Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour
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Adizes, Ichak; Cudanov, Mladen; Rodic, Dusanka Article Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour Amfiteatru Economic Journal Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: Adizes, Ichak; Cudanov, Mladen; Rodic, Dusanka (2017) : Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour, Amfiteatru Economic Journal, ISSN 2247-9104, The Bucharest University of Economic Studies, Bucharest, Vol. 19, Iss. 44, pp. 232-248 This Version is available at: https://hdl.handle.net/10419/169067 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/
AE Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour 232 Amfiteatru Economic TIMING OF PROACTIVE ORGANIZATIONAL CONSULTING: DIFFERENCE BETWEEN ORGANIZATIONAL PERCEPTION AND BEHAVIOUR Ichak Adizes1, Mladen Cudanov2 and Dusanka Rodic3* 1)Adizes Institute, Santa Barbara, California, USA 2),3)The Faculty of Organizational Science, Belgrade, Serbia Please cite this article as: Adizes, I., Cudanov, M. and Rodic, D., 2017. Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour. Amfiteatru Economic, 19 (44), pp. 232-248 Article History: Received: 19 July 2016 Revised: 12 November 2016 Accepted: 21 December 2016 Abstract The aim of this paper is to show organizational perceptions and behaviours regarding proactive search for consultancy services. Management consulting is operating primarily through the analysis of perceived and existing organizational problems, but on the other hand it could be considered as a creation of value for organizations through the application of knowledge, techniques and, assets to improve organizational performance which is in the unknown and hidden potential part of organizational Johari window. Perceptions of organization are shown through managers and consultants perceptions survey in southeast Europe region. From the other side as an empirical base of real managerial behaviours there is a database of companies which had been proactively asking for consultancy services in southeast Europe region. This research is based on Adizes Institute database, which is the reason we have introduced the Adizes Corporate Lifecycle model theory. We will show the difference of perceptions at what stage in lifecycle organizations should engage consultant help and reality, when companies actually do that. We will use data analysis results to discuss whether timing when organizations decide to proactively engage consultants is the right time for such engagement. Keywords: Management consulting, Adizes Corporate Lifecycle stages, managerial perceptions, organizational reality, Johari window in organizational consultancy context JEL Classification: L29, L84, M10 *Corresponding author, Dusanka Rodic – d[email protected]
Economic Interferences AE Vol. 19 • No. 44 • February 2017 233 Introduction Among various contemporary definitions of management or business consulting services, early definition example of the Association of Consulting Management Engineers (ACME) stands out, defining management consulting as the professional service performed by specially trained and experienced persons in helping managers identify and solve managerial and operating problems of the various institutions of our society, and this professional service focuses on improving the managerial, operating, and economic performance of these institutions (Kipping and Clark, 2012). Management consulting develops and changes along with the technology and industry so the following definition and its explanations must be considered. Management consulting has long been recognized as a useful professional service that helps managers to analyse and solve practical problems faced by their organizations, improve organizational performance, learn from the experience of other managers and organizations, and seize new business opportunities (Kubr, 2002). As a process, management consulting could be stated as a way of practice in helping organizations to improve their performance, operating primarily through the analysis of existing organizational problems and the development of plans for improvement. Management consultancy could be considered as a creation of value for organizations through the application of knowledge, techniques and assets to improve organizational performance. Management consulting industry developed with the rise of management as a unique field of study, and first consulting firm dated in 1886 and it was Arthur D. Little Inc. in USA. But the expansion in management consultancy industry was in 1980s and 1990s.The industry than stagnated in 2001 and recovered after 2003, with a current trend towards a clearer segmentation of management consulting firms. Management consulting is today divided into numerous specialized domains, such as supply chain management, logistics management, change management, information technology consulting, enterprise integration, mergers and acquisitions, workforce optimization, human resource consulting, financial consulting, taxation and advisory consulting, audit and assurance consulting, virtual-digital management consulting, strategic communication consulting, and many others, which could overlap between. Larger diversified consultancies, such as Booz Allen Hamilton, Accenture, Delloite, McKinsey, Ernst and Young, PricewaterhouseCoopers, Bain and Company cover wider domains, while smaller organizations usually specialize. Current challenges lie in critiques, such as numerous business books published with techniques which could be helpful for improvement of organization, but do not work in real cases, impression management – presented and promoted false benefits – raised potential client’s expectations and not fulfilling it. Also, the rising of digitalized world is one of the biggest challenges for every industry so for consultancy as well, now when lots of knowledge is viral and accessible, competition is not just from large consulting companies, but also from smart individuals. The main reason of hiring consultants is solving of major problems which could not have been solved by management, mainly by gaining external (objective) advice and use of services/specialized expert knowledge which organization lacks, but has been externally confirmed in practice many times. Consultants can function as bridges for information and knowledge, and that external consultants can provide these bridging services more
AE Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour 234 Amfiteatru Economic economically than client firms themselves (Bessant and Rush, 1995). If managers and outside advisers work out in advance what is expected of each party during their work together, the chances of solving problems are improved. He suggests that managers and consultants structure the engagement according to a hierarchy of goals – which proceeds from the most basic objective, providing information, to the most sophisticated, permanent improvement of organizational effectiveness. The best way to move up that hierarchy is for executives and advisers to work together to identify needs and develop solutions (Turner, 1981). Ringland and Shaukat (2004) summarized research that found management consultancies were employed for five key reasons: • Organizations need specialist knowledge (industry-specific knowledge, organizationspecific or some issue-specific knowledge), • Organizations need implementation (organization has constrained resources, or it is inexperienced in that type of project, or organization need effective and efficient work done), • Organization needs validation – assurance (of already done internal work or for decisions or implementation, and from the other hand a better image in front of its clients), • Organizational need for independence/impartiality (objectivity and distance from “centralized” corporate politics), • Organizational need for blaming somebody (when internal work goes wrong, or where stakeholders need someone to “sacrifice”, so called “scapegoat”). We can distinguish proactive engagement, where organizations hire consultants without significant external enforcement, and reactive engagement where main reason is external pressure – e.g. late stage crisis, external entity or legal obligation. Still, there is misunderstanding regarding exact time when consultants should be engaged. Organizational perception for any of five above stated reasons will directly influence actual consultant engagement chance. That perception changes during lifecycle, and depends on number of other factors, e.g. organizational performance, culture and management style. It is appropriate to assume that organizations near the “Prime” lifecycle phase will diminish chance to accept external knowledge and engagement due to enlarged self-confidence and even arrogance. Often it is more important to unlearn, than to learn (Nystrom and Starbuck, 2015), which is even harder in that stage. Individual perception may be different from structural organizational factors and hinder engagement of consultants. Employees may learn that organization needs outside help when organization is still unable to learn and execute that knowledge, because individual learning does not guarantee organizational learning (Senge, 1990). We have found this issue interesting, and with data from confidential consultant’s reports available, have decided to examine following hypothesis: HYPOTHESIS 1: There is significant difference in distribution of probabilities between perception of lifecycle phases when proactive consulting should be procured, and actual proactive engagement of consultants in organization. This hypothesis can be reformulated into form harder to prove by quantitative methods, stating that organizations often do not engage consultants at the right time because they
Economic Interferences AE Vol. 19 • No. 44 • February 2017 235 lack knowledge or fail to confess about problems or crisis existence at the first time. So, contrary to common practice in business, organizations may not engage consultants when they learn there is, or expect future development of an issue or crisis. Instead of that consultants should proactively engage organizations and offer them their knowledge, because in most cases it is the knowledge organizations lack in the first place. However uncommon that approach in business is, it is currently dominant in medicine, where focus of efforts shifts toward primary care, mostly on prevention, just like in quality management (Jarrett, 2016). So instead of waiting for medical problem to develop, show and demand costly, timely and risky treatment at secondary or tertiary healthcare level, healthcare workers are preventing it by proactive engagement. Maybe consultants should try the same. 1. Methods Empirical background of this article is twofold. First part is based on questionnaire answered by 119 managers from companies in Southeast Europe region fitting similar Balkan economy outlook (Savoiu, Taicu and Cudanov, 2016), about perception when do companies proactively search for consultancy services help. Questionnaire had 7 questions, and was sent without bias to 311 random participants within social network of researchers. With total of 119 valid replies, response rate was solid 38.26%. Second part is based on secondary data from consulting experience and case studies of 72 companies from the same region which proactively asked for consultancy services. Case studies were consultant’s Syndag® – organizational diagnosis reports database from the Adizes Institute, and multiple case study, as well as extraction of secondary data is method supported in business research (Zikmund et al., 2012). Syndag® reports are usually about thirty pages long of structured and organized content and results from organization diagnosis workshop. The name represents abbreviation for Synergetic Diagnostic workshop which is the first phase of eleven phases of the Adizes program for organizational transformation. It involves the whole management team of directors of all main functional units and the CEO. The consultants do not do themselves the diagnosis but facilitate through a structured process to identify from the participants the potential improvement points for organization. In today’s accelerating change world, just as organizations change from mechanistic (Weber, 2009) to more organic (Burns and Stalker, 1961), organizational consulting follows the sequence in process of organizational diagnosis, changing from external consultant analysis into method of group consultants and management sessions. The consultants lead the participants in classification of the potential improvement points to identify at which stage on the Adizes Corporate Life cycle curve (Adizes, 2004). To check our hypothesis, we have used chi-square goodness of fit test (Krishnaswamy, Sivakumar and Mathirajan, 2004) to test difference between two distributions of data. Conclusions were provided using inductive and deductive reasoning, following guidelines appropriate for research in business context (Saunders, Lewis and Thornhill, 2011, p. 501). Construct validity as an extent to which an operationalization measures the concept it is supposed to measure (Cook and Campbell, 1979) is analysed by qualitative means, because this questionnaire was originally developed for this research and there is no comparable
AE Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour 236 Amfiteatru Economic data or study on the validity of questionnaire, and because only one method to measure the concept was used, limiting the of advanced statistical analysis of construct validity proposed by Bagozzi, Yi and Phillips (1991). Questionnaire was developed following the guidelines from Saris and Gallhofer (2014) as “concept by intuition”, in order for our questions to measure real impressions of the participants. Second part of our research was primary data, derived directly from observation of consultants. When estimating their accuracy and reliability we bear in mind that consultants worked at least three days in observed organizations, that during the process around one hundred ”Potential Improvement Points” or PIPs were identified (Raz, 2009). Also, process of assessing organization is standardized, timing is planned literally to the minute and guidelines are the same for all consultants, who are required to pass exams in standardized skills and knowledge. Finally, companies paid substantial consultant fees for each of those reports with conclusions and estimations, among which important one is current lifecycle phase. Based on that we conclude that accuracy and reliability of data was acceptable. External validity of the study is mostly limited by our samples in both empirical pillars, focused on Serbia, with 16.81% in questionnaire and 27.78% in analysis coming from neighbouring countries of Croatia, Slovenia, Macedonia, Bosnia & Herzegovina. This limits generalization to the Western Balkan countries, but since Uhlenbruck and De Castro (2000) found many similar trends in the economies of Central and Eastern Europe, generalization of results may be applied to the organizations in countries of Central and Eastern Europe which have finished or are still in the process of transition. 2. Results Questionnaire replies were first normalized, and then average probability was calculated for each lifecycle phase. Results of the questionnaire are presented in the following figure, and follow expected pattern where proactive consulting is more actively sought during early phases of the lifecycle, peaks in “Prime” and “The Fall“ stages, and then decline during the later stages. From the analysis of Adizes Institute ASEE database of 72 client companies which proactively searched for consultancy services, companies proactively asked for consultancy services help when they were in following Adizes Corporate Lifecycle stages in percentages: Infancy (5.56%), Go-go (51.39%), Adolescence (30.56%), The Fall (1.39%), Aristocracy (1.39%), Recrimination (8.33%) and Bureaucracy (1.39%). Probabilities are presented in the following figure, and it is observable how strong discrepancy exists in “Go-go” and “Adolescence” phases where actual engagement is much higher than presumed, as well as in “Prime” and “The Fall” stages where actual engagement is much less than presumed. It is very interesting that in Recrimination phase values are practically the same. (Figures no. 1 and no. 2)
Economic Interferences AE Vol. 19 • No. 44 • February 2017 237 Figure no. 1: Perceived probability of proactive search for consultant services per each Adizes Corporate Lifecycle Stage Source: questionnaire results Figure no. 2: Actual probability of proactive search for consultant services per each Adizes Corporate Lifecycle Stage Source: analysis of consultant reports
AE Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour 238 Amfiteatru Economic Figure no. 3 shows differences between phases, and values were calculated by subtracting actual percentage in that phase from expected percentage. Next, we will examine if differences in distribution are due to the chance. Figure no. 3: Difference between perceived and actual probability of proactive search for consultant services per each Adizes Corporate Lifecycle Stage Source: questionnaire results – analysis of consultant reports In order to examine if difference observed is due to chance we have used χ2 (chi-squared) goodness of fit (GOF) test. First we have checked assumptions required for the test: • Existence of categorical variable – Phases of Adizes lifecycle have been used as categorization for estimated and actual probabilities. As ordinal variable, because there is clear order of phases, it satisfies requirements. • There is no relationship between observations and participants in the research. • Groups of categorical variable is mutually exclusive. In reality, lifecycle phase is closer to continuous variable than to discrete, because consultant reports often describe lifecycle phase as “in-between”, describing characteristics of two consecutive phases. In several cases, reports even found noteworthy characteristics of more than two phases which were not consecutive. In order to eliminate that issue, former Adizes consultant has independently classified each case in the category which was found most representative. • Minimum of 5 expected frequencies in each group. Since there are severe deviations in the actual distribution among different phases, there are seven categories which were not
Economic Interferences AE Vol. 19 • No. 44 • February 2017 239 represented with at least five frequencies. In order to overcome this issue, those categories were merged and treated as single category, both on the survey data and actual data. Afterwards data was processed using R-Studio software package. Results are presented in tables no. 1 and 2. Table no. 1 presents perceived probabilities of proactive consultant engagement in the observed lifecycle phase, followed by actual frequency of consultant engagements in the next row. All other seven phases besides Go-Go, Adolescence and Recrimination are aggregated and treated as one, due to the conditions for Chi-squared analysis. Table no. 1: Values and residuals Lifecycle phase / consultant engagement data Go-Go Adolescence Recrimination All other phases Questionnaire results – normalized values 11.388% 11.500% 8.756% 68.357% Actual occurrence – frequencies 37 22 6 7 Actual occurrence – expected results 8.199146 8.279798 6.304178 49.216878 Standardized residuals 10.0582182 4.768158 -0.1211474 -6.0176799 Table no. 2: Chi-squared test results χ2 (chi-squared) degrees of freedom P-value 160.13 3 <2.2e-16 3. Discussion Our results show there is significant difference of distribution between perceived timing for proactive consultant engagement and actual consultant engagement. P value of <2.2e-16 indicates very little probability that results are due to chance. Also, residual values of 10.0582182; 4.768158; -0.1211474; -6.0176799 show how much approximately standard deviations is the difference between compared distributions in respective categories, and deviations above three are considered large, so our conclusion is that in recrimination phase there is general accord between perception and behaviour, but in all other lifecycle phases there are large deviations. In order to discuss further why could organizations ask for consulting mainly in “Go-Go”, “Adolescence” and “Recrimination” stage we will first review organizational lifecycle theory. 3.1 Main organizational lifecycle models In 1950, Kenneth Boulding (Boulding, 1950) first suggested the concept of organizational life cycles presenting most general model of lifecycle (Ionescu and Negrusa, 2007). It was followed by Haire (1959) idea that there is uniform path most organizations follow in their
AE Timing of Proactive Organizational Consulting: Difference between Organizational Perception and Behaviour 246 Amfiteatru Economic might be solved by using multiple data sources from number of major and acknowledge consulting companies, but since consulting firms usually keep their knowledge to themselves, and often are legally bound to non-disclosure we would recommend other approach to future researchers trying to find original empirical data unbiased by single source. Survey participants might not know Adizes lifecycle and methodology, so part of answers can have bad influence to accuracy and reliability of estimations. Companies from our sample might be biased by strategic environment and redirected to solving more urgent economic issues (Jednak and Kragulj, 2015). Also, research can be extended beyond borders of South East Europe with larger sample which would extend generalization. Our main contribution might be that key organization decision makers will consider successful quality management and healthcare system concepts of prevention as a parallel to engaging consultants. Rational patient should visit doctor regardless of feeling perfectly well in order to prevent possible issues, because doctor might know something that patient doesn’t. Quality should be ensured early in the process, not controlled at the end when everything is over and there are no easy, cheap and quick solutions. Consultants should not only be engaged when organization thinks there is the need for their services, but even when organization feels no need – they might know something organization does not. After all, that is one of the main reason for consultant engagement. References Adizes, I., 2004. Managing corporate lifecycles. Santa Barbara, USA: The Adizes Institute Publishing. Adizes, I., 1979. Organizational passages-diagnosing and treating lifecycle problems of organizations. Organizational dynamics, 8(1), pp. 3-25. Bagozzi, R.P., Yi, Y. and Phillips, L.W., 1991. Assessing construct validity in organizational research. Administrative science quarterly, 36(3), pp. 421-458. Bessant, J. and Rush, H., 1995. Building bridges for innovation: the role of consultants in technology transfer. Research Policy, 24(1), pp. 97-114. Boulding, K.E., 1950. Collective Bargaining and Fiscal Policy. The American Economic Review, 40(2), pp. 306-320. Burns, T.E. and Stalker, G.M., 1961. The management of innovation. London: Tavistock Publications. Cook, T.D., Campbell, D.T. and Day, A., 1979. Quasi-experimentation: Design & analysis issues for field settings. Boston, USA: Houghton Mifflin. Daft, R. L., 2009. Organization theory and design. Mason, USA: South-Western Pub. Downs, A. and Rand Corporation, 1967. Inside bureaucracy. Boston: Little, Brown. Greiner, L., 1972. Evolution and Revolution as Organizations Grow. Harvard business review, iss. July-August, pp. 37-46. Haire, M., 1959. Biological models and empirical histories of the growth of organizations. In: M. Haire, ed. 1959. Modern organization theory. New York: Wiley.
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