Will a “cooperative” structure suit a Management Consulting outfit?

Every consulting team has two critical success factors:

  1. New Assignment Flow
  2. Quality and timely delivery of existing assignments

These are interlinked and call for different demands on time from the consulting team members.

Most of consulting teams experience an alternate flood and drought situation i.e. there are too many assignments and too little consultant time or too little assignments and lot of consultants on the bench.

This calls for managing the constraint, the top / lead / managing consultants’ time, to divide on both the activities so that a constant flow is maintained. It calls for detailed scheduling of those few people’s time who can bring assignments as well as who can deliver the assignments. This can be augmented with on-the-job training of new people who can gradually start playing this role.

Traditionally, the consulting organisations are structured as hierarchical entities – Junior Consultant –> Senior Consultant –> Lead Consultant–> Principal Consultant —> Partners/ Directors.

Partner / Directors are the people who start the outfit or who laterally move in and take the top line and bottom-line responsibility. All the people take salaries and then bonuses are given based on some criteria. The promotions and upward movement of the consultants into partner / director is most of the time based on appraisals and / or on whims and fancies of the top-dog. The salaries naturally increase year-on-year. The Operating Expenses go up for sure but the income stream is uncertain and follows the flood and drought pattern. This creates a host of Undesirable Effects (UDEs).

There are frequent break-ups. People chart out independently and initiate the cycle again.

We have seen and experienced this at our previous company and others too have shown similar symptoms.

Our analysis is that at the root there is a core dilemma felt at all levels of such outfits. Following is the explanation of the Core-Cloud / Root Cause of all the different UDEs that are experienced by people while starting / flourishing / running to the ground such outfits.

The objective (A) is ‘Do well now as well as in future’. The necessary conditions to achieve this objective are (B) Be part of and thrive as a larger group and (C) Excel / Benefit as an individual. The actions required for these two necessary conditions create a conflict. These are (D)Share knowledge, leads, money/profits equitably and (D’) Do not share knowledge, leads, make extra demand on the share of profits/ higher salary.

Our understanding is that the faulty assumption in this core conflict stems from our experiences as human beings when we were dependent on agriculture or manufacturing physical goods. It was a clear zero-sum game. If I agree to divide my ‘field’ and share with some-one, my ability to grow food and earn goes down so much. If I agree to share the ownership of the manufacturing firm, my share of profits goes down so much. There was an upper limit beyond which it was felt to be difficult to extract value. The hierarchical organisation structure evolved giving the ultimate veto power, if anyone will be part of sharing the benefits, to very few people who also took home the major share of value.

The same organisation structure has been adopted for Knowledge Organisations like Consultancy, IT Services etc. These can be successful and grow to a certain extant beyond which the burden of unresolved dilemma breaks-up the unit.

Putting a Co-op model is an injection which removes the faulty assumptions in the core-conflict.

Individuals want to corner as much money and as soon as possible in their anxiety about the future. Sharing of knowledge, leads, money might appear to be a sacrifice but it is actually an investment to secure the future. Knowledge Organisations are different from earlier forms in the basic fact that the upper limit to which value can be extracted is limited by the imagination of the people. Even sky is not the limit.

On the surface this appears to be idealistic, utopian and unrealistic. But if you carefully look at the current reality and agree with the root cause then, this is most practical and realistic. In fact, by taking this step we will avoid the pains and disappointments which by default is the destiny of starting traditional independent consulting outfits.

We have to create a Future Reality Tree and a Pre-requisite Tree to make it really practical and operational. I am sure there are many Negative Branches that need to be trimmed to create a robust solution which can replace all the UDEs with Desirable Effects, the some and substance of which is “Do exceptionally well now as well as in the future” for all the stakeholders involved.

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