The structure of global management consulting firms

Published on October 29, 2015   21 min

Other Talks in the Series: Management Consultancy

0:00
Hello. My name is Mehdi Boussebaa. I am an Associate Professor of Organization Studies based at the University of Bath in the UK. In this talk I shall discuss the ways in which global management consulting firms organize their growing international operations, and also some of the challenges that they face in the process.
0:24
Global management consultancies or simply GMCs, for the sake of simplicity, have become major international corporate players. They offer a wide range of services in a variety of different industries and on a worldwide basis. And their clients include government institutions, non-profits, and importantly, multinational corporations which are a major source of revenue and prestige for the firms, as you can imagine. Now typical examples are prestigious firms such as McKinsey and Co, Bain and Co, and Boston Consulting Group. Or the consulting divisions of the major big four accountancies, Deloitte, KPMG, EY, and PWC. And, of course, the leading providers of consulting, technology and outsourcing services such as Accenture, Capgemini, and IBM. Most of these firms are American by origin but the few are European, so Capgemini from France, for instance, or Asian increasingly. Now what's interesting about these firms is that they are all highly internationalized. They employ thousands of professionals in offices dotted all around the world. Some of them are even more internationalized than the major multinational corporations which they actually serve.
1:53
Now the high level of internationalization that these firms actually demonstrate creates a great deal of organizational complexity in that the firms not only have to be able to offer different types of services in different types of industries but also work across different countries, different geographies, different regions of the world. And working across different regions or different geographies means not only having offices in different countries but also having knowledge about the cultural and institutional characteristics of those countries.
2:33
And clients expect that. They expect local knowledge, they expect that the consultants that they hire will have not only service and industry-based expertise but also country-specific expertise. In other words, the ability to customize service and industry expertise to fit the local environment.
2:54
As one UK manager I interviewed put it, "We're working on this global client at the moment. When we go to Italy, for example, they are expecting us down at the factory level to understand how the market works there. So you have to have consultants who have local knowledge, who have the skill sets of working in particular markets, who have credibility to consult in those markets."
3:19
So, in effect, internationalization forces GMCs to be structurally differentiated along not two, but three different axes: service, industry and geography. And so this is why today all GMCs claim expertise in these different areas, and also organize their operations, their people along these different axes.
3:43
An example is given in the following diagram. Each firm will typically have a number of service lines. So, for instance, strategy, operations, technology, outsourcing. Each firm would also have a number of industry groupings or units. Banking, communications, healthcare, energy, and so on and so forth. It will also have different geographic units at the country level. For example, France, Germany, India, but also at the regional level for the purpose of coordinating work and expertise at that level. So the firms are typically split into regional units. For instance, Europe, Latin America, Asia Pacific, Middle East and North Africa, and so on and so forth. Now within such a structure, consultants are generally connected to the three different axes. They are based in a particular country to start with. That's where they develop close relationships with clients and deliver customized services for them. That's also where they develop their careers. But consultants are then also part of service lines and industry groupings. Industry groupings are particularly important because, in effect, that's where firms try to go beyond geography, that's where consultants can become global experts. So, for instance, global banking specialists or global technology experts. So in sum, the firms are structurally highly differentiated, and as you can imagine, this structural complexity in turn creates significant managerial and organizational challenges for the firms. This is especially the case when it comes to serving clients that are international in scope and that need service to be delivered in multiple countries simultaneously.
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The structure of global management consulting firms

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