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Engagement Management

Session 9,10

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Profit per partner

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The importance of leverage (1)

AAA: large, low skill, BPR consultancy

BBB: niche, high skill, strategy consultancy

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The importance of leverage (2)

AAA: Charge = 400/day, wage = 40k BBB: Charge = 1200/day, wage = 90k

Utilisation: 70%

AAA BBB

Income (Fees) 10,200,000 30,660,000Costs (Wages) 3,600,000 7,200,000Profit 6,620,000 23,460,000Margin 64.8% 76.5%Productivity 113,556 383,250Leverage 9 4Profit Per Partner 662,000 1,173,000

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Firm Strategy

Private Partnership Publicly Floated CompaniesGeneral HRM

Principles Linked to professional values and scope given toconsultants to interpret the rules. Detailed and formal prescriptions for eachtype of consultant.Recruitment Excellent general skills sought, often with MBA. Excellent commercial and technical skills

sought.Selection Based on personal interaction with senior

consultants.Formal selection (e.g. assessment centre) run

by HRM function.On-the-job Based on observation of senior consultants Based on observation of peers.Training Focused on professional and interpersonal skills.

Run by senior consultants. Focused on technical and analytical skills.Run by HR trainers.Feedback Mostly on personal skills. Mostly on technical and analytical

performanceOwnership Owned by partners who buy into their share.

Ownership bought back on retirement. Widely distributed in publicly tradedcompanies. Ownership maintained until saleof shares.

Exit Upor outculture frequently forces exit Usually voluntary exit.Support for

Leavers Excellent support through alumni network. Limited support at all levels other thanpartner.

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CCC: Target Utilisation (2)

Target Utilisation figuresPartner Senior Consultant Consultant

Total week days 260 260 260Public Holidays 8 8 8

TOTAL AVAILABLE DAYS

252

252

252

Less: 45 21 0Annual Leave 40 25 0Sickness 121 77 38Training 139 183 222Management & Admin 53% 70% 85%

Utilisation days available 131 175 214UTILISATION RATE (rounded) 52% 69% 85%

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CCC: Profit per Partner (3)

CCC MetricsIncome (Fees) Before Tax 6,584,500Costs (consultants wages)

2,150,000Costs (support staff) 125,000Costs (running costs) 910,000Net Profit 3,399,500Margin 52%Productivity 146,322Leverage 8Profit Per Partner 679,900

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CCC: Total income per grade (4)

Chargeable

Time Fee Rate Income Generated Total Income PerGrade

Partner 139 1,500 196500982,500

Senior

Consultant 183 1,000 183000

1,830,000Consultant 222 600 133200

3,996,000

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CCC: Profit related to utilisation rate (5)

Consultants Total days Utilisation Actual Days Income () Costs () Profit ()45 252 10% 25 894,726 3,185,000 - 2,290,27445 252 20% 50 1,789,452 3,185,000 - 1,395,54845 252 30% 76 2,684,178 3,185,000 - 500,82245 252 40% 101 3,578,904 3,185,000 393,90445 252 50% 126 4,473,630 3,185,000 1,288,63045 252 60% 151 5,368,356 3,185,000 2,183,35645 252 70% 176 6,263,082 3,185,000 3,078,082

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Managing Culture

Procedures and Rules Socialisation & Education Symbols and Rituals

Individuals Recruitment from top businessschools;

Up or out promotion criteria;

Appraisals.

Induction programme;

Professional associations;

Partner mentoring.Clothing;First in, last out;Professional conduct.

Teams Team-working rules;Knowledge management

processes;Team targets.

Team review meetings;After-work drinks;Away days;Alumni networks.

Communal work space;Team branding.

Organisations Organisational Structure;Business Processes;Partnership agreements;Legal reporting requirements.

Industry newsletters;

Benchmarking reports;Market research;Corporate PR.

Myths and stories,;Image of

the CEO;Logos and name.Membership of professional

associations.

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Knowledge Management

What does KM mean in consultancies?

KM Strategies

Codification PersonalisationStrategy Commodification and re-use using IT Creative people-based problem solvingEconomic

Model Invest once in knowledge asset and re-use manytimes. Generate large revenues. Customised and personalised solutions thoughpersonal expertise. Generate high profit margins.Knowledge

Strategy PeopleDocuments. Use IT to codify, store andshare knowledge assets. PeoplePeople. Use personal interactions to createbespoke knowledge solutions.IT Strategy Invest heavily in IT. Focus on commodification

and sharing. Invest modestly in IT. Focus on connecting people.HR Strategy High leverage ratio. Recruit graduates who can

store and re-use commodified solutions. Low leverage ratio. Hire creative, expert problem-solvers who can tolerate ambiguity.Examples Accenture McKinsey

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Thank You