Management Consulting in India

A new research paper Management Matters: Evidence from India suggests that the average Indian company can be improved significantly with the help of modern business practices. The study involved offering free consulting to a set of mid sized companies in the textile industry. The companies that availed of the free consulting showed a significant improvement in efficiency, lower inventories and higher profits, after they implemented the recommendations. The paper is long but is an interesting read. Also read Ajay Shah’s take on it.

The first thing to ponder is if Indian business practices are less modern. They may be technologically behind the best in the world and they might suffer on account of the creaky infrastructure that supports them. But is it also true that even in the context that they find themselves in, their business practices leave much to be desired?

The paper implies that this is indeed the case. I tend to agree with its conclusion. This is not to say that there aren’t well managed Indian firms – the research focused on mid-sized family owned businesses. But I think that it is safe to say that like technological innovation, management innovation is largely centered in the western world. A lot of it is applicable even to the Indian context, but it’s penetration is not too deep.

The authors then go on to say that the reason why Indian firms are not well managed is because management is not well informed about modern management techniques. They distrust outsiders and rarely use management consultants and so leave themselves in a low information cocoon. They don’t hire business school grads and there isn’t much mobility within the industry that could disseminate best practices.

One of the recommendations of the authors is that a robust management consulting industry could solve some of these problems. The research was supported and partly financed by a management consulting firm, Accenture. So this conclusion is somewhat self-serving, but not necessarily incorrect because of that.

After employee mobility in the industry, management consulting is perhaps the most successful way of disseminating new business practices. My sense is that Indian companies are not very open to management consulting in general. The cost is perceived to be very high. The change they bring about is thought to be too disruptive. And the improvement in the business, too chancy.

Maybe its management consultants who need to look at themselves to see if they are responsible for the underuse of their services in India.

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8 Responses to Management Consulting in India

  1. Krishna says:

    Clearly MCs queered their own pitch by their mediocrity and the game is still on. I would say take the template out of them and their creative wheel stops spinning. One cursory glance at the template wielding charlatan’s machinations will tell you how they run on "formula solutions". First they have a few hours of face time with you and jot down the areas of concern as you see it. Then they go back to their firm, come out with a colorful .ppt slideshow that just reproduces what you’d just told them. For solution, oh, yes they have a ready formula. If the client is large enough they advise "Break Up" and if it is fragmented they say "Merge". A few days later, they present an even more colorful bill and that’s it. I have first hand experience with McKinsey, E&Y, Anderson Consulting and it’s been the repeat act with each one of them.

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  2. Krishna says:

    Similarly they advise only the solution for which they have a template and nothing tailor made to suit a given client. If the client seeks to raise funds, they shoot back with the experience of the latest assignment they did. Many of them advised companies that had no export earnings to take the FCCB route (because overseas debt was cheap) and eventually when stock prices crashed, the convertibility option never got triggered and the lenders insisted on repayment. It led to a good number of companies to default and the management consultant that recommended the "solution" was nowhere to be seen ! Unless they let pin the consultant fee to outcome and calibrate it to the efficacy of their solutions, these charlatans will never make the grade.

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  3. Krishna says:

    If you want to eturn around a business, try the trusted insiders. Listen to them for a change. They are the unsung vterans and they know the customer and the shareholder – the two most important people in an enterprise. Try proven lateral hires on full time basis.

    And If you want to turn it upside down, you know whom to call !

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  4. Ashok says:

    Sir please read there is reference about you in this :-

    http://www.ciol.com/News/News-Reports/Is-Infy-a-g

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  5. MrDalal says:

    "Their business practices leave much to be desired?

    The paper implies that this is indeed the case. I tend to agree with its conclusion. "

    Basab, you got it totally wrong on this one. Given the challenges, I think Indian managers have always done a terrific job in ensuring that the show goes on, with an upward curve.

    like u rightly said, if MS sponsors some work on OS comparisons, or accenture sponsors a paper on consulting, ignore the results.

    However in such cases it would be interesting reads. I mean, the same kind of interest if someone makes a case saying tiger woods is innocent, you just want to know how the case is being made.

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  6. Bharat Rao says:

    MCs have things to do before they are accepted. They have to think about their rates, first of all. Dollar denominated rates won't work. Even $25 / hr is a lot of money for a mid size domestic firm. That rate will break the P & L templates of most big firms. Upmarket hotel stay and even monthly flybacks will make them still more unaffordable. Some MCs got themselves into PSU restructuring projects bankrolled by World Bank/DFID and others and blew up significant sums on lavish expense accounts with not much to show. Also, for $25 or less, most MCs will try to push entry level / freshly hired analysts or their bench resources – which again is a recipe for failure. Some rethinking is happening on the ground, but radical changes are needed. They have to become as nimble as our telecom operators – who are thriving on ARPUs that are a fraction of their western peers.

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    • Bharat – I wonder if there is a different business model for Consulting which can bring the Value/Cost equation to where the customer finds it easier to accept, but the rates can still be reasonably good. After all Consulting is an advisory business – it is supposed to improve a business. It is not necessary to drive it into the onsite, rate per hour classical model.

      Although I wonder if the Indian client will accept a different model.

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  7. Ashok says:

    All you intellectual people out there

    You must be knowing its better to sit at the shores and judge the waves and tides of a sea than when you are actually surfing on the rough waters .

    Our age old rishi munis and pundits used to do the same , meditate and observe and great indian rulers used to go for their tips .

    Also have you observed how Nandan or Azim premji built huge empires when the actual people were like Basab ?? This is becuase their heads were silent and observing .

    I think all you people are the kind of people who like to surf on the waves more than actually understanding it .

    If you want to make money in stock market keep yourselves on the shores and dont get tempted to SURF on the WAVES .

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