ABS

Amity Business School

MBA, Semester – 4
Management in Action Social, Economic & Ethical
Issues

-Teena Bagga
1
 Aim ABS

The course aims at bringing the students closer to reality

by developing their understanding of the professional
prerequisites to practice of management in terms of
required skills and attitude to respond proactively to
rapid discontinuous change in business environment.
Integrative in approach, this course aims at developing
not theoreticians but practitioners who are expected to
sense the ongoing conflict between environmental
change and internal desire of management for stability.
 Objective ABS

• Course Objectives:
– Bring students closer to reality by developing their
understanding of the professional prerequisites to
practice of management in terms of required skills
and attitude to respond proactively to rapid
discontinuous change in business environment

– Develop students the attributes of a consultant.

– Develop not theoreticians but practitioners who are

expected to sense the ongoing conflict between
environmental change and internal desire of
management for stability.
 Learning Outcomes ABS

• On completion of this course, students will be

able to :
– Examine political, economic, geographic and cultural
sources that shape a global competitive context
– Provide deep understanding and working knowledge
of managing a consulting firm
– Be able to develop a systematic / structured approach
to diagnose management problems.
– Develop critical thinking skills through reading and
case studies to apply social responsibility concepts
and ethical principles to current business scenario
 Module I: ABS

Introduction
Modern Management Practices and Issues
Involved, Outsourcing Management Services
and Evolution of Management Consultancy,
Skills-set Required for Management Consultants.
Consulting and performance counseling.
 Module II: ABS

The Process of Management

Consulting
Consulting Proposals. Identification and Definition of
Problem, Fact-Finding Leading to Solution
Development and Implementation, Developing
Strategic and Tactical Plans and Subcontracting,
Pricing of Consultancy, Acquiring and Developing
Talents for Consulting.
 Module III: ABS

In-house Management versus

Management Outsourced

Why a Sense of Skepticism and Unease Towards

Management Consultants. Cost versus Value
of Advice, Separating Consulting Success
from Consulting disaster. Some Revealing
Situations.
 Module IV: ABS

Cross Cultural Management

Systems and Processes
Types of organizational culture, Strength of
organizational culture, Function of
organizational culture, Importance of culture to
the organization, Cultural Models, Cross-
Cultural Perspectives, Geert Hofstede and Cross-
Cultural Issues
 Module V: ABS

Economic and Social Issues in

Management
Adaptation to Changing Environment in General and
Economic Environment in Particular, Economic Growth
and Change Areas, Emerging Opportunities in Various
Sectors including Social Sector, Management Practice
and Cultural Issues, The global Political Situation, The
Global Competitive Environment and the internal scene
in India, War Game.
 Module VI: ABS

Ethical Issues in Management

Relationship among Various Stakeholders,
Reasons for Conflict of Interests Among
Stakeholders, Corporate Governance and Ethics.
Why Unethical Decisions Leading to Conflicts
are Taken, Power and Politics, Initiatives on
Corporate Governance by the Governments.
 Assessment ABS

• HA 05
• Seminar 05
• Project 10
• Viva 05
• A 05
• End Term Exam 70

11
 The Career Structure ABS

• Analysts
• Consultants
• Senior Consultants
• Business development managers
• Directors/Partners
 ABS

Challenges faced
by
Business

13
 Uncertainty ABS

– Uncertainty in the global economy

– uncertainty in the credit markets,
– uncertainty in how new regulations will affect business,
– uncertainty about what competitors are doing, and
– uncertainty about how new technology will affect the
business—
– …..
– uncertainty leads to a short-term focus
– we believe that a failure to strategically plan five years
into the future can end up destroying value.
– The problem to be solved, therefore, is to balance the need
for a more reactive, short-term focus with the need
for informed, long-term strategies. 14
 Globalization ABS

– Understanding foreign cultures is essential to everything

from the ability to penetrate new markets with existing
products and services, to designing new products and
services for new customers
– to recognizing emergent, disruptive competitors that only
months earlier weren’t even known.
– The problem to be solved is to better understand
international markets and cultures through better
information gathering and analysis of what it all means.
– Similarly, the incredible degree of government intervention
in nearly all major economies of the world is leading to
much greater uncertainty in the global marketplace, making
international operations ever harder to manage.
15
 Innovation ABS

– Big companies are struggling with innovation

– A better innovation process is at the top of the agenda for
most CEOs
– But the idea of a more innovative culture appears too
frightening to many.
– The problem to be solved is how to become more
innovative while still maintaining a sense of control over
the organization.

16
 Government Policy ABS

& Regulation
– A changing regulatory environment is always of concern in
certain industries,
– Uncertain energy, environmental and financial policy is
complicating the decision making for nearly all companies
today.
– Dealing with an unknown regulatory environment is fast
becoming the new normal and companies are deciding to get on
with it—whatever “it” may be—despite the angst.
– The problems to be solved are to understand the meaning of
regulation and government policy in your industry, its
implications for your business, and to develop the
skills necessary to deal with it.
17
 Technology ABS

– The pace of technological improvement is running at an

exponentially increasing rate.
– the pace today makes capital investment in technology as
much an asset as a handicap
– because a competitor may wait for the next-generation
technology, which may only be a year away, and then use it
to achieve an advantage. What’s a CEO to do?
– Similarly, the ability for even the best of technologists to
stay informed about emerging technology is in conflict
with the need to master a company's current technology.
– The problem to be solved is to develop a long-term
technology strategy while remaining flexible enough to
take advantage of unforeseen technology developments.
18
 Diversity ABS

– A particular subset of human capital planning is found so often in

our research that it is worth its own mention.
– Diversity brings many challenges, as it makes it far more likely
that people do not agree, and the lack of agreement makes running
a business very difficult.
– At the same time, the lack of diversity within many large company
leadership teams leads to a narrow view of an ever-changing and
diverse world—contributing to groupthink, stale culture and a
tendency to live with the status quo for too long.
– The problem to be solved is to first define what diversity (and
we’re not talking about satisfying government statisticians) really
means in your company, then foster the expansion of differing
ideas and viewpoints while ensuring a sufficiently cohesive
environment that efficiently gets things done. 19
 Complexity ABS

– There’s no doubt that life and business have gotten more complex,
even as certain tasks and activities have become easier due to
information technology.
– The pace of change is quickening.
– The global economy is becoming still more connected, creating a
much larger and more diverse population of customers and
suppliers.
– Manufacturing and services are increasingly targeted at smaller,
specialized markets due to the flexibility that IT provides in these
areas. We know from our knowledge of the patterns of evolution
that, in reality, systems tend to become more complex as they
evolve, then become simplified again.
– The problem is how to develop better systems-thinking
capability so you can design your business models, processes,
products and services in a way that minimizes unnecessary
complexity.
20
 Information Overload ABS

• It is said that the only true constant is change, and in

today’s world nothing is changing more, or growing
faster, than information.
• Every day, 2.5 quintillion bytes of data are created.
• The ability of companies, much less individuals, to
consume and make sense of the information that is
available (and necessary) to make good decisions is
becoming a nearly insurmountable challenge.
• The problem to be solved is to deal with this mountain
of information with both technology and human
know-how, then to convert this information into valuable
knowledge.

21
 Supply Chains ABS

– Because of uncertainty in demand and the need to stay

lean.
– companies are carrying smaller inventories than ever.
– At the same time, uncertainty in supply, driven by wildly
changing commodity prices, an apparent increase in
weather-related disruptions, and increasing competition for
raw materials makes supply chain planning more
challenging than ever.
– The problem to be solved is to develop a supply-chain
strategy that not only ensures the lowest costs, but also
minimizes the risk of crippling supply-chain disruptions.

22
 Strategic Thinking ABS

& Problem Solving

– The lack of sophisticated approaches to information acquisition,
analysis and the development of unique insight leaves many
companies at a disadvantage;
– they lack a long-term strategic imperative and instead jump from one
strategy to the next on a year-to-year basis.
– Everyday problem-solving competency among today’s business
leaders is also limiting their ability to adequately deal with the first nine
problems.
– This is why corporate managers tend to jump from one fire to another,
depending on which one their executives are trying to put out, and in
many cases the fast-changing business environment is what ignites
these fires in the first place.
– So what is the problem to be solved? Companies must resolve that
strategic thinking and problem solving are the keys to successful
business, then develop a robust capability at all levels.
23
 ABS

Outsourcing
Management Services

24
 OUTSOURCING INTRODUCTION ABS
“the strategic use of outside resources to perform activities
traditionally handled by internal staff and resources” Dave Griffiths

Services
COMPANY OUTSOURCER

Organization Service
Level Level
Agreement Agreement

Outsourcing denotes the continuous procurement of services from a

third party, making use of highly integrated processes, organization
models and information systems.
 Recent trends in ABS

outsourcing
• 40% to 50% of the top 500 companies in the world is
leveraging on outsourcing for most of their business
processes.
• Current figures values this robust industry to a staggering $20
billion USD.
• On an average global outsourced projects involve about 28%
that belong to the hardcore IT sector, 11% to finance sector,
15% to sales and marketing and 9% from administrative sector.
The remaining 22% belong to many other different sectors
such as consumer distress calls, general data segregation jobs,
tourism etc.
 Reasons for Outsourcing ABS

Why Outsource?
– Provide services that are scalable,
secure, and efficient, while improving
overall service and reducing costs.

Traditional role - reaction to problem

– Reduction and control of costs
– Avoid large capital investment costs
– Insufficient resources available

Modern role – business strategy

– Allows company to focus on their core
competencies
– Keeping up with cutting-edge technology
– Creating value for the organization and its
customers
– Building partnerships
 Types of Outsourcing ABS

Business process outsourcing (BPO) is a subset of outsourcing

that involves the contracting of the operations and responsibilities of
specific business functions or processes to a third-party service
provider.

Knowledge process outsourcing (KPO) describes the outsourcing of

core business activities, which often are competitively important or form
an integral part of a company's value chain. Therefore KPO requires
advanced analytical and technical skills as well as a high degree of
proprietary domain expertise
 Types of Outsourcing ABS

Legal process outsourcing (LPO) refers to the practice of a law firm

or corporation obtaining legal support services from an outside law firm
or legal support services company. This process has been marked by the
practice of outsourcing any activity except those where personal
presence or contact is required.

Recruitment Process Outsourcing(RPO) is a form of business process

outsourcing (BPO) where an employer outsources or transfers all or part of
its recruitment activities to an external service provider.

Engineering process outsourcing( EPO)

EPO offers global consulting and outsourcing services providing end-to-
end services in the areas of Engineering and Technical Process
Outsourcing.
 When to Outsource ABS

PricewaterhouseCoopers Model

Strategic Non-Strategic

Competitive Not Grey

Outsourced Area

Non-Competitive In House
Outsource
if Possible
Decision Matrix ABS

31
 Form a strategic alliance ABS

• Tasks in this quadrant are high in strategic importance,

but contribute little to operational performance.
• So, although you need to retain control of them to ensure
they are done exactly as you want, or you get the quality
you want, they are relatively insignificant in terms of cost
or smooth running and so not worthy of full in-house
focus.
• This means that you should form a strategic alliance .
For example, an auto manufacturer could align with an
advertising agency.
• The manufacturer needs to be closely involved in the
message and tone of adverts, but advertising has little
impact on the day-to-day operational performance of the
company. 32
 Retain ABS

• Tasks in this quadrant are high in strategic importance

and have a big impact on operational performance.
• These tasks should be kept in-house so that your
organization keeps maximum control.
• In our auto manufacturer, the assembly of cars would be
retained as it is strategically critical – it should be one of
the organization's core competences , in fact – and it
makes a massive contribution to the smooth running of
the organization.

33
 Outsource ABS

• Tasks this quadrant are important for successful operational

performance, but are not strategically important.
• These tasks could safely be outsourced. They're simply not
worth spending in-house time managing.
• For example, the auto manufacturer in the example above
could outsource its delivery logistics to a specialist company.
• How you deliver cars to dealers is generally not a source of
competitive advantage, as it doesn't touch the customer's
experience, but how well it's done has a huge impact on
operational performance.
• If transporters are late, stock builds up at the manufacturing
plant, and dealers don't have the vehicles they need in their
show rooms for customers to test drive. You can learn more
about outsourcing in Working with Outsourced Suppliers . 34
 Eliminate ABS

• Tasks in this quadrant are not important to your organization's

overall strategy and nor do they make a significant
contribution to its day-to-day operational performance.
• Although you might not be able to eliminate these tasks
completely, it's important to check why you're doing them.
• An example might be running a subsidized staff crèche.
Although having an in-house childcare facility might help you
to attract certain staff (strategic importance) or reduce
absenteeism caused by childcare problems (operational
performance), does the effort involved justify doing it?
• Perhaps it does, but equally, perhaps you might be better off
paying your people a little more, so that they can afford to use
independent crèches situated nearby.

35
 Advantages of ABS

Outsourcing
• Swiftness and Expertise: Most of the times tasks are outsourced to
vendors who specialize in their field. The outsourced vendors also have
specific equipment and technical expertise, most of the times better than the
ones at the outsourcing organization. Effectively the tasks can be completed
faster and with better quality output
• Concentrating on core process rather than the supporting
ones: Outsourcing the supporting processes gives the organization more
time to strengthen their core business process and help in Increased
productivity and Efficiency
• Risk-sharing: one of the most crucial factors determining the outcome of a
campaign is risk-analysis. Outsourcing certain components of your business
process helps the organization to shift certain responsibilities to the
outsourced vendor. Since the outsourced vendor is a specialist, they plan
your risk-mitigating factors better
• Reduced Operational and Recruitment costs: Outsourcing eludes the
need to hire individuals in-house; hence recruitment and operational costs
can be minimized to a great extent. This is one of the prime advantages of
36
offshore outsourcing
 Problems With ABS

Outsourcing
• Risk of exposing confidential data: When an organization outsources
various services, it involves a risk if exposing confidential company
information to a third-party
• Synchronizing the deliverables: In case you do not choose a right partner
for outsourcing, some of the common problem areas include stretched
delivery time frames, sub-standard quality output and inappropriate
categorization of responsibilities. At times it is easier to regulate these
factors inside an organization rather than with an outsourced
partner.Selection of supplier !!!
• Hidden costs: Although outsourcing most of the times is cost-effective at
times the hidden costs involved in signing a contract while signing a contract
across international boundaries may pose a serious threat
• Lack of customer focus: An outsourced vendor may be catering to the
expertise-needs of multiple organizations at a time. In such situations
vendors may lack complete focus on your organization’s tasks. Loss of
Control!!!
• Provider may not understand business environment
• Provider slow to react to changes in strategy
• Too dependent on service provider
 Outsourcing ABS

Implementation
• Program initiation
– Opinions and ideas shared to form draft
contract

• Program implementation
– Transferring staff
– Service Level Agreement (SLA)
– Establish communications between partners
– Actual transfer of the service
– Establish management procedures

• Contract agreement

• Contract fulfillment
 So… ABS

• The guiding principle of outsourcing has been the

transfer of a process or function, that is typically not a
core competence of an enterprise, to an organization
that has expertise in that area, allowing the enterprise to
effectively utilize its resources in its core areas of
business.
• This principle has dual objectives:
– Save on cost of operation by acquiring services from a team more
productive that the internal resources (based on their expertise, or their
ability to leverage infrastructure across multiple clients); and
– Improve quality and value of operation by acquiring services from an
organization with best practices in managing that business activity.
• Any outsourcing contract will ultimately be about either
or both of these two objectives.
39
 Onshore Outsourcing ABS
• Onshore outsourcing limits the outsourced work within the locality or
the country of origin, making outsourcing providers more accessible
and is nearer to the company itself.
• There will be no problem with traveling and it makes communication
between you and the outsourcing team more comfortable and
available.
• Onshore outsourcing will not impose as much risk as offshore
outsourcing, but the benefits that you would enjoy is not as great and
as rewarding as its foreign counterpart.
• Aside from that, when it comes to intellectual property rights, you and
the outsourcing company that you are working with are covered by the
same legal rules while in the practice of legality and ownership of
intellectual properties.
• Onshore outsourcing business can help your company(client) save on
office space, cost and be more efficient. The geographical limits may
just allow you to come in contact with the team every day and
supervise their operation.
40
 Offshore Outsourcing ABS

• Offshore outsourcing can be defined as the system of

collaborating with an external organization and assigning that
organization to carry out some of your business roles.
• Usually the product or the service which has been outsourced
would not be sold in the offshoring location; it would only be
marketed in the outsourcer's country.
• Offshore outsourcing gives organizations access to high-
quality services at lower operating costs.
• There are basically three main categories in offshore
outsourcing; business process outsourcing (BPO),
infrastructure and technology outsourcing and software
outsourcing.

41
 Differences in the sourcing ABS

strategy..
Insourcing vs. Outsourcing – Managing the complexities of the global
delivery
model requires a deep expertise in the local environments and experience with
cross border business operation, making the evaluation of whether to
outsource a project or leave it in-house very different from a purely onshore
sourcing decision.
Structure of the solution – The lack of maturity of the offshore industry
requires a significant commitment from the enterprise in supporting the
development and growth of the outsourcing solution. Making that commitment,
keeping a eye on the long-view necessitates a strategic sourcing decision,
distinctly different from a domestic sourcing contract.
Due diligence on operating models and supplier selection – The level of
due diligence required, and the types of issues to address during supplier
selection are substantially different. For example, in offshore sourcing for 24X7
process support, it is imperative to check the availability of 100% captive power
generation. Indeed, it’s imperative to check for the level of reserve gasoline
available.
42
 Differences in the sourcing ABS

strategy..
Resource deployment/redeployment – Offshore Outsourcing transactions
rarely include asset and resource transfers from the buyer to the service
provider, whereas in onshore sourcing deals, that is a common point of
negotiation.
Knowledge transfer – the transfer of information and training around the
buyer’s IT environment and other relationship parameters are very difficult to do
in offshore sourcing. Since this has a direct effect on path to productivity for
service providers, it becomes an important evaluation criterion, as well as a
phase in the sourcing cycle.
Portfolio Assessment and planning – the ‘offshoreability’ of an IT service or
business process is dependent on many factors, and in most enterprises,
transitioning to an offshore model requires early planning. The portfolio
assessment and planning phase is a critical component of a successful
offshore sourcing initiative.–

43
 ABS

Consultancy

44
 History ABS

• Management as a unique field of study

• Arthur D.Little (1890s)
• McKinsey & Company
– First management and strategy consultancy
– Founded by James McKinsey in 1926 (Chicago)
– Hiring of bright young MBAs
• Rise of management consultancy after World War II
– Development of tools for strategic management
– Boston Consulting Group (1963), McKinsey&Co, Harvard Business
School
– Bain&Co - focus on shareholder wealth
• Consulting within accountancy and technology firms
– PwC and IBM
• Niche consultancy firms
– Corporate social responsibiity
 Types of firms in the ABS

industry
• Accountancy firms offering consultancy
• Large non-accounting consultancies
• Small specialist boutiques
• Gurus
Strategy HR

• Independents Process and

Operations Marketing
Management
consulting

Org design Change

Infotech
 Major consultancies ABS

• Bain & Company

• Boston Consulting Group
• Deloitte & Touche
• Ernst & Young
• A.T. Kearny
• KPMG
• Arthur D.Little
• McKinsey & Co
• Mercer
• PriceWaterhouse Coopers
 Different types of consulting ABS

services:
a knowledge-based view
Productise Competitive strategy Bespoke

Reuse economics Economic model Expert economics

People-to-documents KM strategy Person-to-person

IT focus Technology IT enables personal

Buy experience Build experience

Reward for HRM Reward for

contribution to document knowledge creation and
database sharing

Example
Ernst & Young McKinsey & Company
 Why? ABS

• The cost of ‘doing it yourself’ is often more than getting experts in to do it

for you, even if their daily rate is high.
• It is unsurprising that ‘expertise’ is not the only reason why clients
bringing in consultants.
• Clients are quite capable of doing themselves, yet they do not have the
time.
• Client managers call in consultants because their image of ‘expertise’
provides security in an inherently insecure and uncertain business world.
• Clients can use this ‘expert identity’ to bolster their own image in an
organisation or to provide legitimacy to a decision that the client has
already made.
• Consultants also provide a very real succor to clients in that they provide a
legal liability for when decisions go wrong.

49
 What? ABS

The definition of management consultancy is no minor problem. The

Management Consultancies Association (MCA) in the UK defines the role as:

“…the creation of value for organisations,

through the application of knowledge, techniques and assets,
to improve business performance.
This is achieved through the rendering of objective advice and/or the
implementation of business solutions.”

“Consulting involves individuals, whether self-employed or employed,

individually or collectively using their knowledge, experience and analytical
and/or problem-solving skills to add value into a wide variety of organisations,
and therefore to the UK economy as a whole, within a framework of
appropriate and relevant professional standards, disciplines and ethics.” (IC)
50
 What ??? ABS

“…to try to take ownership of an organisation’s problems and

use research and logic to develop possible options for a way
forward.”
Matt Baumann

“giving solutions to the problems that companies have.”

Jane Ridley

In Nutshell …..
Consulting is about helping an organisation
get from A to B…
 Attributes of Successful ABS

Consultants
• Powerful Negotiator
• Effective Communicator
• Reservoir of Self Control
• Understanding of Individual Psychology
• Understanding of Group Psychology
• Understanding of Organizational Psychology
• Complete mastery of the given “area”.
 Barriers common to Consultants ABS

1. Know – it – all attitude

2. Inability to understand technical language
3. Inadequate background or knowledge
4. Poor organization of ideas
5. Differences in perception
6. Prejudice or bias
7. Personality conflicts
8. Tendency not to listen
9. Resistance to change
10. Lack of credibility
11. Inability to understand Non-Verbal Communication
12. Hostile attitude
13. Lack of feedback
14. Differences in status or position
15. Too many Gatekeepers
16. Overly Competitive Attitude
 Activity… ABS

• List down the consulting firms in India.

• Segregated them into three categories:
– Strategy and general business consulting
firms in India
– IT consulting firms in India
– HR consulting firms in India
• Find out the kind of openings/profiles
these firms have for Fresh/Experienced
Management Graduate.
• And the competency required for the
various profiles. 54
 Deloitte’s one firm strategy ABS

The consultancy market has experienced unprecedented This case study outlines how the delivery of an
change through the 1990s and over the end-to-end service, involving multiple service lines,
last decade. Strong growth over this period has can add exponential value to the client. It also sets
been driven by waves of new ideas, not least the out some of Deloitte’s lessons learned in organizing
introduction of technology in all its forms: from enterprise and incentivizing the practice to achieve this.
resourcing planning systems during the Traditionally, professional services firms have
boom years of the late 90s, through the inflation gone to market and sold work by service line (for
and bursting of the internet bubble, a trend towards example: consulting, audit, tax, corporate finance).
offshoring, to today’s market where cost reduction This model is not always conducive to offering the
is the service in demand. best client service. Firstly, staff working in one area
Throughout this time, the competitive landscape may not understand the competencies and skills
has been in flux. Of particular significance offered by other parts of the firm, and so will miss
was the major restructure in the early 2000s as out on opportunities for these to provide more
most of the ‘big 5’ professional services firms sold rounded and complete client advice. Secondly, and
off their consultancy practices in response to market perhaps more seriously, the firm’s recognition and
perceptions and regulatory pressures in the reward structures may motivate staff to work in
aftermath of Enron. Ernst & Young, KPMG and service silos, delivering as much as possible of an
PricewaterhouseCoopers engagement from within their own team or division,
all sold their consulting when perhaps other teams have additional
businesses – to CapGemini, BearingPoint and IBM
respectively. Deloitte, however, retained its consultancy
business and embarked on a new ‘One Firm’
strategy to maximize the opportunity from this
unique positioning.
55
 ABS
or more relevant skills. The result is rarely the best 2. What technology systems, processes and
outcome for the client, who may receive very different organizational structures will best support
service depending upon which part of the cost effective operations and the planned
firm was originally engaged. It is important to remember strategic changes and growth?
that clients do not care which service line 3. How should the company be organized
they are speaking to. They have a challenge – and and located to maximize investment incentives
they would like it solved. The best solution to this and to minimize its tax burden?
challenge will often come from a multi-disciplinary 4. What structure will best meet the company’s
team, possessing a blend of different skills. ongoing financing needs and how
In 2000, Deloitte was perhaps best known as an should these needs be secured?
audit and financial advisory firm, but consultancy was 5. How should the organization plan a
also a core and expanding part of the business. Having
retained its consultancy capability, whilst other Organizations in such a position need a broad
firms sold theirs, Deloitte had a valuable differentiator. consultancy advisor, and preferably one that can support
In particular, the firm was well positioned to provide them through the journey, from the initial strategy
a broad and comprehensive service, supporting the through to its execution and implementation.
client from the start of an issue or initiative, through
to the implementation of a solution. Whilst many Emphasizing the breadth and integration of our
firms could compete on advisory services and many capability, we moved to a single brand, ‘Deloitte’ in
others could compete on implementation and operational 2003, and subsequently introduced the ‘One Firm’
services, few could offer such a full breadth of strategy in 2004. Our overall strategy was to focus
support through the lifecycle of the business. on the client, not the service organization, at a time
For example, consider a company that has enjoyed when other organizations were looking internally at
success in its local market, but is now seeking divesting and rebuilding their consulting businesses
to develop and grow its business. Typically, this
will trigger a series of questions:

1. Which products and services should be developed?

Where and how should they be
taken to market?
56
 ABS
Deloitte’s approach was based on the following ‘Deloitte’ for all services, adopting an integrated approach
strategic choices: to marketing supported by a high profile
1. Collaborate as one Deloitte team, going to ‘Have you asked Deloitte?’ campaign. However, embedding
market with a portfolio of businesses that this culture needed considerable effort and
can team effectively to serve clients with required incentives. Our lessons learned include:
distinction. • The approach requires staff (especially senior
2. Develop and maintain four world-class managers and above) to understand all
businesses (audit, tax, consulting and corporate the firm’s service lines. This does not mean
finance). making a technology consultant an expert in
3. Attract and retain the best people, becoming tax, for example, but it does mean that the
known as the place where the best technology consultant needs to understand
choose to be. where we can help clients on tax issues and
4. Be a client-centric organization and deliver who to go to for advice on this internally.
exceptional client service with an unrelenting • Firm-wide propositions are necessary so
focus on quality. that clients can understand the value of
5. Own the high ground, leading the profession having a broad and end-to-end service
in restoring public trust in auditing and offering at their disposal. We invested in
business advisory services. the development and marketing of propositions
such as ‘Business Critical Programmes’,
We planned to drive incremental value for our ‘Enterprise Cost Reduction’ and ‘Finance Transformation’.
clients by leveraging synergies across the different • It is key to focus on relationships within current and target
facets of our capability. The One Firm approach clients. We established
supported the delivery of more complex engagements. cross-firm client target lists, representing a
By offering co-ordinated support across a balance of industries and organizational maturity.
variety of different areas, clients received a more We targeted and approached these organizations in a co-
joined up and valuable service. Client relationships ordinated manner, drawing on our full range of competencies.
were strengthened and staff benefited from more • Forming multi-disciplinary client teams and
challenging and rewarding work. account development teams gives huge benefits in cross-
The ‘One Firm’ strategy started to break down internal fertilization of ideas and skills and understanding of other areas
barriers, with staff going to market as of the business.
57
 ABS
• lt is important to formally recognize cross Questions
service line activity and referrals. Our 1. In what ways might a consultancy structure
assessments of partner and staff performance its workforce to maximize its success?
recognize sales for any service line as 2. What advantages does a consultancy offer
strongly as the originator’s own service line. compared to a team of contractors?
• Communication of examples and rewarding 3. What are the key advantages of a ‘full service’
of successes is important and needs to consultancy compared with a more
be constantly reinforced. niche operator?

The co-ordinated approach needs to be

applied at all levels of the organization,
not just partners, in order for it to be
successful.

Deloitte’s strategy has:

• ldifferentiated the firm in the market place
through unmatched breadth and depth of
services;
• created an ability to deliver comprehensive
solutions and become ‘advisor of choice’
for clients;
• lntroduced a more collaborative culture;
• facilitated the delivery of more challenging
and interesting engagements;
• lthrough the above, created a reputation
that has helped the firm to attract and retain
the best talent.

However the market and competitor landscape

continues to evolve and as such so too does
58
Deloitte’s strategy and approach to maintain and
further expand its position.
 The Consulting Process ABS

• During a typical consulting intervention, the consultant and the client

undertake a set of activities required for achieving the desired
purposes and changes, known as “the consulting process”.
• This process has a clear beginning (the relationship is established
and work starts) and end (the consultant
• departs).
• Between these two points the process can be subdivided into
several phases, which helps both the consultant and the client to be
systematic and methodical, proceeding from phase to phase, and
from operation to operation.
• Many different ways of subdividing the consulting process, or cycle,
into major phases can be found in the literature.
• Various authors suggest models ranging from three to ten phases.
• We can have a simple five-phase model, comprising entry,
diagnosis, action planning, implementation and termination.
59
 The Consulting Process ABS

•First contacts with clients

Entry •Preliminary problem diagnosis
•Assignment Planning
•Assignment Proposals to clients
•Purpose Analysis
•Problem Analysis
•Fact Finding Diagnosis
•Fact Analysis
•Feedback to client
•Developing Solutions
Action •Evaluating Alternatives
Planning •Proposals to clients
•Planning for implementation
•Assisting with implementation
•Adjusting proposals Implementation
•Training
•Evaluation
•Final Report
•Settling commitments
Termination •Plans for follow-up
•Withdrawal
 Process ABS

• Consulting Proposals.
• Identification and Definition of Problem,
• Fact-Finding Leading to Solution
• Development and Implementation
• Developing Strategic and Tactical Plans
and Subcontracting
• Pricing of Consultancy
• Acquiring and Developing Talents for
Consulting.
61
 The Consulting Process ABS

•First contacts with clients

Entry •Preliminary problem diagnosis
•Assignment Planning
•Assignment Proposals to clients
•Purpose Analysis
•Problem Analysis
•Fact Finding Diagnosis
•Fact Analysis
•Feedback to client
•Developing Solutions
Action •Evaluating Alternatives
Planning •Proposals to clients
•Planning for implementation
•Assisting with implementation
•Adjusting proposals Implementation
•Training
•Evaluation
•Final Report
•Settling commitments
Termination •Plans for follow-up
•Withdrawal
 Entry ABS

• Initial phase in any consulting process and assignment.

• The consultant and the client meet, try to learn as much as possible
• about each other
• Discuss and define the reason for which the consultant has been
brought in, and on this basis agree on the scope of the assignment
and the approach to be taken.
• The results of these first contacts, discussions, examinations and
planning exercises are then reflected in the consulting contract, the
signature of which can be regarded as the conclusion of this initial
phase.
• Entry is very much an exercise in matching.
• The client wants to be sure that he is dealing with the right consultant
• And the consultant needs to be convinced that he is the right person,
or that his firm is the right consulting organization, to address the
problems of this particular client.

63
 Entry ABS
• Initial contacts
– The consultant makes the contact or The client makes the contact
– First meetings and Preparing for initial meetings
– Agenda for the first meeting
– Agreement on how to proceed
• Preliminary problem diagnosis
– Scope of the diagnosis
– Some methodological guidelines, rules, procedures and analytical techniques used in the preliminary problem diagnosis are the same
as those of the later diagnosis
– Using comparison(Gap Analysis)
– The client’s involvement
– Sources of information
– Alternative approaches(problem-identification workshops, Self-diagnosis by individual business owners or managers etc.)
• Terms of reference
– initial statement of the work to be undertaken by a consultant
– If terms of reference are used: the client’s policy is to do as much analytical and planning work as possible before considering to use a
consultant; often this will be the case with assignments dealing with relatively narrow and well-defined technical issues; the client
(usually in the public sector)
– If terms of reference are not used: the client (usually in the private sector) prefers to select a consultant, do the preliminary problem
diagnosis, and define the scope of the assignment jointly with him or her. The client then confirms the choice on the basis
– of a proposal received from the consultant, without using the intermediate stage of drafting terms of reference.
• Assignment strategy and plan
– A fundamental aspect of designing and planning a consulting assignment is the choice of assignment strategy.
– The assignment plan, including the strategy that will be followed, is formally presented to the client as a proposal
• Proposal to the client
– aka technical proposal, project document, project plan, contract proposal etc.
– Sometime in predetermined format. To facilitates evaluation of alternative proposals received from several consultants.
– A proposal submitted to the client is an important selling document.
• The consulting contract 64
 Diagnosis ABS
• The purpose of diagnosis is to examine the problem faced and the purposes
pursued by the client in detail and in depth, identify the factors and forces that
are causing and influencing the problem.
• The consultant should start the diagnostic work with a clear conceptual
framework in mind.
• Diagnosis is sometimes viewed as equal to collecting, dissecting and analysing
vast amounts of data, including a great deal of data that may have no
relevance to the purpose of the assignment.
• In principle, problem diagnosis does not include work on problem solutions.
This will be done in the next phase, action planning.
• Diagnosis may even lead to the conclusion that the problem cannot be
resolved, or that the purpose pursued cannot be achieved and the problem is
not worth resolving.
• In practice, however, it is often difficult or inappropriate to make a strict
distinction between the diagnostic and the action planning – and even the
implementation – phases of the consulting process
• Diagnostic work will identify and explore possible solutions.
• Requires to Restating the problem and the purpose
• Challenge : The human side of diagnosis 65
 Diagnosis ABS

1. Diagnosing purposes and problems

– Instead of starting diagnosis by asking “What’s wrong here? What’s the matter?”, the
consultant should ask first “What are we trying to accomplish here? What are we
trying to do?”
2. Defining necessary facts
– Facts should enable the examination of processes, relations, performances, causes
and mutual influences, with special regard to underutilized opportunities and
possible improvements.
3. Sources and ways of obtaining facts
– records; events and conditions; memories.
4. Data analysis
5. Feedback to the client

66
 Action Planning ABS

• This phase includes developing possible solutions to the problem

diagnosed, choosing among alternative solutions, presenting proposals
to the client, and preparing for the implementation of the solution
chosen by the client.
• The client’s involvement in action planning should be even more active
than in the diagnostic phase.
• The emphasis is no longer on analytical work, but on innovation
and creativity.
• The objective is not to find more data and further explanations for the
existence of a problem, but to come up with something new.
• Obviously, not all solutions to clients’ problems will involve totally fresh
approaches.
• Often there will be no need to develop a new solution from scratch
because a suitable one already exists somewhere.
• Action planning requires the best talents to be mobilized and all good
ideas to be examined; it will be ineffective if the talents within the client
organization do not contribute. 67
 Action Planning ABS

• Searching for possible solutions

• Developing and evaluating alternatives
– The evaluation technique used will be selected with regard to the nature and
complexity of the particular case. It may be a simple break-even analysis,
cost–benefit analysis, return on investment analysis, linear programming
technique, decision analysis, or some other technique.

68
 Identification and ABS

Definition of Problem
• Steps for problem identification, definition and solution-
1. Description of problem(s) to be solved.
2. Objectives and expected results (what is to be achieved, final
product).
3. Background and Supporting information.
4. Budget estimate or resource limit.
5. Timetable (key stages and control dates)
6. Interim and Final reporting.
7. Inputs to be provided by the clients.
8. Exclusions from the assignment (what will not be its object).
9. Constraints and other factors likely to affect the project.
10.Profile and competencies of eligible consultants.
11.Requested consultant inputs into the project.
12.Contact persons and addresses.
 FACT-FINDING ABS
LEADING TO SOLUTION DEVELOPMENT AND
IMPLEMENTATION
What should the new solution achieve?
•What basic purpose?
•What other purposes?
•What level of performance?
•What quality of output?
•What new product, service, or activity?
•What behaviour?

How will the new situation differ from the present?

•Different products, services, or activities.
•Different methods.
•Different system(s).
•Different equipment.
•Different location.
•Different way of managing.
 ABS

Are the effects likely to last?

•Are the client’s business and market changing rapidly?
•Is competition likely to come with better solutions?
•Is there a possibility that people will revert to present practices?
•Should further developments be foreseen?

Where could solutions and ideas be found?

•In the same unit?
•In the same enterprise?
•From business partners or friends?
•In literature?
•In a research institution?
•In the consulting firm?
•From other consultants?
 DEVELOPING STRATEGIC AND ABS
TACTICAL PLANS AND SUBCONTRACTING
Strategic Plans
•Porter’s Five Forces: Barriers, Buyer Power, Customer Power, Substitutes,
Competition.
•4Cs: Customers, Cost, Competition, Companies.
•4Ps: Product, Price, Promotion, Place.
•Scenario Planning: Planning done according to the situations.
Tactical Plans ABS
Some of the tactical plans used in the management consulting are-
•Beneficiary, Target group: Who will actually benefit from the project.
•Purpose: What purpose is to be accomplished by the project.
•Result: Project must be result-oriented, what results are estimated to be achieved.
•Development Objective: It defines a wider perspective, framework. It tell about the
ultimate or long term objective.
•Immediate Objective: The objective of completion of project successfully and how,
the short term objective.
•Output: What all delivered by the project and what all has to be delivered by the
project.
•Indicator of Achievement: Measurement of whether objective is achieved and how
successfully. A controllable indicator used.
•Actions: A set of actions to achieve and meet objective.
•Input: Resources to be utilized- both quantitative and qualitative methods.
 SUBCONTRACTING ABS
•Subcontracting is especially prevalent in areas where complex projects are
the norm, such as construction and information technology. Subcontractors
are hired by the project's general contractor, who continues to have overall
responsibility for project completion and execution within its stipulated
parameters and deadlines.
•Subcontracting is a type of work contract that seeks to outsource certain
types of work to other companies. This is a step down from general
contracting, which is a contract overseeing a much broader project in many
cases. Subcontracting is done when the general contractor does not have the
time or skills to perform certain tasks.
•For example: When a building is being constructed, subcontracting becomes
a major deal. A general contractor may take care of a number of tasks,
including the brick-and-mortar construction, but look to subcontractors for
other types of tasks, especially things like plumbing and electrical work.
These disciplines are nearly always subcontracted out.
 ABS

Advantages of Subcontracting:
Subcontracting offers a number of advantages.
•First, it allows work on more than one phase of the project to be done at
once, often leading to a quicker completion.
•Second, because subcontractors already have the expertise and
equipment to provide the service, it is often much cheaper for them to do
the work than a general contractor who may not have that special
expertise.
•Finally, the subcontractor is usually able to work with a general
contractor on more than one project, thus creating a savings for both in
the long run as a relationship is formed.
 PRICING MODELS ABS

• 3 core pricing models that are practiced in the management consulting industry
• Fixed Price,
• Time and Material and
• Risk-Reward.
• Fixed Price approaches would be more suited to projects where the consultants
have already worked on something similar and hence becomes applicable to where
toolkits may be used.
• A time and materials model would best suit a project where neither the consultant
nor the client are completely sure of what the client needs are or how complex the
project may be - which makes estimations difficult.
• Finally, a risk-reward project is sometimes the best solution to motivate consultants
to bring about radical changes in the client business.
• One size doesn’t fit all , Various factors which can be kept in mind:
• Scope of Work
• Client Involvement
• Client-Consultant Relationship
• Revenue and Value
• Risk
• Transparency
76
PRICING MODELS ABS

77
PRICING MODELS ABS

78
 Consulting fee models ABS

• The main strategies for setting consulting fees include:

• Doubling/tripling your hourly wage
• Using a daily rate for consulting
• Setting consultant fees by the project
• Setting consulting fees based on performance
• Setting consultant fees strategically using real-life data
• Charging what everyone else charges
• Moving to Solution-based Fees

79
 PRICING METHOD ABS

• Many new consultants underestimate operating costs when pricing their services.
Bill Mooney, founder of William Mooney Associates, a consultant to consultancies,
offers a simple formula for calculating your daily rate.
• The Magic Formula : Start from the bottom of your income statement and build up
to get to your top line (i.e. the fees that you will charge).
Profit + Labor Costs + Overhead = Daily Fee Revenue
• Labor : Your time is money. If you plan to take home an annual salary of $200,000
and work 260 days per year (365 days, minus Sundays, a few Saturdays, holidays
and two weeks’ vacation), you will pay yourself $769 per working day.
• Overhead : Overhead includes recurring expenses associated with running your
business, such as rent, a secretary, phone bills, postage, benefits, insurance and
equipment. Say all of that equals $15,000 per month, or $180,000 per year. Next,
divide your annual costs by the number of working days per year. Market-research
firm Kennedy Information figures most consultants spend 58% to 62% of their time
working directly for their clients; 62% of those 260 days equals 161 days per
year. Grand total: $1,120 per day.
• Profit Margin : By Mooney’s estimates, a consultancy’s profit margin averages
between 15% and 25% of its total expenses. Continuing from the previous slide,
20% of $1,120 is $224.
• Adding It All Up : Plug those numbers back into the fee formula. Your daily fee
equals $769 + $1,120 + $224. That’s $2,113 per day–or $211 per hour for a ten-hour
day. 80
 ACQUIRING AND DEVELOPING ABS
TALENTS FOR CONSULTING

Recruitment & Diversity &

Selection Inclusion
programs strategies

Acquiring
Talent

On Boarding
Profiling &
program design &
Sourcing pratices
Implementation
 ABS

Global
Leadership
development

Team Top Talent

Effectiveness strategy

Developing
Employee
Mentoring Talent Development
Programs strategies &
programs

Training
Virtual Executive Program
Coaching Design &
Delivery
 Acquiring and Developing ABS

Talents for Consulting

People skills: High

Sales skills: Medium
Communication skills: High
Analytical skills: Extremely High
Ability to synthesize: High
Creative ability: High
Initiative: Medium
Computer skills: Medium
Work hours: 50-90/week

83
 Acquiring and Developing ABS

Talents for Consulting

• Consulting is an exciting but risky profession
• Consulting is About
• Consultants Listen
• Not Everyone Starts on
• Network, Network and Network
• Teamwork, Teamwork...
• Brainwork, Brainwork...
• A Different Perspective Can Work
• Industry Knowledge Counts.
• Presentation skills matter.
• It's Not Always Fun...

84
 ABS

Why a Sense of Skepticism and

Unease Towards Management
Consultants
• Outsource vs. In-house

85
 Outsourcing ABS

Pros
• Specialized - you can get the best
• Personal attention from a senior practitioner
• Each campaign treated uniquely
• Holistic view - consultant is intimately aware of
all aspects of the campaign
• 5.Relationship – it is easier to form a long term
relationship with the owner/operator than an
account rep that may change jobs

86
 ABS

Cons
• Specialized - yet another vendor to manage
• Has to wear many hats (eat what they kill)
• Physical limitations on number of clients that can
be serviced
• Can be more expensive per hour
• Limited in the number of things that can be done
well

87
 In-house ABS

Pros
• Strong connection to the product / service offering and in
depth understanding of the industry and top competitors.
• Concentrated focus on servicing just one client instead
of balancing the needs of multiple clients.
• Less expensive to maintain internal resources,
depending on the size and experience of the team.
• Timely and complete access to forecasts, sales data,
inventory, etc.
• Better integration and coordination with other internal
departments, including marketing, merchandising, IT,
and finance 88
 ABS

Cons
• Internal positions do not usually foster competitive spirit.
• A sense of boredom and eventual lack of motivation due
to continually working on the same site as opposed to
new challenges and opportunities.
• Lack of informal learning opportunities which inhibits the
ability to deliver in a rapidly changing environment.
• Professionals are rarely equally trained or experienced in
both organic optimization and paid search marketing
• Difficult to drive organizational change from within.
• External resources are needed to justify priorities,
directional change, and budgets 89
 Cost vs. Value of Advice ABS

• If an outsourcing consultant warns of danger zones as a

buyer steps into uncharted territory, the advice is
invaluable.
• If the advice ties up dangling loose ends, gathers and
analyzes relevant input from the right sources, and
prevents costly mistakes, the value is easy to measure.
• If the consultant provides a systematic way of making
things predictable and understanding implications of
decisions, the value of advice is far more than its price.

90
 ABS

• An outsourcing advisory firm’s value includes crucial

expertise in designing an effective RFP, service levels,
pricing components, and other contractual elements.
• An advisory firm has daily insight into the marketplace and
can provide valuable advice on strategic and cultural fit of
potential providers.
• An advisory firm knows the pitfalls of outsourcing
relationships and can construct an
implementation/transition phase that comes in on time and
on budget.

91
 Separating Consulting Success
ABS
from Consulting Disaster
• It is best for companies to engage consultant for a specific
task.
• Companies will have to remember that consultants are not a
substitute for vision and good management.
• Bringing in consultants without any clear idea of the help
that is needed is a waste of time and money.
• Many consulting interventions ultimately fail to achieve the
ends intended, because they call for the consultant to make
highly subjective judgment about the complexity of the
problem to be addressed before studying the problem itself.

92
 ABS

• To overcome this problem, there has to be strong dialogues

between the consultant and the client.
• Apart from recognition of the circumstances and the issues
at hand, there has to be conviction from the consultant and
management team on the need for the correct course of
action and change.
• Often this requires the consultant and management team to
look at observable facts and arrive at a set of shared
assumptions about the future.

93
 Some Revealing Situations - ABS

THAI AIRWAYS
• Implementation of Asia’s First Airline
Management Cockpit®
• Thai Airways turned to Atos Origin’s
management consulting practice to implement
The Management Cockpit® which is a tool to
help Thai Airways to execute their corporate
strategies.

94
 ABS

• Business Challenges
• To strengthen Thai Airways’ competitive
advantage by:
– Increasing revenues and profitability
– Increasing customer satisfaction
– Improving productivity of staff and assets
– Ensuring proper management of key projects

95
 ABS

• Solutions
• Implementation of the Management
Cockpit® built around the following key
principles:
– A framework driven by Thai Airways
– Key Performance Indicators (KPIs)
– Balanced Scorecard (BSC)

96
 ABS
• Benefits
• Thai Airways management can now able to focus on
essential issues for more effective decision-making
• Consolidation of a high-level information or equivalent,
accepted by top management using modern “world
class” performance indicators
• Improved shared responsibility and accountability
amongst its managers
• Improved transparency for the management thereby
helping them in effective decision making
• Created an environment that encourages more focus
management meetings and boosts team performance in
amicable ways 97
 Understanding Culture ABS

• Culture is composed of many elements

categorised as:
– Symbols
– Heroes
– Rituals
– Values

98
 ABS

In management consulting, concern for

culture is as important as any technical
concern.
• Being Culture-conscious
– Generate interest and enhance knowledge
about various cultures
• Being Culture-tolerant
– Respect for different cultures
– Tolerance of their values and beliefs
– Overcome the disparity between consultant’s
culture and the culture at work. 99
 Types of organizational
ABS
culture
• Normative Culture:
– Norms and procedures of the organization are predefined
– Employees behave in an ideal way and strictly adhere to the policies of the
organization.
• Pragmatic Culture:
– More emphasis on the clients and the external parties.
– Customer satisfaction is the main motive
– Such organizations do not follow any set rules.
• Academy Culture:
– Roles and responsibilities are delegated according to their skill set.
– Training to upgrade the knowledge and to improve their professional competence.
– The employees stick to the organization for a longer duration and grow within it.
– Educational Institutions
• Baseball team Culture:
– Employees are the most treasured possession of the organization who have a
major role in its successful functioning.
– Individuals always have an upper edge and they do not bother much about their
organization.
100
– Advertising agencies, event management companies, financial institutions
 ABS
• Club Culture:
– Individuals are hired as per their specialization, educational qualification and interests.
– Appraisals are a regular feature of such a culture.
• Fortress Culture:
– Employees are not very sure about their career and longevity.
– The employees are terminated if the organization is not performing well.
– Stock broking industries
• Tough Guy Culture:
– Feedbacks are essential. Team managers are appointed to discuss queries with the
team members and guide them whenever required.
– Employees are under constant watch in such a culture.
• Bet your company Culture:
– Take decisions which involve a huge amount of risk.
– The principles and policies are formulated to address sensitive issues and it takes
time to get the results.
• Process Culture:
– Adherence to the processes and procedures of the organization.
– Feedbacks and performance reviews do not matter much.
101
– Government organizations
 Strength and Importance ABS

of organizational culture
• Powerful strategic tool
– To orient all units towards common goals
– To mobilize employee initiative
– To ensure loyalty
– To facilitate communication
• Mix of cultures within organization;Ex:MNCs

102
 Cultural Values and Behavioural
Norms within organizations ABS

• Organization’s mission and image

• Seniority and authority
• Relative importance of different management positions and
functions
• Treatment of people
• Role of women in management and other jobs
• Selection criteria for managerial and supervisory positions
• Work organizations and discipline
• Management and leadership style
• Decision making process
• Circulation and sharing of information
• Communication patterns
• Socialization patterns
• Ways of handling conflict
• Identification with the organization 103
 Consulting Firm’s culture ABS

It encompasses values and norms concerning

wide range of issues including:
• Consulting methods and practices
• Commitment to clients
• Responsibilities and rights of junior and senior
consultants
• Career progression
• Transfer of know-how to clients
• Code of ethics
It is a mix of organizational, professional and
national cultural factors. 104
 Function of organizational ABS

culture
Managing external adaptation:
• Mission and strategy- shared
understanding of primary tasks
• Goals – derived from mission
• Means – how goals should be achieved
• Measurement – determining how well the
group is doing
• Correction – remedial and repair strategies
105
 Function of organizational ABS

culture
Managing Internal integration:
• Creating a common language and conceptual
categories
• Defining group boundaries and criteria for
inclusion and exclusion
• Distributing power and status
• Developing norms of intimacy
• Defining and allocating rewards and
punishments
• Explaining the unexplainable – ideology and
religion 106
 Cultural Models ABS

• They are made up of culturally derived

ideas and practices embodied, enacted
and instituted in everyday life.
• They give a form and direction to
individual experiences.

107
 Geert Hofstede and Cross- ABS

Cultural Issues
• “Culture is more often a source of conflict than of
synergy. Cultural differences are nuisance at best and
often a disaster.” – Geert Hofstede
• The Hofstede Model of Cultural Dimensions can be of
great use when it comes to analyzing a country’s culture.
• Developed a model that identifies 5 dimensions to assist
in differentiating cultures
– Power distance
– Uncertainty Avoidance
– Individualism
– Masculinity
– Long-term Orientation
108
 ABS

Hofstede Cultural Dimensions

109
 ABS
• Power Distance: The extent to which the people of a particular culture are
willing to accept unequal power distribution.
• High Power Distance:
– Centralized decision making.
– Management and superiors are highly respected and have the last say
in decisions.
• Low Power Distance:
– Everyone expects to share in decision making.
– Management hierarchies are flatter and more open to questioning
• Uncertainty Avoidance: The extent to which a society fears and avoids
uncertainty and uncertain outcomes.
• High Uncertainty Avoidance:
– Strictly defined rules of behaviour and formality
– Things that are different or unexplained can be viewed as dangerous
• Low Uncertainty Avoidance:
– Willingness to take risks
– More experimentation and / or innovative behaviour 110
 ABS

• Individualism vs. Collectivism: The extent to which people in the society

define themselves as part of larger groups.
• High Individualism:
– Social ties are loose
– Individuals expected to look after themselves
• High Collectivism:
– Individuals are strongly incorporated into groups of family, clan, school
– Government policies often favour the group over individual rights
• Masculinity vs. Femininity: The extent to which a society favours certain
gender traits.
• High Masculinity:
– Favours assertiveness
– Emphasis on competition
• High Femininity:
– Focused on quality of life
– Importance placed on the well-being of relationships 111
 ABS

• Long vs. Short-term Time Orientation: The extent to which

society is focused on the future as opposed to the past and present.
• Long-term time orientation:
– Promotes virtue and persistence.
– Focus towards future rewards.
• Short-term time orientation:
– Emphasize the past and present.
– Fosters a respect for tradition.

112
 ABS

What are stakeholders?

A stakeholder is anyone with an interest in a business. Stakeholders are

individuals, groups or organisations that are affected by the activity of the business.
They include:

•Owners who are interested in how much profit the business makes.
•Managers who are concerned about their salary.
•Workers who want to earn high wages and keep their jobs.
•Customers who want the business to produce quality products at reasonable prices.
•Suppliers who want the business to continue to buy their products.
•Lenders who want to be repaid on time and in full.
•The community which has a stake in the business as employers of local people.
Business activity also affects the local environment. For example, noisy night-time
deliveries or a smelly factory would be unpopular with local residents.

Internal stakeholders are groups within a business - eg owners and workers.

External stakeholders are groups outside a business - eg the community.
 ABS

Diagram showing the internal and external shareholders

 ABS

Stakeholders are involved in and/or affected (negatively or positively) by

the outcome and impact of an action, project or program. Stakeholders
can be divided into two main categories:

Internal stakeholders:
Internal Stakeholders are engaged in economic transactions with the
business. (For example, stockholders, customers, suppliers, creditors, and
employees)

External stakeholders:
External Stakeholders are affected by or can affect a business's actions
without being directly engaged in the business. (For example, the general
public, communities, activist groups, business support groups, and the
media)
 ABS

Stakeholders and their objectives

 ABS

Stakeholders and their objectives

 ABS

Stakeholders and their objectives

 ABS
Types of Stakeholders:

1.People who influence an endeavour but are not directly involved with doing the work.
Examples include managers, suppliers, or the financial department of an organization.

2.People who are affected by any action taken by an organization or group. Examples
are parents, children, customers, owners, and employees.

3.An individual or group with an interest in an organization's success. These

stakeholders influence programs, products and services. An example of such a
stakeholder is one who owns stock in the organization.

4. Any organization, governmental entity, or individual that has a stake in or may be

impacted by a given approach to environmental regulation, pollution prevention, energy
conservation, etc. The environmental organization Greenpeace would be an example of
such a stakeholder.

5.A participant in a community mobilization effort representing a particular segment of

society. Examples include school board members, environmental organizations, elected
officials and chamber of commerce representatives.
ABS
 ABS

Conflicting
. stakeholder objectives
Different stakeholders have different objectives. The interests of different
stakeholder groups can conflict. For example:

•Owners generally seek high profits and so may be reluctant to see the business
pay high wages to staff.

•A business decision to move production overseas may reduce staff costs. It will
therefore benefit owners but work against the interests of existing staff who will
lose their jobs. Customers also suffer if they receive a poorer service.
 ABS
Disagreements between stake holders

Due to the demands placed on businesses by so many different stakeholders, it is no surprise

that there are often disagreements and conflict between the different groups. Some of the
more common areas of conflict are:

1.Shareholders and management

Profit maximisation is often the over-riding objective of shareholders - resulting in large
dividend payments for them. However, it is far more likely that the managers of the business
will aim to profit satisfy rather than profit maximise (that is, they will aim to earn a
satisfactory level of profits, and then use the remaining resources to pursue other objectives
such as diversification and growth). This conflict between these two groups is often referred
to as divorce of ownership (the shareholders) and control (the management).

2.Customers and the business

Customers are unlikely to remain loyal and repeat purchase from the business if the product
that the have purchased is of poor quality and/or is poor value for money. More customers
are prepared to complain about the quality of products and after-sales service than ever
before, and the business must ensure that it has in place a number of strategies designed to
satisfy the disgruntled customer, reimburse any financial loss that they may have incurred
and persuade them to remain loyal to the business.
 ABS

3. Suppliers and the business

Suppliers are often quoted as complaining about the lack of prompt payments
from businesses for deliveries of raw materials, and if this became a regular
problem then the suppliers may well refuse credit to the businesses or may even
cease all dealings with them. On the other hand, many businesses have been
known to complain about the late deliveries of raw materials and components
from suppliers, and the dubious quality of the parts once they have been
inspected.

4.The community and the business

As outlined previously, the local community can often suffer at the hands of a
large company through the negative externalities of pollution, noise, congestion
and the building of new factories in areas of outstanding beauty. However, if the
business faces strong protests from residents and from pressure groups concerned
about its actions, then it may decide to relocate to another area, causing much
unemployment and a fall in investment in the community it leaves behind.
 ABS

What is corporate governance?

The system of rules, practices and processes by which a company is directed

and controlled. Corporate governance essentially involves balancing the
interests of the many stakeholders in a company - these include its
shareholders, management, customers, suppliers, financiers, government and
the community.

The following definition should help us to understand the concept better.

“Corporate governance is not just corporate management, it is something
much broader to include a fair, efficient and transparent administration to
meet certain well-defined objectives. It is a system of structuring, operating
and controlling a company with a view to achieve long term strategic goals to
satisfy shareholders, creditors, employees, customers and suppliers,
and complying with the legal and regulatory requirements, apart from
meeting environmental and local community needs. When it is practised
under a well-laid out system, it leads to the building of a legal, commercial
and institutional framework and demarcates the boundaries within which
these functions are performed.”
 ABS
What are the objectives of corporate governance?

The development of corporate governance concept is naturally and essentially related to

the ‘objectives of corporate governance’ and it may be important to note what the
‘Introductory framework’ has to say on this

“Good governance is integral to the very existence of a company. It inspires and

strengthens investor’s confidence by ensuring company’s commitment to higher growth
and profits. It seeks to achieve following objectives:
(i) That a properly structured Board capable of taking independent and objective
decisions is in place at the helm of affairs;

(ii) That the Board is balanced as regards the representation of adequate number of
non-executive and independent directors who will take care of the interests and
well being of all the stakeholders;

(iii) That the Board adopts transparent procedures and practices and arrives at
decisions on the strength of adequate information.

(iv) That the Board has an effective machinery to sub serve the concerns of
stakeholders;
 ABS

(v) That the Board keeps the shareholders informed of relevant developments impacting
the company;

(vi) That the Board effectively and regularly monitors the functioning of the management
team; and

(vii) That the Board remains in effective control of the affairs of the company at all times.

The overall endeavour of the Board should be to take the organisation forward, to
maximise long-term value and shareholders’ wealth.”
 ABS

Corporate government initiatives by government

Initiatives
• New Companies Act – inducing good CG practices through self regulation,
responsive legal framework based on shareholders’ democracy; disclosure based
regime; rational penal provisions with built-in deterrence and effective protection.

• Amendments to the Acts governing three professional institutes

(ICAI/ICSI/ICWAI) with a view to strengthen the disciplinary mechanism and bring
transparency in their working.

• Notification of Accounting Standards with a view to bring the disclosure norms in

tune with the international reporting standards;

• SEBI – Clause 49 – Appointment of IDs, Audit committee, Code of conduct,

disclosures of related party transactions, remunerations, compliance of accounting
standards, certifications of CEO & CFO, Compliance Certification & Whistle-blower
policy (optional);
 ABS

The Government has renamed the Ministry from “Company Affairs” to “Corporate Affairs” –
with a new vision

“We resolve ourselves to be the leader and partner in initiative for Corporate Reforms, Good-
Governance and Enlightened Regulation, with a view to promote and facilitate effective
corporate functioning and investor protection.”

Introduction of LLPs; transformation in the service delivery mechanism for transparency and
certainty – low-cost, easy compliance;

Setting up of Investor Education and Protection Fund.

Empowering investors through the medium of education and information with the help
of investor associations, VOs, NGOs, etc.;

Launching of websites – www.investorhelpline.in and www.watchoutinvestors.com

Setting up of NFCG in partnership with stakeholders – CII, ICAI & ICSI

 ABS

What is Ethics?

A set of standards derived from Social Values, to choose what is good and evil, Right
or wrong, ought to do and not to do is Ethical Standards. These are the set of
values in accordance to the Social norms which helps to survive in the
community. The Behaviour values which are considered important presently for the
existence, acts as a standard for the future ethical organization decision making.
There has been an increasing Unethical practices gained importance for being into
Fair practices, things came into limelight after the Unethical practices like Financial
Frauds by companies like Enron and Arthur Anderson carried on, by which there has
been an Increasing pressure on the organization from the Government
body and has more concerned on social responsibility and in unethical practices.

An ethical decision making should be in such a way that it should

be legally and morally, acceptable by Employees and the Shareholders. May
be an ethical decision doesn’t always directs to Ethical behavior, whereas an Ethical
Behaviour always comes before an Ethical decision making.
 ABS

Factors leading to Unethical Decision Making:

 One of the reason why there is been an increasing unfair practices are because of Competition
Driven Performance Management, where the possibilities of Violation of rules are higher.

 Since the objective of any organization is Profit maximization, the concentration of the mangers
tends to be more on short term goals rather than long term, which thrust them for taking
unethical norms just to meet the performance targets.

 Intrinsic Factors, like lack of Moral Awareness about the nature of decision, can make the
decision go wrong and other Individual Factor values can also arises problem
in making decision as per organization Ethical standards which influences greatly where the
intensity depends on how strong one is at, at their own values.

 Even after the implementation of Ethics policy it has been observed that, the subordinates follow
what their supervisors likes rather than, what the policy says. So, if the manager is unethical,
the subordinates follow the manager in such unfair practices.

 Problems in Ethical decision making may occur not only when the intentions are evil, but also
when there is a conflict between Individual Interest and social norm.
 What is power?
ABS

 Power is the ability to …

– Get someone to do something you want done.
– Make things happen in the way you want.
 Influence is …
– What you have when you exercise power.
– Expressed by others’ behavioral response to your exercise of power.
 Reward power.

– The extent to which a manager can use extrinsic and intrinsic

rewards to control other people.
– Success in accessing and utilizing rewards depends on manager’s
skills.
 ABS
What is power?

 Coercive power.

– The extent to which a manager can deny desired rewards or administer

punishments to control other people.
– Availability varies from one organization and manager to another.
 Legitimate power.
– Also known as formal hierarchical authority.
– The extent to which a manager can use subordinates’ internalized values or
beliefs that the “boss” has a “right of command” to control their behavior.
– If legitimacy is lost, authority will not be accepted by subordinates.
 ABS

What is power?

 Expert power.

– The ability to control another person’s behavior through the possession of

knowledge, experience, or judgment that the other person needs but does not
have.
– Is relative, not absolute.
 Referent power.

– The ability to control another’s behavior because the person wants to identify
with the power source.
– Can be enhanced by linking to morality and ethics and long-term vision.
 ABS

Organisational Politics

• Politics refers to the structure and process of the use of authority and power to
affect definition of goals, direction and the other major parameters of the
organization. Decisions are not made in a rational way but rather through
compromise, accommodation and bargaining. – TUSHMAN

From the above definition two points emerge

• Political behavior is outside one’s specified job requirements.

• It generates efforts to influence the goals, criteria or processes used for decision
making that will result in the distribution of advantages and disadvantages within
the organization.
 ABS
FEATURES
• Organizational politics involves the use of some kind of authority, power or
pressure over other person or groups. Rewards and punishment are commonly used
for this purpose.
• Basically political behavior is self serving in nature. Attempts are made to use
organizational resources for personal benefits or to give some benefits to others.
• Political behavior is outside ones specified job requirements. It involves getting
things accomplished that are not formally recognized practices or procedures.
• Political decisions may not be rational from the organizational point of view. They
are usually made to acquire more power.
 ABS

Handling Organizational politics

• Organizational politics has several unintended consequences such as less servicing

behavior, goal displacement, conflicts, demotivation of organizational members etc.

• In order to check undesirable behavior following steps may be followed :

1. Clearly defined jobs.

2. Proper managerial behavior.
3. Effective communication.
4. Fair evaluation system.
5. Judicial distribution of resources.