Managing Internal Consulting Units: Challenges and Practices
Ejenas, Markus, Werr, Andreas, SAM Advanced Management Journal
What are the pros and cons of establishing and operating internal consulting units (ICUs) within a large organization? And how do ICU differ essentially from independent consulting firms? After identifying four key challenges for ICUs--formulating a strategy, building credibility, controlling performance, and attracting and motivating employees--the authors examined them in the context of four multinational organizations based in Sweden. The results yielded three major precepts for ICU managers to follow: build credibility with a limited stock of external assignments and a central organizational position; maintain operational autonomy; and attract and motivate professionals with a different, alternative employee offer.
During the past decade, internal consulting units have experienced a revival in large industrial firms and government organizations (Niewiem and Richter, 2004). Reliable statistics on the total volume of internal consulting are not available, but anecdotal evidence points at a substantial proliferation of internal consulting units (ICUs). Mohe and Kolbeck (2003) in a German context found that 75% of publicly traded companies employed internal consulting staff. In a survey of the 500 largest organizations in Sweden, 19% (including the largest, multinational firms) claimed to have established internal consulting units. Some of these ranked among the largest management consulting organizations in Sweden (Werr and Pemer, 2009).
Internal consulting units (ICUs) make available to managers within a parent organization specialized resources that may assist in problem solving and decision making and implementation, and, thus, can substitute for external consulting services (Johri, Cooper, and Prokopenko, 1998). The main purpose of an ICU is to enhance the productivity of functional or product divisions by providing common services. ICUs are important tools for management in dealing with the complexity of large international organizations (Johri, et al., 1998).
The management and organization of professional services in general and management consulting in particular has attracted considerable research in the past years (e.g., Alvesson, 2004; Greenwood and Empson, 2003; Kipping and Engwall, 2002; Lowendahl, 2005; Maister, 1993). A key claim of this research has been that professional services share a number of characteristics that create a specific context for management, organization and governance to the extent that traditional, bureaucratic/industrial organization, and management models are unsuitable (Greenwood, Hinings, and Brown, 1990; Lowendahl, 2005). Professional services, it is argued, require unique forms of governance, ownership structures, images and identities, organizational structures, and management practices that are catered to in the unique structures, processes, and practices of the professional service firm (PSF).
ICUs, being embedded in the large, bureaucratic structures of industrial firms, face very different conditions from the independent professional service firm (PSF). Still, they often compete with these for both clients and talented employees (c.f. Maister, 1993). Research on the organization and management of professional services in contexts other than independent PSFs is, however, scarce and dated (Wylie, Sturdy, and Wright, 2010). Against this background, this paper pursues two related purposes. First, it will elaborate on the distinctive challenges of managing ICUs by comparing their specific conditions to those suggested for the independent PSE Second, we discuss possible strategies for dealing with these challenges based on four case studies of ICUs in large multinational firms (ABB, SKF, Vattenfall, and Volvo). This paper contributes both to the literature on internal consulting and its involved challenges (e.g., Barnato, 1990; Johri, et al., 1998) and to the practice of managing these units. It also contributes to the large and growing body of literature on professional services by paving the way for studying their production in contexts other than the PSF. …