Operations Management in a Small Evaluation Consulting Firm
This project analyzes eight operations management topics that are relevant to the success of a small evaluation consulting firm: (a) inputs and outputs, (b) core capabilities, (c) transformation system, (d) capacity planning, (e) customization vs. standardization, (f) communicating and delivering quality, (g) customer-suppliers, and (h) sourcing. The focal organization is a boutique firm located in a mid-sized Midwestern city. The company has particular expertise in the field of evaluation, and its clientele is concentrated in the social sector. Research on operations management in consulting firms is generally sparse, and very little empirical research has focused on the distinct specialization of evaluation consulting. Therefore, the project cites literature pertaining to professional service firms, operations management in general, and small businesses. Analysis also incorporates insights from online sources, including the firm’s website. Appendices consist of (a) an analysis of the firm’s personnel history and (b) an analysis of the staff’s competencies.
This project explores a relatively obscure topic: operations management in a small evaluation consulting firm. Consulting is a large and growing industry, and firms of all sizes operate within it. However, according to the Encyclopedia of Management, “Only a moderate amount of research has been done on the management consulting industry, although the industry has experienced a phenomenal growth rate since essentially emerging during the 1980s” (“Consulting,” 2012, p. 170). Richter, Dickmann, and Graubner (2008) made a similar observation: “Despite the growing importance of the consulting sector, surprisingly little is known about the HRM policies and practices of the firms in this industry. Most of what has become public information about consulting firms is based on anecdotal evidence” (p. 185). Additionally, consulting firms that are the occasional subject of research studies tend to be medium and large enterprises, not boutique firms.
Research on evaluation consulting, a distinct specialization within the overall consulting field, is particularly sparse. According to Viola (2015), “there is a plethora of information available about the art and science of evaluation. However, there isn’t much published or taught in universities about how to build your evaluation consulting practice” (para. 2).
Consulting firms fall within the larger classification of professional service firms (PSFs), which include businesses that provide expert services in fields such as accounting, law, and advertising. Nevertheless, even this larger segment of the economy is less than adequately researched. According to Kaiser and Ringlstetter (2011), “In spite of this high de facto influence and these numerous challenges, professional service firms have so far received comparatively little attention in management literature” (p. vii). Likewise, Lewis and Brown (2012) stated that “professional services are under-researched in OM” (p. 3). Finally, in the words of Halinen and Jaakkola (2012), “Research on value creation within professional services firms is surprisingly scarce and fragmented” (p. 219).
Locating current scholarly sources that address operations management in the small evaluation consulting firm is challenging. Therefore, this project relies on sources from five different streams, as depicted in Figure 1. A small core of sources address evaluation consulting directly. A larger group of sources discuss operations management in the broader consulting industry. In an effort to draw even more insights, operations management studies pertaining to PSFs are considered. Finally, contextual insights are derived from general operations management texts as well as sources concerning the management of small businesses. Taken as a whole, the literature in these five streams allows one to assemble an array of useful insights concerning the operations of a small evaluation consulting firm.
The subject of the study is an unidentified boutique consulting firm located in a mid-sized Midwestern city. The company has eight employees. Readily accessible information about the firm is comparatively scant, a fact that is not surprising, given its status as a small, privately held corporation. Nonetheless, the essential structure of its operations can be discovered or inferred from the company’s website and other online sources.
Mission, Market, and Services
Consulting firms distinguish themselves from one another on a number of dimensions, including size, areas of expertise, target industries, and range and locale of services. Common specializations include emphases on accounting and taxation, information technology, strategy development, marketing, and health care (“SIC 8742,” 2011). Additionally, though some consulting firms merely advise their clients on possible or recommended courses of action, others actually assist them in implementing chosen solutions (Hillstrom, Magee, & Lacoma, 2011).
The firm under study is competent in using data to aid in decision-making, with particular expertise in the field of evaluation. Examples of its services include survey design, data collection, analysis of quantitative and qualitative data, and interventions designed to enable organizations to become more effective in conducting evaluation. Given that the need for evaluation applies across sectors and industries, the firm does not target clients narrowly. Nevertheless, as discussed in the section that follows, certain kinds of external customers tend to predominate among its clients. Furthermore, available information strongly suggests that most of its clients are situated in the local area.
Available information indicates that the firm’s clientele is most highly concentrated in the social sector. For example, it has done substantive work related to community health and welfare as well as education and after-school programs. Additionally, there is evidence that the group has significant experience with grants, strongly suggesting an emphasis on not-for-profit clients.
Consulting work is often carried out in teams (“SIC 8742,” 2011), and this is the case at the firm under study. The collaborative nature of consulting implies that a given employee will usually have several fellow employees as internal customers. Furthermore, if a client engagement requires expertise that is not available within the firm, a contract may be extended to a field consultant, involving yet another kind of internal customer. Finally, consultants often engage representatives of the client organization as contributors to the consulting process. These participants function as customer-suppliers (Meredith & Shafer, 2013), receiving work in process and reverting it to the firm’s permanent staff for further transformation.
The focal company’s staff is made up almost entirely of consultants who are differentiated into three ranks. A mid-ranked consultant is responsible for producing deliverables for clients. These may include grant proposals, data collection plans and processes, analyses of evaluation data, verbal and written reports, logic models, evaluation plans, and more. In order to generate value and advance the company’s mission, consultants must excel at both independent work and collaboration with clients and fellow employees. The ability to communicate effectively—in written form, interpersonally, and via presentations—is critical to a consultant’s success. Personal expertise in the firm’s practice areas is a critical asset, and consultants are not only expected to develop their own expertise but to help improve the firm’s business processes. Successful consulting requires managerial skill—namely, the ability to see that projects are completed on schedule and according to specifications, even when multiple client engagements are competing for one’s attention. Finally, consultants are expected to expose the firm to prospective clients, creating opportunities for revenue generation.
There is no evidence to suggest that faith commitment plays a role in the life of the firm. Nevertheless, the organization and/or its employees have clearly engaged with social issues that overlap with social concerns of the Christian community, broadly construed. These include strengthening marriage relationships, pursuing the welfare of children and youth, advancing community health, and reducing crime and substance abuse.
Essential Elements of the Production System
Like any organization, this consulting firm must devise systems that enable it to produce something valuable for its customers. Meredith and Shafer (2013) described four ways that organizations transform inputs so as to add value to an entity: altering, transporting, storing, and inspecting. To a large extent, these types of transformation emphasize physical goods. Halinen and Jaakkola (2012), on the other hand, articulated three ways that a PSF can add value for a client: transferring the firm’s knowledge to the client, performing services on the client’s behalf, and offering services to enhance the client’s operation.
Consulting involves helping to solve problems that the client lacks the time or expertise to handle on its own (Hillstrom et al., 2011). The nature of the production system that leads to such outcomes is less than optimally understood. According to Lewis and Brown (2012), “Previous OM research has defined the PSO as a generic service type with high levels of customer contact/service customization and fluid/flexible processes with low capital/high labor intensity” (p. 1). However, their research—conducted over a two-year period—found that reality in their focus firm was significantly more nuanced.
Inputs and Outputs
According to Meredith and Shafer (2013), inputs in a production system include all resources that will interact with one another in order to enable the creation of something valuable. Significantly, inputs include not only physical assets and supplies, but also capital, labor, knowledge, and time. Outputs can be described as services that may or may not be accompanied by something tangible—what Meredith and Shafer labeled “a facilitating good” (p. 10). In the consulting realm, outputs are largely intangible. As Meredith and Shafer have noted, knowledge and information have unusual properties; unlike physical products, they can be replicated at little cost, they do not deteriorate, and they can be reused.
Maister’s (1993) classic, Managing the Professional Service Firm, alluded to the “close connection between morale, commitment, and productivity in professional service firms” (p. 19). Given that morale and commitment are aspects of human behavior, it follows that human resources are the inputs most responsible for producing value in professional service industries, including consulting. More recently, Barrington’s (2012) advice to aspiring evaluation consultants has strongly suggested that success in this kind of work is dependent on inputs that are uniquely human: personality traits, values, political skills, entrepreneurial behavior, and time management, among others.
There is evidence to suggest that the firm under examination has a strong commitment to managing its human resources so as to yield outputs valued by clients. As described in Appendix A, the firm appears to have retained almost all of the employees that it has hired over the past eight years. During this time it has gradually increased its personnel headcount from three to eight.
According to Meredith and Shafer (2013), “core capabilities provide the basis for developing new products and services and are a primary factor in determining an organization’s long-term competitiveness” (p. 38). In their view, core capabilities are practices and processes that are rooted in the firm’s core competencies—that is, “the collective knowledge and skills … that distinguish it from the competition” (p. 38). Hill (2012) emphasized that “a core competence is not a product or service, but rather the processes, abilities, and unique attributes (differentiated processes) that allow the organization to develop and deliver differentiated ‘core products’” (p. 84). According to Hill, a firm’s core competences are closely identified with the barriers that prevent other firms from capturing its market share. These may include proprietary technologies, economies of scale, brand equity, a favorable location, and other factors.
If people are the most critical assets in a consulting firm, then it is natural to expect that core capabilities will be located there to a significant extent. Hillstrom et al. (2011) characterized effective consultants as those who are not only experts in their field, but also have the capacity to deal with clients effectively (through marketing, networking, solving problems, and relating well overall). Kaiser and Ringlstetter (2011) corroborated and expanded on this description, arguing for the necessity of “general intellectual abilities, such as analytical skills and problem solving competence, but also certain other characteristics, like objectivity, discretion, willingness to learn, flexibility and the ability to cope with pressure and behavior” (p. 28).
Within the specialization of evaluation consulting, Barrington (2012) emphasized the importance of personal characteristics (e.g., intellectual capacity, endurance), values (e.g., ethical integrity, concern for social justice), political skills, capacity for self-development, and a range of entrepreneurial and business skills (e.g., managing money, time, and knowledge). Viola (2015) stressed the need for effective communication, project management, and bidding for jobs.
Core capabilities are, by definition, aspects of a firm that distinguish it from others. If the skills and dispositions described in the previous two paragraphs are indeed essential to effective consulting, then one would expect them not to be differentiating factors. However, it is probably best to view the aforementioned factors as ideals to which all consultants should aspire, but that will not be achieved fully or uniformly within a given firm.
It is fitting to ask what the focal firm’s core capabilities are, and how it might leverage this concept to business advantage. The firm’s website lists the areas in which each employee has distinctive professional competence. The analysis contained in Appendix B shows that, collectively, the firm’s strongest competencies are in three domains: human resources, evaluation methods and tools, and education. Clearly, it is critical that the firm’s owner understand his staff’s competencies and respond to evolving conditions by building collective expertise in areas that will capitalize on demand and yield competitive advantage.
An additional core capability of the firm becomes evident when one reviews the staff’s biographical data. Most of the employees appear to have deep ties to the area where the company is located. Judging from publicly accessible evaluation reports produced by the firm, most of its clients appear to be located in this region. Staff members have strong inroads into the community by virtue of their association with local schools, universities, charitable organizations, employers, and other organizations. When the firm bids for consulting projects, the depth of its social network may well provide an advantage over competing firms.
According to Meredith and Shafer (2013), “Operations is concerned with transforming inputs into useful outputs according to an agreed-upon strategy” (p. 6). They identified five kinds of transformation systems: project, job, cell, flow, and continuous process. These can be distinguished from each other by the extent to which they lend themselves to either volume or variety in production, or to some combination of the two (Leseure, 2010).
PSFs are generally regarded to produce highly customized output through processes that require high contact with customers (Maister, 1993). To the extent that these attributes reflect the reality of consulting operations, a firm that provides such services best fits the archetype of a job shop. Although some authors, such as Hill (2012), define the job shop solely as a producer of physical goods, other authors view this kind of transformation system as “especially appropriate for service organizations because services are often customized, and hence each service requires different operations” (Meredith & Shafer, 2013, p. 59). Consistent with this interpretation, Maister (1993) reasoned that “the professional service firm may be viewed as the modern embodiment of the medieval craftsman’s shop” (p. 7).
Though it seems generally appropriate to describe the consulting firm as a job shop, it should be acknowledged that certain aspects of the firm’s operations may be more consistent with other transformation systems. Consulting work is often performed by teams of workers (“SIC 8742,” 2011), an organizational feature that is often associated with cellular production (Meredith & Shafer, 2013). On the other hand, consulting firms are often “structured by projects” (p. 212), and in this regard their operations are most consistent with the project model of transformation. In any case, Leseure (2010) has noted that it is difficult to distinguish job shop operations from projects based on the repeatability of processes. The most obvious point of differentiation is the site where the two kinds of transformation take place.
Maister (1993) observed that a client may contract with a PSF for any of three different reasons: (a) to derive value from the firm’s intellectual resources, (b) to take advantage of the firm’s experience, or (c) to obtain efficiencies in the execution of a project that is somewhat procedural. Significantly, these three kinds of projects require decreasing levels of intervention from experienced professionals. Maister used the word leverage to describe “the ratio of junior, middle-level, and senior staff in the firm’s organization” (p. 3). Operationally, PSFs need to take measures to ensure that the experience of their staff matches the nature of the projects required by clients. This reality has led many firms to implement policies that force up-or-out personnel decisions, thus maintaining the proper degree of leverage.
Richter et al. (2008) conducted a study of 28 consulting firms, seeking to identify distinctions between two types of organizations: the professional partnership (P2) and the managed professional business (MPB). Analysis of interview data showed clear differences in their human resource management practices. P2 firms represent the more classical approach to consulting, while MPBs operate much more like typical businesses. Small firms are more likely to identify with the P2 model, which is characterized by (a) partner involvement in personnel decisions, (b) firm-wide adherence to a professional code, (c) recruitment of candidates with a broad array of skills, (d) up-or-out promotion policies, and above all, (e) a training approach that emphasizes involvement of partners or managers with substantial experience.
The theory and research presented in the preceding paragraphs has important implications for the operation of a small firm like the one under examination here. First, such a firm needs to be deliberate about designing a transformation system that leads to the creation of value for customers. The system may well incorporate features of job shops, cellular production, and project operations. To the extent that the firm relies on team-based work, it needs to ensure that it its structure and practices effectively assimilate new personnel and leverage the distinctive contributions of all team members.
Second, the firm needs to pay close attention to the relationship between its leverage structure and the projects that its clients demand. Judging from a distance, this is a potential concern for the focal firm. The analysis in Appendix A seems to show that as the firm has grown over the past eight years, it has become less leveraged—that is, through promotion, it has come to have a higher proportion of senior employees. Unless this change has been accompanied by a shift in the complexity of the jobs that it acquires, it may pose a problem: that more experienced, better compensated employees have to be assigned work that is less than optimally challenging.
Hill (2012) defined capacity as “the maximum rate of output for a process, measured in units of output per unit of time” (p. 57). According to Leseure (2010), “Capacity planning is the set of management decisions that establishes the overall level of productive resources for a firm” (Capacity section, para. 2). Meredith and Shafer’s (2013) coverage of capacity-related issues gives a sense of their importance to operational success. Capacity planning is critical because poor planning decisions can compromise operational objectives such as cost-effectiveness, quality, and timely delivery. Planning can be examined against long- or short-term horizons. Capacity and location decisions are interdependent. Significantly, “in pure service organizations capacity is a special problem because the output cannot normally be stored for later use” (p. 302).
The firm under obviously encounters capacity planning issues in the course of its operations. The clearest evidence of its action on this front has been its gradual expansion from three employees in 2007 to eight at present. As noted in the previous section, the retention and promotion of employees alters the concentration of competencies within the firm over time. Depending on patterns of demand for the company’s services, the reduction in leverage could be problematic or strategic.
Learning curves, which will be discussed in the next section, impact capacity planning in that the firm gradually gains the capacity to perform given tasks in a shorter time span. Additionally, the fact that the focal firm offers a somewhat diversified range of evaluation-related services may help ensure that demand is more consistent over time. Nevertheless, the production of multiple outputs introduces complexity, particularly since it becomes necessary to manage the allocation of employees to specific client jobs. Cross-training the staff may allow the firm to treat its human resources a little more interchangeably in certain cases, thus simplifying the task of short-term capacity planning.
As Meredith and Shafer (2013) noted, service organizations encounter their greatest capacity management challenges in the short-term. A variety of options are available to the focal firm as it responds to actual or anticipated shifts in demand. First, it can adjust the extent of its marketing efforts in order to stimulate or suppress the inflow of new jobs, thus optimizing the utilization of capacity. Second, it can consider outsourcing certain aspects of its work in order to address short-term spikes in demand. (Outsourcing will be discussed more in the final section.) Third, when demand declines, staff members can use their time to develop new knowledge and skill.
Issues of Value and Quality
The output of a PSF is clearly not characterized by mass production. In fact, conventional wisdom maintains that professional services are highly customized. An examination of the range of reports produced by the firm under study suffices to demonstrate that its production system entails a significant degree of customization. Nevertheless, as Kaiser and Ringlstetter (2011) have explained, some may overstate the extent to which consulting output is customized.
A typical claim of consultants is the development of constantly new specific solutions for each client. This is also referred to as “expert economics.” Whether firms like management consultancies are actually able to live up to this claim in the individual case remains questionable. (p. 17)
Customization vs. Standardization
According to Meredith and Shafer (2013), customization and efficient production have historically been thought to be at odds. However, within the past 30 years or so, the concept of mass customization has emerged, postulating that continuous improvement can enhance an organization’s capacity to deliver flexible output, thus enabling it to produce a wider variety of goods with relative efficiency. Because services cannot usually be stored in inventory in anticipation of a client’s request, there is a sense in which they will necessarily be offered on a make-to-order basis.
It is important to remember Maister’s (1993) observation that PSFs deliver various kinds of services, and that these range from the innovative and intellectually complex to the more routine and standardized. Clearly, rendering services for which there is little precedent is labor-intensive, and will require a good deal of exchange between the PSF and its client. Kaiser and Ringlstetter (2011) have referred to these processes as “sparring,” noting that they “are often characterized by intensive reciprocal interaction” (p. 19). However, it is misguided to think that each engagement requires a consulting firm to provide services from a blank slate. Over time, innovation and learning can create opportunities to increase output volume without compromising the requisite level of customization.
Two recent studies of European law firms have yielded insights that may be applicable in the context of a consulting firm. Lewis and Brown’s (2012) case study of a single English law firm showed that investments in information technology solutions offered the potential for greater automation and standardization of work processes. The extent to which the firm delivered customized services in any given case was contingent on several factors, such as whether (a) the client had the capacity to generate sophisticated specifications, (b) the law and professional standards effectively limited freedom of action, and (c) the service requested by the client held elements in common with services previously rendered to other clients. Overall, the authors found that there were significant opportunities for PSOs to become more efficient, but they acknowledged that the inertia of professional culture could hinder change.
Similarly, Habicht, Heidemann, and Ross’s (2014) study of 21 large German law firms found that recent economic conditions, coupled with deregulation, had created incentives for them to adopt innovations leading to increased productivity. Most of the participating firms were less than mature in their innovation management. Operational innovations undertaken or envisioned by the firms included (a) automation of business processes through information technology, (b) cost reductions based on “self-service elements” (p. 121), and (c) various forms of market positioning (e.g., broad, global emphasis vs. narrow focus).
The company under consideration here fits the definition of a boutique firm on several counts. Not only is it small, but it has a specialized area of practice and a regional focus that limit the extent of its competition with larger firms (“SIC 8742,” 2011). Small firm size has its challenges (Needleman, 2013), but is not entirely problematic, for “precise focus on specific market niches and distinct areas can generate strong competitive advantages” (Kaiser & Ringlstetter, 2011, p. 23). By performing jobs repeatedly within its specialization, the focal firm has the potential to achieve learning and innovation effects. In essence, by standardizing its processes to some extent, it can produce duly customized services with relative efficiency. This is an economically attractive proposition, but, as Maister (1993) noted, it has consequences for management of human resources within the firm. Therefore, the firm’s owner needs to pay close attention to the relationship between client demand, leverage, domains of staff expertise, and the impact of routine work on employee motivation.
Communicating and Delivering Quality
According to Hill (2012), “Quality is somewhat difficult to define. The standard textbook definitions include fitness for use, conformance to customer requirements, and conformance to specifications” (p. 288). Other aspects of quality cited by Meredith and Shafer (2013) include performance, features, reliability, and durability. Many dimensions of quality seem to be much more applicable to facilitating goods than to services. Even if service quality can be defined, it is not easy to measure “for a variety of reasons—including the service portion being abstract rather than concrete, transient rather than permanent, and psychological rather than physical” (p. 110). Although communicating and delivering service quality is challenging, doing so is critical to the success of PSFs.
According to Brymer, Molloy, and Gilbert (2014),
One particularly salient aspect of human capital as a product or service is its credence good qualities, that is, the extent to which information asymmetry exists between a customer and supplying firm on the human capital’s product or service quality. (p. 492)
Because it is so hard for PSFs to verify the quality of their human resources, they often resort to signaling quality—for example, by repeatedly hiring personnel whose academic or other affiliations are highly respected. Brymer et al. referred to this practice as “pipeline hiring” (p. 497).
Breidbach, Kolb, and Srinivasan (2013) reported on a multiple case study of technology-enabled exchanges through which consulting firms and their customers co-created value. Significantly, they included both large and small firms among the subjects of their study. Their research led to a few findings that may bear on a small consulting firm’s capacity to deliver quality.
The size and stability of groups engaged in a service system affect the development and maintenance of the relationships that are needed to co-create value. A small firm, by virtue of the limited size of its staff, may have a certain advantage over a larger firm, where more people might be rotated onto and off of a service team.
Because time is a critical production factor in the provision of consulting services, provider-client relationships should be managed intentionally. For example, (a) exchange should be initiated in a face-to-face environment, (b) technologies should be used judiciously, and (c) trust should be developed so as to enable value co-creators to work without unnecessary interruption.
Co-creation of value is first and foremost a human social process. It follows, then, that “human actions and their decisions—not technology—are crucial factors that influence a service system’s ability to co-create value in technology-enabled environments” (p. 438).
Halinen and Jaakkola’s (2012) study—based on a major literature review—also affirmed that expertise is necessary, but not sufficient, to effective PSF operations. Professional services are delivered via relationships, and in the context of intangible goods, client perceptions of quality are often tied to the quality of the relationship that conveys the service. Additionally, reputation and word of mouth are important ways of reducing uncertainty in the mind of potential clients concerning the value of a PSF’s offerings.
There is evidence to suggest that the focal firm performs well in communicating and delivering quality. First, firm employees are known to serve as volunteers for local organizations. Second, the firm has repeatedly secured contracts with organizations in its own community—an outcome that would be unlikely in the absence of a positive reputation. Third, the firm has grown steadily—albeit slowly—over the years, indicating that it provides valued services.
Supply Chain Management
PSFs have unique features that impact the ways that they secure the resources needed to produce desired outputs. Two dimensions of supply chain management will be examined in this section: the role of customer-suppliers and the emergence of viable sourcing options in the realm of pure service industries.
According to Meredith and Shafer (2013), in some service industries, customers not only purchase the output of a provider’s transformation process, but also contribute inputs to it. Therefore, these customers actually function as customer-suppliers. The consulting industry adheres to this pattern, with customers functioning as part of the supply chain. The Encyclopedia of American Industries states: “Often, client personnel will work as part of the consulting team for the duration of the project to ensure that the organization has input into the process” (“SIC 8742,” 2011, p. 3056).
If the ultimate quality of a consulting service is somewhat contingent on the inputs that customers bring into the system, it should come as no surprise that a consulting firm evaluates its prospective client before agreeing to an engagement. “This process, called qualifying the client, involves considering the nature, scope, and urgency of the project, as well as the client’s budget. It is also helpful to learn the client’s desired outcomes and decision-making process …” (Hillstrom et al., 2011, p. 277). The need to attract customers who can function as good suppliers (Meredith & Shafer, 2013) may be one reason that developing new business is an expensive aspect of consulting firm operations—accounting, according to one source, for 20% of costs (“SIC 8742,” 2011).
As noted previously in this paper, the nature of a consulting job may require a significant amount of interaction between client and firm. The client needs enough engagement in the consulting process to ensure that the outcome meets its needs, but the provider cannot operate efficiently if the customer is active in every single element of the process. Meredith and Shafer’s (2013) discussion of decoupling high- and low-contact components of service is relevant in this situation.
Lewis and Brown (2012)’s study of a law firm’s operations revealed that some attorneys tended to keep clients at a distance, sensing that, as experts, they could perform their tasks satisfactorily without client input. Of course, some consulting engagements will require much more provider-client interaction, but even here, the goal should be to earn the client’s trust so that the provider gains freedom to perform its service without undue interruption (Breidbach et al., 2013).
A review of publicly accessible reports produced by the firm under study shows that it is ready to engage with its clients during the consulting process. The role that customers play as suppliers appears to be abundantly clear to the firm. One can only assume that it has also found ways to maintain the distance necessary to produce outputs efficiently.
The emergence of lean production in the manufacturing sector has given rise to the concept of the value stream, which is equally applicable to the services sector. “Broadly speaking, the value stream includes all activities (value-added and non-value-added) from the creation of the raw materials to the final delivery of the output to the end consumer” (Meredith & Shafer, 2013, p. 181). In the case of the small consulting firm, most of these activities are typically performed by the provider and/or its customer-supplier. However, the sourcing and distribution of services and information can take more complex forms.
Historically, a service firm’s location has been a constraining factor in its attraction of customers (Meredith & Shafer, 2013). As has already been noted, the focal firm’s clients are predominantly located in the region where the company is located. Nevertheless, advances in telecommunications have made it increasingly feasible to transmit information at long distances, and this has opened options for service firms to secure services from remote entities, and in some cases to do business with far-flung clients.
Because a consulting firm’s outputs are customized to individual client needs, the firm’s operations should be designed with the purpose of “maximizing the flexibility and responsiveness of the supply chains” (Meredith & Shafer, 2013, p. 255). In other words, the focus is not primarily on reducing costs and increasing efficiency, but rather ensuring that services meet clients’ functional and timeline requirements. A small service firm has an increasing array of sourcing options as it seeks to pursue provide flexible and responsive service. Value stream activities can, of course, be outsourced to other providers (Meredith & Shafer, 2013). Additionally, the firm might find it helpful to establish partnerships with other firms that can complement it functionally or geographically (Kaiser & Ringlstetter, 2011).
Rather than performing all of its jobs solely through internal resources, the focal firm has employed a couple of external sourcing arrangements. First, for at least eight years it has maintained relationships with field consultants in order to secure additional capabilities. It is not clear whether these contracts have been used to expand the range of the firm’s expertise, reduce job turnaround time, or both. Second, the firm has partnered with a technology firm to develop a software tool for use in a particular evaluation context. Each of these sourcing arrangements has presumably allowed the focal firm to focus on using its core capabilities and avoid costly incursions into areas for which it does not have persistent demand.
Conclusion and Recommendations
This project has successfully explored the application of operations management theory and research to a small evaluation consulting firm. Eight themes have been investigated: (a) inputs and outputs, (b) core capabilities, (c) transformation system, (d) capacity planning, (e) customization vs. standardization, (f) communicating and delivering quality, (g) customer-suppliers, and (h) sourcing. Key findings concerning the small consulting firm include the following:
By virtue of its size and focus, the firm’s success is highly dependent on the effectiveness of its human resources.
Core capabilities reside primarily in the knowledge, skill, dispositions, and social network of the firm’s staff.
Consulting services adhere most closely to the job shop model of transformation.
Leverage—the ratio of junior to senior consultants—is of critical importance to the firm’s success.
Capacity planning is a significant aspect of managing the firm, particularly in the short term.
Client projects are necessarily customized, yet the firm may standardize its processes in order to achieve efficiency in its production.
Since it is difficult to measure the quality of professional services, the firm may take various measures to communicate and deliver on its promise to create value for its clients.
Clients function as part of the firm’s supply chain, and thus must be meaningfully involved in the transformation process, but not to the extent of impeding the firm’s work on its behalf.
The firm can secure resources from various external sources, whether through outsourcing or strategic partnerships.
As noted in the introduction, the management of PSFs has not been researched adequately, and this deficiency is even more evident in regards to consulting firms. Habicht et al. (2014) expressed ambivalence concerning the generalizability of research findings between various kinds of PSFs. Therefore, there is much need for research focused specifically on the consulting industry. Opportunities include the following:
Current literature on evaluation consulting is scant. A study of virtually any operations management topic would fill a gap.
Most studies of the consulting industry have focused on larger firms, yet the industry has many smaller providers that provide important niche services. Within this specific context, the eight topics discussed in this project are worthy of formal, empirical study.
A few specific issues raised in this project—leverage, customization, and quality—are of critical importance to the success of consulting firms regardless of size, warranting additional study.
Barrington, G. V. (2012). Consulting start-up and management: A guide for evaluators and applied researchers. Thousand Oaks, CA: SAGE.
Breidbach, C. F., Kolb, D. G., & Srinivasan, A. (2013). Connectivity in service systems: Does technology-enablement impact the ability of a service system to co-create value? Journal of Service Research, 16(3), 428–441. doi:10.1177/1094670512470869
Brymer, R. A., Molloy, J. C., & Gilbert, B. A. (2014). Human capital pipelines: Competitive implications of repeated interorganizational hiring. Journal of Management, 40(2), 483–508. doi:10.1177/0149206313516797
Consulting. (2012). In S. D. Hill (Ed.), Encyclopedia of management (7th ed., pp. 169–171). Detroit: Gale. Retrieved from http://go.galegroup.com.ezproxy.liberty.edu:2048/ps/i.do?id=GALE%7CCX4016600062&v=2.1&u=vic_liberty&it=r&p=GVRL&sw=w
Habicht, H., Heidemann, F. W., & Ross, A. (2014). Service productivity in professional service firms. In J. Bessant, C. Lehmann, & K. M. Möslein (Eds.), Driving service productivity: Value-creation through innovation (pp. 113–130). Cham, Switzerland: Springer. doi:10.1007/978-3-319-05975-4_7
Halinen, A., & Jaakkola, E. (2012). Marketing in professional services firms: Turning expertise into customer perceived value. In M. Reihlen & A. Werr (Eds.), Handbook of research on entrepreneurship in professional services (pp. 219–237). Cheltenham, UK: Edward Elgar.
Hill, A. V. (2012). The encyclopedia of operations management: A field manual and glossary of operations management terms and concepts. Upper Saddle River, NJ: FT Press.
Hillstrom, Magee, & Lacoma. (2011). Consulting. In V. L. Burton, III (Ed.), Encyclopedia of small business (4th ed., Vol. 1, pp. 275–278). Detroit: Gale. Retrieved from http://go.galegroup.com/ps/i.do?id=GALE%7CCX2343700131&v=2.1&u=vic_liberty&it=r& p=GVRL&sw=w&asid=443a97f9a00d991f4484fc86da33138f
Kaiser, S., & Ringlstetter, M. J. (2011). Strategic management of professional service firms: Theory and practice. Heidelberg: Springer.
Leseure, M. (2010). Key concepts in operations management. London: SAGE. Retrieved from http://ezproxy.liberty.edu:2048/login?url=http://literati.credoreference.com/content/title/sageukkcopm
Lewis, M. A., & Brown, A. D. (2012). How different is professional service operations management? Journal of Operations Management, 30(1–2), 1–11. doi:10.1016/j.jom.2011.04.002
Maister, D. H. (1993). Managing the professional service firm. New York : Free Press.
Meredith, J. R., & Shafer, S. M. (2013). Operations management for MBAs (5th ed.). Hoboken, NJ: Wiley.
Needleman, S. E. (2013, October 16). Shutdown is latest challenge for small firms. Wall Street Journal (Online). Retrieved from http://search.proquest.com.ezproxy.liberty.edu:2048/docview/1442246633
Richter, A., Dickmann, M., & Graubner, M. (2008). Patterns of human resource management in consulting firms. Personnel Review, 37(2), 184–202. doi:10.1108/00483480810850533
SIC 8742: Management consulting services. (2011). In L. M. Pearce (Ed.), Encyclopedia of American industries (6th ed., Vol. 3, pp. 3055–3061). Detroit: Gale. Retrieved from http://go.galegroup.com.ezproxy.liberty.edu:2048/ps/i.do?id=GALE% 7CCX1930401010&v=2.1&u=vic_liberty&it=r&p=GVRL&sw=w
Viola, J. (2015, January 29). Best of aea365 week: Judah Viola on building capacity to succeed as an independent consultant [Web log post]. Retrieved from http://aea365.org/blog/best-of-aea365-judah-viola-on-building-capacity-to-succeed-as-an-independent-consultant/
Appendix A: Personnel History Analysis
The size of the staff has grown progressively since the firm’s staff directory page was first indexed by the Wayback Machine in 2007.
There has been a clear pattern of research/consulting staff being promoted to higher tiers. The underlying directory data reveals almost no attrition within the firm over an eight-year period. Selection, training, development, and reward systems appear to be effective in promoting the acquisition and retention of critical human capital.
The hiring of an Executive Assistant within the past two years may signify that the firm has finally grown to a level that requires centralization of administrative operations in a position that is not responsible for research/consulting.
Appendix B: Analysis of Firm Competencies
The table below analyzes the competencies listed for each employee on the focal firm’s website. The firm’s most evident strengths cohere in the domains of human resources, evaluation methods and tools, and education.