Finding a Definition of Management Consulting
by Dr. Alan Blackman, PhD CF CMC-AF LIMC (Emeritus), Director, ICMCI (CMC-Global).
29 October 2023
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Management consulting has been an essential service for governments and organisations since the late 1800s, but there remains a debate over what it is.
This argument has largely been due to the incursion of and demand for subcontractors with specialist skills who call themselves or are referred to by their clients or employers as ‘consultants’.
However, accountants, lawyers, and IT specialists are not management consultants unless they are also undertaking holistic advisory roles to their client organisation’s management.
Management consulting is a significant industry in its own right, contributing approximately 0.23% of the global Gross Domestic Product (Haslam & Blackman, 2023). Therefore, agreeing on a clear definition of the industry is needed.
So, what exactly is management consulting?
Greiner (1982) defined management consulting as:
an advisory service contracted for and provided to organisations by specially trained and qualified persons who assist, in an objective and independent manner, the client organisation to identify management problems, recommend solutions to those problems, and help, when requested, in the implementation of solutions.
(Greiner, 1982)
By 2001, the International Council of Management Consulting Institutes (ICMCI) had adopted a formal definition of management consultancy as:
The service provided to business public and other undertakings by an independent and qualified person or persons in identifying and investigating problems concerned with policy, organisation, procedures and methods, recommending appropriate action and helping implement those recommendations.
(Curnow & Reuvid, 2001, p. 16).
Taking a similar but more concise line to Greiner’s, in 2002, the International Labour Office defined it as:
an independent professional advisory service assisting managers and organizations to achieve organizational purposes and objectives by solving management and business problems, identifying and seizing new opportunities, enhancing learning and implementing changes.
(ILO, 2002, p. 10)
More recently, in 2017, the International Organization for Standardization (ISO) stated that:
Management consultants use their know-how to support clients in any sector locally, regionally, and globally to deal with important issues such as handling complexity, achieving sustainable organizational growth, innovating, achieving change and enhancing productivity.
(ISO, 2017, p. iv).
And so, it seems that determining the overarching purposes of management consulting vis a vis other contractors and employees is essential to defining the role.
What are the differences between a management consultant, subcontractor and an employee?
Differentiating between management consultant, subcontractor, and employee should not be difficult. The key determinants are:
| Criteria | Management Consultant | Subcontractor | Employee |
| Independent | Yes. Management consultants have their own business or are a part of another independent business. | Yes. Sub-contractors have their own business or are a part of another independent business. | No. Employees work in and are part of the business. They are employed wholly or mainly for their labour (ATO, 2023). |
| Structure | Company/trust/partnership. | Company/trust/partnership. | Individual |
| Contract-based | Yes | Yes | Possibly |
| Period | Short-term, but might extend or repeat. | Short-term, but might repeat. | Longer term. It may be full-time, part-time, or casual. |
| Reports to | Client | Client | Employer |
| Paid by | Client as a contract fee | Client as a contract fee. | Employer as a salary |
| Service | Advisory/project services that are specific to helping management improve organisation performance, address challenges, problem-solve, identify opportunities, maximise growth, and implement changes. | Tends to be task-specific: typically to install, maintain, or develop operational systems or equipment or to provide accounting, financial or legal services. | According to a Position Description |
| Number | Multiple clients | Multiple clients | One or two employers |
| Work selection | Able to select projects | Able to select projects | Determined by their employer. |
| Taxation responsibilities | Company tax, GST, superannuation, Fringe Benefits, and PAYG tax. | Company tax, GST, superannuation, Fringe Benefits, and PAYG tax. | Personal Income Tax. The employer is responsible for collecting PAYG and paying superannuation. |
| Financial and operational record-keeping | Responsible for keeping financial and operational records. | Responsible for keeping financial and operational records. | Generally not responsible, except within the terms of their Position Description |
A proposed revised definition.
As Table 1 shows, determining whether a person is an employee or a subcontractor is straightforward. However, choosing the difference between a subcontractor and a management consultant is less evident and limited only to the type of work and the intent of the project commissioned. As a result, any description of management consulting should stress that difference.
Therefore, I propose a revised definition:
Management Consulting is an independent advisory service contracted to improve organisational performance, address management challenges, help solve management problems, identify and assist clients in taking full advantage of growth opportunities, and assist with implementing change
(Blackman, 2023, p. 15).
While this more narrow description excludes some who self-identify as consultants and is at variance with several existing views on who is and is not a management consultant, the functional distinction goes to the heart of management consulting and the misclassification of the profession by government and non-government organisations, and many practitioners.
I commend it to you.
Dr Alan Blackman, PhD CF CMC-AF LIMC (Emeritus)
Director, ICMCI (CMC-Global)
29 October 2023
References
ATO. (2023, 16 December 2022). How to work it out: employee or contractor. Australian Taxation Office. Retrieved 29 November from https://www.ato.gov.au/business/employee-or-contractor/how-to-work-it-out–employee-or-contractor/#Classifyingyourworker
Blackman, A. J. (2023). Professional Management Consulting: A Guide for New and Emerging Consultants. Routledge Taylor Francis.
Curnow, B., & Reuvid, J. (2001). The International Guide to Management Consultancy (B. Curnow & J. Reuvid, Eds.). Kogan Page.
Greiner, L. O. (1982). Consulting to Management. Financial Times/Prentice-Hall.
Haslam, S., & Blackman, A. (2023, 1 June 2023). ICMCI National Consulting Index Global Report. International Consultants Day, Online (Zoom).
ILO. (2002). Management Consulting – A Guide to the Profession (M. Kubr, Ed. Fourth ed.). Bookwell Publications. (1976)
ISO. (2017). ISO 20700:2017(E): Guidelines for management consultancy services. In. Geneva, Switzerland: ISO.