requires
practice. For example, experience quickly teaches that the law of diminishing returns
begins once counted up about 80 percent of the market, thus lending validity to the 80-20
rule often alluded to by managers and executives. It is a good rule-of thumb.

However one should count only the firms its capable of serving. In effect, focusnot
trying to be all things to all clientsis a discipline one learn either through planning or
through error. Planning and thinking are quicker, easier, and cheaper than trial-and-error.
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For example, a market in another country may be completely measurable and demonstrably
profitable, but of no value to one firm unless it is planned to set up shop there or send
people on location.

Just for recap ,just read the summary slides given below and introspect, what you
have learnt.
INTRODUCTION Marketing of Consultancy Services
A MARKETING FIRM CAN EXIST AND PROSPER IF
IT GETS AND KEEPS CLIENTS
But why
does a
client need
to reach out
for consultant's help?
Why cant a client
handle his problems
himself?

WHAT IS TO BE MARKETED ?
Consultants sell a promise (but no guarantee) of a service that will meet the clients
needs and resolve the problem.
THE MARKETING APPROACH IN CONSULTING
WHY SHOULD THEN A POTENTIAL CLIENT BUY A MERE PROMISE? WHY
SHOULD HE OR SHE TAKE SUCH A RISK?
Because the client has established or just feels that it might be useful to get the
consultants help. Secondly because the client has no alternative.

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Reluctance to admit that
consultant is needed
Doubts about consultants
competence and integrity
Fear of becoming
dependent on a consultant
Fear of excessive fees
General feeling of
uneasiness and insecurity
WHY DO ORGANISATIONS HESITATE IN HIRING CONSULTANTS
(GENERAL HINDERANCES CONSULTANCY COMPANIES FACE, FROM CLIENTS SIDE)
I can handle my
problems myself,
no more
consultants loads
please

MARKETING OF CONSULTING SERVICES DEALS WITH BOTH
DIMENSIONS OF CONSULTING APPROACH :-
TECHNICAL DIMENSION
(The technical know-how needed to solve the clients specific management or business problems)
HUMAN DIMENSION
(The relationship between the consultant and the client, and the consultants ability to face human
problems)

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Regard the clients needs & requirements as the focal point of all the marketing
Remember that every client is unique
Dont misinterpret yourself
Dont oversell
Refrain from denigrating other consultants
Never forget that you are marketing a professional service
Aim at an equally high professional performance in marketing and in execution
7 FUNDAMENTAL PRINCIPLES OF CONSULTANCY
MARKETING

Professional Integrity
Technical Competence
Rapport with the consultant
Assi gnment Design
Capabil ity to deli ver
Abili ty to mobil ize further resources
Cost of services
Certifi cation of competency and / or quali ty
Professional image of the consultants
MARKETING STRATEGIES TO BE FORMED, KEEPING IN VIEW THE
CLIENTS CRITERIA FOR SELECTION OF CONSULTANTS
What Marketing Strategies do we
form for our consultancy organization.

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TECHNIQUES FOR MARKETING THE CONSULTANCY FIRM
WORKING THE REFERRALS
PROFSSIONAL PUBLICATIONS
(Books for managers, articles on management & industry topics,
occasional papers & pamphlets, newsletters)
RELATIONS WITH PUBLIC INFORMATION MEDIA
SEMINAR & WORKSHOPS
MANAGEMENT & BUSINESS RESEARCH (New
research by the consultancy companies attracts
customers)
ADVERTISING
Contdon next slide

TECHNIQUES FOR MARKETING THE CONSULTANCY FIRM
MAILING PUBLICITY MATERIALS
EXHIBITIONS
CONSULTANTS PROFESSIONAL & SOCIAL ACTIVITIES
DIRECTORIES
RESPONDING TO ENQURIES NAME & LOGO LOCATION & STANDING
OF OFFICE FACILITIES

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TECHNIQUES FOR MARKETING CONSULTING ASSIGNMENTS
COLD CONTACTS
COLD VISITS
COLD MAILING
COLD TELEPHONE CALLS
CONTACTS BASED ON REFERALS & LEADS
RESPONDING IN INVITATIONS TO SUBMIT PROPOSALS
TECHNICAL MEMORANDUM
TECHNICAL PROPSALS
AUDITING
MARKETING DURING THE ENTRY PHASE
MARKETING DURING ASSIGNMENTS

MANAGING THE MARKETING PROCESS
MARKETING AUDIT
MARKETING PROGRAMME
OBJECTIVES OF MARKETING
MIX OF MARKETING TECHNIQUES
VOLUME OF MARKETING EFFORTS
PLANNING THE FORWARD WORKLOAD
PACING THE MARKET EFFORT
THE MARKETING
INFORMATION
SYSTEM
Information on markets for services
Information on individual clients
Information on specific new business opportunities
Information on the consulting firms own marketing
Activities and capabilities

7.7.1.6 Marketing Mix : The marketing mix refers to the 4Ps Product/service; Price
or fee; Placement taking the services to the client ; promotion.
Discussing the Marketing mix of Firm to increase market share ,

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The firm must engage in Strategic Planning that clearly defines objective & assesses both
internal and external situation to formulate strategy, implement the strategy evaluate the
progress and adjustments as necessary to stay on track.

Guided by business vision, we can define measurable Financial and Strategic objectives.
Financial objectives involve measures such as sales/clientage targets and earnings growth.

Strategic objectives are related to Co`s business position may include measures such as
market share.

The Goal is to maximize the market share to become dominant player in the market.

Market share : The companys performance related to competitors can be measured by the
proportion of market share the Co is able to capture. Total market share are more difficult
to determine. Usually, this information is available form trade associations and market
research firms.

Co`s sale
Market share = ----------------------
Total market sale

Ways to Increase Market Share
The market share of product can be modelled as
share of market = share of preference X share of voice X share of distribution
According of this model , There are three drivers of market share ;
Share of preference can be increased through product , pricing, and promotional
changes.
Share of voice the firm s proportion of total promotional expenditures in the
market . thus; share of voice can be increased by increasing advertising
expenditures.
Share of distribution can be increased through more intensive distribution .

From these drivers we see that market share can be increased by changing the variables of
the marketing mix.

THE MARKETING MIX

Target
Market
Promot
ion
Price
Place
Product
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The major marketing managements decisions can be classified in one the following
four categories.
product
price
place ( distribution )
promotion

These variables are known as the marketing mix or the 4 P ; s of the marketing . they are
the variables that marketing managers can control in order to best satisfy customers in the
target market.

Attempt to generate a positive response in the target market by blending these four
marketing mix variables in an optimal manner .

*Product.- in the case of physical products . it also refers to any the product attributes can
be changed to provide more value to the customer ,for example , by improving product
quality. The product for consulting firm can be services or conveniences offered to client. .

Branding & establishing service quality level to meet client requirements on project
time & project outputs
Maintaining the service standards, adding addition support services
Differing services that of competitors

Price if the price elasticity of demand is elastic, a decrease in price will increase sales
revenue . this tactic may not succeed if competitors are willing and able to meet any price
cuts.
Pricing decisions should take in to account profit margins and the probable pricing
response of competitors . pricing includes not only the list price ,but also discounts
financing . and other options such as leasing.

Distribution add new distribution channels or increase the intensity of distribution in
each channel place ( or placement) decisions are those associated with channels of
distribution that serve as the means for getting the product to the target customers . the
distribution system performs transactional . logistical , and facilitating functions .

Distribution decisions include market coverage . channel member selection .logistics and
levels of service

Distribution for consulting firm can be decisions related to time offices consultants
locations coverage geographically for target clients

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Promotion increasing advertising expenditures can increase market share , unless
competitors respond with similar increase.

Promotion decisions are those related to communicating and selling to potential consumers
.since these costs can be large in proportion to the product price .a break even analysis
should be performed when making promotion decisions. It is useful to know the value of a
customer in order to determine whether additional customers are worth the cost of
acquiring them .

Promotion decisions involve advertising public relations . media . etc .

- Professional publications
- books for managers writing books to be made by managers in as reference
works
- Articles on management & industry topics
- Pamphlets
- News letters / instruments / website/Q & As
- Relations with public information media
- Seminars and workshops

Ansoff matrix that focused on the firms present and potential products and markets
(customers). By considering ways to grow via existing products and new products,
and in existing markets and new markets, there are four possible product-market
combinations.

Ansoffs matrix is shown below

Existing products New products
Existing markets Market penetration Product development
New markets Market development Diversification

Ansoffs matrix provides four different growth strategies :
Market penetration the firm seeks to achieve growth with existing products in
their current market segments, aiming to increase its market share.
Market development the firm seeks growth by targeting its existing products to
new market segments.
Product development the firms develops new products targeted to its existing
market segments
Diversification the firm grows by diversifying into new businesses by developing
new products for new markets

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Selecting a Product market growth strategy

The market penetration strategy is the least risky since it leverages many of the firms
existing resources and capabilities. In a growing market, simply maintaining market share
will result in growth, and there may exist opportunities to increase market share if
competitors reach capacity limits. However, market penetration has limits, and once the
market approaches saturation another strategy must be pursued if the firm is to continue to
grow.

Market development options include the pursuit of additional market segments or
geographical regions. The development of new markets for the product may be a good
strategy if the firms core competencies are related more to the specific product than to its
experience with a specific market segment. Because the firm is expanding into a new
market development strategy typically has more risk than a market penetration strategy.

A product development strategy may be appropriate if the firms strengths are related to
its specific customers rather than to the specific product itself. In this situation, it can
leverage its strengths by developing a new product targeted to its existing customers.
Similar to the case of new market development, new product development carries more risk
than simply attempting to increase market share.

Diversification is the most risky of the four growth strategies since it requires both product
and market development and may be outside the core competencies of the firm. In fact, this
quadrant of the matrix has been referred to by some as the suicide cell. However,
diversification may be a reasonable choice if the high risk is compensated by the chance of
a high rate of return. Other advantages of diversification include the potential to gain a
foothold in an attractive industry and the reduction of overall business portfolio risk.

We explain this concept thru some examples.

1. Marketing Mix of NIIT Technologies
Marketing Mix
The marketing mix for a company basically consists of the four well known Ps. These are
Product, Price, Promotion and Place. These are the Ps which define the business for any
organization. Before discussing the Marketing Mix for my company, it will be worthwhile
to have a brief review of these four Ps.
Product: which defines the defining the characteristics of the companys product or service
to meet the customers' needs.
Price: Deciding on a pricing strategy.

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111

Promotion This includes advertising, personal selling, sales promotions, and
atmospherics (creating the right impression through the working environment).
Place or distribution. Looking at location and where a service is delivered.

The Marketing Mix of NIIT Technologies
Having undergone the concepts of the factors of the Marketing Mix of a company we can
discuss these in detail for NIIT Technologies.

The Product:
NIIT Technologies is into the business of Technology Integration for over 15 years. The
basic business is the supplying Integration and Procurement Services with adequate
expertise to design and deploy the right infrastructure solution to organizations of any size
and nature.

With an abundance of Project Management skills, complimented by strategic relationships
with the world's leading technology players NIIT Technologies has the capability to
provide cost-effective and reliable solutions for its customers.

As a testament to this effort NIIT Technologies has been rated as "The number one
Network Integrator in India for 5 years in a row."

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The range of Services that NIIT Technologies offers include:

o Call Center Practice
o Data Center Practice
o Enterprise Management Service
o Network Integration
o Platform Integration
o Security Services
o Storage Practice
o Managed Network Services

The Pricing Strategy:
Being in the Services Business, the pricing strategy of NIIT Technologies is pretty simple.
For each of the services that NIIT Technologies sells, there are pre-determined slab-rates
calculated per man-day. These rates are calculated on the following basis:
o Hot-Skill and Skills in Demand
o Fixed Costs
o Competition Pricing
o & Other Environmental Factors

The Product/Service Promotion:
The product promotion strategies are very important to survive in the competitive market.
Following are some of the product promotional strategies that are being followed at NIIT
Technologies.

o Advertising: Creating Awareness among the potential customers about the products
and services that NIIT Technologies can offer is the aim behind the advertising.
Advertising is carried out mainly through the Electronic and the Print media.
o Loyalty Programs: This includes special promotional and loyalty schemes who have
stuck to NIIT Technologies despite the existence of the competition. Such schemes
include special discounts on offered products and services.
o Other Discounts: There are discounts for customers on certain services if they are
bundled with some other product or service that the customer is already purchasing
or has already purchased.
o Tech-Seminars: NIIT Technologies often conducts Tech-Seminars; the audience to
it is the potential customers. This helps us to bring all the needy in one place and
feed them with all the technical queries that they might have related to the product
or the service.
o Public Relations: There is a full fledged marketing team that also looks after the
public relations and the job of which is to find the potential customers for the
products and service offerings of NIIT Technologies.

The Place:
NIIT Technologies basically takes care of three geographical locations:
o India
o Middle East Asia
o APAC including Australia

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Since most of the business is selling of services, the only thing that needs to be taken care
and which is of utmost importance is the involvement, alignment and distribution of human
intellect as and when the need arises. This is managed by having a global pool of resources
that can be moved from the bench to the customers who have purchased the services from
NIIT Technologies.

The Competition:

Of all the geographies in which NIIT Technologies Ltd. Operates, the major part of the
business comes from the Indian market space. The Indian market constitutes of about 75
80 % of the total turnover of NIIT Technologies. Since the major portion of the business of
NIIT Technologies ltd. comes from the Indian market, the major competitors are also
indigenous.

Datacraft, HCL Comnet and IBM Global Services are the major competitors in the Indian
market followed by HP.

In the networking domain, Datacraft is a giant competition and captures about 50% of the
total networking market. However the turnover of NIIT Technologies is far ahead of
Datacraft because of the diversity in the business. NIIT Technologies is not only in the
reselling and services of the networking equipment but also in the Platform Integration,
Storage Integration, Call Center Integration and Data center practices. This gives NIIT
Technologies an edge over the competition because often the need of the customer is to get
a total solution from one System Integrator rather than getting the System Integration done
from different System Integration Companies.

HCL Comnet is one company, which is into the same category of being a total solution
provider as NIIT Technologies is; however, the problem with HCL Comnet is over
diversification of the business. This has recently resulted in the lack of focus from HCL in
the System Integration domain. HCL off-late has started to concentrate on the BPO
business rather than the System Integration business. NIIT Technologies however has taken
one step forward and created a different company for the BPO business. This has helped to
concentrate on the lines of business that each of the companies handle.

IBM Global Systems has recently entered into the Indian market and has succeeded in
capturing some market share based on its strong international standards and experience in
the System Integration domain. The main problem with IBM is their pricing strategy. IBM
doesnt have competitive pricing as compared to HCL or NIIT Technologies. This is one
big reason that most of their customer base in India is limited to their global customers and
they have acquired very few new customers in India.

HP being another major competition for NIIT Technologies is one company that should
give stiff competition to NIIT Technologies. After the merger of Compaq and HP, all their
customers have also merged and now they are one single strong giant. Also with the merger
of HP and Compaq, HP has acquired a very strong franchisee network in India since all the
PC dealers of Compaq are now partners of HP.

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Example 2 Marketing Mix of TK Consulting

A) Description of Products and Services

The primary types of services TK Consulting will provide include market feasibility
studies, business plans, reengineering strategies, organizational reviews, strategic planning,
seminars and workshops.

Our services include the development of:

1. Market Feasibility Studies:

We develop market feasibility studies for businesses that want to market new products
or technologies. Some of these companies are looking for funding to commercialize the
technology or product. Our market feasibility studies include a full assessment of
potential markets, competitive analysis, and the financial viability of commercializing
the product.

2. Business Plans:

We will develop full business plans for start up and existing businesses requiring financing,
introducing new products, entering new markets, and restructuring.

3. Other Services:

Our other services will include operational reviews, strategic planning, and
development of corporate reengineering strategies.

4. Seminars and Workshops:

We will offer seminars to small and medium sized businesses. The seminars will focus
on key management issues for small and medium sized operators such as market
analysis, product commercialization, writing business plans, marketing strategies,
customer service etc.

Key Features of the Products and Services

TK Consulting will specialize in small and medium sized firms. With today's unpredictable
political and economic environments, it is increasingly difficult for entrepreneurs to
successfully start new businesses and for existing small and medium sized businesses to
remain profitable. Our services will differ from our competitors in that TK Consulting will
offer creative, innovative, and effective solutions to business problems. Too many
consulting firms try to develop standard models to solve key business problems. TK
Consulting realizes that business problems have a variety of solutions; what may be right
for one business would not necessarily meet the needs of another business.

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Future Products and Services

We will continually expand our services based on industry trends and changing client
needs. We will also get feedback from clients and seminar attendees on what is needed for
future seminars and workshops.

B) Pricing Strategy:

TK Consulting services will be priced competitively with other small consulting firms.
Typically the fees charged by small firms are much lower than those charged by the large
firms due to lower overhead costs. Our fees will be based on several factors including the
time and resources needed to complete a project, overhead costs, and the fees charged by
other competitive consulting firms. Our hourly rates would be much lower than the hourly
rates charged by the large consulting firms. The total project costs will vary depending on
the time needed to complete the project as well as the direct expenses incurred as part of
the project.

C) Promotion Strategy:

TK Consulting will market its services by placing an ad in the yellow pages, listing with all
local business and industry associations, developing a brochure to be distributed to lending
institutions and clients, becoming an active member of a number of business and consulting
associations, e.g., CDC, networking with the local business community, and developing
small business workshops and seminars.

1. Workshops/Seminars
Our seminars and workshops will be used to promote our other consulting services.
Attendees will be able to pick up our corporate brochure and ask any questions regarding
the services we provide.

2. Corporate brochure
We will develop a corporate brochure outlining our services and fee structure. The
brochure will also highlight our past experience and level of expertise. The brochures will
be distributed at our workshops and seminars, distributed to lending institutions,
associations, key business leaders, and to potential clients.

3. Advertising
TK Consulting will not do much advertising except for placing an ad in the local yellow
pages & newspapers. Subsequently, we may develop our own Internet site highlighting our
expertise and services.

4. Networking
TK Consulting will join local business associations in order to maintain contacts in the
business community as well as to stay well informed about the issues that are important to
local businesses.

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D) Distribution Strategy:
Distribution is not an issue for consulting firms. Reports will be couriered, e-mailed,
faxed or mailed directly to customer depending on the terms set out in the contract

Example3 MARKETING MIX

M/S ABC CONSULTANTS (INDIA) PVT LTD

1. M/S ABC Consultants (India) Pvt Ltd is a budding consultancy company in the field of
Defence Production Sector. The company presently is concentrating in establishing
market presence in the country, however, aspires to be Global player in days to come.

The market

2. India is one of the worlds largest democracies. By virtue of countrys secular
credential, a very rich cultural heritage, the geo-political set up vis--vis the other
developing nations of the world and also due to the contribution to the worldwide
campaign against terrorism the country has secured a very special status in the world.
With increase in the investment from all over the world especially in the IT and other
BPO sector India is emerging as one of the fastest growing developing nation. India
aspires to be the key player in the world economy and also a superpower in the days to
come.

3. One of the core area where a country has to progress to become a superpower is the
Defence. The country should have the ability to demonstrate its MILITARY MIGHT.
The Defence production sector is thus one of the very promising sectors worldwide.
India, like other aspirant, also spends a major part of its annual budget on Defence
Sector. The Indian industries have also realised the potential. The scope of Defence
Production Sector is thus promising and would comfortably continue till the civilisation
exists.

Market mix

4. The marketing mix approach to marketing a company is one model of crafting and
implementing market strategies. It stresses the mixing of various decision factors in
such a way that both organisational and consumer objectives are attended. While
conducting the mix the important consideration was, who are the target markets, the
needs of the customer. The marketing strategies and plans are designed to satisfy the
market need. Due care was also taken to ensure that the mix must meet or exceed the
objective of the organisation. While building a marketing program to fit the need of the
organisation we have weighed the behavioural forces and then juggled the marketing
elements in the mix and while doing so kept resources in mind.

5. While working on the marketing mix we worked on two set of information. Firstly, a
list of important elements that goes into the mix and secondly lists of forces that
influences that decision variables. The variables used in consulting a marketing mix are
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4 Ps i.e. Price, Promotion, Product and Place. All these variables could change in the
long run but in the short run it may be difficult to modify the product or the distribution
channel. These variables described what we have to work with. Each of these variables
could also be seen from a customer perspective. The transformation is achieved by
converting Product into Customer Solution, Price into Cost to the customer,
Place into Convenience and Promotion into Communication.

6. The price i.e. the cost to the customer is the first to be considered in a market mix. The
main objective is to manage cost to ensure steady profit. In the Defence Production
Sector the major contributor of the cost is the Research and Development work and he
Quality Control area. The R & D set up has to heavily focus on the future operational
need of the Armed Forces, the developmental pace of the contemporary competitions
and the timeframe for development. For a developing country like India exposure,
expertise and thereby knowledge is a major thrust area. Organising seminars involving
decision making level and also working level cadre of Armed Forces, Captains of the
Indian Industries, Political heads and officials from Ministry of Defence and Finance
and Non-resident brainpower employed in the related field in industry or educational or
research institutions is one possible way out. Redundancy and 360 Quality assurances
are two important steps to strengthen the quality control aspect.

7. The product in the defence sector covers the ranges from weapon solutions to the
knowledge and the process supplement required for strategic and tactical planning in
the force and weapon structure. Regular formal and also informal interactions between
the user and the industry would bridge the gap. Promotion and placement i.e.
Communication and Convenience could be governed by positioning the office
closer to the decision making body of the Armed forces, the industries and the ministry.

Example 4 MARKETING MIX OF MY CONSULTANCY COMPANY

The consultancy firm, with which I am associated, provides service for Civil Engineering
infrastructure Projects. The duties include preparation of feasibility reports, draft Project
reports, providing design and drawing of related structure, supervision of work during
execution of Project to ensure proper quality control.

India is lagging far behind other developed countries in the field of infrastructures like
roads, power, hydel schemes, irrigation Projects, housing and other similar amenities.
Present Govt has a vision to develop infrastructure in a big way as a tool for development
of the nation. Economy is opened and lots of MNCs are coming to invest in this country
and lot many are vouching for the same. At the same time they are insisting for developing
infrastructural support. In such a scenario, the field of consultancy which I have opted, has
ample scope in future and it needs sound marketing program with well defined objectives
to capture the market.

The marketing techniques of a consultancy firm must be consistent with the firms existing
and desired professional profile, image and market penetration on the one hand and its
personnel and financial resources on the other hand. It is desired to achieve optional
marketing mix.
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My consultancy firm is doing very good business in roads and bridges Projects, fair in
hydel Projects and trying to penetrate in the power consultancy. The marketing mix which
the company has adopted is in consistency with the past success stories, type of prime
consultants and its financial health. With the set up of NHAI, planning for development of
East-West and North-South corridors, and Golden quadrilateral Project is in full swing and
consultancy companies are busy in getting road Projects. It is supposed to be no dearth of
projects, if quality products (DPRs, Design of roads, design of bridges) are produced and
optimal marketing mix is preferred. There are may retired experienced Chief Engineers
and young highly technically qualified Engineers employed with the company. The quality
of product is assured under their proven capabilities and guidance. Wherever new projects
are coming, chief consultant are hired for completion of the Projects

Several direct and indirect techniques are followed by the company to promote the business

(a) Cold contact: Several visits, letters or telephone calls are initiated by consultants to try
to sell services to potential clients. Although these are regarded as the least effective
marketing techniques, but the past performance of our company with several
construction companies enables us to get new projects. The purpose is to present the
consultant to the prospective clients and prepare the ground for a further contract.

Prospective clients are carefully selected based on the potential market. Since
consultants of the firms are technically well qualified, usually they dont find problem
in convincing the clients to get a technical solution.

(b) Responding to invitations of tenders: In case of public sector or Govt agency,
wherever they invite tenders for consultancy work for supervision or preparation of
DPRs or Design of certain structures, etc., our company responds to these
invitations. Based on performance and pool of consultants wherever we quote
reasonably, works are offered to us. The clients own technical services or an external
consultant might have undertaken a preliminary investigation and developed the
terms of reference. Usually the selection is in two steps:-

(i) Technical bid for all consultants
(ii) Financial bid for those successful consultants who have been short listed in
technical bids.

(c) Marketing during entry Phase: In many instances, the client doesnt give a final
contract agreement to the assignment before having seen and revised technical
proposal based on preliminary problem diagnosis. The entry phase cannot be
considered as successfully completed until the contract has been signed or confirmed
by a verbal agreement. It simply means that the marketing of a new assignment does
not end at the first discussion with the prospective client but continues through out the
entry phase even if some technical wok on the new assignment has already started. My
company firmly believes on this. The company thinks of the marketing effect of
everything the prospect says or does in the first meeting in the preliminary diagnostic
survey, in formulating and presenting the proposal, in giving price quotations, in
formulating the contract and in suggesting how to staff the assignment.
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(d) Marketing during assignment execution: My Company believes that marketing to
existing clients starts during execution of an assignment. The consultants to the existing
client remains alert to any sign of un happiness or apprehension concerning the approach
taken, the progress made, the costs incurred, or the behaviors of the assignments team.
The company keeps the eye open for further client needs and opportunities and mentions
to the client in an appropriate way.

Techniques for marketing the firm:

Although wide range of techniques are available to consultants for building up their
professional reputation and image, the main techniques adopted for this purpose by my
firm is as mentioned below:

(i) Advertising: The purpose of advertising is to arouse the interest of large no of potential
clients by telling them about the services particularly attractive to them. Press
advertisements are planned in journals and newspapers where potential clients are likely
to seem them.

(ii) Web page: In the era of internet, when more and more clients seek information about
consultants on the web, the company is updating all sorts of information required
for any prospective client on the web page.

(ii) Professional publication: The consultants of the company are busy with writing

Books for technocrats
Articles of new technologies adopted in the field of construction.
Newsletters
Articles on management and industry topics

(iv) Seminars and workshops: Conferences, Workshops, seminars, executive briefing and
social events are very popular marketing tools in the consulting company which I have
joined. Consultants keep on attending seminars and my company also organizes
seminars generally on newer technologies useful for clients /prospects.

(v) Relation with public information media: Public information media such as the
press, TV and Radio are constantly looking for information of interest to their
audience. Our consultants have found it beneficial to keep in touch with the media
and to collaborate with them. Medium people often need quick help from well
informed, trustworthy and reliable resources, and my company helps them in such time.

Where is the company placed

My Company spends approximately 15-20% of income on marketing. It is mainly spent on
advertising campaign in major technical publications, arranging seminars and workshops
and organizing some social events. The company maintains a sufficient backlog of orders
for several weeks or months. A steady monitoring of the forward workload helps to place
the firm marketing effort in order to avoid both underselling and overselling. A number of
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initial meeting with prospective clients, follow up visits of former clients, management
surveys for preparing proposals to clients, assignment proposals in preparation are always
in the pipeline. The ratio of accepted proposals and submitted proposals are varying
from 1:3 to 1:4. Whenever there is a drop in ratio, the firm needs to revise its tendering
policy and work quality in drafting, submitting and negotiating proposals. Some consultant
in the company prefers to give all his regular working time to a current client, and he puts
extra hours to meet new prospects and do some marketing. The volume of offers coming in
the filed of road construction is immense. There are various firms in this field and as on
date my company has established as a good consulting company in the filed of roads and
bridges and it has covered 13-15% of market and is trying hard to penetrate in the market
up to 25%in coming years.

Example5 Marketing Mix of Consulting Co.

Being a practicing Chartered Accountants firm, marketing of services is regulated by
certain guidelines issued by the Institute of Chartered Accountants of India from time to
time. According to these guidelines, certain restrictions have been issued by ICAI, which
effectively bans advertising and soliciting of the work by CA firms.

Keeping in view the regulatory aspect, the firm (GSA & Co., for this assignment) has
chalked out its marketing mix, which has been discussed here.

What to Market

The Essential of any marketing is product and in CA firm, which is nothing but provider of
intellectual and knowledge resource to its clients is another form of consulting business.
This firm offers consulting in the following categories:

Audit services
Tax service personal and corporate
Corporate Finance
Corporate law
Mergers and acquisitions
International accounting such as transfer pricing,
International accounting standards
Corporate Governance
Information Technology implementation of accounting software
Personal financial planning

Our firm intend to enter in the following lucrative and emerging are of financial consulting
in the near future:

Forensic accounting (developing skill in identification and tracking computer
frauds, particularly in the realm of e-commerce)
International Taxation and tax structuring
Business valuation

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Our company has consultants with over 25 years of experience in the relevant area of their
specialization and company spends considerable amount of time and money on retraining
and continuous improvement of skills. It certainly depends on outsourcing services of
some of the consultants; however, there is a commitment to undertake assignments on
based on urgency, specialization or size of the work.

As our company is more than 20-year-old organization and has some of the best talent
available with us, we have been able to offer our services and then retain on continuous
basis and lot of work is coming through referral of the old clients.

We have therefore created a good brand name for ourselves. We also showcase our
specialists before the client in order to provide a comfort level and make them understand
that our firm has competence to undertake difficult work and deliver on time. We offer our
clients following to impress what we offer them:

Organizational competence
Competency of the consultants based on qualifications, knowledge and experience
in the respective field
Capability to deliver
Understanding client needs
Confidentiality and integrity

Where to provide service

The firm has offices at two locations one at Jaipur and another at Ghaziabad. Both the
locations are very important as the Jaipur is the capital of Rajasthan state and this city is
growing at a very past pace. It is Indias foremost tourist centre, number one centre for
exports of Gem and Jewellery across the world. Ghaziabad is an important city with in the
NCR and its proximity to Delhi offers the same advantage as the Delhi itself albeit at
lower cost.

Majority of clients are either based at Jaipur or in NCR and with good number of partners
and associates, it is effectively offering service to the clients situated in other parts of the
country also.

Majority of the services offered by this firm does not require it to be always present at the
clients location, and at times it has to act as an interface between the client and
government agencies or other customers of the client. In those cases, where we are
representing the client before the government departments such as in Tax assessments,
office of the Registrar of Companies, Company Law Boards, SEBI etc., our consultants
present themselves before such authorities. In those cases, where we have to do audits, we
send our associates visit the clients factories and offices and carry on the preliminary work
at those places and finalization of balance sheets and compilation work is carried at our
own offices.

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To sum up, we provide services at:

Clients workplace
Offices of the legal authorities, wherever required by personal presence
Our own offices

What is the Price of services?

Being a knowledge-based organization, we have set out our cost based on the standards of
services to be provided by us. Further, there are certain guidelines issued by the Institute of
Chartered Accountants of India for charging minimum amount of fee for professional
work.

Our organization has more than 20 consultants and associates and the fee is fixed based on
the time to be spent by each of the members of the team. The objective of fixing fee is that
the company is able to meet its operational costs and is able to generate a profit of 15% on
each assignments.

There are certain services, which take long time to finish such as audit services; the fee is
based as a percentage of the turnover of the company. This ensures that time spent as well
as the expertise involved, both are given due Weight age in deciding the fee.

The various modes of billing to the customer adopted by us can be classified in the
following categories:

Lump-sum fee (merger & acquisitions)
Fee based on time spent (merger & acquisitions, advisory on transfer pricing,
international standards
Turnover based fee (audit services)
Fee based on results (in case of tax assessments etc.)
Retainer ship basis (accounting services)

How to market

It is difficult for a chartered accounting firm to market itself, one that business
community has very high regard for the profession and another there are stringent
regulatory guidelines, which debars an accounting firm to market itself.

However, as a prudent policy, we do our marketing in the following ways:

Participation in professional seminars /workshops
Listing in the official directory of members
Professional and social gatherings
Attending in refresher courses
Associating and lending name to the professional events
Contributing articles, write-ups, expert opinions in the various professional
magazines, journals and newspapers
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Accepting invitation to deliver lectures as faculty to professional institutions and at
seminars
Reference of the customers
Encouraging associates and consultants to become members of the governing
bodies of the professional associations such as CII, PHD Chamber of Commerce
and Industry, ASSOCHAM etc.

The above marking policies have really helped our company to grow business and have
really helped us in getting quality assignments of leading companies in India.

7.7 Networking

It means, generally, getting to know people who can help you grow your business, or
who know people who can help you expand your business. It means letting a great many
people know who you are and what you can do for them. Its also called building
contacts.
Its a business process, not just a social process.
While its true that an overwhelming amount of business for professional firms is built
through networking, a closer look at those who do it successfully quickly shows that
networking is more than glad-handing, more than taking a banker to lunch, more than
playing golf at the right country club. And certainly, its more than cynically using your
friends and others to further your business.

Successful networking is a carefully planned system of buildingand nurturinga
structure of business associates with whom you can work for mutual advantage to build
your business. And theres more to the success of networking in the mutual advantage
than in any other aspect of building and sustaining the contracts.

Successful networking means building relationships with people in ways that allow them
to know and understand what you do, and that you do it well, and that they can trust you
to bring credit to them for having recommended you. It means, as well, building trust that
you can deliver what you promise, that you can be recommended safely. At the heart of
the process is the concept of mutual benefit.
Lester Garnas, a marketing and sales training consultant who is an expert on networking,
suggests that successful networking is often impeded by a mythology that restrains
pursuing useful relationships effectively. Too often, he says, professionals believe
that reaching out to people who might help them requires them to be aggressive and
pushy, and to be manipulative. Some people seem to feel that networking is only for the
extrovert, or the individual with the outgoing, backslap- ping, hale-fellow-well-met
personality.

Nothing is farther from the truth, Garnas says. If you consider two key factors of the
process, networking becomes a significant marketing tool. Those two factors are that you
always think of establishing relationships in which there is an advantage thats mutual;
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and that you recognize that every technique you use in a networking context is a business
skill, not merely a personality skill.
Successful networking, says Garnas, is considerably more than building social
relationships based on pleasant conversations. Its a skill, he says, and more
significantly, its an acquired skill.

The SeminarNetworking Starts Here
Too often, seminars are perceived simply as a way to tell people what you know and
what you think they should know. Those are the seminars that waste everybodys time
and your money. The key to a successful seminar is not what you want to say, but what
your target audience wants to learn. Failure to understand this point is a guarantee of a
failed seminar.
What a seminar really isand should beis a magnet for attracting prospects. While
seminars are ostensibly for the purpose of educating clients, which in fact they do, they
serve an even more important purpose in practice development. They afford the
opportunity to reach out to the business community to project expertise, and to engender
their perception of that expertise and enhance your reputation as a leader in your field
in a context that can result in turning non clients into clients. They afford an opportunity
to develop and cement relationships, and to establish contacts, with non clients who
might become prospective clients and with those who influence their decisions in
changing professionals. They can be a focal point for both press coverage and re
printable material. Seminars, with all their advantages, can be done as easily by sole
practitioners as by larger firms.
But a seminars greatest and most sustaining value is that it affords a face-to-face contact
with a prospective client, or with somebody who can recommend one. How you use that
contact is your choicebut there, in a seminar, is your target.
You will find, too, that seminar attendees also come to network, which is a major reason
why seminars are so popular.

Seminars have been a practice development tool for many yearswell before Bates
and so professionals are experienced in running them. But it should be remembered that
no two seminarseven on the same topic with the same panelare alike in terms of
timing, place, depth of subject material, mixture of clients and nonclients, and so forth.
No matter how many seminars youve done, the next one is different. Some simple
planning makes a difference.

Networking model also helps reducing Marketing costs. Likeminded companies can be
networked through Licenses or sublicenses. Clients are aware of such practices and do not
object to such practices as long as they are assured of competitive and good quality
services.
Back

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Chapter 8

PROPOSAL PREPARATION & PRESENTATION

OBJECTIVE

To understand the detailing of making of a proposal and learn the art of making its
presentation to the client .

8.1 Preparing a Proposal

Whatever the selling or buying process being conducted, it is good practice to submit a
written proposal, so that both consultant and the client have shared expectations of what is
to be done. The function of the proposal may vary from being simply a record of what has
already been orally agreed, to being the document on which the client is to make the buying
decision. Some proposals may need to set out the rationale for carrying out the project in
the first place (that is, the need for it and the benefits of proceeding). This is required when,
for example, the client or the client's colleagues need to be reassured of the value of the
project. If this is not required, then it need only to describe how proposal will meet the
needs defined by the client and the reasons why firms consultancy practice is particularly
well suited so to do.

In taking the decision on what to include in the proposal, one need to consider the probable
audience. What can they be safely assumed to know already? If in doubt, it is probably
better to include explanatory material rather than leave it out. Ideally, the proposal should
serve to confirm that which has already been discussed, but it should also bring some added
value to the client.

E.g. Some years ago some associates and I were commissioning a piece of consultancy, and
our experience is instructive. We interviewed four firms. With one, the meeting was
curtailed; the consultant made some disparaging remarks about a couple of our competitors.
My associate asked for us to be excused for a moment. Outside the meeting he said, 'We
can't possibly use him. What if he were to make similar remarks about us?' So, we found an
excuse to end the meeting.

A second consultant came from a large firm. Being ourselves a small firm, we had an
uncomfortable (and possibly unfounded) feeling that we would not be treated with great
importance because of our size. We were left with two contenders, both of whom we
invited to put in proposals. One firm (Firm A), although we were not very taken with them
at the outset, conducted a very good sales meeting; by the end, they were front-runners.
Then we received their proposals.

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Firm A sent in a proposal that simply confirmed the assignment. It seemed very much like
a boilerplate job - that is, a standard proposal that had received some limited tailoring to
meet our requirements. By contrast the other firm in the running - Firm B - produced a
thoughtful proposal that really added value. It showed an appreciation of our
circumstances, and contributed helpfully to our thinking, which gave us greater confidence
in their ability to do the job. Had Firm A produced something half as good, it would have
got the job; as it was, Firm B won the contract.

The message therefore is that as a consultant one should seek opportunities to add value in
a proposal. This can be by an insightful appraisal of a client's situation: helping the client to
gain a clearer understanding of the circumstances in which consultants are going to deliver
the consultancy services.

Sometimes it may be possible (and helpful) to prepare a proposal in draft and send this for
comment to a close contact in the client organization involved in the buying process. It can
then be refined to meet the client's needs more closely. (This can be part of a sophisticated
selling technique: by getting the client's involvement in producing the proposal, it is seen as
a joint problem solving process rather than selling.)

8.2 Sections of the Proposal

A proposal has a selling purpose. It must
Persuade the client to undertake the project (or to endorse a decision already made);
Make the case for engaging consultants;
Set out how the consultancy would approach the assignment;
Convince the client that the consultancy is well equipped to carry out the
assignment, and that it should be chosen so to do;
Lay out the terms on which the assignment is to be conducted.

The length, form and complexity of proposal documents will vary widely according to
what is appropriate but, in varying degrees of detail; proposals will normally contains
technical and second is financial sections. In addition, there will probably be a statement of
the benefits of proceeding.

Technical section this is the main nerve of the overall solution consists of
following:
o An appraisal of the nature of the client's business, the background of the
proposed assignment and the problems to be tackled
o Definition of the terms of reference and scope of the assignment with
comments on the validity and any critical aspects of the terms of reference
supplied by the client
o Proposed approach to the project describing the tasks to be accomplished
and the methodology and techniques to be used
o A work plan indicating the timetable, sequence and duration of tasks and the
total elapsed time needed to complete the assignment
o A statement of the expected results and outputs from the assignment
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o Details of the form and frequency of reporting and arrangements for regular
liaison with client staff
o Proposed staffing levels and roles to be assigned to consulting staff and
client counterpart staff and an estimate of the total time inputs proposed
o Supporting information on the consultancy's services, and relevant
assignment experience and curricula vitae of the assignment team members
o Details of the consultancy's standard terms and conditions (or the terms and
conditions applicable to the particular assignment)
o Methods for assuring the quality of the assignment

Financial & other terms section
o Fee and expenses quotation and invoicing procedures (which may be
presented separately)

8.3 Other Aspects of Proposal
9.3.1 Presenting the Proposal

A Proposal is at least a written record of what has already been orally agreed with the
client. A presentation, however, allows the client to assess the individual consultants. It is a
form of sales meeting, albeit structured in a format somewhat different from other
meetings. The risk at this point is that Consultant become 'proposal orientated': one regard
the presentation as only an oral proposal.

Suffice it to say at this point that it is important to understand why the client is interested in
a presentation, and what they hope to get out of it. As a consultant one can then tailor the
presentation against these criteria.

Even products that can be customized are usually broadly predefined offerings, which may
be tailored in detail to the needs of the client. Much of the time, consultancy is the
opposite. It starts with identifying the needs of the client (or responding to a set of needs as
embodied in an invitation to tender) and then putting together an offering that helps the
client to address these needs. This means that unless as a consultant with only one
product it is unusual to sell consultancy by going to a client with a preconception of
what you are going to sell him or her. Selling is more often about spotting opportunities
than creating needs. The implications for you if you are a traditional salesperson are
therefore:
Each consultancy project is a uniquely tailored offering. A car salesperson might
sell from a product catalogue; the only variations are the extras that a customer
might want. In consultancy, the sales process involves product definition.

Consultants must listen to clients' requirements and respond with offerings that
reflect their needs.

In a large firm, one cannot have a comprehensive knowledge across all fields of its
consultancy offerings, and so one need to involve specialists in support selling.

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The role of salesperson in consultancy is more one of facilitator than 'hero'. One have to
create opportunities that others will help to realize.

Figure hereunder shows the critical dimensions in thinking about the role of the
salesperson. The figure shows two extremes; it is unlikely that any sales activity will be
wholly at one end or the other, but will be somewhere in between. What the figure points
out, though, is the thrust in selling consultancy; for those whose experience lies in selling
products, the challenge lies in moving towards the right in the diagram. The spectrum of
selling is shown from being transaction oriented to relationship oriented. A salesperson
who is strongly transaction oriented will be impelled to close the sale. In an extreme form
this is typical of the high-pressure salesperson, which has a prime objective to ensure that
you buy.

Figure: The selling spectrum

Salespeople who want repeat business recognize early in their careers that they cannot be
wholly transaction oriented. Of course, the quotas and targets that they are set are usually
related to sales volume - no points for having wonderful relationships and no sales - but
they will be anxious to preserve a good relationship with their customers.

Consultancy, too, has quotas and targets, but the need for a good relationship is even
greater than with other products. When buying a tangible item you can see an example of
what you will get; in consultancy you buy only a promise. Even if the consultancy has a
proven track record, this is no guarantee of success on this occasion; it simply reduces the
sense of risk. So there has to be a high level of trust between the salesperson and his or her
client. But as with other successful client relationships, once they are firmly established,
consultancy clients become a fruitful source of continuing business.

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8.3.2 The Clients reaction

Once the proposal has been submitted, the sale will need to be nursed. It is rarely
satisfactory to submit a proposal and then wait for a 'Yes/No' answer. Ideally the
salesperson should know the steps involved in the client's decision-making process and be
on hand to deal with any difficulties and to direct attention to the benefits of your
undertaking the assignment.

Immediately after submitting the proposal, the salesperson might contact the prospect to:

Check that the proposal has been received;
Get initial reactions and confirm the decision-making process;
Identify any real difficulties the client has in choosing your proposal and deal with
intrinsic objections.

On this last point, note that in various sector particularly, price is only one of several
factors that influence a client's buying decision. Classic negotiation on the cost, payment
terms and so on may be required, but these are less important than the prospect:

Believing that you have clearly understood Clients needs;
Having confidence in the consultancy's people;
Believing that the proposed approach will achieve the benefits claimed.

If a client is unhappy with a proposal, therefore, see this as a joint problem solving process.
The client needs consultancy, consulting firm want to provide it, so how can this be done to
the best advantage of all concerned? When a client expresses concern, the salesperson must
probe to find out what that concern really is.

For example, suppose your estimate of the consultancy fees for a particular job is Rs.
20,00,000, and the client is resistant to this. Let's assume that consultancy firms fee
estimate is based on a costing of fee days times fee rate. An obvious option is to attempt to
reduce the fees. If, however, firms fee rate is realistic and estimate of the time required is
accurate, then reducing the total fee means changing one of these.

8.3.3 Negotiating the Proposal

The general practice within consultancy firms is to set fee rates annually at a fixed rate for
costing purposes. In this environment, this means that a reduction in total fees will show up
as a 'loss', that is, the same number of days at a lower fee rate than standard. The result is
that there is then some pressure to do the job more quickly, or to use less expensive
resources, both of which are likely to diminish quality.

So, go back to the original problem: why is the client wanting to reduce the fees? Is it
because they do not think it represents value for money? Or is it because they do not have
the budget? If their reservations are about value for money, as their consultancy firm one
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truly believe that the benefits of this project adequately outweigh the costs, both actual and
opportunity costs? If yes, then the problem is one of communication. The client:

does not recognize the benefits; or
does not value the benefits in the same way as you; or
lacks the confidence that the benefits will accrue.

In these circumstances there is a major job to be done to diagnose which of these applies
and then take remedial action. Of course, if the benefits are not worthwhile, should one be
advising them to proceed with the project in the first place?

If the client's problem concerns their budget, can the budget be changed? If the answer is
no, the onus is upon consultant to see what they can do to restructure the project within the
time allowed by a reduced budget, usually by reducing the scope. There is an effective
strategy is to go through this with the client. Go through the tasks and the estimate of times
required for each, to see what can be pared. This allows the client to make suggestions that
may not have occurred to me, as well as making clear what the effect of the reduced budget
will be. Treating this as a serious problem, and engaging in joint problem solving with the
client, will also help to build a good relationship.

Just a quick recap through the slides as under..

PROPOSAL TO THE
CLIENT

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SECTIONS OF THE PROPOSAL
TECHNICAL SECTION
STAFFING SECTION
CONSULTANTS BACKGROUND SECTION
FINANCIAL & OTHER TERMS SECTION

8.4 TERMS OF BUSINESS

The terms of business are usually sufficiently standardized to be drawn up as a permanent
document for attaching to proposals submitted to the client. This avoids having to type
them afresh on each occasion. The main non-standard item may be the fee rate. This is left
blank, to be filled in when the report is submitted .

The example below gives a typical list of terms. The document may or may not have a
blank space at the end for entering any special conditions.

1. Our charges for this assignment are Rs per day per consultant
employed, inclusive of supervision , but excluding travelling and subsistence
when the consultant is engaged on the clients business away from the office or
plant to which he is assigned.
2. The fee covers all time spent on the clients work whether carried out on his
premises or elsewhere. No charge is incurred during absence due to illness or
leave, but no deduction is made for public or statutory holidays. Any computer
bureau charges will be invoiced at cost. Charges are invoiced and payable
monthly.
3. We reserve the right to review our fees in the light of operating costs and to
adjust them accordingly, but in the event of any change being required at least
three months notice will be given to current clients.
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132

4. On concluding an assignment, it is our practice to maintain contact with the
client, and to carry out periodic servicing visits to ensure that the benefits
secured through our work are maintained. Such visits are charged at Rs.
Per day, excluding travelling, subsistence and time spent after the visit in
preparing a servicing report. A charge of Rs per day is also made for any
one-day visits prior to the start of the assignment.

5. Our work may be terminated on either side by one weeks notice in writing.

6. All forecasts, and recommendations in this and any subsequent report or letter
are made in good faith and on the basis of the information before us at the time.
Their achievement must depend among other things on the effective co-
operation of the clients staff. In consequence, no statement in a report or letter
is to be deemed to be in any circumstances a representation, undertaking,
warranty or contractual condition.

All our consultants are under special contract which protects our clients against the
divulging of confidential information. Our consultants are also under agreement not to seek
or accept employment with our clients, and it is a condition of the engagement of our
company that you will not employ on your staff any member of our company involve
Let see a copy of the actual proposal submitted by a consulting company to its client

A Proposal from
Productivity Institute

to

Date: 23
rd
April, 2007

Submitted to:

Submitted by

PRODUCTIVITY Institute of India
ADDRESS..XXXXXXXXXXX
Tel: XXXXXXXXX
Email:XXXXXXXXX
Fax.XXXXXXXX

Copyright 2000 @ of PRODUCTIVITY Institute Ltd. All rights reserved.
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133

To,

M/s.

Kind Attn:

Subject: PROPOSAL FOR GEMBA KAIZEN WORKSHOP

Dear Sir,

Please refer to our discussion on --- April 2001. As desired by you during the discussion,
we are pleased to submit our proposal as under.

OBJECTIVE:

To train executives working in ----------. in the concept and practice of KAIZEN &
GEMBA KAIZEN.

To implement KAIZEN in , by introducing large improvements with small
investments in money and time.

METHODOLOGY:

Both objectives can be achieved, synergistically, (two birds can be killed with one stone)
by choosing an appropriate methodology. The methodology uses the GEMBA KAIZEN
WORKSHOP, as the prime vehicle to achieve both objectives. The workshop is held at the
workplace (shop floor) of the host organization, where large, and many small,
improvements are implemented within a short span of four to six days with small
expenditure of money. The implementation is done by a combination of consultants,
employees of the host organization. The participants learn by doing.

The unique methodology was developed in Japan and was copyrighted as a registered
trademark under the name of KAIZEN WORKSHOP & GEMBA KAIZEN WORKSHOP,
by Mr.XXXXXX, the founder and Chairman of the PRODUCTIVITY INSTITUTE. Mr.
XXXX has licensed us to use it after personally certifying our repeatedly proven capability
and providing us with the requisite hands-on training.
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134

However, KAIZEN has become a generic word and is used by many people. Often, TQM
consultants claim to know KAIZEN. They propagate KAIZEN as a system, where
employees (mainly workers) make implemented improvements and report them. They
present KAIZEN like a suggestion scheme - one where the idea suggested is also required
to implement the idea. Such a system is called as a teian system in Japan. (Teian is a
Japanese word, approx. meaning implemented idea). Since, many suggestions do result in
improvement, the scheme is sometimes referred to as KAIZEN TEIAN system.

KAIZEN TEIAN is very different from the trademarked systems of KAIZEN &
GEMBA KAIZEN. A KAIZEN TEIAN system can be implemented the later phase of
KAIZEN or GEMBA KAIZEN implementation.

Unfortunately, many unauthorized consultants begin with teian, and mistakenly think
that, they have implemented a KAIZEN system. It results in a few small improvements
and some damage to the organization through changes that appear to be improvements on
the surface, but are actually not.

The KAIZEN or GEMBA KAIZEN system is one of the most powerful vehicles to
catalyze transformation in an organization of a sustained Consultancy.

TYPICAL RESULTS OF GEMBA KAIZEN WORKSHOP WORLD WIDE:

TANGIBLE RESULTS:

To the uninitiated, the results of the workshops are truly staggering. The average
improvements done through GEMBA KAIZEN WORKSHOPS between 1993 and 1995 by
PRODUCTIVITY INSTITUTE, all over the world, are presented below (these figures are
available on page 179 of GEMBA KAIZEN book written by Mr. .XXXXXX).

Cost Quality Rejects : reduction by 95 %
Rework : reduction by 72 %
Set-up time : reduction by 66 %
Work-in-progress : reduction by 60 %
Through put time : reduction by 56 %
Downtime : reduction by 25 %
Scrap : reduction by 46 %
Finished goods inventory : reduction by 44 %
No. of operators required : reduction by 32 %
Floor space : reduction by 30 %

These are results averaged over two-year period. However, in individual KAIZEN
workshops, work in process inventory reductions of 95%, through-put time reduction of
90%, quality improvement of 80%, floor space reduction of 50% have been frequently
achieved. Manufacturing velocities have been doubled and even quadrupled.

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135

GEMBA KAIZEN workshops have been conducted with similar results in all kinds of
industries; automobile, metal working, plastics, electronics, chemical, pharma, steel, textile,
hotels, stock broking, financial investment, banks, education institutions, office areas.

The consultants from India too have experience in conducting GEMBA KAIZEN
WORKSHOPS in all the industries listed above (except banks and financial investment).

When we did workshops ourselves and converted the tangible gains into monetary terms,
along with the companys representatives, we found really large savings. in some cases,
we ourselves were surprised - we quote the savings.

Factory making boards from sugarcane waste: Additional production (not additional
profit) of $1,000,000 per annum and additional savings of $70,000 per annum.
Factory making galvanized steel: Additional production of $1,500,000 and saving or
$50,000 both per annum
Chemical Factory: Cancellation of budgeted expenditure of $40,000 the company
decided to do GEMBA KAIZEN WORKSHOP before investing in new equipment. At
the end of the workshop, the productivity went up so much that the investment was
cancelled.
Tea estate: Saving of $60,000 per annum.
Taj Group: Saved an annualized Rs.8,00,00,000/- per annum through 10 workshops.
Omax Group of COs : Saved Rs.100 Lacs & 10,000 sq ft in just first few GKW

The point to note is that, the savings can indeed be substantial, if we select improvement
projects correctly. Selection of projects is important.

INTANGIBLE RESULTS:

During the GEMBA KAIZEN workshop, the whole atmosphere changes. Participants from
the host company and external organizations, find their latent capabilities unfolding.
Participants are amazed by how much they did within a short span of time. In one
organization (Tollyboard in India), a 10 metre conveyor was fabricated in house overnight.
It cost $600 only as against the price quotations of $40,000. The conveyor is still working
well after one year. The participants acknowledged that the unique atmosphere in the
GEMBA KAIZEN WORKSHOP was what enabled them to make this phenomenal
achievement.

PARTICIPANTS LEARN:

Working with team work.
KAIZEN paradigms, many of which counter conventional wisdom. When they see
themselves implementing the KAIZEN paradigms, under the guidance of the
consultant, they get convinced about the power of these paradigms.

KAIZEN methods, that enable rapid problem diagnosis, solution and implementation.
Five golden rules of Gemba Management.

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136

UNIQUE FEATURES OF OUR SERVICES:

Implementation rather than mere advice.
Small demands on time and money.
Attack on bottleneck issues resulting in large gains and big improvements.
Consultants work with their own hands taking responsibility for results.
(CONSULTANTS ARE NOT MERE FACILITATORS)
Consultants are very demanding; they produce results before exiting the GEMBA
( workplace).
Use information Technology and shared infrastructure facilities to keep costs low for
our clients.

HOW THE WORKSHOP IS CONDUCTED

OUTLINE OF CONSULTING ACTION:

You select the most important unit ( factory or office) for doing KAIZEN. Your
criteria for selection would be based upon your strategic imperatives. Linking
GEMBA KAIZEN workshops to strategy is vital.

We shall start with GEMBA KAIZEN workshop in such a unit. Each workshop
would cover four days and would address some of the strategically key issues,
classified as either problem areas, or as improvement opportunities. The head of the
unit would need to be involved with the workshop, to guide. Management personnel
would participate in the KAIZEN workshop, especially the first one.

We shall conduct the GEMBA KAIZEN workshop with two / three consultants
(typically)

About a month after GEMBA KAIZEN workshop we shall conduct a one-day review
session. Based on the review, areas for further improvement would be identified, in
consultation with the head of the unit. Thus, each review becomes the post-workshop
activity for the previous workshop and the pre-workshop activity for the next
workshop. If the problems are not clear, we may diagnose during this visit.

While we recommend that a workshop be held two months, over a one-year period,
the exact frequency can be worked out based on the reviews.

Each workshop generates tangible gains, visible by the end of the workshops. The
gains can be calculated and confirmed in each review, between two workshops.

Our experience is that attitudinal or cultural changes are inevitable by-products of this
approach to consulting. Though they are difficult to quantify, they do become visible
in daily behaviors of employees. Expectation of miracles should be avoided, of course;
however, some concrete behaviors changes do become visible.

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137

The top Management is expected to provide guidance on the areas to be worked upon
(KAIZEN projects). As you know very well, top Management commitment is vital.

If the Management so desires, we can conduct workshops in more than one unit
simultaneously. Each unit can follow its own sequence of workshops.

To summarize in one year, your unit would go through 6 GEMBA KAIZEN
workshops of 4 days each with two/three consultants, and 6 reviews of one day with
one consultant. The input would thus be approximately 65-70 consulting mandays in a
year at site. this does not include the back office work that would be required more our
side to support the workshop.

We can call in Imai Sensei for a major workshop at a later stage, when initial gains
have been obtained.

PRE - WORKSHOP ACTIVITY:

We identify a number of problems to be worked upon in the host company in advance.
If we are to work with ---------- , then the problems could be; elimination of Muda,
introducing Kanban, improving the stores, improving reliability of equipment, 5-S,
etc. We do some pre-workshop activity of determining from the head of the company,
what problems we need to work on. If there are no problems, we take-up the areas that
need improvement from a strategic point of view. for instance, in one Chemical
company, we selected improving performance of the effluent treatment plant, since it
was an area that had the potential to become a problem in future, with increasing trend
of effluent flows. When we did the KAIZEN workshop, the incoming effluent reduced
from 12 kiloliters over-day to 5, all with negligible expenditure.

ACTUAL WORKSHOP (4 DAYS WORKSHOP):

Day 1: The first day is spent in a lecture / conference room. The location can be
anywhere. It is better if the lecture / conference room is near the shop floor. on this
day, the consultant explains the
JIT (just in Time) or Lean Manufacturing
5-S application and how to spread it company wide
TPM (Total Productive Maintenance) to gain equipment reliability - how to apply it and
what change it can make in the factory
TQM related areas; Variation Reduction (Quality Improvement)
Kanban to facilitate flows
Cellular Layouts, Single piece flow
Re-organization of responsibility / authority structures

WORKSHOP TIMINGS:

Ideally, there should be no break from the first to the last day. However, it is possible to
take a holiday between the first and second days, since the first day is a lecture day. Once
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138

the action starts, it is not desirable to take a holiday in between, since it breaks the
momentum. We can take a holiday between the second last and the last day.

The daily timings have to be worked-out according to local convenience. We
recommended stretching as much time as possible. Typically, the GEMBA KAIZEN
WORKSHOP starts at 9.30 am and goes on till 7.30 PM. Ten to twelve hours of working
is quite common. Thanks to the charged atmosphere, people do not get tired; they
work even as long as 14 hours every day and report fresh for KAIZEN work the next
morning. In the Taj Group of Hotels, (where accommodation and food can be easily
provided), participants have worked from 8 am to midnight, repeatedly. We have
conducted workshops, where the activity has started at 9 am and ended at 5.30 pm also. In
every case, the workshop succeeds.

However, it is sometimes, not desirable to emphasize this aspect in the beginning,
otherwise some potential participants avoid enrolling for the workshop from the fear of
having to work late. We never force any participant to stay late; usually they do on their
own.

This point is important from the point of view of logistics and costing, because when
participants elect to stay late, it is good idea to provide them some extra snacks and tea.

NUMBER OF PARTICIPANTS:

As the number of participants in ceases, more improvement can be handled simultaneously.
However, it becomes more difficult for the consultant to guide many teams at one time.
This is because, the consultant personally takes responsibility for diagnosis and solutions.
When the number of participants becomes large, we use two or three consultants.

The most convenient number of participants is about 10 for one consultant. However, this
being first workshop, we can accept whatever number we need to make the workshop
economically profitable. The advantage of more participants is, of course, that more
revenue accrues.

Personally, we can lead upto 40 participants is a workshop. However, it works if
everybody is very co-operative, the organizers themselves provide some support and we are
allowed to push the participants very hard.

CHARGES: The advantages of basing our Asia-Pacific and Africa ,operation in India is
that We are able to charge Indian prices for international quality work.

For the four days workshops - our lump-sum fee for per workshop shall be ..+
service tax. Fee for one day reviews shall be charge @ . per day +
service tax.

In each case, expenses on travel, hospitality, contingencies and taxes & levies have to
be borne by the client as extra at actual. Currently, service tax @ 5 % is levied on
consulting.
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139

One day - KAIZEN awareness Training Program (optional). In case of such a program,
which will expose participants to concepts like KAIZEN 5-S, MUDA Elimination,
TPM, SGA, JIT etc. Lumpsum fee of shall be charged.

If we call Mr.XXXXXX, his services would be chargeable @ per day, with first class
international airfare, internal travel, hospitality, contingencies taxes and levies as extra
at actual. Other overseas consultants would have to be paid similar charges, depending
upon the person involved.

An advance of 25 % shall be paid to us before the workshop & balance on completion.

All payments shall be made to

Changes in Schedules and Cancellation Policy

Change in Schedules:
We shall make every endeavor to adhere to the schedule and are confident that it will be
reciprocated from the client. Generally, changes in schedule will be mutually agreed to
with advance notice of one month.

Cancellation of Contract:
The spirit of the contract shall be progress through mutual co-operation. The parties may,
however, cancel the contract with one months notice from either side.

Validity of this Offer:
This offer is valid upto 31.07.2007. Kindly confirm by signing this proposal as token of
acceptance.

CONCLUSION:

It appears feasible to extend KAIZEN Consultancy to ---------- member Cos.. We would
deeply appreciate an early response and an early start to the program. You are welcome to
contact us for any clarification.

We eagerly look forward to your early comments. Please draw our attention to any items
that we may have missed.

With Regards,

For PRODUCTIVITY INSTITUTE OF INDIA

Quote:

KAIZEN TRAINING - AN EXPERIENCE
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140

Let me introduce myself, I am working at the moment with ESCORTS FINANCE
LIMITED as Senior Manager - HRD and have 11 years experience in the same field. In
our organization we had I implemented BPR and I was inquiring about a course which will
be the best suitable to learn the process of an organization and on learning show how to
device best operation level. I was trying to enroll myself in course like PEOPLE SOFT,
SAP etc. During this time, I learnt about the P institute. My first reaction was that they
are going to teach us about Kaizen suggestion system which had bit of negativity in our
mind. When I attended their orientation program and found that KSS is one of the tools to
achieve JIT in organizations, I became quite clear that I was looking for this avenue of
learning only.

The reason of my feeling so was that I was very clear to achieve excellence in life. If you
have to lead a quality life and to achieve excellence in you profession you must bring
quality into your profession you must bring quality into your every effort. And here is a
course which talks about quality of work & quality of life through self discipline,
Housekeeping, creating standards in procedures and practices & Eliminating waste from
your thinking process, from your work procedure and so on.

The key our learning is through a simple tool of GEMBA KAIZEN. The Gemba means
workplace and KAIZEN is change for good. you change your personal and professional
life by low cost common sense approach and by continuous improvement. We all know
customer is the king, whatever be our profession, customer is most important and others are
only means. The course in GEMBA KAIZEN teaches us how a raw material can be
processed into a final product as per the customer need through JIT. JIT is implementable
not only is shop floors but also in IT sectors, e-commerce, etc.

The pattern of teaching which is followed in the institute is through involvement of
students. We are made to feel partners in the learning process by discussing cases in each
theory like productivity, QCD, 5S, Standardization and so on. We have shared with our
fellow students the book reviews prepared by us.
We visited a factory and could understand further how much practical this course is (we
were all excited to see very clearly we have not completed the course as yet) with our
learning how we can help the organization achieve quality by implementation of simple
tools taught to us by KII.

I must tell you this course has changed me as a person as I no longer want to be an ordinary
person but an achiever. It had also affected my career growth as I am getting excellent
offers from good organizations. They are recognizing the course and would like me to
implement there what I have learnt.

At the end. I would like to quote from an article of Azim H Premji, Chairman, Wipro
Corporation; There is no longer any debate on whether a person should work smart or hard.
The leaders must work both hard and smart, long and intense. It is the only way to keep on
top of the demands.

Customers want more quality for less cost. That is an absolute global truth. Customers do
not want only what is best in India, they want the best in the would. unlike what happened
in a protected economy, the customer today travels, reads and possibly surfs the net to
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know all that is available outside the country. Emphasis on quality is a fundamental
requisite for leadership.

here I must say, we are not leaders is many fields due to our ignorance of quality and it is
amazing to see how Japanese are ahead of us by adopting simple, low cost commonsense
approach. We get impressed by the presentations given by European/American consultants
but practically when we try to implement them we find they are nice jargons but very
confusing to implement.

The PII is allowing us to learn simple technique to be world class through 5S, TQM, TPM,
JIT, etc.

Ms. XXXXXX Manager (HRD) STXXXX INDIA LTD. Phone: XXXXXXX

Back

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Chapter 9

Consulting Costs and Fees

Objectives

To understand importance of cost and fees in consultancy
Methodologies adopted to calculate cost and fees
Types of fee arrangement

9.1 Introduction

This is the most important aspect of the Consultant- Client relationship. Under this, the
basic concept of relationship of consultancy is reversed i.e. whereas consultant fulfills the
needs of his client by consultancy; by paying the dues, the client fulfills consultants
requirements. It is essential for both consultant and the client to understand how cost and
fee are evaluated. Client shall understand that a consulting firm needs to generate adequate
remuneration for the services provided by it to have healthy financial
viability/sustainability. The consultant should see that the fee charged is proportionate to
the real value contributed to the clients business by his intervention. It is in this paper we
are going to study all the possible aspects related to payment of services rendered.

9.2 Fees and cost

Why we are considering these two terms together? It is obvious that these two reflect the
actions taken by client and consultant. The consultant renders services and client pays him
the fees. The consultant puts efforts and has obvious cost involved and thus needs fees for
his service. The cost to the client is the fees paid to consultant. ( Is this the only cost which
a client bears in his mind?).

The consultant gets fees for the cost of efforts done by him. Is this the only cost? We will
be dealing with all the aspects. But important here is to understand that cost and fees have a
broader aspect and both are interlinked. There are explicit and implicit factors. There are
past present and future aspects which are inbuilt into cost and fees from both client and
consultant side.

The client has cost implication in terms of fees which he visualizes vis a vis in relation to
benefits he gets from the advice or solution proposed by the consultant. In other words, for
a client basic issue is not merely the immediate returns but future results as well. The client
never is willing to share these future results. What he believes is that the consultant puts
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effort to suggest solution, takes his fees and goes away. There are the risk factor of changes
and future uncertainty which are there in the mind of client.

Clients should not expect to get an excellent professional service for a very low price and at
the same time consultant should not overcharge the client. Consultant should seek
remuneration that fairly reflects the efforts made and the time spent and the client wants to
pay according to impact achieved in working for a particular client. Consultant demands
other costs and expenses required in consultancy assignment. He also needs acquisition
and development of his intellectual capital, service marketing, practice management and
administration etc.

Broadly we can say cost & fees have two aspects:

Client impact Consultant
His cost and time Interrelated gain

Consultant Client
Efforts done Visible to invisible
Overhead
profits In visible
Lease period Not agreed

9.3 Income generating activities

It may happen that consultant makes a cold contact visit to many places and his success
rate is say 10% i.e. he gets one assignment after 10 visits. Now how to get financed for the
9 activities? This is most important to understand. Why at all client will pay for 9 futile
visits of consultant. But how will consultant charge or manage his firm. He has to depend
for expenses on client. So how do we define service for which client is to be charged.

This precise definition of services is essential for which clients can be charged. This will
be the basic criteria to costing and pricing of consulting services. If only chargeable
Client pays fees
Client has cost = fees + his
time + change suggested
Consultant solution
has time implications= time
spent in finding solution+
time in implementing
solution+ productive time lost
Returns = time lag + volume
of returns
Time factor Resultant Money factor
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144

services generate income, the every other service and every other activity of the consulting
firm which is carried during firm operation will have to be supported by this income
generating service.

What we can conclude is that, in time-based fees clients are to be charged directly for all
services provided to him under a specific contract agreement with only exception of those
services which cannot be charged directly or where it is not possible to charge.
Alternatively, in all a client has to pay to consultant/firm for services which consultant
performs directly relevant for him.

9.4 Costing for time of consultant

Let us see a simple example for calculating how much time is actually available for
consultancy.

Costing of Services to the clients is done and, in many cases, charged on the basis of
consultant-days (or hours or weeks). It is essential to plan for and attain the required
number, which may be determined as shown in table (assuming a five-day working week).

Chargeable time
Item Weeks Days
Total Time Available 52 365
Total Weekly Off
Other leave
15*
3
104
15

Public holidays 3 14
Days gone to sickness/employees 1 7
Gross days available for consultancy 45 225
Days spent in training, meetings and seminars 2 10
Days for office, marketing research, administration 5 25
Net time available in consultancy 38 190

So out of total 365 days, only 190 chargeable days are available any consulting firm can
use for the estimation. On percentage basis utilization of the total time, can be determined
by the ratio:

Chargeable time/Total time = 190/365= 0.53

This is only a hypothetical example, and can not be taken as a standard figure. For various
firms, these things can vary in different countries. Every consulting firm has to establish its
own time budget based on local conditions.

The other way of calculating this ratio is to compare chargeable time with gross days
available since this is the maximum time a consulting firm can link or expect from his
clients.

Chargeable time/Days available = 190/225 = 0.84
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9.5 Chargeable services cost

Depending upon their own expertise, a consultant can be comfortable with (i) day; (ii)
week; (iii) hourly basis time unit for calculating fees. The basic rule is simple: every fee-
earning day has to earn a corresponding proportion of the total budgeted income. Say a
firm has to earn Rs. 100 lakh in one financial year and net committing days are 190. Then,
Each day earning = Rs. 100 lakh/190 = Rs.0.526 Lakh per day. This, of course, is an
average figure. The actual fee charged will be influenced by many other factors depending
on available assignments, need of outsourcing etc.

Let us use the hypothetical example of a consulting unit and assume that the time budget of
the 20 operating consultants in that unit is 190 days each and that the six senior consultants
should achieve 130 chargeable days each. To keep things simple, the units director and
the two trainees attached to the unit do not do any directly chargeable work. Let us assume
too that the units target income is Rs 50,000,000. The average daily fee rate will then be :

Total income/Fee earning days = 50,000,000/(20X190)+(6X130)

Charging the same daily rate for all consultants irrespective of their experience and
seniority would be a wrong policy. It is the experience which matters in consultancy.
Moreover, many clients would insist on having only senior consultants assigned to their
projects if they could get them for the same price why will a client prefer to have a less
experienced/expert consultant. In contrast, some tasks that can be done by less experienced
consultants would become too costly. Thus it is imperative that consulting firms must
apply a differential fee rates for different categories of consultants i.e. lower fees is charged
for less experienced and higher fees is charged for more experienced consultant. The
difference in fee rates charged for various categories of consultant can be quite large(1:5 or
more). This can be quite varying within a firm and also across the firms. But this gives
rise to a difficult situation then how to calculate or estimate the fee for any assignment
because any assignment may consist of different consultants. Moreover the senior
consultant may be used in two or more assignment while a junior may be used dedicatedly
for one assignment only. Similarly, the helper or outside Xerox or binding will be common
for complete firm. Here the difficulty arises as to have to charge in built fees. There is no
specific or standard and universal technique but what is prevalent or rational will be
proposed by us.

Description No. of working days No. of man days
Sr. Consultant - 1 No. 260 260 X 1 =260
Junior Consultant 5 Nos. 190 190 X 5 = 950
Computer Operator 2 Nos. 200 200 X 2 =400
Helper 1 No. 300 300 X 1 = 300
Outside expert/outsourcing
activity equivalent to 2 Jr.
Consultants
100 100 X 2 =200
Total man days 2110
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Let us take a very simple case study. A consulting firm has various

consultants with different no. of working days as tabulated.

Let us assume that our budget income is Rs. 5 crore. Now we will calculate the man days
as below:

So, total income/Fee earning day
= 5 crore/2110 = Rs. 23696 Income per day

This income per day has a very important bearing in calculating our fees which is charged
by consultant. What we conclude that a consultant has to see that he must per day earn this
amount so that his operational expenses and profit are met with.

9.6 Fee/Salary Ratio

Another ratio used by consulting organizations (the so-called factor or multiple)
compares the salaries paid to the fee-earning consultants with the total fees earned as
follows :

Total fees earned/Salaries = Factor

The value of this ratio in most consulting firms is between 2.5 and 4.0, but higher ratios are
not uncommon in large firms.

There are other issues which a consulting firm also sees while charging the fees. Some of
the issues are:

9.7 Normal fee level
This is what the firm calculates based on its expertise and profit.

Fees charged by competitors
If competitors are charging more, then there is leverage available which consulting firm
can pay to charge its client having ethical issues.

Fees for different market segments
Often firms have different rates for PSUs, private sectors and also depending on working
hazards. For example, the consulting firm working in J&K, Mizoram or Sikkim states will
charge different from what will for Bangalore, Delhi, etc.

Promotional fees
Sometimes firms have to discount their rates to see the future business prospects also.

Subsidized fees
This normally happens when two PUSs are interacting when fees is subsidized for
infrastructural support or by way of repeat orders as marketing cost is saved Congruence
of fees with the consultants image
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It is often noted fees charged by Mackinsey, price, copper etc. is relatively higher than
other firms in the field. There may of course be different quality of standard.

9.8 Principal fee-setting methods

When it is not possible or feasible to calculate the basis of payment as a fixed price that
must be specified in the contract, payment may be calculated, using one of the following
methods:

9.8.1 Per diem. A fixed daily rate, including payroll and overhead costs and profit,
based on the level of experience and expertise required and the length of the normal
working day as defined in the contract. Generally used for short term, intermittent or other
assignments when the scope of the work cannot be accurately determined.

9.8.2 Payroll cost multiplied by a factor. The multiplying factor compensates the
consultant or professional for overhead costs, interest on invested capital, responsibility and
profit. It varies with the type of service performed, the geographic location and the length
of the assignment. This method, based on the direct costs to the consultant or professional,
is suitable when the scope of the work and the services required are extensive; when it is
not possible to determine accurately the scope of the services to be provided; or when a
percentage fee does not adequately reflect the cost to the firm. It may be desirable to place
a limit or ceiling price on the total payable under this method. The consultant or
professional must maintain detailed time records and accounting procedures to substantiate
all costs, and all records must be available for audit by the contracting authority.
9.8.3 Payroll and overhead costs plus a fixed fee. This is a variant of (b) above. The
consultant or professional is paid actual payroll and overhead costs, together with a fixed
fee, negotiated to cover interest on invested capital, responsibility, and profit. It is used for
the same type of work as the preceding method and also for the management of
construction projects. The fixed fee portion is calculated as a percentage of the estimated
capital cost for construction projects and as a percentage of the estimated cost of payroll
plus overhead for other types of work.
9.8.4 Percentage of the cost of construction. This method has two main
shortcomings: the fee does not adequately reflect the cost of performing the service and it
penalizes the consultant or professional for economical design. Care should be taken to
stipulate a budget ceiling and to verify that the estimated fee will be in line with the
estimated cost to the consultant or professional. This method has been used when the
principal responsibility is design, preparing of contract documents and the providing of
non-resident supervision during construction. It is expressed as a percentage of the cost of
the project and the fee is translated into a fixed amount, which is calculated on:
the construction contract award price, or
the pre-tender estimate approved by the contracting authority,
whichever is less.

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9.8.5 Percentage of approved estimate. Sometimes, fees based on the construction
contract award price may result in inequities to either the consultant/professional or the
Crown, usually because the construction market or tendering situation is not predictable
enough to be used as a basis for the fee of the consultant or professional. In this event, a
fixed fee may be negotiated for the design portion of the work based on a depart-mentally-
approved estimate made before working drawings are begun. The fee applicable to the
construction supervision phase should be based on the construction contract price.
9.8.6 Retainer. A stipulated amount is paid at regular intervals. This method is used
when the services will be required at intervals over a period of time, such as during
prolonged litigation and other special advisory services. The retainer is merely to ensure
that the services will be available on demand. The fee for the actual services is based on
one of the methods described above.
9.9 Overtime
Overtime will not apply to consultants and professionals paid per diem, unless the contract
provides it and it is specifically authorized by the contracting authority. Compensation for
actual overtime worked by the staff of the consultant or professional, as authorized by the
contracting authority, must be based on payroll costs for normal working hours plus the
applicable overtime premium. The multiplying factor for overhead must not be applied to
the overtime premium.
9.10 Expenses and disbursements

Normally the consultant or professional is reimbursed for the actual cost of direct
out-of-pocket expenses or disbursements incurred during the course of work as stipulated
in the contract and subject to the prior approval of the client.

Now-a-days clients want results. Moreover some product companies are diverging into
consultancy or sometimes a consulting firm has a diversification strategy. Under both
circumstances, the equity participation is there where consulting firm becomes a consultant
to its subsidiary and have equity participation. Often in PSUs such phenomenon is
common. For example the government gets a dividend from PSUs , or say Airtel has
equity in Airtel Software.

Price of exceptional expertise

This may be required out of a particular assignment when some expert is to be hired and
firm goes normally for an external expert and makes a special provision in the agreement.

Current trends in the Industry are quite challenging ,as far as charging of the fee is
concerned. The trends in Management consulting business are changing . Clients are
getting more inclined to linking the fee to the performance parameters, which are
predetermined and predefined. They prefer to offer a specific percentage of the gains
expected to be achieved. And the payments release is linked to various predefined
milestones . You achieve them to get the payments.

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Some clients ,particularly the small companies, even prefer to offer part of the fee in the
form of shares of the company ,in addition to some minimum lump sum figure. However
,this is not a very popular option.

The Government clients prefer the per diem mode of payments .

Project /Engineering consultants normally offer a percentage of the total project cost as
their fee. When the project costs are a suspect ,a cost plus a block percentage is offered to
the consultants .

In technology transfers ,a fixed up front fee, which is normally pretty high , is offered along
with a royalty fee linked to the product sales.

9.11 What a bill should have?

Often consultants who are single owner firm or are working from their apartments do not
know or in casualness are having no information /knowledge what should be given in
raising the bill to the client. Or sometimes while making the contract agreement, bill format
is required to be properly designed.

For convenience, we are giving detailed information about what is to be contained in the
bill. These are in general and normally contained in the bill.

Information to be provided in a bill

Bill No.
Period covered
Services provided (listing, dates, volume or work by each consultant)
Fee rates and total charges.
Expenses billed separately from fees
When payment is due
How to make payment (Currency, method of payment, account number)
Whom to contract for queries
Date of expedition of the bill
Name and address, telephone and fax numbers of the consultant
Signature and courtesy formula

9.12 Evaluation of Proposals

The most important is how to evaluate a proposal i.e. if three firms have quoted their
proposals how a client should evaluate these.
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For example. Consider two bids (i) Technical weight age = 60%; (ii) Financial weight age
= 40%.

Suppose three firms A, B and C have quoted rates as 120, 118 and 130 lakhs respectively
and the technical marks given by the Committee are 85, 78 and 90 based on some
predefined technical criteria. Here the client will have to do the calculations as given below
:

Financial Bid

Proposal Cost Equivalent Cost Weighted Eq. Points
A 120 100/120 100/120 X 40 = 33.3
B 118 100/118 100/118 X 40 = 33.9
C 130 100/130 100/130X40 = 28.57

Technical Bid

Proposal Evaluation Points Weighted Eq. Points
A 85 85 X .6 = 51.0
B 78 78 X .6 = 46.8
C 90 90 X .6 = 54.0

Total Points/Score

Proposal Total Points/Score

A 33.3 + 51.0 = 84.3
B 33.9 + 46.8 = 80.7
C 28.57 + 54.0 = 82.57

So A is the winner here as his proposal is the most favourable for the clien
9.13 Marketing Policy Considerations,while defining Overall fees

While defining the overall fees and charges to a client during marketing, there remains
various factors and rational which need to be taken into account. Some of the typical are
briefly discussed are as:

Normal fee level this fees should be calculated by the consulting firm, on the
assessment of the project, typical consultant-efforts required, what should be the
fees charged for the required consultants-efforts.

Fee charged by competitors another way to offer or market the consultancy
services, with the services charges at par with the fees charges by the competitors.

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Fees for different market segments another aspect for proposing the fees can be
deepening on the industry to industry, or client to client, sometimes it also varies
from geography to geography or state to state.

Promotional Fees consultancy firms seldom take marketing initiatives just to
entry into a segment or organisation or enterprise or government agency. Using one
time promotional fees can build some long term relationship with the client.

Subsidized Fees Similarly, consultancy firms can provide consultancy services at
subsidised or discounted fees, in order to restrict the competition entry into clients
account; this may be based on the prevailing marker rates in a market segment, but
the proposed rates can be below the consulting firms fees /salary package. The
subsidised fees can also be on the also be proposed based on clients requirement or
recommendation.

Fee determined by clients in some typical cases, clients has certain estimates for
the required man efforts or in some cases they can have limited budget; so
accordingly the consulting firm needs to accept the fees structure or fees payment
along with payment terms.

Congruency Of Fees With The Consultants Image this is one of the factor where
consulting firm offers / market their services as per their image; their market value;
various clients perception; for e.g. the consulting firm which has global presence,
bring value & best practices from world wide consulting exposure for a client
depending on the nature of consulting assignment. Such global presence also helps
its clients in minimising their risks and able to get the best practices, which have
value associated with the consulting services.

Other essential factors to be kept in mind while offering or proposing services to the client
are as:

Fair-play in fee setting & billing consultancy firms should ensure that fees should
be as per the services which are getting offered to client. There should be value
underlying the services which a client deserves once he / she gets the services from
consulting firms. The fees / charges should be reasonable as per the required
consultant efforts for the project. Similarly, billing / invoicing should be clearly as
per the terms & conditions of the consulting assignment, on the basis of the pre
accepted consulting-hours rates / fees. Consulting firm should maintain high degree
of professional aspect from marketing to execution to billing. E.g. if the efforts put
on by the consulting firm were less than the proposed one, firm should raise the bill
as per the actual ones.

Communicating fee to the clients consulting fees should disclose all the billing
heads to the client in their proposal, and once the fees & other terms are accepted
should be adhered for the particular assignment. The billing heads such as
consultant-hours, TA, DA, travelling, boarding & lodging, communication,
printing, service tax, etc should be clearly communicated to client.
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Overcharging as consultant one should ensure that billing or invoicing done
should be reasonably correct and should not be piled up above the actuals
(consultant efforts put in) to increase the revenue.

Double billing this can be explained similar to above.

Price of exceptional expertise

Towards value billing

9.14 Let us look at some practical examples to show how consulting companies
develop their financial Models for ensuring profits by managing various costs by
developing and using standards.

a. Financing Model of the Consultancy Company ABC Co.

All businesses have to be economic activities and consultancy service is no different and
hence, should generate enough revenue to sustain in the long term. In order to understand
the financial model, it is important to know what the costs are and how revenue is to be
generated.

Costs
In ABC Consulting Company, like in any business, three types of cost are associated with
operations:

Variable cost
Semi-variable cost, and
Fixed cost

The financing pattern of consultancy organisation is significantly different to that of a
manufacturing organisation. In manufacturing company, large capital investment is needed
for acquiring land & building, plant & machinery, other equipment, inventories etc.
However, in consulting, all such capital expenses can be done away with as there is no
plant and equipment and large offices are not needed. Its main assets are the consultants &
associates.

As explained earlier, the cost can be categories into variable cost and semi-variable one.
To explain, in order to sustain the business, it is essential to bring some minimum
personnel and consultant on board; where as a large pool of consultants' can be created
through networking. This not only will keep the fixed cost down (due to permanent hire)
but also allows the business to utilise the available talent pool to the maximum. In case of
large assignments, additional consultants can be hired (semi-variable cost) easily.

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We have in our organisation Principal Consultant (Partner) and then associates. These are
full time employed in the company and form part of apprx 25% of the cost. Others
consultants are drawn from the networking pool and are drawn according to the need.

Other major costs associated with the organisation are travel and communication expenses
and often billed to the client based on the clients assignment.

Fee

Since our organisation is a Chartered Accountancy organisation, it is bound by certain
guidelines issued by the Institute of Chartered Accountants of India. The Institute has
drawn certain basic minimum standards for charging the fee and it is not advisable to
undercut the fee standards else it may invite disciplinary action. Keeping in view these
issues, our organisation charges fee based on the following methods:

Directly chargeable cost such as direct supervision, guidance and support costs
Indirect costs- such costs are general administration, marketing, promotion etc and
are not charged to the clients but while fixing fee for assignments, are kept at the
back of mind.
Promotion may take shape of seminars, lectures and as such is not billed specially
to any client.
Clients are generally charged based on time spent on the assignment and is based on
best effort basis as far as time is concerned. The cost of senior consultants,
associates is arrived at based on their involvement and then per hour cost is billed to
the clients.
In assignments where the time is quite uncertain, such as handling of tax cases or
merger and acquisitions, the fee is generally charged on certain percentage basis or
on lump-sum basis.
Since, we also undertake assignments on retainership basis, a fixed monthly fee is
also charged from certain clients.

The company has devised the policy of generating at least 40% profit to each assignment
and each consultant is expected to generate revenue to the extent of 5 times their cost.

Even though there is lot of competition in CA firms, but due to the guidelines issued by the
Institute, firms generally do not indulge in undercutting, even though the fee charged by the
competitors is always kept in mind

In all it can be concluded that the fixed cost is generally kept at 25% level of the total cost
and revenue is generated at least 5 times the cost of each consultants and associates.

This strategy has helped the company to stay afloat over the past 10 years and has
generated sufficient revenues continuously.

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b.Financial Model for my Company

The financial model which I would like to develop for my company will commensurate
with my marketing policy and the aim of my company in terms of profitability and
services. We will develop a model where we can calculate the cost and profit on individual
assignments basis.

We will first identify which of the activities are directly chargeable (Direct cost) and which
are indirectly chargeable (Indirect Cost).

Direct cost of any assignment are consultants cost (salary), traveling cost and any cost
which is directly associated to that particular assignment.

We will create the database of direct cost per hour per consultant and total available man-
hours of total consultants in the firm. This is calculated by dividing direct cost related to
particular consultants by possible available consultant hours.

We calculate the total indirect cost like general management & administration, marketing,
promotion cost, research cost, training cost etc.

Then we will calculate the approximate indirect cost per hour by dividing total indirect cost
by number of possible consultants hours available.

Then we will calculate the total consultant hours required for the particular project. This
will give us direct cost related to that project. We also have the indirect cost per hour of
consultants. This way we can calculate the total cost of project. We add margin taking into
several factors like, account possible gains of client, financial position of client, Criticality
of project to client & relationship with client. The aim would be to generate remuneration
for the services provided by our company and to have a substantial marketing share.

But in todays competitive World we cant fix the profit directly, so if required I will
change Prices, depends on the market, the competitors, and the market conditions etc. I will
like to fix it to 40 % of the total cost as profit. So profit is fixed. Cost is the only variable
factor in this pricing scheme, so my aim would be to Control COST. I can also go for
association ship with other consultants like project based fees etc. The aim should be to
transfer the variable costs into the fixed costs. This is because fixed costs are to be incurred
whether the company is making profit or not. Once the fixed costs are more, the aim now
would be to keep it to a minimum. The two thumb rules are:

(i) Thumb Rule 1
Fixed Cost to a minimum
Consulting Cost 35 % to 50% of total revenue

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(ii) Thumb Rule 2
a Available Man Days or Man Hours
b Sold Man Days / Man Hours (engaged)
b/a >= 85%

This means irrespective of profit or loss of the company, my consultant should be engaged
for 85% of the time. These are few important financial policies I would strictly implement
in my company.

c. Develop the finance model of your company PokayOkying profitability.

In any organization one of the key objective of the operational management & control is to
monitor operations and prevent event that could affect the efficiency of the operation or
lead to crises. The two basic tools being utilized by the operational management are:

1. An operating work plan
2. An operating financial budgeting

The operating plan reflects the firms strategies chosen and detailed plan how those
strategies would be implemented in forthcoming year.

Like in my organization (Management Services Group, Sahara India Pariwar) workplan
includes
The volume of the consulting is mainly include TQM Solutions, Management
System Certification facilitation etc in various divisions of Sahara like Housing &
Infrastructure, Airlines, Products etc.
Continuous research and development is followed in order to keep updated us of
standards available in various other fields like Call Centre, Hospitals and proposing
to concerned division.
We undertake training for the efficient implementation of the systems
We encourage further studies also to enhance the efficiency & quality of
consulting.
We have strong networking with national & international organization.

The operating financial budgeting includes all the expenses the firm is expected to incur
and to fix the projected income at a level required to cover expenses and ensure an
adequate profit. In case the budgeting is not balanced then we should review the
operational work plan. It includes the structure of the expenses that includes the cost that
may or may not directly related to particular assignment to the client.

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The profit of the consulting firm is calculated as:

Profit = Selling price of the product (SP) Cost

Here the cost includes the setup cost and the operational cost of consulting and Selling
price is what is being charged from the client. A good management decides the profit
margin from 15- 20%.

Since price depends on the market, the profit is directly linked to the cost. To ensure
adequate profit, cost requires budgeting. Budgeting, which includes examining workplan,
planned expenditure, costing and pricing (SP).

We are not charging any price for the consulting as it is inhouse but we do have budgeting,
costing plan.

How to control the cost depends on the consulting organizations strategic choices. Here is
where the consulting firm needs to look at the fixed and variable costs.

The various costs involved in a Management Consulting firm may be

Salary of the consultant
Salary for Administrative and Support Staff.
Benefits on professional salaries
Marketing and promotion expenses
Rentals and utilities
PCs, Printer, Scanner, Furniture, Materials, Stationery
Communication like Phone, Fax, Modem etc
Taxes, overhead expenses.
Library, Subscription, Membership fees
Staff Training and Development
Other expenses (Travel, entertainment etc)

The cost of the Management Services Group is not much as its services are utilized
internally. There is operational/ Overhead cost involved.

In any consulting firm, the best strategy for profit making is to keep fixed cost to
minimum. In good consulting firms the cost varies from 30% to 50 % of the total revenue.
Or engagement (against available mandays) of the consultant to 85% Plus and Research
and Development cost of total revenue to be 15%

It is also advisable in order to make the firm full proof, consulting cost should be kept
minimum by adopting strategy of capacity utilization through networking.

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Slide 1

Consultancy Practices Consultancy Practices
Financial Costing model of Financial Costing model of
Consulting Organization Consulting Organization

Slide 2

HOW DO THE ORGANIZATIONS ACHIEVE THEIR
PURPOSE ?
By producing such goods and services
which are needed by the society
and
for which there is a CLIENT

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158

Slide 3

The Competitive Environment
Threat of
New
Entrants
Rivalry Among
Existing
Competitors
Bargaining Power
of Customers
Bargaining Power
of Suppliers
Threat of
Substitutes
Porters strategic analysis model (five force model)

Slide 4

The World is Moving So Fast These
Days That The Man Who Says It
Cant Be Done Is Generally Interrupted
By Someone Doing It
Elbert Hubbard

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159

Slide 5

Fundamental Competitive
Strategies
Di f f er ent i at i on St r at egi es
Di f f er ent i at i on St r at egi es
I nnovat i on St r at egi es
I nnovat i on St r at egi es
Gr ow t h St r at egi es
Gr ow t h St r at egi es
Al l i anc e St r at egi es
Al l i anc e St r at egi es
Cost Leader shi p St r at egi es
Cost Leader shi p St r at egi es

Slide 6

Basic Strategies of use
Lower Cost
Save in production or efficiency
Differentiate
Self from competition; niche market
Innovate
New way of doing business
Promote Growth
Capacity to produce more or global markets
Develop Alliances
To improve efficiency or get new business

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160

Slide 7

Strategic Uses
Improving
Business
Process
Promote
Business
Innovation
Locking in
Customers
and Suppliers
reduce costs
of doing
business
improve
quality
link business
to customers
and suppliers
create new
products or
services
Enhance
Efficiency
Create New
Business
Opportunities
Maintain Valuable
Customers and
Relationships
St r at egy
Rol e
Out c ome
Cost

Slide 8

THE PURPOSE OF ANY FIRM IS THE PURPOSE OF ANY FIRM IS
REVENUE - EXPENDITURE > OR = 0
TO EARN PROFIT
OR
TO GENERATE SURPLUS
TO SUSTAIN ITSELF ?
TO PROVIDE BENEFITS TO BENEFICIARIES

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161

Slide 9

WHAT ABOUT THE COMPETITIVENESS?
COMPETITIVENESS IS A FUNCTION OF?
PRICE

Slide 10

THE CONCEPT OF PRICE
PRICE
SUPPLIER CUSTOMER
PERCEIVED VALUE
FUNCTIONAL + ESTEEM
VALUE VALUE
COST + PROFIT
PRODUCTION + DELIVERY
COST COST

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Slide 11

Profit =Income - Cost
Price =Cost +Profit
In a competitive environment
Profit =Price - Cost
Market / customer
decides the price
To earn profit
continuously,
we need to control/reduce
cost
Financial Model Financial Model

Slide 12

Profit =Price - Cost
Rs (L)
Profit
Fixed Cost
Variable cost
Sale
price
Sale price =VC +FC + Profit
Minimize
Fix your profit (e.g. 15 - 20 %)
Pass on benefit to consumer to
compete with market if you are
able generate more then you
specified
Financial Model Financial Model

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Slide 13

To sustain / increase profit it is important to control/decrease
Fixed & Variable costs.
Consulting cost can vary from 35 % to 50 % of total revenue.
Improve productivity :
- available man-hours with in org (A)
- Sold man-hours (B)
Productivity : B/A x 100 ( Should not be less then 85 %)
Identify wastes & reduce to minimum.

Slide 14

Components of COST
VARIABLE COSTS :- The costs that vary with Volumes
USAGE VARIANCE,
WASTE ( Time, rejected proposals etc)
CONSUMABLES,
POWER AND FUEL (Energy)
FIXED COSTS :- Costs that are not dependent on Volume
REPAIR & MAINTAINENCE,
EMPLOYEE COST,
OUTSIDE SERVICES,
TRAVELLING,
COMMUNICATION,
PRINTING & STATIONARY,
DEPRECIATION.

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Slide 15

Cost - Reporting/Tracking Format
2005
ACT 2005 OP-2005 Var iance ACT 2005 OP-2005 Var iance
Rs. in Lacs Rs. per Pr oject
Cons. Proj ects (nos)
USAGE VARIANCE
WASTE COST
CONSUMABLE
TOOLS
LIGHT &POWER
VARIABLE COST
REPAIR &MAINTAINENCE
EMPLOYEE COST
DEPRECIATION
TRAVEL
OTHER OVERHEADS
FIXED COST
CONVERSION COST
Year ti l l Month
Tracking - Monthly
To control & improve it is important to track the cost periodically. Actual Vs Targeted
( as decided in the beginning of the year while setting the objectives).
Made mid term corrections to bridge the gaps.

Slide 16

FINANCIAL ACCOUNTING FINANCIAL ACCOUNTING

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Slide 17

ACTIVITIES - FINANCIAL ACCOUNTING
MONTHLY COMPILATION OF THE BALANCE SHEET
AND PROFIT & LOSS ACCOUNT WITH SCHEDULES.
FIXED ASSET TRACKING
PAYROLL MANAGEMENT.
WORKING CAPITAL MANAGEMENT.
MONTHLY BANK RECONCILIATION
PREPARATION OF AUDIT SCHEDULES

Slide 18

BALANCE SHEET
A BALANCE SHEET is the statement of an entitys ownership's and debts at a
given date. It shows the Financial Worth of the Entity at that date.
Bal ance Sheet as at <Date> Current Previ ous
Date Date
SOURCES OF FUNDS
Shareholders Fund
Loan Funds
APPLICATION OF FUNDS
Fixed Assets
Investments
Current Assets,Loans & Advances
Less
Current Liabilites & Provisions
Net Current Assets
Miscellaneous Expenditure
Porfit& Loss Account

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Slide 19

PROFIT & LOSS ACCOUNT
A PROFIT & LOSS ACCOUNT of an Entity for a given period shows the Incomes
& Expenses and Gains & Losses of that entity during that period. Structure of a Profit
& Loss Account:-
Profi t & Loss Account Current Previ ous
for the year ended <Peri od> Peri od Peri od
INCOME
EXPENDITURE
PROFIT/LOSS
Before Depreciation & Taxation
DEPRECIATION
PROFIT/LOSS
Before Taxation
TAXATION
NET PROFIT/LOSS
carried to Balance Sheet

Slide 20

NOW TO MOVE AHEAD
ASK AND ANSWER THESE QUESTIONS
Where is your organization today?
Where do you want your organization to be?
How do you plan to get there?

Back

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Chapter 10

Consultant - Client relationship

Objective

To understand importance of consultant - client relationship
Problems associated with having healthy consultant-client relationship
How the client can be involved or integrated into the process
How the client interest can be retained

10.1 Introduction

The basic factors or constituents of consulting process may be listed as

Need
Consultancy
Consultant
Client
Advice

Unless the consulting process satisfies all the above factors, the process will be called
deficient.

You will note that out of five factors, two viz. client & consultant are physical while the
other three are intangible. You will agree that the two physical ends are bonded by
intangible factors. While the client is responsible for needs, the consultant is responsible for
advice but for consultancy both are responsible. The simple process is apparent only. In
practice, the process is complex and the series of activities between client, his needs and
consultant and his advice take very complex forms. Some times it may happen that whole
of the consultancy process is terminated without fulfilling objectives.

You may have come across many such situations. In this article, we have kept our objective
as how to improve this consultancy which we call as consultant client relationship. What
are the problems associated with it? Why at all the problems are there? What methods we
can use to build healthy relationships thereby improving the consultancy as a profession.

10.2 Need of relationship

Consultancy ought to have client and consultant. Often consultant is external though in
some cases he can be internal also. But in such cases, he may be some process expert or
may be expert in a particular area and is external to the needs. So consultant is broadly
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external to the organization and client is internal to the organization. The client has an
objective which he has formalized in form of needs. The consultant understands the need
and works on it and suggests a solution. The solution some times is to be implemented also
by consultant or sometimes by client. Now here we will refer to two terms Asymmetric
information and expectations.

Asymmetric information: The client knows his needs better than consultant. The
consultant knows his methodology and solutions much better than client. Thus there is
asymmetry in the information contained by both.

Expectations: Client has some perceptions or some internal needs. He may also have some
solution conceived by him alone. He after expressing his needs wants the solution which
should be better than his own perceptions. We call this expectations. The consultant has to
fulfill these expectations.

If we further classify, the needs have associated asymmetry and advice has associated
expectation with it. The consultancy which signifies relationship thus has to take care of
both the issues.

It will be now easier for us to establish that the relationship between client and consultant
must address the two issues.

10.3 Problems in client consultant relationship:
Though there can be enormous problems associated with client consultant relationship but
broadly they can be associated on two categories. The basis for this category is
Asymmetry & Expectations.

10.3.1 Client may have complaints viz.
No new solution has been given
This solution does not suit us
The project has run out of time
The problem has not been understood by consultant
We can not implement the solution
We can not pay him now till this is provided by consultant
The consultant appointed does not know the job
We do not have faith in consultant
Not having any original ideas and produced recommendations which were either
impractical or otherwise unacceptable.

On the contrary

10.3.2 Consultant may complain

There is no body to give us information
The relevant information has been changed
We are dealing with the wrong group
The scope of agreement does not cover this issue
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The expectations are too high
They are interested in report only
They want solution in different manner
The client has not understood our solution
Client lacked the management skills or courage to implement the recommendations
contained in the report.

10.3.3 The consequences of this can be

Rejection of report
Arbitration
Termination of contract from both sides
Rescheduling
Delay
Cost overrun

All these have bitterness and frustration associated with it.

10.4 Why Client-Consultant Relationships Go Awry?

Most client-consultant relationships have problems for largely non-technical reasons,
including:

Lack of effective communication about how the project will proceed
Setting expectations too high or too low
Lack of follow through on small yet important details
Under estimating project complexity or scope
Failing to understand user requirements

It may be instructive to identify the major pitfalls so that both parties can edge around them
- or at least recognize when they have fallen into them. Like most relationships, that
between a consultant and a client will be most fruitful (and long-lasting) if it is based on a
degree of trust and mutual respect

Thus it is utmost essential that an effective, progressive and amicable client consultant
relationship is evolved. There can be more attributes to this relationship. But we
specifically want to emphasize here that

Effective because it helps to achieve objectives.
Progressive because it improves consultancy as a profession and thus results in
growth of client and consultant.
Amicable because it improves productivity and keeps both enthusiastic.

Check your progress

Why the client consultant relationship is important?
What is asymmetry in information?
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It is the expectations of client which makes consultancy a success or failure. Justify
this statement.

10.5 Improving the consultant client relationship

We know the basic saying - success has many fathers failure is orphan.

The same is truth with consulting also. When every thing works smoothly, both consultant
and client try to take credit. But if some problem arises, the blaming work starts. Often
consultancy works in dichotomy manner either it is win-win or loose-loose. But it is
required that consulting assignment should be made successful and for this prime
responsibility lies with consultant. It should be endeavor of consultant to build the
relationship in such a manner that the complete assignment works in effective, progressive
and amicable manner.

There can be numerous ways to describe the improvement in relationship depending upon
experiences of consultants but here we will try to elaborate in basic manner.

Consultancy consists of five major steps or phases which can be described as below:

10.5.1 Entry phase

It is the phase when consultancy begins. The consultant here has a keenness to get the
assignment and client may be keen to give contract, may only be exploring the possibility
of giving or may be evaluating. In this phase a consultant is keen to build the relationship
but clients attitude is hidden. It may happen that client may not even explicitly tell the
problem because he is not sure what the consultant may ask for fees.

Thus we see there is asymmetry as far
Problem/scope of contract
Assignment
Fees

The expectations are more of consultant but client has fewer expectations at this stage.

Now here as a consultant it is important to understand
What is the assignment all about?
Is the client in desperate need?
Is it a rework?
Is it only resource consulting or implementation also?
The client who is at front end holds how much authority?
Does he have the competency to take this assignment?
Does his schedule permit this?

Here it may be required that consultant has to brief about his firm and past clients or
assignments. A consultant must not be keen to take the assignment for sake of work. He
must not have in his mind to just pass on the work back to other fellow client. What is more
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pertinent here is to understand the client and his urgency for the consultancy. He must be
able to gauge the requirements with his capabilities, resources and schedules. Here the long
term relationship is to be seen. It is not wise to take a consultancy work in haste and then
regret later. The consultant must see that the image goes before we go anywhere.

It was told that consequences of entry phase are contract agreement. The details about
consultancy agreement are told in other units but you must remember that contract should
be clear from scope, time schedule, role of client, what is not covered in contracts and
deliverables. These should be brought out explicitly in the agreement.

Also the entry phase has negotiation as main part. The location for negotiation plays an
important role. Can you think of how?

Remember, here the basic aim is not to get consultancy assignment but to get information
from client whom is to be evaluated in deciding to go ahead with assignment or simply
ignore this. We here suggest that it is better to say no to the work in case it does not suit
any of your requirements rather than accepting and not completing or ending in dispute. As
a consultant you need to know where the line is between being 'unprejudiced' by earlier
experience and not having the technical knowledge to meet the client's requirements.

From client side

As a client, one should not try to mislead the consultants by concealing his own views but
also not to give them enough information to carry out the project. Before engaging
consultants, he may also need to consider what he will do if they come up with a
conclusion which he will not welcome.

This amounts to a degree of honesty between consultant and client at the start of the project
which, although not unusual, if absent will make it pretty difficult to achieve a satisfactory
outcome from the project.

DEFINITIO
N PHASE
Role of
Consultant
Institutional
Framework
For Delivery
Assignment Specifics
Technical, Financial &
Contractual
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Its equally important for the Consultant that the Client establishes an appropriate
institutional framework for executing the Consulting assignment. This involves deciding
who should lead the effort from the Client side and what the monitoring and coordination
mechanism should be. Further, it is important to ensure that all affected and influencing
parties (other suppliers, subcontractors) are represented in the proposed framework with
well-established responsibilities and a suitable coordination mechanism.

10.5.2 Diagnosis phase

This is the most important phase from relationship building point of view. Here it is
necessary that consultant and client both should open themselves.

The diagnosis phase is where client expectations have to be judged by consultant and all
the asymmetry should be finished from here. We can further divide this diagnose phase in
the following way as exhibited in the diagram.

Approval Explore
Record
Diagnosing
Entry phase
Role of
Consultant
Role of Client
Institutional Framework for Delivery
Assignment Specifics Technical, Financial &
Contractual
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Explore: Here as a consultant it is necessary to know What the problem is? What the
problem is perceived by client? It may happen that client may not be aware of the problem
also. He may only tell the incidence for which he wants solution. The consultant should
also see whether the front end person is authority to define the problem. Practically it
happens that consultant front end representative and client side also front end
representative discuss the diagnosis. It should be remembered that diagnosis phase is most
important phase and here in no way delegation is to be done. If at all it is done, both higher
authorities should be informed.

Define: the explored problem as formulated by consultant should be defined and explicitly
recorded. The matching with scope of work should also be seen. Practically it may require
that diagnosis phase call for major changes in the scope of contract. Sometimes full facts
may not have been informed by the client or representative from client and consultant both
sides nay have changed. It must be ensured that writing on a simple piece of paper and
taking approval helps the relationship.
When requirements are clearly documented, changes can be negotiated more easily. When
the scope of work is determined, it is much easier to build terms of reference and
deliverables easily.

Approval: the taking of approval at this stage will help you to understand
Who holds the key power for making decisions from both consultant and client
side?
Who has got main interest in success or failure of assignment?
Who should be informed?
Whose direct collaboration is essential?
Her most important is joint definition of problem, deliverables, achievable and
authorization.

10.5.3 Action plan

This is normally the phase where consultant works in his office or outside the premises of
clients office. This is the phase where for some time no contact is there. Here consultant
has to ensure that relation ship is maintained and on short power cuts are there in the
relationship. The absence of information about consultants effort to the client creates
confusion and bad impressions. The consultant must not forget that it is easier to get a bad
image and difficult to loose the bad image. A routine discussions or formal visits to client
office are kept on. The continuity in consultancy plays important role in impressing upon
client. This will also help in assessing the keenness of client inter alia the atmosphere in
clients office.

It is also necessary that the consultant should not ignore any of resource people. The
consultancy success depends not in maintain the relationship with top management but also
with all those who will be required in seeking the information or with whom discussion is
to be carried out for the problem or to whom the first hand alternatives will be discussed.
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10.5.4 Implementation
It is the phase when consultants merges with the client organization and put his advice into
working. It is in this phase where client and consultant relationship built in the past plays
important role. There may be hidden enemies who may have vested interests and do not
want solutions to be implemented. e.g. in government offices and PSUs union play a havoc
role in implementation. There may be manhandling to resistance. The consultant has to
build its intimacy with the client such that he is protected. He some times has to device a
special methodology to implement his plans also.

Client on the other hand has to see that implementation is successfully done. Because it
may happen that if consultant refuses to work in hostile environment the other consultant
may also refuse to work. Similarly if some reengineering is to be done with reference to
processes than consultant must tell all possibilities and repercussion that for how many
days the work will be affected. It is also noticed that solution is proposed by an expert with
in consulting firm and implementation is done by some other one. In this case it is
necessary that consultant representative should be expert one and must be thorough with
the action plan. This will enable quicker and amicable implementation.

10.5.5 Termination

The termination is the last phase of the current consultancy assignment on which consultant
is working but is the beginning of new opportunities. You must remember that one gets
signaled for more assignments when a hand shaken is done in the end. The evaluation of
complete work is there with in the eyes of top management to whom good bye is said. The
consultant can very effectively terminate the contract. It can be a

Formal meeting giving thanks
Praising all those who helped or even associated
Also explaining the technical expertise which as consultant you have
Public acknowledgement e.g. in meeting and giving feedback form on the spot
helps in free and clear opinion.
Client classification
Contact person
Process experts
Financial resource
Data resource person
Top management
Sponsoring person
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The consultant should not be afraid of evaluation, he should see this as an improvement
step or assessing his strengths.

10.6 Some other important points for consultant client relationship
Collaboration more important than contradiction
Motivation more important than ----
Explicit more important than implicit
Cause to problem more important than problem
Accepting mistake than hiding mistake
Unambiguous more important than ambiguity.

10.7 Turn over of staff

This is major problem associated with consultancy. The staff from both sides gets changed
frequently. Some of the tips for this are given:

Try to keep key staff on the project for as long as possible.
Plan time, as part of the project budget, to bring new project staff members up to
speed.
When turnover happens, both sides should work hard to make sure new players
become acquainted with each other.
Both sides should remember that the natural tendency is for either side to severe the
relationship when turnover occurs. In some cases this may be appropriate. In other
cases, it can cost either side significant time and money.

10.8 Consultant participation

Some myths which will help you to improve relationship

The Consultant is entirely responsible for an assignment
Clients often assume that once a consultant is contracted for an assignment, they will not
have to do anything. Everything will be taken care of for them. Some consultants even like
to give clients this impression. While this might be the case when the client buys a car,
when the client buys a well-tailored custom application, the client does have some work to
do. In addition, if the project fails, it is not just the consultant who is at risk. The client is at
a great risk as well. With this in mind, here are some tips for clients:

Ask your consultant for resumes of the people they want to put on the project.
Good consultants hire good people and will be glad to show off their expertise. If
the expertise is not up to your standards, tell the consultant.
Review your consultant's methodologies, project tracking systems and defect
removal and tracking process. Good consultants have well documented well
entrenched systems in these areas.
Find out what industry leadership expertise your consultant has. Have they
demonstrated the necessary expertise in the product or service they advertise?
Check consultant references carefully.
Have a close look at other pieces of software the consultant created.
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Get an understanding for your consultant's vision for the future. Does their vision
make sense to you? Does it seem aligned with your vision (if you have one)?
Get a look at the consultant's standard contract. Are the terms of the contract
acceptable? While consultants and clients can usually negotiate contracts that are
mutually acceptable, sometimes you might find a show-stopper detail in a contract
that the consultant will not alter.
Granted, finding a good consultant means that you won't have to verify every little
detail. Building a successful, long-term relationship requires this "trust and verify"
effort early. Once both sides understand each other's skills, the relationship requires
far less maintenance.

10.9 Relationship Management:

The Client-Consultant relationship is a lateral relationship based on equality and
partnership with each one playing its pre-defined role. It needs special attention to ensure
that the relationship does not degenerate into a boss-subordinate relationship. Several
Clients are accustomed to a command and control setup and are uncomfortable in this kind
of relationship, hence the onus of managing this relationship throughout the assignment
is on the Consultant. Consultants have to demonstrate sincerity, trust and professional
competence in early interactions with Clients in order to win their confidence and to be
treated as partners in the relationship as differentiated from the other contractors, suppliers,
outsourcing parties or external auditors. Once the relationship is established, Consultant
must possess sufficient discipline and self control to avoid leveraging the Clients
dependence to arrogate the power of the Client. Consultants need to have authority with
Clients and not over or under them.

11.10 Some practical tips to check healthy relation ship

Right relationship is in place is when either of Client or Consultant is equally
comfortable in shifting appointments, if they are not 100% prepared for the task
defined for the meeting.
A further sign of a healthy relationship is that the Consultants do not obediently
(almost automatically) accept every demand made, nor do they expect Client to
behave in that manner.
While preparing minutes of the meeting after every interaction, Consultants may
give some thought to the behavioral and emotive aspects of the interaction in order
to pick up any early signals of shift in balance.

Managing the client-consultant relationship requires diligent work. When clients and
consultants communicate frequently throughout the all phases of the process and hide
nothing from each other, the relationship can be a good one. In addition, there is a big
benefit for clients if they can successfully manage this process and can lower project costs.
Consultants don't want to lose money and reputation on a project and they don't want to
spend "hassle" time with the client.

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If the client can arrange a relationship in which the consultant is guaranteed to make their
profit and the client is guaranteed quality, the consultant will be less likely to employ delay
tactics or more pricing to make back lost money on bad projects.

When the relationship is based on trust, both sides can streamline the communication
process and save resources that would otherwise be spent on screaming, yelling, accusing
and complaining. Consultants should also look at it from the clients' perspective. Clients
want solution that works reliably built on time, suits their requirement and is within the
budget allocated.

Both sides should remember that the vast majority of projects fail for non-technical
reasons. If both sides want to succeed then they should master the relationship management
which addresses three attributes viz. effectiveness, progressive and amicability.

In conclusion, there is really no magic formula which makes the relationship between
consultant and client work. It's all an ACT - based on Anticipation, Communication
and Trust.

Extracts of the article Critical Aspects of Client-Consultant Interface by Prof S
Raghavan /Vivek Soin

Management consulting is professional management, operating entrepreneurially, seeking
opportunities in the form of problems to solve. Inherent in the consulting process are very
sensitive and complex relationships with the client, development of an image or reputation
that inspires the client to seek the consultants professional services, an interdisciplinary
approach to management problems, acceptance of artificial time constraints on problem
solving even when the problems are vaguely and often incorrectly defined, and emphasis
on the individuals continued learning through exposure to a variety of management
problems

Generally the management consultants help the client by providing the services in strategic
planning, TQM, organizational restructuring and in functional disciplines. However, it is
the process of developing a trust based relationship with the client that is critical to the
success of the services.

Collaborative Approach towards Consulting

The examples given below have one thing in common Relationship. The former is
marked by its absence and the latter by its presence. The results are obvious. If the client
consultant expectations are not clarified, the client becomes very dissatisfied.

A consultant was hired by a large stereo equipment manufacturer to re-organize the
company. The company felt it needed to regear itself to meet new changes in consumer
buying habits and increased foreign-made competition. Organization functioned well
during the growth years because we developed a good product line and the market was
waiting for us. Now we are being hurt by a contracting market and not only is our
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domestic competition importing components from abroad but foreign competition itself is
invading this country. We need to shift gears both organizationally to cut our costs, and
functionally to meet the shift in consumer buying habits.

The consultant a greed with the need. After conducting surveys, and evaluating the
executives, he developed new production methods and techniques and submitted his report
all 104 pages of it, single-spaced. He followed this up with his final bill.

The client hit the ceiling. The report is fine, he said, only if I had the time to read,
digest and understand it. I thought the consultant would hold us by the hand during the
reorganization and follow-up on it to make sure it worked and to make adjustments where
it did not. By the time I get through reading this report, I could have done the job myself.
The report now remains in presidents desk draw, the company is out nearly $44000 and
the companys executives have very unkind things to say about consultants and consulting
(3)

I was hired by a company to help it acquire ISO-9000 certification. The CEO of the
company introduced me to many people throughout the company y and from the beginning
till end of the project, he never missed a meeting or training session. When the training
sessions were held, the CEO always introduced me, stayed for the entire session, and then
talked with participants informally following the session to assess how they felt about the
training. The company was able to get ISO-9000 certification full 9 months ahead of our
earlier expectation.

The client is most often under the impression that the act of hiring a management
consultant is the end of his managerial problems whereas the consultant should listen to the
client carefully and focus on the needs of the client.

Peter Block (4) suggest that consulting is a 50/50 proposition, which in other words means
that the consultant should also focus on relationship with client to achieve 50/50
respectively.

Stages of Relationships

To understand the complexities of client-consultant interface, there is need to analyze the
role relationships in the five stages of consulting suggested by Milan Kubr. (4)

1. Entry where both understand fully the objectives
2. Diagnosis where both agree
3. Action Planning where both collaborate
4. Implementation where client takes full responsibility for the results.
5. Termination where clients learn to do better after the consultant leaves.

Interface at Entry Stage

The principal of a consulting firm visited a glove plant. He had never before been in one.
Before going in he asked one of his senior consultants who had made the contact and who
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had toured the plant to name an operation. Thumb setting. How many do they do an
hour? About 120.

When he too was given the tour, he stopped at the thumb-setting operation, turned to the
companys vice president of manufacturing and noted, Humm, thumb setting. What do
you run an hour, about 120. This established him a an expert on manufacturing gloves.

A small tool manufacturer found his costs were excessively high as evidenced by the fact
that while his prices were competitive, his competition was making money. High costs, he
concluded, could only mean low productivity from equipment and / or personnel. His
profit structure had been keeping pace with the rest of the industry until a year ago. He
called a consulting firm heavily experienced in manufacturing. After seven weeks of
effort, the consulting firm, by re-vamping assembly lines, reduced manufacturing costs by
3.75. Within his field of specialty, the consultant apparently did a competent job. The
economics of the situation, however, were such that his bill $ 11,000, absorbed the first 16
months of saving. The client was not ecstatic over the results, especially since the resultant
savings did not really solve his problem.

The above situations have one thing in common, unsatisfactory interface at the entry stage.
In the first situation the consultant selection was based on the judgment by the client. The
second situation highlights the importance of preliminary problem diagnosis. The
consultant did just what he was told to do by the client, without searching for the real
cause.

Chip R. Bell (6) states that entry phase begins with either client, feeling some need for
help, contacting a consultant, though making contact with the potential client during a
search for new business. Regardless how the contact capable of providing help; or
consultant is initiated, of the entry of some person in anothers life brings to the surface
relationship issues which impact the quality and viability of the client-consultant
relationship. There is need to develop a trust based relationship. Building of trust requires
the consultant to be skilled in building relationship such that the client perceived hi a s
helper.

The Four Questions during Entry phase

Chip R. Bell defined the primary goal, during entry phase as predicting profitability of
the endeavor. Profitability need not be in monetary terms alone. Other examples of
profitability are improved performance, increased productivity, broader fame, larger
fortune, psychic satisfaction etc. Predictability is achieved in the minds of client /
consultant when they have found answers to at least four major questions representing steps
towards successful client-consultant relationship during entry phase of consulting. These
are:-

i) Why am I here ? It is struggle of the client to express the quality and
quantity of need and it is the effort of the consultant to feel a kinship with
that need and its source. It is step towards problem definition.

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ii) Who are you ? This question is an inquiry into role definition. The client
contemplates self role in the process to determine if its coupling with the
consultant will result in complimentary union. Likewise, the consultant
examines personal competencies against the demands for problem solution
to assess his / her likelihood of effectiveness.

iii) What is likely to happen? It seeks clarification on the goal to be achieved
and the means of expending energy towards that end. The consultant tries to
find the boundaries of the consultation whereas client tries to find the
dependency on the consultant.

iv) What will be the result ? It can be labeled as reward or tall clarification.
Both client and consultant try to find to gain out of their relationship. The
client seeks the greatest benefit cost ratio whereas consultant seeks
maximum profit for services rendered. The questions which client /
consultant need to ask are given in the table following.

Interface During Diagnosis

The diagnosis stage of a consulting engagement is important to both the consultant and
client. To consultant it is important as a means of learning what he needs to know in order
to shape an appropriate response strategy. Diagnostic process involves an in-depth study,
based on fact finding and analysis, and the change process gets initiated. Is the
fundamental change problem technological organizational, psychological?. If it has ll these
dimensions, which is the crucial one ?

What attitudes to change prevail in the organization? Is the need for change appreciated or
will it be necessary to persuade people that they will have to change?. The diagnostic
process identifies directions of change as also how to re-orient work. The consultant must
understand that this phase is sensitive, since it surfaces situations and persons causing
problems in the client organization. Developing an understanding of how to quickly move
to action planning is important. A skilful consultant would weave diagnosis into action
planning.

For effective diagnosis, a healthy relationship should exist between the client and the
consultant. Diagnosis is a fault finding assignment by the members of the clients
organization and can affect interface. The client consultant interface during diagnosis
entail:

Shaping Agreements

Some approaches that help in shaping of client-consultant agreements:-

Client and consultant agree on the intention of the diagnosis keeping in view the
necessary change for survival and growth of the organization.

The client and the consultant need to agree on how the diagnostic information will
be handled to meet the clients purpose and to satisfy all criteria of ethics.
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Empowering the client

It means helping the client to perform his function to the fullest extent, of his ability and
facilitating his growth as a person in areas which go beyond work. This is a crucial result
of successfully handling the relationship dimensions of the diagnosis. The advantages are
that it can substantially increase consultants value to the client and it enables the client to
execute his role in subsequent phases of consulting.

FOUR CRITICAL QUESTIONS

Why am I
Here
Who are
You
What is Likely
to Happen
What will be the
Result

Do I really need a
helper ?

What will be
expected of me in
this relationship ?

Will I be made
stronger by this
relationship ?

Is the gain greater
than the direct and
indirect cost

Client
Asks
Client

What would
happen if the
problem was just
ignored?

Does this
consultant focus
on the problem
and really care?

How do I
overcome my fear
of exposure or
loss of control ?

Will you assist me
in defining
problems by
testing my
assumptions?

Is this consultant
capable of
providing the help
I need ?

Is this a
consultant with
whom I can work
?

Do I experience
caring
compassion and
trust with this
consultant ?

Can you provide
the kind of
assistance I need ?

Is this effort
substantive of
cosmetic ?

In what ways
can a consultant
provide a sense
of objectivity?

Are my goals
measurable,
attainable and
verifiable /

How do you
intend to operate
?

Have I been open
and honest in
negotiating this
agreement ?

Should the
consultant be more
clear regar-ding
his/her rewards?

How do I
communicate if I
fear coercion or
consultant
dependence ?

How much will
this cost and how
long will it take ?

Client
Asks
Consultant

Have I been clear
in defining the
problem?

What additional
information can I
provide

For what will I be
responsible ?

How much energy
are your willing to
invest in this
agreement?

Are you willing
to have your
services
evaluated?

What feedback is
required to help
us assess
progress?

What from will the
result of the
consultation take?

What evaluation
criteria needs to be
installed now?

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182

Doest the problem
appear to be
solvable within
constraints ?

Why has this
client sought help?
From me?

How shall you
and I confront
each other when
required?

Does the client
have the power to
implement
changes?

Are you satisfied
with the goals
and
expectations?

Will I grow as
result this
relationship?

How will our
contract be
terminated?

Am I clear on the
contractual
agreement?

Why am I
Here
Who are
You
What is Likely
to Happen
What will be the
Result

Consultant
Asks
Consultant

Are my motives
for aiding ones
with which I am
satisfied?

How will
probable change
impact other
client systems?

Am I getting a
whitewash instead
of symptoms of
the problem?

How is the
problem currently
being assistance?

Who is the real
client and is that
client negotiating
?

Is this a client
with whom I can
work?

What are my
resources for
aiding the client?

What role will
you play in the
relationship?

Am I being set
up as scapegoat
or hatchet man
for the client?

Are the goals
clear and
achievable?

Is this client
capable of
revising the
goals if
required?

Can I depend on
you to assume
responsibility for
the outcome?

Are the terms of
agreement
realistic?

Have I been open
and honest in
negotiating this
agreement?

Will I be able to
give the client
feedback on the
relationship ?

Will I have access
to the organization
and information
required?
Consultant
Asks
Client
How is the
problem currently
being managed?

What result do
you desire ?

Who are the
others who will be
involved in the
consultation?

What resources
and information is
now available?

How shall we
deal with
confidential
information?

Are you
committed to
exerting the
energy required
for success
Can I depend on
your support
throughout the
relationship?

What are the
benchmarks to tell
us the agreement
is working?

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183

How long has the
problem existed?

Do you feel I am
the appropriate
person for this
role?

Are there other
client goals in
conflict with
consultative
goals?

How will our
contract be
terminated?

For empowering, the consultant need to do following

Increase client ability: Consultant needs to work in a fashion which increases the
clients awareness of what needs to be done.

Additionally, the consultant may help the client to acquire the necessary skills to do
what is required.

Increase clients motivation: It requires the consultant to learn the clients
personal needs and arrange positive rewards for taking appropriate steps.

Improve organizational system: The organizational variables can limit the
clients ability to perform to his/her fullest capacity so the consultant can help by
helping the client to clarify the goals, roles and reward system.

Handling of resistance:

The third step in accomplishing the purpose of the client engagement through the
diagnostic stage is the process of preventing and handling resistance. A major
consideration is who can resist what?. The resistor could be the client, the clients
followers or the consultant himself. The client or his followers can resist those changes
that deal with their beliefs and fears. They can also resist changes in the demands the
organization makes on them can resist the consultant altogether.

Resistance takes many forms, some of them very subtle and elusive. In course of a single
meeting a consultant can encounter a variety of forms. Peter Block Lists following forms
of resistance:

Give me more detail: The client keeps asking for finer and finer bits of
information.

Flood you with detail: The client gives too much details which may not be
relevant.

Time: The client makes the consultant to go ahead with the project but at some
time informs that timing is first a little off.

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184

Impracticality: The client keeps reminding the consultant that they (client) live in
the Real world and are facing Real world problems that is, access the consultant
of being impractical and academic.

Im not surprised: When the consultant finishes the study and submits it to the
client, the client typically express. Know it all attitude.

Attack: The client directly attacks the consultant with angry words, pointing
fingers.

Confusion: The client keeps claiming to be confused or not understanding what
the consultant has to offer.

Silence: The client give very little or no response to the consultant.

Intellectualizing: The client instead of deciding how to proceed, starts giving
theory about why things are where they are.

Moralizing: Moralizing resistance makes great use of certain words and phrases
like those people should. Should and they need to understand.

Compliance: The most difficult form of resistance to see complaint manager
who totally agrees with the consultant.

Methodology: The client repeatedly questions the methodology of data collection
used by the consultant.

Light into Health: It is a very subtle form of resistance wherein the middle or
towards the end of project it appears that the client no longer has the problem that
the consultant was addressing to.

Pressing the solutions: The client typically responds by saying Dont talk to me
about problems, I want to hear solution.

Peter Block suggests three steps for handling resistance by the consultant. These are:-

Step 1: The consultant should specify in his / her mind the form of resistance taking
place. The skill lies in picking up cries from the client and analyzing what is
happening.

Step 2: The consultant should state in neutral, non-punishing way the form of resistance
taking that is, naming the resistance.

Step 3: The consultant should remain quiet and let the client respond to the resistance
named by the consultant.

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185

The consultant should:

i) Not take the resistance personally.

ii) Give two good faith responses. That is, give chance to the client to express
himself.

Interfaced During Action Planning Phase

In a consulting assignment it was discovered that , as it grew, staff coordination became a
problem. It called in an organization specialist no help solve the problem. He analyzed the
communication break-down and concluded that the obvious and best solution was to house
the staff in one building. This noble bit of intelligence cost the client $ 3100.

I didnt need to spend $ 3100 for that answer, said the company president, not without
heat. If we had the money to build or lease a new headquarters wed have done it. We are
not that stupid.

An expert on organization was called in by a growing conglomerate to help the company
work in the newly acquired management teams it was absorbing. Coincidentally, the
consultant had just performed the same job for another conglomerate. The previous
company had a strong operation oriented management team. Its philosophy was to buy
ailing companies at bargain prices and turn them around. With this company the consultant
had strengthened the bonds of corporate management and weakened the authority of the
absorbed management. It worked. The strong-willed competent corporate management
made itself felt with success on the less competent absorbed management.

The consultant was delighted. In this enthusiasm, he wrote an article on the subject based
on his successful experience Conglomerates, he concluded, should have strong central
managements. With his previous success as a blueprint, he promptly proceeded to
reorganize the latest client the same way. The result was chaos.

He above situations highlight the common errors made in the most crucial phase of
consulting i.e. Action Planning. IN the first the situation consultant delivered the best
solution and not necessarily the implementable solution. The consultant focused more on
what rather than how to. In the other situations consultant tried to apply ready made
solution, rather than the adapting it to clients organization.

This third phase aims at finding the solution to the problem. It includes work on alternative
solutions, the evaluation of alternatives, the elaboration of a plan for implementing,
changes and the presentation of proposals to the client for decision. Action planning
requires imagination and creativity, as well as rigorous and systematic approach in
identifying and exploring feasible alternative, eliminating trivial and unnecessary changes,
and deciding what solution will be adopted. A significant dimension of action planning is
developing strategy and tactics for implementing changes, in particular for dealing with
those human problems that can be anticipated, and overcoming resistance to change.

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186

Steps in Action Planning (5)

1. Searching for Ideas / Solution
The action planning starts by searching for ideas. It involves generating all feasible
alternatives and subjecting them to preliminary evaluation. Following factors need
to be considered while searching for ideas / solutions.

Nature of problem including technical characteristics (functional area techniques /
methods to be changed), complexity (technical, financial, human and other aspects
of management mixture).

Importance to the client organization.

Degree of newness i.e. whether consultant / client familiar with the problem
involved.

Following will help in searching for feasible alternatives:

What should be new arrangements achieve?

What level of performance ?

What quality of output ?

What new product, service or activities ?

How will the new situation differ from the present ?

Different products, services or activities ?

Different method ?

Different location ?

Are the effects likely to last ?

Is the clients business and his market changing so rapidly that before long, the need
for the new product, service or activity will end ?

Is there a possibility that people will revert to present practices ?

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187

What difficulties will arise ?

Employee resistance ?

Work hazards ?

Over production ?

Shortage of materials ?

Who will be affected ?

Are employees receptive ?

What should be done to prepare them ?

Do matching changes have to be made elsewhere ?

When is the best time to change ?

At the end of a season ?

During vacation time ?

At the close of a financial period ?

At the beginning of a new calendar year ?

Any time ?

2. Developing and Evaluating Alternatives

Evaluation of alternatives in not a one-off action to be undertaken solely at a
defined point in time in assignment. It is an on-going process in consulting. There
is need for a comprehensive evaluation when the client finally opts for one
particular alternative. The process of evaluation mainly focuses on generating
alternatives with the client concerned to evolve alternatives. The consultants role
is to help in evaluating alternatives by developing readiness of the client to let him
decide the course of action. For example, where a client and his organization is
ready for business process reengineering, the consultant may go for the radical
changes. On the other hand, if the clients readiness is for performance
improvement in specific areas, the consultant should assist the client in identifying
practical and implementable solutions.

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188

Interface During Implementation

Plans are good only if they are implemented. This one line sums up the critically of
interface in this phase of consulting. Also consider the following example.

A large multinational consulting was hired by a leading Indian Steel Manufacturer for
succession planning. After exhaustive analysis and interviews, a well written report was
tabled. Though this report was accepted, it could not be implemented as it faced severed
resistance from key executives.

Implementation phase of consulting provides an acid test of the relevance and feasibility of
the proposals developed in collaboration with the client. The new system is finalized,
developed in detail and put into effect. The changes proposed start to become a reality.
Things begin to happen either as planned or differently. Unforeseen new problems and
obstacles may arise. The original design and action plan may need to be corrected as it is
not possible to foresee exactly every relationship, event or attitude. Reality often differs
from the plan. Therefore, close monitoring and managing implementation is very
important. If there is no implementation, the consulting process cant be regarded as
completed.

Involvement of a Consultant in Implementation Phase

There is misconception that a consultant should leave as soon as diagnostic work has been
done and recommendations are made. Although ultimate responsibility for implementation
is with the client who makes all the management decisions, the issue of the consultants
participation in implementation should never be underestimated. The advantages of
involving a consultant during this phase are:

Presence of consultant can infuse confidence in the client and his team.

The project or plan presented by a consultant is a model of future conditions and
relationships, assuming certain behavior on the part of the client and his staff as
well as particular environmental and other conditions affecting the client
organization. Many of the assumptions can change after the acceptance of
consultants report. The consultants involvement ensures developing necessary
modifications.

Interface During Termination Phase

This fifth and final phase in the consulting process includes several activities. The
consultants performance during the assignment, the approach, the changes made and the
results achieved have to be evaluated by both the client and the consulting organization.
For the consultant, it is necessary to generate repeat business. For the client it is necessary
to evaluate the consultant, so that a decision to engage the client on another assignment can
be taken or otherwise problems can be solved in-house.

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189

To choose the right moment for withdrawal is often difficult, but if a wrong decision is
made, a good relationship can be spoiled and the success of the project jeopardized. As
Sharu Rangrekar, the Bombay based Management Consultant puts it, The Consultant
should get out before he is found out. So for termination, the following may be kept in
mind.

The question of timely withdrawal ought to be discussed at the beginning of
assignment together with the results to be achieved.

Termination can be discussed in review meetings.

Most appropriate time for withdrawal is when the client is able to continue the work
without the consultant.

Evaluation is the most important part of the termination phase in any consulting process.
Without evaluation it is impossible to assess whether the assignment has met its objectives
and whether the results obtained justify the resources used. Neither the client not the
consultant can draw useful lessons from the assignment if there is no evaluation. As with
the whole consulting process, effective evaluation is a joint exercise, yet no once can force
the client and the consultant to share all conclusions from their evaluation.

The key questions that consultant should consider before terminating the relationship are:

Has the consultant transmitted all technical reports and documentation in the agreed
form and number of copies ?

Have the reports been reviewed, evaluations made and closing meetings held ?

Did the consultant ask for permission to mention the assignment in his firms
referrals and was the permission given ? Are there any restrictions due to
confidentiality ?.

Has the consultant returned all borrowed equipment, documentation ?

Have all payments been settled (including reimbursable expenses) ? when and what
conditions will the final payments to the consultant be made ?

Summing Up

Effective management of client-consultant interface is critical for achieving the objectives
of the assignment. The consultants role is to bring about the changes in the client system.
The consultant should initiate proactive steps to get to the bottom of the problem and help
the client in solving the problem. He should differentiate between the demand and needs
and deliver the solution which is required and not the one which sounds good or is the
best. On the other hand, if the client is too aggressive the consultant should take a
collaborative stance.

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190

At entry stage, building trust is of vital importance. The consultant should ask himself
whether he has the capabilities to solve the clients problems. During the diagnosis phase
the consultant should not rush to quick conclusions. The consultant should go to the depth
and learn to manage the resistance, if any, in the clients organization. During the action
planning phase the consultant needs to focus on how to rather than what. The
disengagement takes place when the client feels confident about handling similar problem
without the consultant. The consultant has to evaluate the benefits of implementing the
recommendations and ensure that the knowledge and skills needed for problem-solving are
internalized.

References

1. The Association of Mangement Consulting Firms (1987),
How to Select and Use Management Consultants.

2. Cody, Thomas G (1986), Management Consulting:
A Game Without Chips. A Consultants News Publication.

3. Bell, Chip R., Leonard Nadler (Ed), The Client Consultant Handbook.
Gulf Publishing Co. Book Division Houstan Texas.

4. Block, Peter (1981), Flawless Consulting:
A Guide to Getting your Expertise Used. University Associates, C.A.

5. Kubr, Milan (Ed) (1986), Management Consulting,
A Guide to the Profession International Labour Office, Geneva.

6. Bell, Chip R and Nadler, Leonard Entry is Critical Phase, Clients and
Consultants, Gulf Publishing Company.

The above article was published in the Oct 96-March 97 issue of Consultancy Today,The
Institute Of Management Consultants of India, New Delhi

Back

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191

Chapter 11

Data collection and data analysis

Objectives

To understand consultancy as a research work
To understand steps in research
To understand need of data collection
What precautions are needed for data collection?
Data collection methodologies

It is imperative that consulting is done in scientific way. For this it is essential it is done on
perfect reasoning. This reasoning needs some valid ground. It needs some authentic proof
which means a data. So data collection is a primitive need of any consultancy assignment.

For this, it is suggested to do consulting assignment more like a research. There can not be
any consultancy where consultants have not to go for research. The clients demand of
originality and uniqueness in solution makes research an inevitable part of assignment. The
research can not be independent of data. Any type of consultancy will have some or other
form of data. It is utmost essential part for a consultant to get expertise into such research
activities and make them competent enough to analyze the data. The concepts of data
collection, doing market research or employees responses can not be ruled out. In this unit
effort has been made to emphasize some of basics about data collection and its analysis.
Though primarily, one needs to learn these techniques through market research or through
statistics or other econometric methods but this unit will help you to understand some of
the basics.

11.1 Understanding empiricism

An important concept to be known to a consultant is empirical

Empirical testing denotes observations and propositions which are based on
sensory experiences and/or derived from such experience by methods of inductive
logic, including mathematics and statistics

Researchers using this approach attempt to describe, explain, and make predictions
by relying on information gained through observation.

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192

11.2 The need of data

The consultant after getting any assignment must be clear in the mind what he is going to
tackle at the entire problem. As we have stated and stressed about joint need or joint
definition about the problem, he must work out where the possibilities or causes of the
problem is. This will help him to understand the Diagnostic requirements. We here
emphasize to follow a 6 sigma approach which states

What the problem is
Where is the problem
When is the problem
How much is the problem

Also consultant has to work in the manner
Supplier>>input>> process>> output>> customer

The diagnosis is just the reverse
Customer (requirements)>> output (level or specification or target)>>process
(parameters)>>input (levels constraint)>> supplier (his methods)

Any assignment if visualized in the above way will solve the diagnostic method. This will
tell the consultant where the Data is residing. Where he has to go for qualitative approach
or where he has to go for quantitative approach.

After visualizing he above chain, the consultant will be able to judge

Whether the information is available (secondary Data) or fresh information is to be
sought (primary data)?
Who the people are which have to be contacted. i.e. target population/source?
The existing knowledge, level, attitude of target population/source
The motivators and barriers to the information
Methodology to seek the information
Whether some expert is needed or the information can be managed in house?
How much should be the budget for this?

Normally there is no thumb rule for this but the experience indicates that 5-10% budget is
normally spent on Data collection. For consultancy projects which are primarily market
research or consumer or customer oriented, this can be as high as 35-40%.

There can be several ways of data collection but primarily these can be classified into
categories as below. Any consultancy will have to employ one or the other or all of the
research methodologies

Exploratory research: It is when all the options are open before the consultant.
This can be with diagnosis or it can also be after diagnosis when he has established
or short listed the target audience or resource. (here we want to emphasize that out
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193

come of a exploratory research can be another exploratory or it can subsequently
lead to developmental research).

Developmental communications: This research is basically to ascertain or define
who at all is to be tested in depth. Or at what, when, where and how the
observations are to be done

Concept testing: It is research to explore how the action plan (proposed) is reacted.
This can have many repetitions as the consultant tries to test his many of the
options. And this may require a very deep observation and also time

Bench marking: Some times research is to set a bench mark which can be in terms
of parameter, attitude behaviour etc.

Tracking: Research to track any changes in the target /source/population. This can
be awareness, attitude, behaviour or can be parameter it self.

Post assignment evaluation: This can be a simple evaluation or it can also be to
see the effect of implementation. Some times, the consulting firms do these
themselves while some times, it is done by clients to know the effectiveness.

It is the type of assignment which decides what type of research or data collection is
needed. It is the experience of consultant which counts here. Often it has been noticed that
consulting firm has a expert group on these research methodologies. The consultant or team
leader has to fully associate here along with the client so that whole exercise does not go
futile. It is a time consuming and expensive exercise and complete action plan is based on
this.

We have also noticed that there is often a problem in getting secondary data and the
resource person who holds this data is reluctant to hand over or gives incomplete or fudged
data. Our suggestion here is whenever secondary data is required, it is to be taken in hard
and soft form under authorization letter.

11.3 Data collection methodologies

Here it is emphasized that data may not be confused with numerical data. It can be certain
tips, practices also which we say as attitude, behaviour etc, so in a broader sense it is
research methodology instead. It can be

Quantitative: Here aim is to measure or count or numeric representation. This is more
often a statistical report or data.

Qualitative: Here aim is to get detailed information than quantitavie methodology. It can
be of the form of interview or group discussion or focus interview etc. Here it is to be noted
that this is exploratory and diagnostic, so can never be generalized.

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194

A consultant should follow a three step research
Desk research>> expert research>> in depth research

Normally the consulting moves in the direction
secondary data >>> exploratory (qualitative)>>> quantitative

These methodologies can be longitudinal, cross sectional, disguised, non disguised, single
variable or multivariate. You are here requested to get fully acquainted with these
methodologies as these play a very crucial role in handling any consulting assignment.

11.4 Why at all data is needed?

The data is important from following point of view

It will set objectives for proposed action plan.
It will be form the basis for evaluating various options/alternative action plan.
It will be used to set a prescribed criterion for testing optimality of action plan.
It will decide who at all from consulting and client side has to associate with
assignment particularly in Implementation Phase.
It will be used in performance monitoring post implementation.
It will be used for evaluating the complete assignment in Toto.

11.5 A useful tip

Often consultants do a mistake in data collection. They always have a perception about the
data required and move in this fixed perceived direction. Here it is emphasized that the
emphasis should be given to 3 categories viz.

Primary target: This is different from primary data. This means which is directly
indicated as required for further diagnosis or is the prime cause of the problem or basis for
solution.

Secondary target: which is considered to be affected indirectly i.e. may not be a direct
requirement but is essentially being affected by primary target.

Basic frame work: this can also be referred to as stake holder as well. We emphasize here
that some times consultants try to give a solution which changes complete environment
which any client will not like to do. This basic frame work or stake holder is not to be
disturbed or if required to be changed it is to be modified with clients confidence.

(To visualize this, it is advised to see it as a simple market research with primary target
population, secondary target population, stake holders)

Some important aspects which are to be monitored for Data collection

Time line program
Cost effectiveness
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195

Reference from similar projects
Explore all possibility of available secondary sources
Ensure authentic sources for data
Get data collection plan approved by client

Consultant and clients must see that following can be assistance to expeditious completion
of assignments. It is to be remembered this is joint assignment and financial implications
are very nominal but advantages are enormous.

Easier access and sharing of data
Allowing access to consultants to use computer systems, emails or internet access
Access to office space, existing reports
Access to databases and interest groups
Access to MIS used for collecting information
Access to other expertise which is available in clients reaches

The data collection can have different approaches viz.

Door to door
Central place
Face to face interview

While formulating time schedule, it is necessary that all these aspects are seen by
consultant

11.6 Data analysis

This is a special field in itself and requires detailed deliberations separately.

11.7 Types of data

Dichotomous >>>> true false; yes no; male female
Discrete >>>> name religion, educational qualification etc.
Continuous>>>> time, temperature, income age etc

11.8 Dichotomous variables have only two values that reflect the absence or presence of a
property.

Variables also take on values representing added categories such as demographic variables.
All such variables are said to be discrete since only certain values are possible.

11.09 Continuous variables take on values within a given range or, in some cases, an
infinite set.

11.10 Independent Variable is the variable manipulated by the researcher to cause an
effect on the dependent variable
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196

Predictor
Presumed cause
Stimulus
Predicted from
Antecedent
Manipulated

11.11 The dependent variable is the variable expected to be affected by the
manipulation of an independent variable. The important aspect with dependent variable is

Criterion
Presumed effect
Response
Predicted to
Consequence
Measured outcome

11.12 Exogenous

Variables which are not part of model i.e. they are treated as given or beyond control.

11.13 Endogenous

Which are part of model i.e. which are with in our control.

For analyzing the data it is required to ascertain

Whether it is an exploratory data or it is a descriptive or a causal data?
Who will edit the data?
How the data will be coded?
Who will supervise the data?
Will computer or hand tabulation will be used?
What tabulations are called for?
What analysis techniques are used?

Let us now look at the famous Data Analysis toolsSeven QC Tools in the following
slides. You can make your notes on the space provided under the slides

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197

Quality Improvement: Problem Solving
Seven Quality Tools
Seven Quality Tools
by
Ashok Puri

Slide 2

Seven Quality Control Tools Seven Quality Control Tools
Pareto Chart
Histogram
Process flow diagram
Check sheet
Scatter diagram
Control chart
Run Chart
Cause and Effect Diagram

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198

Slide 3

Pareto Principle Pareto Principle
Vilfredo Pareto (1848-1923) Italian
economist
20% of the population has 80% of the
wealth
J uran used the term vital few, trivial
many. He noted that 20% of the quality
problems caused 80% of the dollar loss.
7 Quality Tools 7 Quality Tools

Slide 4

PURPOSE
To separate the most important causes of a problem from
many trivial. Also, to identify the most important problem
the team has to work on.
WHEN TO USE
When a team is analyzing a data relating to a problem to
decide which are the most important factors to be tackled
first to have the maximum impact on the problem

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199

Slide 5
HOW TO USE
List the activities or causes in a table and count
the number of times it occurs.
Put them in descending order of magnitude in
the table.
Calculate the total of the whole list.
Calculate the percentage of the total that each
cause represent.
Plot the diagram with vertical axis showing the
percentage and the horizontal axis showing the
activity or cause.
Interpret the results.

Slide 6

Pareto chart Pareto chart
28
16
12 12
6
4
3
0
5
10
15
20
25
30
Loose
Threads
Stitching
flaws
Button
problems
Material
flaws
%

C
o
m
p
l
a
i
n
t
s

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Slide 7
Pareto Pareto
Chart Chart
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a
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Slide 8
Histogram Histogram
PURPOSE
To display data collected by check sheets so that any
pattern can be discovered.
WHEN TO USE
At an early stages of problem solving when a team is
trying to find out what is happening

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201

Slide 9

Histogram Histogram
HOW TO USE
There are four simple steps invol ved
Collect the data using check sheet.
Use the vertical axis to display the no of times each
value occurs.
Use the horizontal axis to display the values
Interpret the histogram.
Different patterns of histogram suggest that the
problem being studied has particular characteristics.

Slide 10

Histogram Histogram
0
5
10
15
20
25
1
.9
2
.9
3
.9
4
.9
5
.9
6
.9
7
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8
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9
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3
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Cat egor y
F
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q
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c
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Slide 11

Histogram Histogram
0
5
10
15
20
25
30
35
40
1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1

Slide 12

Flow Diagrams Flow Diagrams
" Draw a flowchart for whatever you do.
Until you do, you do not know what you
are doing,
you just have a job.
-- Dr. W. Edwards Deming.

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203

Slide 13

Flowcharts Flowcharts
FLOWCHARTS
To generate a picture of how work is done by
linking together all the steps taken in a process.
Used to describe processes that are to be
improved.

Slide 14

Flowchart
Flowchart
Activity
Decision
Yes Yes
No No

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204

Slide 15
Flowchart Flowchart

Slide 16


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205

Slide 17


Slide 18

Process Chart Symbols Process Chart Symbols
Operations
Inspection
Transportation
Delay
Storage

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206

Slide 19

Process Chart Process Chart
S
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p
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(
m
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n
) Descripti on
of
process
1
2
3
4
5
6
7
8
9
10
11
Unload appl es from truck
Move to inspection stati on
Weigh, i nspect, sort
Move to storage
Wait until needed
Move to peeler
Apples peeled and cored
Soak in water until needed
Place in conveyor
Move to mixi ng area
Weigh, i nspect, sort
Total Page 1 0f 3 480
30
5
20
15
360
30
20
190 ft
20 ft
20 ft
50 ft
100 ft
Date: 9-30-00
Anal yst: TLR
Locati on: Graves Mountai n
Process: Apple Sauce

Slide 20


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207

Slide 21

Check Sheet
Check Sheet Check Sheet
PURPOSE
TO COLLECT DATA WHEN THE NUMBEROF TIMES A
DEFECT OR VALUE OCCURSIS IMPORTANT
WHEN TO USE
EITHER DURING PROBLEM DEFINATIONWHEN YOU ARE
COLLECTING DATA TO FINDOUT WHAT IS HAPPENING,
OR WHEN YOU HAVE IMPLEMENTED A SOLUTION AND
YOU ARE COLLECTING DATA TO MONITOR A NEW
SITUATION

Slide 22

Check Sheet
HOW TO USE
THERE ARE FIVE SIMPLE STEPS TO DRAW A CHECK
SHEET
1. AGREE THE DATA TO BE COLLECTED, THIS IS VITAL,
YOU CAN NOT ANALYSE DATA THAT HAVE NOT BEEN
COLLECTED
2. DESIGN A CHECK SHEET
3. TEST THE CHECK SHEETUSING SOMEONE WHO HAS
NOT BEEN INVOLVED IN THE DESIGN, GET HIM OR HER
TO USE THE CHECK SHEET WITHOUT ASSISTANCE. IF
NECESSARY MODIFY THE CHECK SHEET.
4. DESIGN A MASTER CHECK SHEET. IF MORE THAN ONE
PERSON IS INVOLVED IN DATA COLLECTION, IT IS EASY
TO BRING DATA COLLECTED TOGATHER.
5. COLLECT THE DATA

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Slide 23

Check Sheet

Shifts Shifts
D
e
f
e
c
t

T
y
p
e
D
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f
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c
t

T
y
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Slide 24

COMPONENTS REPLACED BY LAB
TIME PERIOD: 22 Feb to 27 Feb 1998
REPAIR TECHNICIAN: Bob
TV SET MODEL 1013
Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |

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Slide 25

Cause-and-Effect Diagrams
Cause Cause- -and and- -Effect Diagrams Effect Diagrams
Developed by Kaoru Ishikawa (1953)
Also known as
Fishbone diagrams
Ishikawa diagrams
PURPOSE
TO EXAMINE THE EFFECTS OR PROBLEMS TO FIND OUT
THE POSSIBLE CAUSES AND TO POINT OUT POSSIBLE
AREAS WHERE DATA CAN BE COLLECTED.

Slide 26

Cause-and-Effect Diagrams
Cause Cause- -and and- -Effect Diagrams Effect Diagrams
HOW TO USE
FOLLOWING ARE THE STEPS TO CONSTUCT A CAUSE
AND EFFECT DIAGRAM
BRAIN STORM ALL THE POSSIBLE CAUSES OF THE
PROBLEM OR EFFECTS FOR SELECTED ANALYSIS.
CLASSIFY THE MAJOR CAUSES UNDER HEADING MAN,
MATERIAL, MACHINE, MANPOWER.
DRAW THE DIAGRAM AS SHOWN IN THE FIG. AND POST
THE CAUSES
WHEN TO USE
WHEN A TEAM IS TRYING TO FIND POTETIAL
SOLUTIONS TO A PROBLEM AND LOOKING FOR
ROOT CAUSE.

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Slide 27

Cause and Effect
Skeleton
Cause and Effect Cause and Effect
Skeleton Skeleton
Quality
Problem
Materials
Equipment People
Procedures

Slide 28

Fishbone Diagram Fishbone Diagram
Quality
Problem
Machines Measurement Human
Process Environment Materials
Faulty testing equipment
Incorrect specifications
Improper methods
Poor supervision
Lack of concentration
Inadequate training
Out of adjustment
Tooling problems
Old / worn
Defective fromvendor
Not to specifications
Material-
handling problems
Deficiencies
in product
design
Ineffective quality
management
Poor process
design
Inaccurate
temperature
control
Dust and
Dirt

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Slide 29
Cause and effect diagrams Cause and effect diagrams
Advantages
making the diagram is educational in itself
diagram demonstrates knowledge of
problem solving team
diagram results in active searches for
causes
diagram is a guide for data collection

Slide 30

Cause and effect diagrams Cause and effect diagrams
To construct the skeleton, remember:
For manufacturing - the 4 Ms
man, method, machine, material
For service applications
equipment, policies, procedures, people

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Slide 31
Scatter Diagram Scatter Diagram
PURPOSE
TO ALLOW THE RELATIONSHIP BETWEEN CAUSE AND
EFFECT TO BE ESTABLISHED.
WHEN TO USE
SCATTER DIAGRAMS ARE USED WHEN A GROUP IS
TRYING TO FIND OUT IF THER EXISTS ANY
RELATIONSHIP BETWEEN TWO ITEMS , OFTEN A
CAUSE AND A EFFECT.

Slide 32

HOW TO USE
THERE ARE FOLLOWING STEPS TO DRAW A SCATTER
DIAGRAM
COLLECT DATA ABOUT CAUSE AND EFFECT.
DRAW THE CAUSES ON THE HORIZONTAL AXIS.
DRAW THE EFFECTS ON THE VERTICAL AXIS.
DRAW THE SCATTER DIAGRAM.

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Slide 33

.

Slide 34

Run Charts Run Charts
Run Charts (time series plot)
Examine the behavior of a variable over
time.
Basis for Control Charts

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Slide 35
Control Chart Control Chart
PURPOSE
IN ORDER TO INDICATE WHEN OBSERVERVED
VARIATION IN QUALITYARE GREATER THAN COULD
BE LEFT TO CHANCE, THE CONTROL CHART METHOD
ANALYSISAND PRESENTATION OF DATA IS USED.
WHEN TO USE
WHEN MONITORING A PROCESS TO DETECT CHANGES
OR WHEN A CHANGE HAS BEEN MADE TO PROCESS
INPUTS TO FIND WHETHER THE MEAN VALUE CHANGES.
IT SHOWS WHETHER THE PROCESS IS IN A STABLE
STATE OR NOT BY ADDING STATISTICALLY
DERTERMINEDVALUESTO THE RUN CHART.

Slide 36

HOW TO USE
THE CONTROL CHART IS USED BY ADOPTING
FOLLOWING STEPS
DEFINE THE MEAN VALUE OF THE PROCESS,
DETERMINE THE UPPER CONTROL LIMIT BY ADDING
3 SIGMA.
DETERMINE THE LOWER CONTROL LIMIT BY
SUSTRACTING 3 SIGMA
PLOT THE VALUES AT A REGULAR INTERWAL
MORE THE VALUES NEARER TO THE MEAN , MORE
STABLE IS THE PROCESS.
SEE THE EXAMPLE

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Slide 37

18
12
6
3
9
15
21
24
27
2 4 6 8 10 12 14 16
Sample number
N
u
m
b
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r

o
f

d
e
f
e
c
t
s
UCL =23.35
LCL =1.99
c =12.67

Slide 38

Control Charts Control Charts Control Charts

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216

Slide 39
Stemand leaf Stemand leaf displays displays
4.6 4.0 3.7 4.1 4.1 5.6 4.5 6.0 6.0 3.4
3.4 4.6 3.7 4.2 4.6 4.7 4.1 3.7 3.4 3.3
3.7 4.1 4.5 4.6 4.4 4.8 4.3 4.4 5.1 3.9
Dat a
Integrated Circuit Response Time (ps)

Slide 40

Stemand leaf Stemand leaf displays displays
3 7 4 4 7 7 4 3 7 9
4 6 0 1 5 6 2 6 7 1 1 5 6 4 8 3 4
5 6 1
6 0 0

Slide 41

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Dot diagrams Dot diagrams
3 4 5 6
Plant A
Plant B

Back

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218

Chapter - 12

Quality Management in Consulting

Objective

To understand requirements of Quality in Consulting

12.1 Quality Management in consulting

Consulting is the business of providing advice to clients for a fee in order to help them
solve a particular problem or range of problems with in a certain area of business .
consulting services are provided by consultants , a majority of whom have gained expertise
from previous employment. Some consultant work for large consulting organizations that
offer expertise in a wide range of business areas , other consultant hails from academia and
assist companies with problems relating to research or theory , and still other consultants
are self employed , who offer specialized skill in a certain field.

Yet expertise alone does not make some one a consultant. To be a consultant requires
applying that expertise to practical problem solving. Consulting , moreover is a business ,
so it requires marketing skills and the ability to reach out & establish job contracts.

Most consultants claim to embody the concept of quality in their objectives , placing
considerable emphasis on the quality of people , on impressive experience , on roboust
processes & offering clients a highly responsive professional service.

12.2 Aspects of good consultancy

Consultancy services should be offered honestly by consultant with the experience & skill
to undertake the program or work proposed.

When thinking what makes good consultancy , first is obviously that brief must be
successful in use. The five components of a good consultancy shown below may not be the
only one , but they cover all consultancy.

The consultancy should be :

Available quick turn around , secure & open contact methods &
give priority to clients needs
Practical giving hands on support in drafts , plans ,briefs, and
presentations when needed ; working to transfer skills to clients
organization
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Flexible capable of producing plan B or Plan c ; able to vary
working practices according to circumstances.
Knowledge based with proven experience of successful delivery &
able to develop knowledge base of clients staff & ; able to
undertake research , and to give sound guidance on job at hand
Appropriate working at cost related to situation with a realistic
plan or strategy which takes account of the time , money & people
resources available to the client

2. Characteristics of a good consultant

COMMITMENT to develop clients skills and competence by offering professional
advice based on lifelong learning .
RESOURCES to address the critical issues for consulting by providing a vast array of
industry information, knowledge and data . There is the opportunity to share best practices
amongst members and potentially to reduce costs through increased networking and
efficiency.
EXPERTISE to drive better business performance - offer opportunities through regular
interaction that enhance prospective business opportunities.

12.3 QUALITY MANAGEMENT IN CONSULTING

Though consultant strive to provide expertise to solve the problems of client to the best of
their ability , yet the image of consultants among clients is patchy ; while some clients
respect the consultants services as useful & valuable , other regards them , at worst , as
charlatans , or, at best , as smart aleck to be avoided.

12.4 Reasons for such a negative image are a combination of such factors as
Poor initial planning
Careless marketing of ones business
Intense competition
Inadequate attention to training & knowledge enhancement
Lack of process discipline

in recent years , management consultants have begun to address the quality management of
their own firms. physician heal thyself is not appropriate given that management
consultants have taken the lead in devising & implementation of quality management
systems in their clients organization.

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12.5 KEY ELEMENTS OF QUALITY ASSURANCE OF CONSULTING
ORGANISATION

The definition of quality meeting customers requirements suggest the best starting
point for any such quality improvement program . feedback from clients can provide focus
& leverage to debates on quality issues & introducing measures to improve performance.

Hence it is important to map the processes in any consulting organization , their sequence
& interaction , criteraias & methods needed to ensure that both the control & operation of
these processes are effective.

Some key processes in any consulting organization are

1. Assignment management
2. People management
3. Quality program management

Assignment management
Client feedback is a useful tool in reviewing the need for , and structure of , assignment
management procedures , to ensure that the focus remains firmly on matters that have the
greatest influence on quality in client- consultant relation ship. It also provides a
framework that consultants can more readily understand and accept.

The various stages of assignment management are;

a) Project planning stage.
b) People management.
c) Quality management.

a) Project Planning Stage

Planning is the first step in any assignment. Time spent in planning the project will
pay dividends in the easier management and execution of the project. Normally the
following questions should be answered to do effective panning.

i) What (work needs to be done)
ii) Who (should do it)
iii) Where should it take place)
iv) When (will it take place)
v) How (will it be done)

Any project should have clearly defined goals and objectives these will impact
directly on selection of personnel with appropriate knowledge and skills, as well
as a training plan in place to provide any additional expertise that project may
required.

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12.6 RESEARCH

Research of scope of any particular project, it can be assumed that a similar project
have been carried out some where in the past. There is strong likely hood that
information about such projects will be available in the archives of the consulting
organization or published journals etc. researching the area as part of the project
planning process can help to plan workflow and processes and to avoid issues and
obstacles

1. As early as possible in planning process, carryout research into any other project
which are oppressing the similar issues to the planned project. This handbook
provides a starting point. Research helps avoiding mistakes. It can also put the
project team in contract with others who have completed similar projects and
give the opportunity to learn from their expenses.

2. Having carried out research adds credibility and value to the output of any
project. Assurance that your project has not been carried out in vacuum, by
taking into account the work of others, enhances the results of your project.

3. Risk Assessment: At the start of any project, plans have to be made to
guarantee a successful outcome. However, the goal is not to eliminate all risks
but to prepare for them by creating a project frame work within responds to
unforeseen in a personnel and effective way. The aim is to create a project with
staff and procedures that can accommodate changes. Therefore, all project
planning need to have a risk analysis.

4. Execution of the project (Delivery): Delivery is the most important process
where the plans are converted into reality the primary data, for assessing the
current state, on site, is corrected on regular basis, on regular planned interval to
assess the direction of project. Corrections are made, in planned workflow, to
respond to current state (Beauty on the site).

Carefully and steadily project is gulped to its desired goals and objectives.

5. Follow up for sustainability: Once the assignment is completed, it is a good
practice to regularly review the out come of the project. Most of the projects,
after achieving target results suoe back to original starting point due to lack of
follow up.

At this stage standardization should be introduced so that desired results are
sustained.

b) People management:

Good personnel policies and people management are essential to quality
management and to ensuring that continuous quality improvement is achieved.
Apart from the application of high standards, appraisal and training provide the
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vehicles for taking corrective action and addressing client satisfaction. Quality can
be enhanced b y:-

The consistent application of high standards in recruiting new consulting staff
and in selecting subcontractors.

Induction and training in core skill s to equip consultants with the necessary
competencies.

Coaching, helping and supervising people on the job.

Practicing knowledge management to make sure that best practice experience is
available to operating consultants and that they are encouraged to seek it and
use it.

Assignment appraisals which feed into an individuals longer-term
development, remuneration and promotion.

Using databases of skill s and experience which enable properly structured and
highly competent teams to be formed for client assignments.

Feeding back results of client satisfaction surveys into consultant appraisals and
training.

Defining and publishing a code of ethics for the firm and encouraging voluntary
membership in professional associations and institutes.

c) Quality management : QMS in Consulting Organisation:

The consulting organization shall develop and maintain documented procedures for
effective management of organization (In line with ISO-9000 : 2000). Which
should include.

Organisations background, structure, key business areas, process and
responsibilities, details of office / associates etc.

Detail of projects covered.

Control of organisations publicity and advertising.

A documented control system for maintenance and up dating of procedures and
records.

Criteria for selecting functional area experts, procedures for their initial training,
evaluation of their delivery and ongoing review of performance.

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Procedure for ensuring the credibility of appropriateness and relevance of
secondary data / information used in preparation of project plan.

Regular management reviews.

Records of projects carried out including statistical analysis of reports submitted
/ generated.

Security and confidentiality of project reports.

Complaints and appeals.

Records:

The consulting organization shall maintain records of projects carried out.
The records may be in the form of any type of media, such as hard copy or
electronic media.

Client Feedback:

The consulting organization shall have documented procedure for handing of
complaints / customer feedback with in a reasonable time. The procedure
should include provision for corrective and / or preventive action organization
shall maintain record of all complaints / feedbacks of their resolutions and
corrective and preventive actions taken.

ISO 9001 : 2000 based quality assurance standard
Requirements Action to taken by Consulting organisation
Identify processes and
their application
Determine Sequence
and Interaction
Criteria & Methods for
control and
effectiveness
Availability of
Resources and
Information
Monitor. Measure and
Analyse
Implement actions to
achieve planned
results and continual
Improvement
Identify processes in the organization Viz marketing, planning ,
assessment , training , delivery , feed back etc & decide their
sequence & interaction. Processes should be classified as COP (
Customer oriented process) SOP ( Support oriented process ) &
MOP (Management oriented process) . Process mapping
techniques like Turtle diagram should be applied to find out
what skills , resources , inputs & support are required to give
desired out put. Effectiveness & efficiency parameters to
monitor performance of these processes should also be
identified. PDCA methodology should be deployed to make
continual improvements in these parameters.

QMS Documentation It is a good practice to document the mission , Vision , quality
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shall include:
a. Quality Policy and
Objectives
b. Quality Manual
c. Documented
Procedures
d. Documents needed
to ensure effective
planning, operation &
control of these
processes
policy & objectives of consulting organization. These then
become guiding principles of the organization . Top
management shall ensure that effectiveness of QMS is
improved continually to enhance customer satisfaction.
Responsibilities & authorities of each & every employee in the
value chain including sub contractors should be defined ,
communicated & understood by everyone. Top management
should ensure that processes for effective communication are
established & communication takes place smoothly with in the
organisation

Top Management shall
review the QMS at
planned intervals, to
ensure continuing
suitability, adequacy
and effectiveness
Top management should periodically review the effectiveness
& efficiency of COP & SOP to ensure continuing suitability,
adequacy & effectiveness of QMS. These reviews should
include opportunities for improvements based on feed back by
customer

Competence,
Awareness and
Training
Organisation should determine the necessary competence for
personnel performing work in pursuance with stated policy &
scope of the organization. The personnel should be periodically
assessed about their competencies & provide training or take
other actions to satisfy these needs. Consulting organization
being in knowledge industry should be continually enhancing
skills of their personnel.

Employee Motivation
and Empowermen
The organisation shall have a process to motivate employees to
achieve quality objectives, to make continual improvements,
and to create an environment to promote innovation

Planning of product
realization
Need to establish
processes , documents
& provide resources
specific to the project
Confidentiality
Organisation should
determine
requirements specified
by the client ,
requirements not
stated by client but
necessary for the
intended results
Ability of the

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organization to meet
defined requirements

Monitoring of
customer satisfaction
As one of the measurement of Quality management system ,
consultancy firm should monitor customer satisfaction relating
to customer perception as to whether the consultancy firm has
met customer expectations . Method for obtaining & using this
information shall be decided. Usually survey method is used by
devising a questionnaire. The fedd back thus obtained is then
analysed on points of dis-satisfaction & appropriate actions are
initiated to redress those points.
Internal audits
Monitoring &
measurement of
processes

12.7 Quality Certification :

In recent years there has been considerable debate among management consultants about
the relevance of externally audited quality standards to their firms. Movement towards
seeking certification has been at the pace dicted by the market place, including in some
cases direct pressure from public sector clients, who see certification as a necessary
reassurance of attention to quality. As a result, many large consulting firms have started
preparing for, and gaining, certification for at least some sectors of their business. The
origins of this movement lie in several countries of the European Union, the Netherlands
and the United Kingdom in particular.

12.8 ISO 9001 :2002 Quality Assurance standard.

These standards required the applying organization to have a quality policy and a
documented quality system and supporting procedure, and to provide evidence that the
procedures are being used, conformance is being monitored and there are regular reviews.

A quality audit must be undertaken by an independent certification body (such as BSI
Quality Assurance, Bureau Veritas, Det Norsk Veritas). These bodies are not management
consulting firms, but their function is to audit businesses and organizations in many sectors.
They are accredited by government accreditation bodies.

In theory, the quality management system (QMS) should require no more than a well-run-
business, which takes quality seriously, should be doing already. In practice, the
disciplines of a rigorously applied QMS can necessitate substantial shifts in organizational
culture and work habits.

Seeking certification should not be an end in itself; there is plenty of anecdotal evidence to
support this view. A superficial approach is likely to result in rejection by the consultants
involved and non-conformance being readily exposed b y the external auditor. It is
important that the QMS reflects the needs of actual practice and, therefore, deals with real
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quality issues. It is also essential to involve the staff in its preparation, so that it is not seen
as a bureaucratic imposition.

12.9 Sustaining Quality

In conclusion, client pressure and growing competition have moved quality higher up the
management consultants own agenda. Increasingly, service quality constitutes the
consultants competitive advantage. For long-term development and growth, both large
and small consultancies will need to be proactive in working with clients on quality issues.
As with any such development, clarification of objectives, standards, roles and
responsibilities is an essential first step. ISO 9001 : 2000 contributes by providing
standards that are extremely certificated. Both clients and consulting practitioners need to
share the aim of achieving continuous improvement in service delivery, and to be proactive
in sustaining this.

A formalistic approach to quality must be avoided. There is a real risk that some firms will
be happy to have and to exhibit an elaborate procedure, the bureaucracy of quality, and
that some clients will be unduly impressed by the formal side of quality management. No
control and certification procedure can become a substitute for the quality of people in a
professional firm, for their genuine concern for the clients and for their sense of
professional responsibility.

The decisions concerning quality management and assurance, and the measures taken to
enhance quality, depend on the firms attitude to quality and its determination to achieve
high standards. As Deming said of total quality management,. You do not have to do this
: survival is not compulsory.

Back

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227

Chapter - 13

Report Writing

Objectives

To understand the importance of report in consultancy
How to plan an effective report
Some useful tips for making report effective
Contents of an ideal consultancy report

13.1 Introduction

A skill that every management consultant must have is the skill of writing reports
effectively. This is a skill of fundamental importance as the report is invariably one of the
deliverables in any consultancy assignment.

You will agree that the manifestations of all efforts of a consultant are presented in a report.
It is our common practice to judge any author by his writing or book. You must have
experienced in your graduation course that Mr. X is a very good author, he writes very
clearly etc. Even when you are reading these notes, you must have had a feeling of the
work or talent of the author. It is this impression or effect which the report can have.

The consultant and client relationship is not for ever. It gets terminated with termination
phase but the impressions of the work are memorized in the report. Moreover, the
references about the work of consultant are given in the form of report. In this unit, we will
explain - how to write an effective report and what are the key points which you should
follow to improve report writing. You can evaluate your own performance against and
benefit from its concise presentation.

13.2 Importance of report

The report as said above is the final representation of the work done by the consultant to
achieve an objective. The report can serve many purposes.

It can be

Contract obligation
As a reference
As marketing tool
As guide for implementation
For evaluation
For improvements
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228

A consultant may have spent a lot of time with his client and built up a strong relationship
but this does not change the fact that leaving the right impression will depend ultimately
on the quality of his report. So, sufficient efforts must be put in planning, preparation and
presentation of the report so as to do real justice with the work done.

It is a fact that mountains of paperwork stifle most companies: the average manager claims
to receive eight reports or other long documents each day. So the report must be pretty
good to compete with all the other documents that will be vying for clients attention.
Client may have made a substantial investment in employing consultant services which
might push a report further up in the queue. A consulting firm might be expert in its area
but this expertise will be lost if it fails to communicate it effectively and will simply
become one of the many thousands of people who regularly spend hours struggling to write
a turgid business document that nobody will read.

So what can a consultant do to make sure that his report goes to the top of the pile, makes a
lasting impression and demonstrates his firms proficiency and understanding?

13.3 Preparing the report

Good writing is an iterative process. We start with raw materials and polish them into a
finished product. It's important to get ideas on paper first and then worry about hammering
them into shape. There are a number of key decisions to be made before start writing.

The prime most important thing you should remember that the audience for report is client.
(the sub-classification of client we will take subsequently). So here what is imperative is to
know what the Client wants. So the report should be client-centered, rather than
consultant-centered.

The others things include determining the style and tone, and developing a graphic
treatment.

13.4 Organize Report

A report is not a data dump. What really matters to clients is how consultant analyzes,
interprets, applies and synthesizes his discoveries. The facts or details are only important to
back up. One can organize information using both horizontal and vertical logic. Horizontal
logic describes the flow of findings (main ideas) through report. They are on the same level
of importance and flow from one to the other. Vertical logic describes the flow of
supporting points (facts) that fill out the detail and support the main idea.

13.5 Time scheduling

The chances are that no sooner it is realized that the report deadline is looming, one
immediately falls into the getting it done trap. The focus is on getting it done and
present or put up some thing rather than on the client and his needs. Here instead of
writing a report at the nick of time, it is essential that due weightage is given to report
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writing. The consultant must remember that all his tangible efforts are converted into
intangible work by the report.

13.6 Format of report

Often we have noticed that first reports submitted by consultant to clients are summarily
returned saying that please change the format or it is not in the format what we follow.
It is thus important that proper format is the most important aspect of report. This format
will also take care of sub clients. We can also ask client specifically in what format the
report is needed. Why not ask the client exactly what they want to see in the report and
even how long they would like the report to be?

Remember the basic principle that report should be like women dress. It should be
according to the fashion, attractive and cover all aspects.

Whats more, the public and private sectors are becoming increasingly cynical about
consultants, believing that they produce overlong, overwritten reports on purpose to justify
their exorbitant fees. Avoid providing any additional justification to that particular
argument.

13.7 Planning content

Do not try to simultaneously plan format and contents. First decide all the contents which
are required to be put in the report. When you are sure you have covered everything, it is
time to tackle the issue of what goes where and in what format. The structuring process
requires an element of bloody-mindedness. Only information that is essential to your client
should go in the main body of the text.

One can seek answers to the following question before finalizing the contents
What information does the client expect?
With what level of detail?
How much knowledge do they already have?
What will they use the report for?
Who will read it?

13.8 Executive summary

Why executive summary?

This is the only part the real decision-makers read, so it is to be framed in such a way that it
can stand alone and that it contains real information, including hard facts and figures.

If report includes recommendations, the executive summary should make it clear what
these are and include their implications, values and costs.

The length of executive summary, as a general rule, is advisable to be maximum of two
pages, using headings and bullets (but not too many), and perhaps a carefully selected
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graph or pie chart, to get your main message across the report. Remember executive
summary is presumed to be read by all, inter alia their relevant portion. So it is essential
that executive summary is made with due care. The executive summary should give a hint -
what at all the consultant wants to say. Here the tip is - it should be like a review of book.

Note: executive summary is always written in the last and after complete report is
made. Here no repetition of paragraphs is to be done.

13.9 Why sub classification of clients

We have already referred to sub classification. In our earlier units, we have mentioned
about the type of clients with in client organization. These are contact client, expert, top
management, finance resource person, intermediatery.

Here it is necessary to understand that who is the main client for this assignment. It may
happen that assignment was for organization structure so all the directors or CEO or MD
may be interested. Or the assignment can be, say for Quality improvement, in which case it
may pertain to a particular director only. It is essential to understand here that the time of
client is important and every body may not be interested in whole of the report. For
example, the finance person will be eager to know what are finance related aspects and a
product scheduling or a job assigner is keen to know what is effect on job scheduling. Thus
the format of report should essentially cover all the sub classified clients.

13.10 Main body

The main body of a consulting report is designed to tell and sell a story in a quick, concise
and entertaining manner.

Main body is to be divided into logical sections with some subheadings. Subheadings
should be clear and meaningful, rather than generic, so that they act as signposts, guiding
client through the report and showing them where to find specific topics.

13.11 Write Headlines & Develop Supporting Points

Headlines present and describe both main ideas and major sub-points. Headlines are single,
complete sentences that can stand on their own without any other information. They should
clearly tell a story otherwise some re-work or re-organization should be done. In general,
report headlines should focus on the real message in its simplest form.

Supporting points back up or explain on the statement made in the headline in a short,
concise manner. Supporting points provide the vertical logic or structure for the report and
provide proof for the statement made in the headline.

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13.12 Create appendix

An appendix is an important tool for including detailed support information in a way that
doesn't interfere with the flow of the report. An appendix can include such things as:

Financial projections and spreadsheets.
Related articles.
Bibliographies.
Glossary of terms.
Names of interviewees.
Bibliography of key individuals.
Proof

13.13 Avoid nonsense

Here only thing which can be given as tip is put yourself in your clients shoes. How
would you react to a report if you felt your valuable time was being wasted on non-
essential details?
A useful few pages are more important than useless more pages. Remember that while your
client may be interested in the background to the project and in how you carried out the
research and the consultation process, they are actually paying you to identify the cause or
causes of a problem or challenge and to tell them how to solve it.
Too much detail in the body of a report signals a lack of analysis or evaluation of data.

13.14 Some practical tips for report writing

Avoid old copy and paste technique and where ever needed, it is to be handled with
extreme care.

Emphasize on the key messages and recommendations.

Make sure that key messages and recommendations really stand out and are not lost
amongst volumes of periphery detail and background.

A far more effective structure is to start with your main message and then provide the
information that supports it.

Avoid falling into jargon or business speak, or using unnecessarily flowery language.

Remember that client has no interest whatsoever in the sophistication of use of
vocabulary. He is interested in solution.

Clients will never appreciate long words, complicated language, management speak and
businesses jargon, nor will they want lots of acronyms and abbreviations.

Do not try to irritate, confuse and waste time of client.

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Provide glossary for complex technical terms.

Avoid using language like It is recommended..., It is estimated, or It has been
proven
Instead of above, use We recommend, We estimate or We have proven. This also
shows joint effort.

Make language lively using simple, direct language and active voice.

Use correct punctuation, grammar and spelling.

Follow the sequence - client needs, format, contents, interpolate content with format,
synopsis, appendix, glossary.

Use complete sentences only.

Express a single thought per headline. A headline is to express something that the reader
doesn't already know. Headlines are not open to multiple interpretations.

Limit the number of bullet points to less than 5 per headline.

Use charts or graphics that can be easily explained in 15 to 20 seconds.

Place background material and in-depth studies in an appendix.

Do not try to plan and structure the report simultaneously.

The most practical way to improve report is to read it out loud with the members of team.
If it sounds good and keeps everyone's interest, it's a winning report.

13.15 A final word

If report is well written, it will influence clients thinking and decisions and induce action.
It will also act as a first-rate marketing tool for consulting firm. But if report is poorly
written, it will exasperate client and jeopardise consultant reputation and will diminish the
chances of recommendations being implemented. A report is how to present an argument
and rationale on paper, which is key to be successful in influencing peoples thinking.

A good report is not a mass of data. Rather, it is a clear and concise presentation of
insightful information. The quality of a report is a direct reflection of the quality of
thinking that goes in to it

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13.16 Lets now look at the finer points of Report writing and its presentation.

TECHNICAL REPORT
WRITING &
PRESENTATIONS

Reports

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234

Report Purpose
To convey information
Report findings
Present analysis
Make recommendation
. Pave way for the next job

Understanding the Report
Who is it aimed at
Why am I doing it
What is my message
What should it contain

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The Reader
Level in the organisation
Extent of knowledge
What is the reader looking for

Building Blocks
Structure Content

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Report Structure
Ensures comprehensivity
Ensures logical development
Ensures contractual compliance
. Prepare the contents list before you start
the report

Report Structure
Main Body
Executive Summary
Table of Contents
Appendices/ References
Dedications/ Declarations/
Acknowledgements

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Table of Contents
Description of Chapter headings
What should the level of detail?
Add separate list of drawings/ charts/
tables if necessary

Executive Summary
Accuracy
Brevity
Clarity
. Avoid cutting and pasting from the main
body

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The Main Body
Introduction
Background & Context
Presentation of Data/ Findings
Analysis Results
Conclusion/ Recommendation

Appendices
Should not contain
Material crucial to continuity/ flow
Infructuous material
Should contain
Details supporting submissions but which
would interfere with continuity in the
main section

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Building Blocks
Structure Content

Language
1. Use simple language avoid jargon
2. Mind your spelling/ grammar
3. Use computer aids (e.g. spellcheck)
where possible

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Form
Use Introduction Main content
Synopsis format
Do not repeat - if necessary cross
reference
Place emphasis on important points
by Bold/ Underline/ Italics

Form
A paragraph should convey a single
idea
Sentences should not be too long <
20 words
Use third person
Use active speech

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Form
Ensure internal consistency
Provide sources of information
Give credit where it is due
Use examples, where possible
Never cross refer to the future

Form
Text
Charts
Tables
Equations
Annotated presentations
It is important to maintain a balance

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Formatting
Paragraph numbering
Table & Chart numbering
Font types and sizes
Use of colour

Remember
Hard writing makes easy reading!!!

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Presentations

Building Blocks
Structure Technique
State

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244

Why Structure?
Logical sense
Maintain a focus
Permission to communicate
Audiences love structure
Control

Structure Options
The logical progression
The flashback
Beginning - Middle - End
Conclusion - How reached

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Mental Preparation
1. Understand your Objecti ve
2. Understand the Message
3. Understand your Audience
4. What are the desired Outcomes

Understand Your Objective
Why am I Here?
Apparent Purpose
Hidden Purpose

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Understand the Message
What are you trying to convey
Define your message in one sentence

Understand the Audience
Who are they?
Who is/ are the decision maker(s)?
Who is/ are the influencer(s)?
What roles do they play?
What power do they have?
Who will be present?

Understand the Audience
- Whatdo they know of the subject?
What do they think of you/ your
company?
What are their styles and values?
What do they expect?
What are their decision making
criteria?
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247

What are the desired
outcomes?
Why should they buy?
Your objectives Their benefits
You can awaken people by dreaming
their dreams more clearly than they can
dream them themselves!!!

How do I remember what to say
Rehearse
Notes
Visual Aids
Links

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Presentation Length
What should I include?
Who is attending?
What is critical?
Linkage?
Attention Span

Attention Spans
Time
Probability of
Recall
100%

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Attention Spans
Time
Probability of
Recall
100%
Break/
Outstanding
Item

The Gettysburg Address
268 words
10 sentences
2/3
rd
were single syllables
And Lincoln was not even the main
speaker!!!

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250

The Longest Inaugural Speech
9000 words
2 hours
Delivered on a freezing day
The speaker William Henry
Harrison died a month later of
pneumonia !!!

Building Blocks
Structure Technique
State

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251

How does technique help?
UCLA Study Finding
7%
38%
55%
0%
10%
20%
30%
40%
50%
60%
Words Tone Body Language
C
o
m
m
u
n
i
c
a
t
i
o
n

E
f
f
e
c
t

The Opening
Get there early
Take a few deep breaths
Begin confidently
Do, do, do
Keep It Simple
Look at your audience

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The Opening
Be apologetic
Start early, start late
Start with an ummmm
Dont, dont, dont
Give out handouts in the beginning

The Opening
Arresting facts
Rhetorical questions
Be theatricalif you can pull it off
Creative Openings
Emphasise the common bond

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The Tone
Anecdotes
Jokes
Colloquials
Audience Participation
Arresting phrases

Visual Aids
People remember better when they see
and hear
Enables to shift focus away
However dont get carried away

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Visual Aids
Avoid tablessay it with charts
Thumb Rules
Limit colours to 3
Avoid clutter

Visual Aids
Bullets
6x6 rule
Highlight key points
Font size >24
Thumb Rules

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Expression

Expression

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256

Posture
Folded arms - Closed
Hands behind back Confident, Strong
Hands in pocket - Casual
Hands on hips - Aggressive
Hands crossed in front - Respectful

Hand Gestures
Usually they come naturally
Too less Blocks communication
Excessive - Irritating, Distracting

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Posture
Folded arms Closed Hands behind back
Confident Strong Hands in pocket
Casual Hands on hips Aggressive
Hands crossed in front Respectful

Pauses
Fulfill what punctuation does in writing
Signal that something important is coming
Gives audience opportunity to digest
Signal for applause
A pause alongwith a frozen hand gesture
is probably the most arresting device in
the presenters armoury

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Eye Contact
Your method of keeping in touch
Conveys your sincerity
Gives you feedback
Lack of eye contact implies low
confidence, builds mistrustDo
maintain eye contact

Voice Modulation
Goes along with rest of body language
Changes the role you are playing
Communicates your mood
Develop your presenters voice
Alters the rhythm of the presentation

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Verbal Tics
Umm, er, Right? You know
All of us have them
Takes away the impact of a presentation
Identify your verbal tic and work on
losing it.

Audience Involvement
Way of building rapport
Puts you in control
Makes the presentation more interesting
How?
Ask questions
Seek opinions
Walk around

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Rehearsal
Practice
Practice till you are nearly perfect
Then practice once more
For some mysterious reason, the more
you suffer in preparing a speech, the
better it turns out to be.
- Dame Margaret Thatcher

Rehearsal
Exposes your weaknesses
Especially important for team presentations
You get to hear yourself out loud.

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Environment
Control it as much as you can
Lighting
Temperature
Mobile phones

Handling Questions
Fortune favours a prepared mind
Who asked it?
Why did he ask?
If you dont know . Say it

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Handling Questions
Park it if necessary
Never disagree with a questioner
Dont patronise
Stay objective Acknowledge the
legitimacy of the question

Building Blocks
Structure Technique
State

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263

Psyching Yourself
Enthusiasms
Anchoring/ Visualisation
Breathing

Building Credibility
Before the presentation
Dress appropriately
Watch your language

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264

Spatial Anchoring
Presentation Spot
Question Spot
Mediation Spot

Combine Visual aids, Hand
gestures and Spatial
Anchoring to create an
impact !!!

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13.17 A sample Project report

PROJECT REPORT
========

A sample project Report

On HFC Refrigerator - A Hope for the future

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266

ACKNOWLEDGEMENTS

I express my sincere gratitude and thanks to Mr. G Kumar, for his valuable
guidance and support in completion of this Report.

I also express our sincere thanks and gratitude to my mentor in this program i.e.
Mr.S K Singh for his support and encouragement.

J Narain
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267

PREFACE
THE REPORT ON THE ASSIGNMENT GIVEN HAS BEEN TRIED TO BE MADE
OUT ON PRACTICAL TERMS. DATA HAS BEEN CREATED WHICH IS BASED ON
NEWS PAPER AND INTERNET. OVERALL EFFORT HAS BEEN DONE TO BE
MORE PRACTICAL AND REAL. THE METHODOLOGY ADOPTED IS TO GET THE
MARKET POTENTIAL FIRST FOR THE PRODUCT, THEN IT IS COMPARED WITH
DATA AND SUBSEQUENTLY STRATEGY IS MADE IN COMPARISON TO
PRESENT MARKET TRENDS.
THE REPORT (BUISNESS CASE) BEGINS SEPARATELY.

ASSUMPTIONS FOR ASSIGNMENT
IT IS ASSUMED COMPANY HAS 3 VARIETIES IN PRODUCT NAMELY 210L,
280L, 310L. THE PRICE RANGE IS RS. 7000 TO 4000. HERE EXCISE, PACKIIGING,
TRANSPORTATION CHARGE, WHOLESALE AND DISTRIBUTION MARGINS ARE
NOT CONSIDERED. FOR CALCULATION ONLY PRODUCTION COST NAD SALE
PRICE FOR FACTORY IS CONSIDERED.
THERE ARE DIFFERENT ASSUMPTIONS FOR REPORT AND ASSIGNMENT
APPENDIX

APPENDIX HAS BEEN ADDED TO SHOW SOME OF THE DOCUMENTS AND
DATA TAKEN

H E R E T H E

BUSINESS CASE BEGINS
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268

HFC REFRIGERATOR A HOPE FOR FUTURE
Project Business Case

BY

BUSINESS DEVELOPMENT GROUP

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269

TABLE OF CONTENTS

S.No. Particulars STARTING
PAGE
1. EXECUTIVE SUMMARY 6
2. INTRODUCTION 7
3. OVERVIEW OF SALES PATTERN 8
4. OVERVIEW OF MARKET SHARE PATTERN 9
4. HFC A VIGARA- BUISNESS PLAN 12
5. ASSESING MARKET POTENTIAL 16
6. COST ANALYSIS 17
7. BREAK EVEN SALES 18
8. PROFIT EXPECTATION 19
9. MEETING FUND REQUIREMENT 20
10. RISK ANALYSIS 21
11. IMPLEMENTAION STRATEGY 23
12. STEPS FOR BETTER PERFORMANCE 24
13. RECOMMENDATION 25
14. REFERENCES 26

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EXECUTIVE SUMMARY

THOUGH WE HAVE MAINTAINED A TRUE MARKET SUPERMACY FROM 1957
TO 1995 BUT IN THE LAST DECADE OUR SALES IN REFRIGERATOR PRODUCT
HAVE FALLEN. WE HAVE SLOWLY BEING PUSHED OUT OF MARKET AND
SUBSEQUENTLY COMPETITION BY OUR COMPETITORS WHO HAVE
BROUGHT NEW TECHNOLOGY IN TO THEIR PRODUCTS.THEY HAVE STUDIED
THE TASTE OF CUSTOMER WELL AND HAVE BEEN ABLE TO WOO HIM FOR
PRODUCTS.

WE HAVE FALLEN FROM EARLIER 53% MARKET SHARE TO 20% NOW. BDG
GROUP HAS BROUGH OUT A MANTRA TO REVIVE THE MARKET OF
REFRIGERATORS BY USING HFC TECHNOLOGY WHICH IS NOT ONLY
ENVIROMENTAL FRIENDLY BUT ALSO IN CONSONANCE WITH GOI
DIRECTIVE AND THIS TECHNOLOGY IS WELL USED BY OUR COMPETITORS.

BDG GROUP HAS WORKED OUT TO GET THIS TECHNOLOGY TRANFERRED
FROM GE. THE COST INVOLVED IN IMPLEMENTING THIS TECHNOLOGY IS
ONLY TO A TUNE OF 10 CRORES.IT PROMISES A GROWTH UPTO 30% IN
MARKET SHARE WITHIN 1 YEAR.IT ALSO PROMISES A INCREASE A PROFIT
INCREASE OF 10% IN ONE YEAR AND 20% IN TWO YEAR.BDG HAS ALSO
PLANNED SOME OF NEW TECHNIQUES RELATED TO MARKETING,
IMPLEMENTATION, AFTER SALES WHICH OUR COMPETITORS HAVE TRIED
AND ARE SUCCESFUL. THESE TECHNIQUES AFTER REFRIGERATORS WILL BE
IMPLEMENTED IN OTHER PRODUCT LINE AS WELL.OVERALL INITIAL FUND
REQUIREMENT WILL BE RS 7.5 CRORES AND SUBSEQUENTLY 15 CRORE
MORE WILL BE REQUIRED. THE FIXED COST WILL BE RECOVERED AFTER
SALE OF 60000 REFRIGERATOR i.e. WITH IN 6 MONTHS AS PER OUR TRACK
RECORD THE PLAN IS FOOL PROOF AND IS INFACT

VIGARA
FOR REFRIGERATOR SALE
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271

Introduction

It is advent that we have enjoyed the status of market leader since 1957 and we have shown
a steady growth up to 1995. The exhibit 1 indicates our past performance.
PROFIT
0
50000
100000
150000
200000
250000
300000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
YEAR
R
S
.
Series1

It is obvious from above that our profits have been declining even though we have
brought a variety in our products but this has not helped us and since the beginning
of liberalization when our competitors have entered in to the market we have lost in
terms of profit and in terms of number.
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272

Overview of past sales pattern

The exhibit 2 indicates we have decline sales in our entire products wether 230L or
260L or 310L.
number sales
0
20
40
60
80
100
120
140
year
n
u
b
e
rSeries1
Series2
Series3
Series1 50 80 100 90 90 120 130 130 120 120 110 100 90 90 90 90 80
Series2 0 0 0 30 50 60 90 100 100 100 100 90 95 95 95 90 90
Series3 0 0 10 15 15 15 50 50 60 50 60 50 40 40 35 35 30
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

WE have enjoyed a monopoly in the market since 1957 to 1999.

But our sales since than have declined. We have also introduced a variety in our products
by introducing 260L and 310L refrigerators which has helped us to maintain our sales but
over last 5 years we have lost the battle.

We have benefited from excise benefits but now market has started drifting from our hands.
With same old technology we have been loosing our market share.

Even though our sales expenses have been rising but sales are falling.

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273

Overview of market share pattern
The exhibits below indicate our declining market share in the past.
1990
1, 50, 17%
2, 60, 20%
3, 30, 10%
4, 155, 53%
1
2
3
4
WE STAND HERE

1998
100, 14%
60, 9%
20, 3%
60, 9%
50, 7%
60, 9% 40, 6%
280, 40%
20, 3%
1
2
3
4
5
6
7
8
9
WE STAND
HERE

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274

2006
200, 20%
150, 15%
150, 15% 150, 15%
200, 20%
150, 15%
1
2
3
4
5
6
WE
STAND
HERE

Thus it is obvious we have lost as market leaders and our share now is 20% which earlier
used to be 53%

Our market share has continuously fallen as indicated in exhibit 6
market share
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
year
%
Series1

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275

CONCLUSION

WE HAVE TO SERIOUSLY THINK AND MODIFY OUR PRODUCT
STARTEGIES TO REMAIN IN BUISNESS AND REGAIN OUR MARKET SHARE
IN REFRIGERATOR BUISNESS.

Business Plan

HFC A VIAGRA FOR BOOSTING

MARKETING OF REFRIGERATORS

IN ORDER TO CAPTURE OUR LOST MARKET AND WOO THE CUSTOMERS WE
NEED A CHANGE IN PRODUCT TECHNOLOGY, MARKETING STRATEGY,
ADVRTISING COMPAIGN AND NEW DISTRIBUTING NETWORK.

THE REPLACEMENT OF CFC WITH HFC WILL MAKE OUR COMPETITORS
FEEL THAT WE ARE STILL BACK IN MARKET WITH VIGOUR AND
STRENGTH.

What we expect to gain from new product line?
With in this year we will increase our market share to 25% and by next year we will
increase our market share to 30%.
We will be increasing our profits by 10% this year and 15% by next year.
Our distribution network will be strengthened as we will stand with our
competitors.
We can start exporting our product to developed countries where only HFC
products are allowed.
We will also be exporting our new product to third world countries.
We can be an ambassador to protecting environment.

Overall we can expect with in three years
a market share of 30%
increase of 20% of profit
and a global presence

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276

Why to change product technology

The patterns of our sales indicate we are at a terminating side of our product life cycle.

The1957-1998 when our profits were increasing a growing business.

We maintained our market leadership from 1998- 2006.

Our sales pattern indicates we are in terminating trend so we must terminate the existing
product and start new product.

We have become older in present technology and need tonic and vitamins to regain
vigour and vitality.

WHY NOT CONTINUE CFC? WHY HFC?

CFC when released into the atmosphere, fluorocarbons destroys the ozone layer or
are suspected of contributing to global warming
HFC does not affect the ozone layer.
HFC refrigerants, which do not affect the ozone layer, are the most appropriate
choice because they can be used without compromising the function of the
refrigerant
GOI may ban manufacturing of CFC based products at the earliest.
Economics times study has indicated that India is going to sign Global warming
agreement sponsored by UNO and will stop all CFC based product manufacturing
and disposal in next 2 years
1957
1998
2006
Year
S
A
L
E
S
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277

Consumer behaviour:

Though it is correct that there is stiff competition from our competitors who are our global
players but we have strength of confidence which our existing customers have shown in us.
As per industry standards it is expected there will be 7.8% growth in sale of refrigerators.
This will further be added because of

Hot summer conditions in India.
High economic growth rate in last 5 years.
Increase in double income couples.
Availability of spare money with Double income couples.
Easy availability of personal loans
Predicated salary hike of 17% in years 2007.

We have to make a strategy to retain our existing customer with attractive scheme of
exchange of refrigerator and easy payment option.

Know your competitors to know why we failed

Earlier we used to be the market leaders. We failed to recognize the action of our market
competitors LG, Samsung, Whirlpool. They have used their new technology of HFC as
environment savvy image and informed customer about this new technology being used in
USA.

Our competitor friends were able to reduce their cost by supply chain management they
reduced their inventory and they marketed product on better logistics.

They properly identified their market segments and tailored their product as per customer
needs.

We followed the equation

Cost + profit= sale price

They followed
Sale price profit= cost

They accordingly reduce their cost.

They also followed profit (low) * volume high = total profit high.

They attract the customer more than us.

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278

Thus we conclude we need to have our new strategy in

Production with reduce cost and latest technology
New advertising methods and new slogan
Easy finance options
New distributors
New market segments
Multi options i.e. clubbing of products

Is the potential exists for sale?

YES THERE EXISTS A HUGE POTENTIAL. THE MARKET IS STILL
UNEXLORED.

ANALYSIS

POPULATION OF INDIA 10000000000
60% LIVE IN FAMILIES 6000000000
CONSIDERING 5 PERSONS IN FAMILY
TOTAL FAMILIES IN INDIA 1200000000

OF THIS 12% WILL HAVE REFRIGERATORS 144000000

WE EXPECT NORMAL INDIAN WILL EXCHANGE REFRIGERATOR
IN 15 YEARS

SO 10% WILL CHANGE EVERY YEAR (A) 9600000

PER ANNUM EXISTING CUSTOMER WILL EXCHANGE
REFRIGERATOR 9600000

WE EXPECT MARKET TO GROW 40 % EVERY YEAR (B) 3840000

SO NEW CUSTOMERS WHO WILL BUY REFRIGERATOR EVERY
YEAR 13440000

THUS TOTAL SALES POTENTIAL OF REFRIGERATOR IN 1 YEAR
(A+B) 13440000

PRESENT TOTAL SALE OF REFRIGERATOR IS (C) 1000000

BALANCE EXPECTED SALES (A+B-C) 12440000

CONSIDERING ONLY NEW CUSTOMERS 2840000

_______________________________________________________________________________________
279

WE CONCLUDE THE MARKET FOR REFRIGERATOR IS NOT SATURATED.
THE ABOVE FIGURE SHOWS ONLY 10% OF MARKET IS TAPPED ONLY. WE
CAN EASILY TARGET A RISE OF 10% RISE IN SALES IN ONE YEAR AND
15% INCREASE BY NEXT YEAR.

COST ANALYSIS

What changes are required to set up new production line?
We need
Technology transfer
Training to staff
New distribution channels
Training for maintenance and support
Advertising
Market research
New inventory

The fund requirement under various heads is indicated
HEAD
FUND
REQUIREMENT

HFC TECHNOLGY TRANSFER 50000000
ASSEMBLY LINE CHANGE COST 50000000

TRAINING COST 5000000
NEW DISTRIBUTOR COST 5000000
MARKET RESEARCH COST 2000000
ADVERTISEMENT COST 10000000
NEW PRODUCT LAUNCHING COST 2000000
NEW MAINTENANCE STAFF COST 1000000

ADD WASTED LYING MATERIAL COST 10000000
ADD CALLING BACK PRODUCTS 10000000

ADD OPPORTUNITY LOST COST 100000000

FIXED COST (TOTAL OF ABOVE) 245000000

Additionally we require new inventory costs which are

NEW INVENTORY 500000000
SALARY STAFF 100000000
COMMISIONS TO AGENTS 10000000
MISCELLANEOUS COST 10000000

RUNNING COST 620000000
_______________________________________________________________________________________
280

This is for 200000 units which is our normal production line and this is our sales in falling
trend.

We have to consider this as our bottom line we can not expect poor performance than this.

CALCULATION OF BREAK EVEN SALES

As we have discussed we have to change our strategy and we have to select our targeted
segment as in the price range of 16000, 13000, and 11000. Based on this break even is
calculated as

FIXED COST TO START
PRODUCTION OF HFC 254000000

SALE PRICE AVERAGE OF HFC 310L 5000

SELLING RATIO 310:280:230
RATIO 1,2,3

EQUATED PRICE OF ONE REFRIGERATOR

5000+4000*2+3000*3=2200
0/6=3667

SO EQUATED PRICE OF ONE
REFRIGERATOR IS 3667

FIXED COST IF TO BE RECOVERED IN 1
YEAR SALES 69273

YEAR SALES 34636

YEAR SALES 23091

OUR LAST YEAR SALES 200000

COST WITH SALES WILL BE RECOVERED IN
YEARS 0.35

_______________________________________________________________________________________
281

Thus we observe that all over fixed cost are recovered in 1 year.

We expect a better performance with new strategy and our fixed cost will be recovered
even earlier.

Even our sales fall to 100000 in the year our fixed cost will be recovered.

How much profit we expect?

With our every year sale of 200000 we expect to get a profit of Rs.11 crore.

SALE OF REFRIGERATORS IN 1 YEAR 200000

NEW INVENTORY 500000000
SALARY STAFF 100000000
COMMISIONS TO AGENTS 10000000
MISCELLANEOUS COST 10000000

RUNNING COST 620000000

COST OF ONE REFRIGERATOR 3100

AVERAGE SALE PRICE 3667

PROFIT 567

WITH SALE 200000 113400000
_______________________________________________________________________________________
282

Meeting fund requirement

How financing will be done

To set up total new assembly line we require a fixed cost of Rs. 25.40
Crore

HFC TECHNOLGY TRANSFER 50000000
THIS GE HAS AGREED TO INITIAL PAYMENT OF 1 CRORE AND REST IN FOUR
YEARS AS REVENUE SHARING

IMMEDIATE REQUIRED 10000000

ASSEMBLY LINE CHANGE COST 50000000
NO CHANGE THIS IS REQUIRED

TRAINING COST 5000000
THIS CAN BE DEALT TO TRAIN A TWO CORE TEAMS ONE WILL BE IN
PRODUCTION AND OTHER WILL TRIAN PEOPLE SO COST CAN BE REDUCED


NEW DISTRIBUTOR COST 5000000
THIS CAN BE DEFFERED BY 6 MONTHS INTERVAL

MARKET RESEARCH COST 2000000
THIS CAN NOT BE DEFFERED MORE OVER IT IS NOMINAL

ADVERTISEMENT COST 10000000

NEW PRODUCT LAUNCHING COST 2000000
THIS CAN NOT BE DEFFERED MORE OVER IT IS NOMINAL

NEW MAINTENANCE STAFF COST 10000000
ADD WASTED LYING MATERIAL COST 10000000
ADD CALLING BACK PRODUCTS 10000000

_______________________________________________________________________________________
283

ADD OPPORTUNITY LOST COST 10000000
THIS IS FICTIOUS COST AND WE CAN MAKE GOOD BY GOOD ADVERISING

TOTAL IMMEDIATE REQUIRED 74000000

THUS OUT OF TOTAL RS 25.4 CRORE FIXED COST ONLY RS.7.4 CRORES
FIXED COST WILL BE REQUIRED.
THE RUNNING COST IN ANY CASE WILL BE REQUIRED SO IT WILL NOT
MATTER.
_______________________________________________________________________________________
284

RISK ANALYSIS

With this strategy we can expect a reasonable profit. There is enough margin or cushion
available with which we can with stand. This is well explained as below.

SALE OF REFRIGERATORS IN
1 YEAR 200000 100000 94000

NEW INVENTORY 500000000 250000000 235000000
SALARY STAFF 100000000 100000000 100000000
COMMISIONS TO AGENTS 10000000 5000000 4700000
MISCELLANEOUS COST 10000000 5000000 4700000

RUNNING COST 620000000 360000000 344400000

COST OF ONE REFRIGERATOR 3100 3600 3663.8

AVERAGE SALE PRICE 3667 3667 3667

PROFIT 567 67 3.17

WITH SALES 113400000 6700000 298000

Thus we conclude even if our sales fall up to 94000 we are running in profit.
There is still a cushion available in our salary which we have kept fixed with down
sales we can plan to improve our productivity further.

_______________________________________________________________________________________
285

Implementation strategy

We will be following the following programme
Collaboration with GE for technology transfer
Visit by CEO and GM BDG to London for agreement signing
Finalisation of plans
Training of expert team for HFC
Procurement of inventory
Plan finalization for assembly line
Implementation of assembly line
Marketing team will complete survey and research for identification of new pockets
Final of advertisement module
Final of finance scheme partner
Final selection of new distributors
Production start
Planning for installation teams
Distribution of refrigerators

Availability of funds

To avoid any risk further we will adopt following methodology
Creditor terms will be increased from 25 days to 45 days for one year
Since this is assembled product so inventory space is less utilized
Based on assembly of 10 days for 5000 refrigerators inventory for only 10 days will
be kept
The scrap available will be sold to raise 1 crore
The bonus will be retained with some commitment of more bonus
The commission to agents will be hold for 3 months with assured 10% extra.
From saving account balance will be kept which will be to the tune of 4crore out of
7.5 crore required

Other marketing steps to ensure performance

Marketing will be given more targets
Distributors will be given more margins
Exchange offer will be given
Mixer/juicer which is low sale product will be given free to 100 new customers
New product mix will be given with refrigerator and oven
Lower market segment will be given attention as our margin is more.
Camps will be put up to show product
Truck display of product will be used
Shop keepers will be given refrigerators at easy finance but with higher segment
Scratch coupon lottery schemes will be launched
For first 6 months till we achieve a sale of 94000 we will follow this after sales
are attained we can dispense of.

_______________________________________________________________________________________
286

Recommendations

Based on above analysis arrived at BDG group recommends
Introduction of HFC product
Stoppage of existing advertisement campaign
Do market study for new towns where distributors are willing
Explore new areas where urbanisation has started
Device new campaign and slogan for product
Give more margin and freedom to distributor to attract customers and installation
his responsibility
Improve assembly line by supply chain management
Improve packaging and product mix
Plan launching of product in series with new model every six months
Use less space for inventory
Improve customer awareness and take after sales in own hand
Give dual responsibility to customer engineer to tell customer about product

Conclusion

BDG GROUP EXPECTS BY MERELY A BEGINNING OF RS. 10 CRORE THE
REFRIGERATOR SALE CAN BE BOOSTED AND THE NEW TECHNIQUES
ADOPTED CAN WELL BE SET INTO OUR OTHER PRODUCTS AND OUR
PROFITABILITY, PRODUCTIVITY AND CUSTOMER SATISFACTION CAN BE
INCREASED.

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