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Amity Business School

MBA, Semester 4

Management in Action Social, Economic & Ethical

Issues

-Teena Bagga
1

Aim

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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

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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

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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:
Introduction

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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:
The Process of Management
Consulting

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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:
In-house Management versus
Management Outsourced

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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:
Cross Cultural Management
Systems and Processes

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Types of organizational culture, Strength of

organizational
culture,
Function
of
organizational culture, Importance of culture to
the organization, Cultural Models, CrossCultural Perspectives, Geert Hofstede and CrossCultural Issues

Module V:
Economic and Social Issues in
Management

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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:
Ethical Issues in Management

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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

HA
Seminar
Project
Viva
A
End Term Exam

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05
05
10
05
05
70

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The Career Structure

Analysts
Consultants
Senior Consultants
Business development managers
Directors/Partners

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Challenges faced
by
Business
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Uncertainty

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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, longterm strategies.

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Globalization

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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 werent 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.

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Innovation

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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.

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Government Policy
& Regulation

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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 itwhatever it may bedespite 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.
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Technology

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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. Whats 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.

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Diversity

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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 were 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.

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Complexity

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Theres 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.

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Information Overload

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

todays 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 knowhow, then to convert this information into valuable
knowledge.

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Supply Chains

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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.

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Strategic Thinking
& Problem Solving

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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 todays 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.
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ABS

Outsourcing
Management Services

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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
outsourcing

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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

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

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Types of Outsourcing
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

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Types of Outsourcing

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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
PricewaterhouseCoopers Model
Strategic

Non-Strategic

Competitive

Not
Outsourced

Grey
Area

Non-Competitive

In House
if Possible

Outsource

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Decision Matrix

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Form a strategic alliance

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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.

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Retain

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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.

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Outsource

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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 .

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Eliminate

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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 crche. 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 crches situated nearby.

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Advantages of
Outsourcing

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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 offshore
outsourcing
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Problems With
Outsourcing

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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 organizations tasks. Loss of
Control!!!
Provider may not understand business environment
Provider slow to react to changes in strategy
Too dependent on service provider

Outsourcing
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

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So

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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.

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Onshore Outsourcing

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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.

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Offshore Outsourcing

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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.

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Differences in the sourcing

strategy..

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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,
its imperative to check for the level of reserve gasoline available.

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Differences in the sourcing

strategy..

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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
buyers 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.

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ABS

Consultancy

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History

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

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Types of firms in the

industry

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Accountancy firms offering consultancy

Large non-accounting consultancies
Small specialist boutiques
Gurus
Independents
Strategy

Process and
Operations

HR

Management
consulting

Org design

Marketing

Change
Infotech

Major consultancies

Bain & Company

Boston Consulting Group
Deloitte & Touche
Ernst & Young
A.T. Kearny
KPMG
Arthur D.Little
McKinsey & Co
Mercer
PriceWaterhouse Coopers

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Different types of consulting

services:
a knowledge-based view
Productise

Competitive strategy

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Bespoke

Economic model

Expert economics

People-to-documents

KM strategy

Person-to-person

IT focus

Technology

IT enables personal

Reuse economics

Build experience

Buy experience
Reward for
contribution to
document database
Ernst & Young

HRM

Example

Reward for
knowledge creation and
sharing
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)

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What ???

ABS

to try to take ownership of an organisations 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
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.

ABS

Barriers common to Consultants

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

Know it all attitude

Inability to understand technical language
Inadequate background or knowledge
Poor organization of ideas
Differences in perception
Prejudice or bias
Personality conflicts
Tendency not to listen
Resistance to change
Lack of credibility
Inability to understand Non-Verbal Communication
Hostile attitude
Lack of feedback
Differences in status or position
Too many Gatekeepers
Overly Competitive Attitude

ABS

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

Deloittes one firm strategy

The consultancy market has experienced unprecedented
change through the 1990s and over the
last decade. Strong growth over this period has
been driven by waves of new ideas, not least the
introduction of technology in all its forms: from enterprise
resourcing planning systems during the
boom years of the late 90s, through the inflation
and bursting of the internet bubble, a trend towards
offshoring, to todays market where cost reduction
is the service in demand.
Throughout this time, the competitive landscape
has been in flux. Of particular significance
was the major restructure in the early 2000s as
most of the big 5 professional services firms sold
off their consultancy practices in response to market
perceptions and regulatory pressures in the
aftermath of Enron. Ernst & Young, KPMG and
PricewaterhouseCoopers
all sold their consulting
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.

ABS

This case study outlines how the delivery of an

end-to-end service, involving multiple service lines,
can add exponential value to the client. It also sets
out some of Deloittes lessons learned in organizing
and incentivizing the practice to achieve this.
Traditionally, professional services firms have
gone to market and sold work by service line (for
example: consulting, audit, tax, corporate finance).
This model is not always conducive to offering the
best client service. Firstly, staff working in one area
may not understand the competencies and skills
offered by other parts of the firm, and so will miss
out on opportunities for these to provide more
rounded and complete client advice. Secondly, and
perhaps more seriously, the firms recognition and
reward structures may motivate staff to work in
service silos, delivering as much as possible of an
engagement from within their own team or division,
when perhaps other teams have additional

55

ABS
or more relevant skills. The result is rarely the best
outcome for the client, who may receive very different
service depending upon which part of the
firm was originally engaged. It is important to remember
that clients do not care which service line
they are speaking to. They have a challenge and
they would like it solved. The best solution to this
challenge will often come from a multi-disciplinary
team, possessing a blend of different skills.
In 2000, Deloitte was perhaps best known as an
audit and financial advisory firm, but consultancy was
also a core and expanding part of the business. Having
retained its consultancy capability, whilst other
firms sold theirs, Deloitte had a valuable differentiator.
In particular, the firm was well positioned to provide
a broad and comprehensive service, supporting the
client from the start of an issue or initiative, through
to the implementation of a solution. Whilst many
firms could compete on advisory services and many
others could compete on implementation and operational
services, few could offer such a full breadth of
support through the lifecycle of the business.
For example, consider a company that has enjoyed
success in its local market, but is now seeking
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?

2. What technology systems, processes and

organizational structures will best support
cost effective operations and the planned
strategic changes and growth?
3. How should the company be organized
and located to maximize investment incentives
and to minimize its tax burden?
4. What structure will best meet the companys
ongoing financing needs and how
should these needs be secured?
5. How should the organization plan a
Organizations in such a position need a broad
consultancy advisor, and preferably one that can support
them through the journey, from the initial strategy
through to its execution and implementation.
Emphasizing the breadth and integration of our
capability, we moved to a single brand, Deloitte in
2003, and subsequently introduced the One Firm
strategy in 2004. Our overall strategy was to focus
on the client, not the service organization, at a time
when other organizations were looking internally at
divesting and rebuilding their consulting businesses

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ABS
Deloittes approach was based on the following
strategic choices:
1. Collaborate as one Deloitte team, going to
market with a portfolio of businesses that
can team effectively to serve clients with
distinction.
2. Develop and maintain four world-class
businesses (audit, tax, consulting and corporate
finance).
3. Attract and retain the best people, becoming
known as the place where the best
choose to be.
4. Be a client-centric organization and deliver
exceptional client service with an unrelenting
focus on quality.
5. Own the high ground, leading the profession
in restoring public trust in auditing and
business advisory services.
We planned to drive incremental value for our
clients by leveraging synergies across the different
facets of our capability. The One Firm approach
supported the delivery of more complex engagements.
By offering co-ordinated support across a
variety of different areas, clients received a more
joined up and valuable service. Client relationships
were strengthened and staff benefited from more
challenging and rewarding work.
The One Firm strategy started to break down internal
barriers, with staff going to market as

Deloitte for all services, adopting an integrated approach

to marketing supported by a high profile
Have you asked Deloitte? campaign. However, embedding
this culture needed considerable effort and
required incentives. Our lessons learned include:
The approach requires staff (especially senior
managers and above) to understand all
the firms service lines. This does not mean
making a technology consultant an expert in
tax, for example, but it does mean that the
technology consultant needs to understand
where we can help clients on tax issues and
who to go to for advice on this internally.
Firm-wide propositions are necessary so
that clients can understand the value of
having a broad and end-to-end service
offering at their disposal. We invested in
the development and marketing of propositions
such as Business Critical Programmes,
Enterprise Cost Reduction and Finance Transformation.
It is key to focus on relationships within current and target
clients. We established
cross-firm client target lists, representing a
balance of industries and organizational maturity.
We targeted and approached these organizations in a coordinated manner, drawing on our full range of competencies.
Forming multi-disciplinary client teams and
account development teams gives huge benefits in crossfertilization of ideas and skills and understanding of other areas
of the business.

57

ABS
lt is important to formally recognize cross
service line activity and referrals. Our
assessments of partner and staff performance
recognize sales for any service line as
strongly as the originators own service line.
Communication of examples and rewarding
of successes is important and needs to
be constantly reinforced.

Questions
1. In what ways might a consultancy structure
its workforce to maximize its success?
2. What advantages does a consultancy offer
compared to a team of contractors?
3. What are the key advantages of a full service
consultancy compared with a more
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.
Deloittes 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
Deloittes strategy and approach to maintain and
further expand its position.

58

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

Purpose Analysis
Problem Analysis
Fact Finding
Fact Analysis
Feedback to client

Assisting with implementation

Adjusting proposals
Training

ABS

First contacts with clients

Preliminary problem diagnosis
Assignment Planning
Assignment Proposals to clients

Developing Solutions
Evaluating Alternatives
Proposals to clients
Planning for implementation

Evaluation
Final Report
Settling commitments
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

Purpose Analysis
Problem Analysis
Fact Finding
Fact Analysis
Feedback to client

Assisting with implementation

Adjusting proposals
Training

ABS

First contacts with clients

Preliminary problem diagnosis
Assignment Planning
Assignment Proposals to clients

Developing Solutions
Evaluating Alternatives
Proposals to clients
Planning for implementation

Evaluation
Final Report
Settling commitments
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

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 clients involvement
Sources of information
Alternative approaches(problem-identification workshops, Self-diagnosis by individual business owners or managers etc.)

Terms of reference

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

initial statement of the work to be undertaken by a consultant

If terms of reference are used: the clients 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

ABS

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 Whats wrong here? Whats 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 clients 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,
costbenefit analysis, return on investment analysis, linear programming
technique, decision analysis, or some other technique.

68

Identification and
Definition of Problem

ABS

Steps for problem identification, definition and solution1. 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
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

ABS

Are the effects likely to last?

Are the clients 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

TACTICAL PLANS AND SUBCONTRACTING
Strategic Plans
Porters 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.

ABS

Tactical Plans

ABS

Some of the tactical plans used in the management consulting areBeneficiary, 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 doesnt 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 Mooneys estimates, a consultancys 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. Thats $2,113 per dayor $211 per hour for a ten-hour
day.

80

ACQUIRING AND DEVELOPING

TALENTS FOR CONSULTING

ABS

ABS

Acquiring and Developing

Talents for Consulting
People skills:
Sales skills:

High
Medium

Communication skills:

High

Analytical skills:

Extremely
High

Ability to synthesize:

High

Creative ability:
Initiative:

High
Medium

Computer skills:

Medium

Work hours:

50-90/week

ABS

83

Acquiring and Developing

Talents for Consulting

ABS

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 firms 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 THAI AIRWAYS

ABS

Implementation of Asias First Airline

Management Cockpit
Thai Airways turned to Atos Origins
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 consultants culture
and the culture at work.

99

Types of organizational
culture
Normative Culture:

ABS

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.
Advertising agencies, event management companies, financial institutions

100

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.
Government organizations

101

Strength and Importance

of organizational culture

ABS

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

Organizations 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 Firms 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
culture

ABS

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
culture

ABS

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 CrossCultural Issues

ABS

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 countrys 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

Types of Stakeholders:

ABS

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

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.

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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.

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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.

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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.

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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 investors confidence by ensuring companys 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;

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(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.

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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 & Whistleblower policy (optional);

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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, GoodGovernance 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

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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 doesnt always directs to Ethical behavior, whereas an Ethical
Behaviour always comes before an Ethical decision making.

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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 managers skills.

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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.

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What is power?
Expert power.
The ability to control another persons 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 anothers behavior because the person wants to identify

with the power source.

Can be enhanced by linking to morality and ethics and long-term vision.

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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 ones 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.

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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.

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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.
2.
3.
4.
5.

Clearly defined jobs.

Proper managerial behavior.
Effective communication.
Fair evaluation system.
Judicial distribution of resources.