Group-based management consulting can be as effective as individual consulting at improving business practices at one third of the cost.
Small and medium-sized manufacturing firms are offered six months of consultancy services from local consultants to identify areas of improvement in their management practices and to implement an improvement plan. While some firms are offered individual consulting, others are offered group-based consulting in small groups of three to eight firms.
- To improve business practices
- To foster firm growth and productivity
A country where firms are typically poorly managed and labour productivity is low by international standards but similar to that in many developing countries.
Small and medium-sized auto parts manufacturing firms. All firms are legally registered, with 10 to 300 employees (a mean of 59) and have been in the business for an average of 24 years. Sales range from US$280,000 to US$6.3 million, with an average of approximately US$2.7 million. Management practices score low by international standards but are similar to those of other firms in the country and in other developing economies.
Initial diagnostic: For two full-time weeks, a team of consultants works with the firm’s top and middle management to evaluate management practices and performance in five areas of interest: logistics, human resources, finance, marketing and sales, and production. The evaluation focuses on 141 standard business practices. It leads to an improvement plan summarising the current state of managerial practices and identifies priority practices to be improved by the management.
The consulting services are provided by a group of six local consultants: a lead consultant with more than 10 years’ experience and five junior consultants, each with expertise in one of the five focus areas.
All firms benefit from the initial diagnosis, but each firm is then offered one of two options:
- Individual consulting: For a period of six months, firms receive individual support for 500 hours to implement the improvement plan, with 100 hours of training and around 100 four-hour sessions of individual consulting.
First, a consultant provides the person in charge of each of the five areas of interest with 20 hours of training, including both theory and practical exercises through which to apply the concepts to the firm’s situation. For the following three to five months, consultants meet weekly with the person in charge of each area to follow up on the implementation plan. The whole team of consultants meets with the management team once a month to discuss improvements and redefine priorities and next actions. Individual consulting costs approximately US$30,000 per firm.
- Group-based consulting: Firms receive support in small groups of three to eight firms that face similar management problems and aren’t direct competitors but instead produce complementary products. The support consists of 40 hours of training and 370 hours of group consulting.
The training is delivered in a classroom setting and covers theoretical aspects of management. Depending on the topic being discussed, the firm sends the staff member in charge of the relevant area. Group consulting sessions are held twice to four times a week. The group meetings focus on the implementation of the actions agreed in the participating companies’ improvement plans. Only management representatives with responsibility for the area being discussed participate in the meeting. This is complemented by monthly visits to the firms to meet with the senior management and review improvements. Group consulting costs about US$10,000 per firm.
A third group is not offered any support.
- Both the individual and group-based consulting support led to similar improvements in management practices, with the adoption of structured management practices increasing from 56 per cent to 64–66 per cent.
- The improvements in management practices occurred across all five areas of interest and persisted for at least one year after the intervention ended.
- Only the group-based scheme resulted in firm growth, with the number of employees increasing by 10–12 per cent and sales by 8–9 per cent.
- Increases in the number of employees persisted for at least three years after the intervention ended.
- None of the schemes had an impact on firm productivity, as measured through sales per worker.
- Peer learning within groups seemed to be driven by co-ordinated experimentation and learning, not by group members taking existing best practices from other group members into their own firms.
- The group-consulting scheme paid for itself in just over a year.
- Both individual and group-based management consulting are effective in improving management practices.
- The group-based scheme is clearly more effective than the individual intervention, with similar or better impacts achieved at a third of the cost.
- Neither of the schemes lead to increased firm productivity.