Behind clients’ doors: What hinders client firms from “professionally” dealing with consultancy?

Scandinavian Journal of Management (2009) 25, 299—312

a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m

j o u r n a l h o m e p a g e : h t t p : / / w w w. e l s e v i e r. c o m / l o c a t e / s c a m a n

Behind clients’ doors: What hinders client firms from ‘‘professionally’’ dealing with consultancy? ¨ner *, Michael Mohe Dirk Ho University of Oldenburg, Faculty II, Business Consulting, Ammerlaender Heerstrasse, 26111 Oldenburg, Germany

KEYWORDS Agency theory; Case study; Client professionalization; Management consulting; Managerial attitudes

Summary Prior research has located the issue of ‘‘professional’’ conduct with consultancy predominantly within the relationship between the manager and the consultant. However, recent studies provide indications that dealing professionally with consultancy may fail because of goal divergences between the individual managers and the organization. The first aim of this article is to re-examine this assumption theoretically, by drawing on agency theory, and empirically, by focusing on a single case study. Through this approach certain attitudes exhibited by managers are identified, which hinder dealing with consultancy in a professional manner across the entire organization. This observation motivates the second aim of the article: since the managers’ attitudes deviate from the company’s goals in dealings with consultancy, the adequacy of governance measures needs to be analyzed. Several researchers have observed that companies primarily use control-based measures, like central procurement rules or policies, to govern managers dealing with consultancy. However, these measures are not readily accepted by managers. In view of the above, this study investigates alternative measures, which are summarized as incentive-based measures. # 2009 Elsevier Ltd. All rights reserved.

Introduction In recent years, the formerly prevalent portraits of clients as victims, marionettes or passive consumers of consulting services have been extensively revised. Contemporary literature increasingly puts forward the notion that clients are becoming more sophisticated and questions the hitherto passive role of managers (Czerniawska, 2005; Fincham, 1999; Haferkamp & Drescher, 2006; Kakabadse, Lourchart, & Kakabadse, 2006; Mohe, 2005; Niewiem & Richter, 2004; Sturdy, 1997; Werr & Pemer, 2005; Werr & Styhre, 2002; Williams, 2001). This could be associated with a move

* Corresponding author. E-mail address: [email protected] (D. Ho ¨ner).

towards a more ‘‘professional’’ conduct with consultancy. However, the term ‘‘professionalization’’ has no sociological sense in this context. Here, client professionalization is defined as adopting an effective and efficient approach to dealing with consultancy. This may be explained by several factors: for instance, according to research, client companies feel that they spend too much money on questionable advice (Ehrhardt & Nippa, 2005; Kitay & Wright, 2004; Wright & Kitay, 2002). Consequently, they focus on reducing consulting fees and enhancing the utility of consulting services. Additionally, many client companies are confronted with an internal consulting landscape that is intransparent and fragmented (Mohe, 2005; Mohe, Kolbeck, Neunhoeffer, & Mildenberger, 2006). In these cases, consultants receive approval without any type of evaluation (Ernst & Kieser, 2002a), which can often lead to companies losing track of consulting projects and consultants. As a result, clients

0956-5221/$ — see front matter # 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.scaman.2009.05.006

300 often do not know with which consultants they have already worked in the past, under what payment conditions, and for what benefits. Against this background, some clients attempt to professionalize their dealings with consultancy. This is displayed by a stricter handling of the process of consultant selection, e.g. the implementation of special purchasing procedures and strategies for employing management consultants (Ba ¨cklund & Werr, 2005; Lindberg & Furusten, 2005; Mohe, 2005; Werr & Pemer, 2005). Another example is the establishment of a consulting infobase, whose purpose is to systematize the internal consulting landscape of the company (Haferkamp & Drescher, 2006; Mohe et al., 2006). Besides that, there is a lot of advisory literature that aims to support managers in the tasks of managing and controlling consultants (e.g. Czerniawska, 2002, 2003; Czerniawska & May, 2004; Kubr, 1993; Phillips, 2000). Further, due to the increasing use of consulting services, the employees of client companies are more experienced in dealing with consulting services; also, a growing number of managers have worked as consultants themselves before taking on their management jobs (Peet, 1988). Therefore, it can be assumed that clients know how the consulting business works, where the potential pitfalls lie, and how to avoid them. Interestingly, the existing research supports the opposite notion, i.e. that ‘‘the way in which management consultants are purchased and managed is far from efficient’’ (Werr & Pemer, 2005 p. B5; see also Czerniawska, 2002, 2003; Haferkamp & Drescher, 2006; Mohe, 2005). This raises the question of what hinders clients from maintaining a professional conduct with consultancy. Recent studies suggest that this is due to goal divergences between the organization and the individual managers. Ba ¨cklund and Werr (2005, p. 184) note that ‘‘there is an inherent tension between organizational efforts to ensure an efficient and effective purchasing process and the preferred practices of the managers’’ when it comes to using consultants. This indicates that managers do not always behave in the company’s interest when dealing with consultancy, and consequently highlights the need for measures that aim at governing the managers’ practices. As this field of analysis has not yet been widely addressed, this article aims to provide empirical insights into the managers’ attitudes, which may hinder a company from professionally dealing with consultancy. Further, it discusses the question of what measures might be appropriate for governing the managers when dealing with consultancy so that this is in the company’s interest. For these purposes the findings of a single case study are presented and discussed. On the strength of that, this paper aims to contribute to the field of research in professional conduct with consultancy. As prior research has focused on the individual manager—client relationship (e.g. Fincham, 1999; Karantinou & Hogg, 2001) or on ‘‘the organization rather than the individual managers’’ (Werr & Pemer, 2005, p. B1), this study intends to generate new empirical insight by focusing on the relationship between individual managers and their organization when dealing with consultancy. This article is structured as follows: in the first part a theoretical framework is developed by introducing agency theory as an approach that predominantly attends to goal divergences and governance mechanisms. The specific problems of goal divergences between an organization and

D. Ho ¨ner, M. Mohe individual managers with relation to employing consultants are described from this perspective, and the literature that provides insights into the practice of governing managers in the context of client professionalization is reviewed. In the second part, the single case study examined here is introduced. After describing how the present research was designed, the main findings are presented in order to investigate the managers’ attitudes as well as appropriate measures for governing managers when dealing with consultancy. Finally, the findings are summarized, the limitations of the current study are stated, and the implications for future research and practice are briefly discussed.

Theoretical framework Agency theory In this article, agency theory is used as a theoretical framework for two reasons. First, it focuses on goal divergences, e.g. between the board of management and the managers when dealing with consultancy. Second, it handles governance mechanisms, which will be specified within this paper, that aim at governing managers in the context of client professionalization (cf. Eisenhardt, 1989a; Fama, 1980; Fama & Jensen, 1983; Jensen & Meckling, 1976; Shapiro, 2005). From an agency-theory perspective, an agent acts on behalf of his principal. Because it is assumed that agents are likely to have goals that diverge from those of their principals, and will consequently behave in terms of individual utility maximization and opportunism, it is generally accepted that agents will try to pursue their own interests, rather than those of their principals. This setting causes some agency problems for principals, because they do not know what level of knowledge agents possess (hidden information) to effectively perform the assigned tasks, and which actions these agents exercise (hidden action) to perform their tasks (Arrow, 1985). Thus, the information asymmetry and the agents’ tendency to act opportunistically represent the major problems principals face. The above are also characteristic problems in management consulting, where the consultant (agent) acts on behalf of the client (principal), so it is not surprising that agency theory has been employed to analyze client—consultant relationships (e.g. Fincham, 2003; Gallouj, 1996; Sharma, 1997). However, as Fincham (2003) points out, there are more principal—agent relationships in the context of management consulting: the manager is not only the principal of the consultant, but also the agent of the company owners, who are the principals of the board of management, who in their turn are the principals of the managers. Despite his differentiation, Fincham — like most researchers — focuses on the client—consultant relationship. In contrast to that research direction, this paper places emphasis on the internal company relationship between the individual managers and the board of management, which is supposed to represent the interests of the organization — or, to be more precise, the owner of the relevant capital — and which has the power to govern managers (Eisenhardt, 1989a) dealing with consultancy (see Fig. 1). As the findings of Ba ¨cklund and Werr (2005) suggest, when it comes to consulting there is an information asymmetry

What hinders client firms from ‘‘professionally’’ dealing with consultancy?

301

they are managers’’ (Watson, 1994, p. 893). Thus, for managers it is difficult to attend to both their personal motives and those of the company, which may result in managerial behaviour which does not always fit with the company’s interests. With relation to our context, the double-control problem means that managers are ambiguous in the way they deal with consultants, because ‘‘on the one hand they have to work with consultants in a way that supports the creation of organizational value, on the other hand, they have to protect and further their own value, position, and self-esteem’’ (Werr & Styhre, 2002, p. 58). However, this accounts for the potential undermining of the organizational goal of dealing professionally with consultancy.

Figure 1 text.

Principal—agent relationships in the consulting con-

between the managers as agents, and the board of management as the principal. For example, the board of management does not know the hidden motives of the managers for bringing in a consultant, how carefully alternative service providers were examined, how tightly the consultants are managed, or how accurately the outcomes are reviewed and evaluated. If the individual managers behave according to the goals of the board of management, this information asymmetry is not problematic; however, as noted above, there is evidence that the company’s goals and the goals of the individual managers are not always congruent when dealing with consultancy. In view of this, the board of management has to search for adequate governance measures to ensure that managers act according to the company’s goals (Pratt & Zeckhauser, 1985). In the following, potential goal divergences and measures for governing managers when dealing with consultancy will be introduced.

Goal divergences when dealing with consultancy Even outside agency theory, the problem of divergences between organizational and personal goals has attracted many scholars (e.g. Argyris, 1987; Simon, 1964), however, it has not been widely discussed in the context of dealing with consultants. Werr (2005) points out that the detailed analysis of the relationship between the client organization and the individual managers needs further research. The assumption that the goals of the organization differ from those of the managers when dealing with consultancy suggests that there is a need to explore thoroughly this issue. As Ba ¨cklund and Werr (2005, p. 199) note: ‘‘Personal and organizational goals and purposes are thus blurred in the manager’s use of management consultants’’. One possible reason for this is the ‘‘double control problem’’ faced by managers. This problem occurs because managers are confronted with ‘‘managing their personal identities, careers and understandings at the same time as contributing to the overall control of the organization in which

Enhancing the transparency of the company’s internal consulting landscape One of the pillars of dealing professionally with consultancy is achieving transparency of the corporate consulting landscape (Haferkamp & Drescher, 2006; Mohe, 2005; Mohe et al., 2006; Werr & Pemer, 2005). If this company-wide transparency is lacking, the consequence is an uncontrolled diffusion of consulting projects and consultancies within the company. This can result in consultants offering the same project to different divisions within the company, and in a risk that the company wastes bundling potentials. As research suggests, managers demand discretion for their consulting deals (Ba ¨cklund & Werr, 2005), and protect their latent motives for using consultants, for instance when they use consultants to legitimate already made decisions (Kieser, 2002). Therefore, they tend to be reluctant to provide information about their consulting projects, which in turn hinders transparency within the organization with regard to its internal consulting landscape. Reducing the overall costs of consulting services From the company’s point of view the reduction of fees for management consulting services is a second goal. Managers are used to deciding themselves what they spend their budget on. This often means that their decisions on how to allocate a given budget are based on different criteria from those that best serve a company’s cost-saving policy. In this context, Ba ¨cklund and Werr (2005, p. 191) found out that cost-saving as an argument is only valid for the board, while on lower levels of management, cost-saving is not a decisive criterion when it comes to budget-planning. Increasing the overall benefits of using consulting services Assessing the overall benefits of consulting projects is a third organizational goal. However, this requires the systematic evaluation of all consulting projects, which again collides with the managers’ reluctance to disclose their own consulting projects. Therefore, managers have no vital interest in an objective evaluation (Ernst & Kieser, 2002a) and are likely to legitimize the consulting fees incurred by ‘‘euphemizing’’ the performance of their own consulting projects–—even if they have failed (Engwall & Kipping, 2003; Kieser, 2002; Kipping & Armbru ¨ster, 2003). To promote their own careers, managers use consultants for their own benefit and not necessarily for the benefit of their company (Czander & Eisold, 2003; Ernst & Kieser, 2002b).

Q1

302 Table 1

D. Ho ¨ner, M. Mohe Rules and policies for the purchasing of consulting services. Public organizations (Lindberg & Furusten, 2005)

Private organizations (Ba ¨cklund & Werr, 2005)

Modus operandi

Strict government rules for purchasing management consulting services Official advertising of public procurements (‘‘tender’’)

No formal rules for purchasing management consulting services Manager are authorized to individual procurement according to their budget

Organizational goals

Purchasing the cheapest and best service Breaking personal ties between individual managers and consultants

Professionalizing the procurement of management consulting services by formal central policies Accumulation of competence and experiences related to the procurement of management consulting services

Dilemma for managers

Following the government rules vs. making individual choices

Following central company procurement policies vs. making individual choices

Dilemma for the organization

Managers try to bypass or ignore the rules

No acceptance; managers see no need, are likely to resist, and get frustrated

Result

Managers follow the rules formally, but not in practice

Tensions and discrepancies between the managers’ and the purchasing department’s views

In sum, the considerations above indicate that there are potential goal divergences between the company and the individual managers when dealing with consultancy. Following this, the question arises, in which way the managers could be governed so that they act in the company’s interest.

Measures for governing managers when dealing with consultancy From the principal’s perspective, two modes of governance measures are predominantly discussed to attenuate opportunism and information asymmetry (e.g. Eisenhardt, 1989a; Fama & Jensen, 1983; Jensen & Meckling, 1976; Pratt & Zeckhauser, 1985; Shapiro, 2005; Szulkin, 1999). Controlbased measures (e.g. rules, centralization, or monitoring) should support the principal to direct the agent and to verify to what extent the agent behaves according to the principal’s interest, while incentive-based measures (e.g. monetary incentives in labour contracts) intend to motivate the agent to align his or her goals according to those of the principal. In the consulting context the question of which measures the board of management could implement to govern managers has not yet been addressed extensively. Lindberg and Furusten (2005) have analyzed procurement behaviour of buyers in public organizations. Typically, the procurement of management consulting services is organized by government rules (e.g. public tenders) and its aim is to buy what is presumed to be the best service for the lowest price, regardless of the (former) relationship between buyers and consultants. However, this is not compatible with the goals of individual buyers as they appreciate personal ties to certain consultants and feel that bureaucratic rules are not appropriate for the purchasing of consulting services. Therefore, buyers do not behave according to the government rules when dealing with consultancy. Instead, they fall back on their personal ties and try to bypass or ignore

the rules in order to secure the selection of their preferred consultants. In another study, Ba ¨cklund and Werr (2005) investigated the purchasing behaviours of sixteen Swedish multinational companies. They observed that some companies try to professionalize the procurement of consulting services by means of formal central policies (see also Werr & Pemer, 2005). Due to this, the procurement office is given more power in the selection of consulting service providers, while at the same time the power of individual managers is reduced. This leads to tension because managers are formally authorized to proceed to individual procurements according to their budget. As a result, such organizational procurement policies are not accepted by managers. They see no need for them, are likely to resist, or just get frustrated. Table 1 compares and summarizes these two studies. Both studies indicate that companies try to govern managers predominately by employing control-based measures. However, both studies also reveal that goal divergences between an organization and individual managers are not necessarily reduced when organizational procurement rules or policies are imposed. Against this background, the current study aims to re-assess these findings from a new perspective, i.e. by directly addressing the managers of private companies who are in charge of employing consultants, as well as to extend the discussion about governance measures for pursuing corporate client professionalization.

Methodology As the literature review above shows, the managers’ attitudes concerning the use of consultants are scarcely investigated. Therefore, the case study method is particularly useful for obtaining insights into such a barely researched phenomenon. Typically, case studies combine various methods of data collection, such as surveys, interviews, observations, and studying archives (Eisenhardt, 1989b; Stake, 1994; Yin, 1981).

What hinders client firms from ‘‘professionally’’ dealing with consultancy? The current case study was conducted in a major company in Germany. This company was characterized by a highly decentralized organizational structure, which led to a marked separation among the different business units and departments. This is something that can affect both the managers’ relationship with the board of management and the managers’ attitudes to dealing with consultancy. In the project, the authors were engaged by a department (from now on referred to as Dept. A) to investigate whether the company needed a more systematic approach in its dealings with consultancy, and the requirements of such an initiative. For this purpose, a mixed method research design was applied, combining a quantitative and an interview-based qualitative analysis, in order to cross-validate the results of each approach (Creswell, 2003; Denzin, 1978). The group of managers that filled out the questionnaire will be referred to as (q), while the group that was interviewed will be referred to as (i). In the latter, each interview partner (IP) has been assigned an individual number. The quantitative and qualitative surveys focused jointly on three major issues: (1) transparency of the internal consulting landscape, (2) general need for measures aiming at overall improvement and (3) tools and services aimed at improving dealings with consultancies. To cover these major issues, the following questions were posed to both groups of managers (q) and (i): (i) How do you perceive the transparency of the internal consulting landscape? (ii) Which measures would be particularly useful for improving the company’s dealings with consultancies? (iii) What tools and services would you use to improve your own dealings with consultancies? For the purposes of the quantitative study, a standardized questionnaire was developed to obtain a broad picture of the managers’ appraisals. Question (i) was rated on a four-point scale, ranging from ‘‘very transparent’’ to ‘‘very intransparent’’. Questions (ii) and (iii) were followed by a list of predefined answers, which the respondents were asked to mark if they applied to them (multiple answers were permitted). The variables were identified in the review of the relevant literature noted above and in the course of discussions held earlier with members of Dept. A. By this means, a substantial list of variables designated to promote professional conduct with consultancies was developed. The questionnaire was designed according to the company’s restrictions concerning employee surveys and then placed on the company’s intranet. Seven hundred and eighty managers at the second and third organizational levels from different business units with budget responsibility for contracting consultants were asked via e-mail to participate. The response rate was 18.3 percent, which is within the usual range for surveys of Dept. A, and not unusual for e-mail surveys, which tend to have relatively low response rates (e.g. Michaelidou & Gibb, 2006). Non-responses, on the other hand, give room for speculations about possible reasons: for instance, in this case non-responses may be attributed to the fact that the cover letter was not personalized, or the managers might have reached a saturation point in reading their e-mails or just become resistant to any kind of e-mail surveys, etc. (e.g. Cook, Heath, & Thompson, 2000; Roy & Berger, 2005). Addi-

303

tionally, it is possible that the managers were not interested in the topic, because ‘‘the purchase of management consultants was viewed as a low priority area’’ (Werr & Pemer, 2005, p. B2). Also, it may be that they do not have a good relationship, if any, to Dept. A, and therefore had no incentive to participate and to support the project. For the qualitative research, personal interviews with twelve managers were conducted to gather more detailed information. The interviewees were selected by Dept. A according to certain criteria (e.g. the managers possess several years of company experience, have an affinity for consulting topics, have carried out own consulting projects). The interviews followed a semi-structured pattern in order to allow as much room for discussion as possible. They focused on the three main questions mentioned above, to which, however further questions were added (e.g. ‘‘which criteria have to be fulfilled to guarantee the acceptance of certain tools and services?’’). Interviews lasted between 45 and 70 min, and were — with the agreement of the respondents — recorded and transcribed. Pre-interviews were conducted to adapt the interview outline to the internal company jargon. The results of the interviews were processed by means of qualitative content analysis (Mayring, 2002) following a combination of deductive and inductive coding approaches (Epstein & Martin, 2005). First, a deductive approach was applied to explore the managers’ appraisals regarding the three research topics. In this case, the deductive coding categories were already pre-defined according to the variablestructure of the questionnaire. Second, the managers’ attitudes towards different measures aimed at governing their dealings with consultancies were coded in assignation to those measures found in the literature. Additionally, an inductive approach was applied in order to identify categories of problematic behaviour on the part of managers, i.e. departmentalism, authority protection, and ‘‘laziness’’. As is typical for inductive coding, these categories emerged in the course of interpreting the research results (David & Sutton, 2004, p. 17; for the coding process of inductive analysis see Creswell, 2002, p. 266).

Attitudes of the managers At first glance, the managers’ answers present a coherent picture: most of them perceive the corporate consulting landscape within their company as ‘‘mainly intransparent’’ or as ‘‘intransparent’’, acknowledge the company’s expectations to improve its dealings with consultancies, and would use several tools or services to improve their personal dealings with consultancies (see Table 2 for details; n refers to the number of marks for the given answers, % refers to the percentage of respondents, e.g. 35.7 percent of the managers [q] identified the need for improved problem definition within consulting projects; see line 5 in Table 2). However, the inductive categories of problematic behaviour that emerged from the analysis of the managers’ answers reveal interesting contradictions and inconsistencies, which from the company’s point of view suggest inappropriate managerial attitudes. Consequently, it becomes obvious that the managers’ behaviour when dealing with consultancies tends to be orientated to departmentalism,

304

Table 2

Quantitative statistics. n

%

1

2

3

4

Perception of the company’s internal consulting landscape

1 2 3 4

Very transparent Mainly transparent Mainly intransparent Very intransparent

3 2.1 2.1 21 14.7 14.7 94 65.7 65.7 17 11.9 11.9

Required measures for dealings with consultancy in the area of. . .

5 6 7 8 9 10

Problem definition Selection of consultants Assembling of project teams Staff integration Control of consultants Conflict solving with consultants at earlier stages Project documentation Detailed project evaluation Involvement of consultants in the stage of implementation Communication of unsuccessful projects Splitting of huge projects into sub-projects

51 56 45 67 44 6

11 12 13

14 15 Tools and services demanded for professionally dealing with consultancy

0.7 0.0 0.7 1.4 0.0 0.0

2.8 4.2 4.2 8.4 2.8 0.7

28.0 30.1 21.0 30.8 21.7 2.8

4.2 4.9 5.6 5.6 6.3 0.7

6

7

8

9

10

35.7 14.7 13.3 16.8 13.3 2.8

39.2 14.7 31.5 19.6 12.6 46.9 16.1 11.2 13.3 30.8 1.4 0.7 2.1 1.4 4.2

11

12

13

14

15

16

17

18

27 18.9 0.0 23 16.1 0.0 71 49.7 2.1

2.1 13.3 3.5 9.1 9.1 32.9

2.8 7.0 4.9 4.9 8.4 3.5 1.4 18.9 2.8 4.9 9.1 6.3 8.4 5.6 0.0 4.2 16.1 4.9 21.0 19.6 13.3 23.8 14.7 1.4 12.6 7.7 49.7

50 35.0 0.0

3.5 29.4

2.1 10.5 16.1 11.9 14.0 14.0 2.8

7.7

5.6 16.8 35.0

14

4.2

4.2

1.4

2.8

34 23.8 0.0

4.9 14.7

4.2

7.0 11.9

85 59.4 0.7 64 44.8 0.0

7.7 41.3 7.0 35.0

9.1 22.4 23.8 22.4 28.7 21.0 3.5 14.7 12.6 32.2 21.7 5.6 11.2 59.4 2.8 14.0 22.4 18.9 24.5 19.6 2.1 7.7 8.4 23.8 22.4 3.5 12.6 30.1 44.8

9.8 0.0

2.1

2.8

4.9

2.1 0.0

3.5

2.1

5.6

9.8 14.0

8.4 0.7

5.6

4.9 12.6

19

22

23

24

25

0.7 14.0

1.4

8.4

7.0

7.0

4.9

4.9 1.4

4.9

3.5

9.8

8.4 1.4

3.5 11.9

8.4 16.1

0.7 1.4

0.0 2.8

2.8 6.3

2.8 3.5

3.5 7.0

1.4 4.2

1.4 0.0 4.2 0.0

1.4 2.8

0.7 2.1

3.5 4.2

2.8 0.7 7.0 2.8

2.1 2.8

2.1 6.3

3.5 7.7

27

28

7.0 28.0 28.7 23.1 37.8 23.1 4.2 13.3 13.3 39.9 30.8 9.1 20.3 42.7 32.9 14.7 4.2

9.1 72.0

2.8 23.8 1.4 5.6 7.7 32.9

4.9 14.0 16.1 15.4 18.2 11.2 1.4 6.3 6.3 14.0 12.6 3.5 6.3 23.1 14.7 0.7 4.9 3.5 4.9 2.1 2.1 0.7 1.4 2.8 4.9 3.5 0.0 3.5 7.0 2.8 6.3 17.5 2.7 14.7 21.0 19.6 1.4 10.5 11.9 26.6 21.7 2.1 11.2 32.9 27.3

6.3 2.8 2.8 1.4 9.1 2.1

6.3 23.8 32.2 2.1 7.7 2.1 9.8 6.3 35.7 14.0 6.3 48.3

37 25.9 0.0

3.5 20.3

2.1

5.6

6.3 12.6 11.2 3.5

8.4 20.3 18.2

4.9 2.1

4.2 20.3

9.1 2.1 14.7 25.9

41 28.7 1.4

2.8 19.6

4.9 13.3 10.5 10.5 12.6

6.3 1.4

8.4

5.6 14.7

9.8 3.5

9.1 16.7 11.9

6.3 1.4

4.2 21.7

7.7 4.2 14.7

4.2 28.7

27 18.9 0.7

0.7 14.0

3.5 10.5

8.4

5.6

6.3

5.6 1.4

4.2

1.4 13.3

7.7 2.1

4.9 11.2 10.5

5.6 0.7

2.8 15.4

7.7 4.2

9.1

2.8 11.2 18.9

18 12.6 1.4 27 18.9 1.4

0.0 9.1 3.5 11.2

2.1 2.8

6.3 8.4

7.7 6.3

6.3 8.4

2.8 1.4 7.0 0.0

2.8 1.4

2.1 9.1 2.1 15.4

4.2 1.4 4.9 2.8

4.9 7.0

6.3 8.4

2.1 0.0 3.5 1.4

1.4 11.9 3.5 14.7

6.3 2.1 4.9 3.5

4.2 9.1

4.9 4.9

62 43.4 0.0 25 17.5 0.0

6.3 33.6 3.5 11.9

3.5 14.0 16.8 11.9 23.1 14.7 2.8 11.2 2.1 6.3 7.0 4.9 10.5 7.0 0.7 4.2

7.7 18.9 20.3 4.2 12.6 30.1 21.0 3.5 7.7 8.4 1.4 7.7 10.5 8.4

9.8 2.8 2.8 0.7

5.6 34.3 12.6 3.5 24.5 13.3 11.9 1.4 12.6 6.3 1.4 9.8 4.2 8.4

4.9 7.7

29

30

31

32

2.1 4.9 2.1 2.8 12.6

46 32.2 0.0 14 9.8 1.4 69 48.3 0.7

6.3 14.7 11.2 14.0 11.2 0.0

26

9.1 2.1 23.8

7 4.9 0.0 18 12.6 0.0

103 72.0 1.4 10.5 52.4

21

3.5 9.8

23 16.1 0.0

4.2 8.4

20

6.3 9.8

5.6 9.1

7.0 12.6 8.4 5.6 18.9 5.6 4.2

5.6 1.4

3.5 43.4 5.6 10.5 17.5

D. Ho ¨ner, M. Mohe

16 Scorecard for consulting projects 17 Consulting database 18 Rankings of consultants recruited by the company 19 Handbook ‘‘dealings with consultancy’’ 20 Key consulting figures 21 Key figures of the company’s consulting landscape 22 Lessons learned from completed projects 23 Project database 24 Consulting market trends 25 Support selection of consultants 26 Support evaluation of consultants and projects 27 Support stage of the concept development 28 Support problem definition 29 Support team staffing 30 Support implementation-stage 31 Support contracting 32 Support project management

35.7 39.2 31.5 46.9 30.8 4.2

5

What hinders client firms from ‘‘professionally’’ dealing with consultancy? authority protection and ‘‘laziness’’. In the following, these attitudes will be examined more closely.

Departmentalism The managers’ statements concerning the internal consulting landscape of the company present a distinctive picture: 66.5 percent of the managers (q) perceive the internal consulting landscape as ‘‘mainly intransparent’’ and 11.9 percent as ‘‘very intransparent’’. Nearly all of the managers (i) agreed to their colleagues’ evaluation. They characterized the company’s internal consulting landscape as ‘‘heterogeneous’’ (IP 1), ‘‘pell-mell’’ (IP 2), ‘‘chaotic’’, being a ‘‘consultants’ nuisance’’ (IP 10), or as follows: ‘‘There is little transparency regarding which consultants were used for which areas. There is also no communication on quality, and no helpful documentation on the topic; a whole lot happens ad hoc.’’ (IP 12) However, some managers (i) make a clear distinction between the transparency of the consulting landscape of the whole company and of their own department: ‘‘There’s nothing I can say about the company. I can only talk about my department, and here, it’s downright transparent. I couldn’t tell you what it’s like in other departments.’’ (IP 6) By highlighting the transparency of their own department, managers might foster the impression that their own situation is under control. This interpretation fits the appraisal of Werr and Styhre (2002) that clients present themselves as the controlling party of consulting interactions to legitimize the use of consultants. This would allow managers to immunize themselves against outside criticism and defend their departments against corporate interventions. As one manager (i) clearly states: ‘‘The individual company units must maintain their autonomy when it comes to the question of how they solve their problems.’’ (IP 1) This indicates that departmentalism might play a dominant role in the managers’ perception, which may be the result of the company’s highly decentralized structure: ‘‘The [decentralized] company structure creates a bunch of individual units that have their own power structures and cultures.’’ (IP 9) Thus, instead of taking a company-wide view, managers take a department-view and aim at department-based solutions for professionally dealing with consultancy. This argument is supported by the attempts of individual departments to build up own expertise in managing consultants: ‘‘Right now we’re trying — and by this, I mean my department — to put together a catalogue of consulting companies to create a better overview that also includes an evaluation.’’ (IP 5) On the one hand, such approaches may fulfil the individual departments’ needs. On the other hand, they could be interpreted as ‘‘thinking in silos’’. In this sense, such approaches are suboptimal for the company as a whole,

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because they tend to reduce synergy and cost effects–—for instance, when different departments use different consultancies to address practically the same problem. Some managers (i) complain about such ‘‘isolated applications’’ (IP 12) — i.e. the development and implementation of individual tools for dealing with consultants — and realize the risks of such departmentalized approaches: ‘‘[The consultants] sell the same project in-house five times over. They’ll do a project in my department, and then go to [A] in the [XY] department and offer the same thing.’’ (IP 11)

Authority protection Managers identify several improvement measures for the company’s dealings with consultancy and are prepared to use several means to effect their own professionalization. At first glance, this fits the managers’ notion that the company’s consulting landscape is intransparent. However, a detailed look at the identified improvement measures and the desired tools and services for professionalization reveals some inconsistencies: 31.5 percent of the managers (q) want to staff the project team more carefully, but just 12.6 percent would accept support in this task. What is more, only 7.7 percent of those managers (q) who see the need for improvements in project staffing would accept assistance in this task. Here, some managers (i) made clear statements that they would not accept any interventions in their consulting projects: ‘‘Interfering in the project is neither necessary nor desired.’’ (IP 8) Furthermore, 35.7 percent of managers (q) see the need to define the problem more clearly prior to the use of consultancy, but just 18.9 percent would enlist assistance in the task of problem definition. The cross-tabulation analysis reveals that only 10.5 percent of the managers who identify improvement potential in the field of problem definition would be interested in adequate support. This aspect was confirmed during the interviews: ‘‘You usually want to recognize and solve your own problems.’’ (IP 11) This indicates that managers fear that accepting support in the form of corporate services when dealing with consultancy results in their perceived competence being curtailed or having responsibilities taken away from them. This also applies to receiving support for the selection process. Here, managers gave high priority to maintaining their autonomy in the selection of their consultants: ‘‘I want to have the final say on a consultant selection. . . . I don’t need a consultant for the selection of my consultant.’’ (IP 10) The findings above show that the majority of managers perceive the company’s consulting situation as intransparent, but just 12.6 percent of the managers (q) are interested in key consulting figures. Although these key figures are appropriate for obtaining a better overview of the consulting situation within the company, the managers (i) demand discretion in their consulting projects:

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D. Ho ¨ner, M. Mohe

‘‘Topics such as project volume are highly sensitive and should be handled with the utmost confidentiality.’’ (IP 8)

general aversion to documenting project results and even questioned the relevance of documentation:

‘‘I don’t want every employee who has an extra ten minutes during their lunch break to be able to go on the intranet . . . and see what I wrote about the [XY] consulting project.’’ (IP 12)

‘‘Where do I get my desire and energy? Well, if I’m under the gun to document parts of my experience so that they’re somewhere to be found, so that someone else can read them, it just might be that I’m too lazy for that.’’ (IP 1)

This is in line with a further contradiction, which supports the idea that managers become defensive when faced with company-wide disclosure of their consulting activities: while 72.0 percent of the managers (q) would like to use lessons learned from consulting projects, just 35.0 percent of them suggest communicating the results of unsuccessful consulting projects. ‘‘Laziness’’ Both quantitative and qualitative data suggest that ‘‘laziness’’ is a third type of obstructive attitude on the part of managers. In this context, the term ‘‘laziness’’ does not refer to a general aversion of labor by managers. However, the results of this study suggest that individual managers exhibit a certain reluctance towards the intensive use of potential measures for dealing more ‘‘professionally’’ with consultancy. This indicates that managers do not recognize that using consultants effectively is a significant managerial task. However, if an organizational problem demands the use of external consultancy in any form, this becomes a managerial responsibility that needs thorough processing. If management is reluctant to acknowledge this because of the effort it requires, ‘‘laziness’’ can be presumed to be a third underlying attitude besides the other two described above. Two cross-tabulations support this: first, 72.0 percent of the managers (q) would welcome ‘‘lessons learned’’ — i.e. documented experiences from completed consulting projects — but only 18.9 percent see the need for better documentation of project results. This raises the question of how ‘‘lessons learned’’ ought to be generated when managers see no need for better documentation of project results. The managers (i) attributed the latter to their

Table 3

‘‘Who in this company is even going to take the time to read the two- or three-page report on a project?’’ (IP 2) Second, 44.8 percent of managers (q) desire internal rankings of consulting firms, but only 16.1 percent want a detailed evaluation of projects. Here, the question arises of how internal rankings could be generated when managers see no need for detailed evaluation, which is a prerequisite for setting up internal rankings. The answers of the interviewed managers (i) present an ambiguous picture. On the one hand, some managers (i) complain about the need for better evaluation: ‘‘Consulting quality needs to be defined, and that’s where you need to check: how can I develop mechanisms that maintain quality? I mean, I want the best possible quality for my money.’’ (IP 2) On the other hand, some managers (i) directly admit their unwillingness to evaluate projects: ‘‘I have to admit, in this regard, I am a little lazy. I would honestly try to avoid this topic [of evaluation] as much as possible.’’ (IP 5) To sum up the findings so far, we could say that the managers’ answers draw a somewhat ambiguous picture: on the one hand they acknowledge that the consulting situation within their company is suboptimal and needs to be improved; on the other hand they predominantly try to optimize and protect their individual interests. Table 3 summarizes these findings.

Behavioural patterns of the managers in dealings with consultancy.

Criterion

On the one hand, the managers. . .

On the other hand, the managers. . .

Departmentalism

Acknowledge the existence and the risks of an intransparent and fragmented consulting landscape within the company

Subordinate the corporate perspective to a department-centred view by using isolated applications

Authority protection

Notice the insufficient project staffing and definition of the project problem Complain about the intransparent corporate consulting landscape

Do not want assistance/intervention concerning their own projects Demand discretion regarding their consulting projects and fear the disclosure of their consulting activities Do not want to communicate unsuccessful projects

Want lessons learned from other projects ‘‘Laziness’’

Desire lessons learned Desire internal rankings Complain about the need for a better evaluation

No need for better documentation of the project results and state aversion to documenting project results See no need for a detailed evaluation of the projects Are too lazy to evaluate their own projects

What hinders client firms from ‘‘professionally’’ dealing with consultancy?

Measures for governing the managers in dealings with consultancy From the company’s point of view, the attitudes of managers identified above hinder professional conduct with consultancy across the organization. Departmentalism leads to ‘‘isolated applications’’ for dealings with consultancy. Accordingly, the coexistence of similar applications in the different departments is suboptimal from the company’s point of view, because resources are required to implement and maintain each of those applications. Additionally, the managers’ tendency for authority protection and their ‘‘laziness’’ are not conducive to achieving organization-wide transparency of the consulting landscape, because managers are unwilling to document and evaluate their consulting projects. Thus, the multiple assignments of similar, if not identical, consulting projects will continue to persist within the organization. Consequently, the question arises of how to rectify this suboptimal consulting situation. From an agency perspective, the answer would be that the board of management, which represents the organization’s capacity to act, has to search for adequate governance mechanisms to ensure that managers behave according to the company’s interest when dealing with consultancy. As the literature review has shown, control-based measures, like purchasing rules or procurement policies for consulting services, were predominantly applied to govern managers–—although such measures are not completely accepted by managers. In the following, this is reexamined on the basis of the current study. Additionally, the current study tries to identify alternative governance measures. These measures were generated from the literature as well as gathered in the process of interviews with members of Dept. A and managers. With reference to the theoretical framework derived from an agency perspective, the following measures have been clustered according to their orientation in control-based or incentive-based measures.

Control-based measures Formal purchasing rules Relevant research indicates that the board of management could set up certain organizational rules that define standardized processes of dealing with consultants (Haferkamp & Drescher, 2006; Lindberg & Furusten, 2005; Mohe, 2005; Werr & Pemer, 2005). On the one hand, such rules would give managers clear instructions for dealing with consultancy and enhance the principal’s control. On the other hand, the implementation of rules is not compatible with the managers’ perceptions of the organizational culture: ‘‘Corporate culture in our company is . . . voluntary. I don’t know whether it would work if you made it mandatory. This may work in other companies, but not here. I think it has to be voluntary.’’ (IP 12) As managers find that formal rules are inflexible (Ferner, 2000), reduce their control over their work, and undermine discretion (Kirsch, 1997), they are likely to ignore or try to bypass them (Lindberg & Furusten, 2005; Werr & Pemer, 2005). This can be confirmed so far as the company that this study researched is concerned:

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‘‘The [company] culture is to bypass such things and to play with your cards close to your chest.’’ (IP 1) Central purchasing/project offices Two approaches to centralization can be distinguished: first, the institutionalization of a central office for the purchasing of consulting services (see also Stock & Zinser, 1987), which selects consultants on behalf of the managers. Werr and Pemer (2005, p. B4) call this the expert strategy: ‘‘The expert strategy represents a highly centralized approach in which a large part of the selection and purchasing of management consultants is handled by an expert within the organization.’’ However, most of the interviewed managers in the current study are against such a centralized solution: ‘‘If I’m in charge of the output of my department . . . then I need to be the one in the driver’s seat. This includes being able to decide for myself who I need as a consultant and who I don’t.’’ (IP 1) As a second alternative, centralization could lead to the institutionalization of a central project office that controls and coordinates all consulting projects across the company (Haferkamp & Drescher, 2006; Mohe, 2005). This idea is also found in a field report by Freedman and Stinson, who report on the idea of appointing a coordinator of consultants, who ‘‘would recruit, select, orient, deploy, monitor, and evaluate external consultants’’ (Freedman & Stinson, 2004, p. 46). Therefore, establishing a central project office goes beyond purchasing consulting services by actively assisting the managers during all phases of their consulting projects. To secure the use of such services, the organization ‘‘strictly forbid[s] any circumvention of the central coordination office’’ (Haferkamp & Drescher, 2006, p. 125). However, in this study the idea of a mandatory central project office is not seen as being compatible with the managerial culture: ‘‘[The managers] have a responsibility for their results, which means that they also have a responsibility for their budget. Therefore, it makes no sense to have someone from outside roaming around, who apparently knows better.’’ (IP 8) Anonymous/non-anonymous reporting channels Many companies rely on and involve consultants extensively in their projects, and this practice is associated with certain shortcomings. Addressing these shortcomings, Ayers and Kaplan (2005) suggest the implementation of specific reporting channels in client companies. To this end, they distinguish between anonymous and non-anonymous reporting channels as two alternative ways for managers to report the wrongdoings of consultants. In the current setting, the board of management could resort to either of these two approaches, which represent two different solutions: one solution would be to establish a non-anonymous reporting channel, via which managers would be obliged to report their consulting activities, i.e. type, scope, fee, and documented ‘‘lessons learned’’ from the consulting projects. Alternatively, companies could opt for an anonymous reporting channel, thus leaving the decision to report or not to the managers. However, neither variant seems to fit the researched company. Concerning the idea of non-anonymous reporting

308 channels, the interviewed managers are sceptical about its appropriateness: ‘‘The details of a project are nobody else’s business. That’s clear . . . I would never make a project document available. Even if there’s a hierarchy or something else behind it, it all runs through me.’’ (IP 7) Considering the numerous statements by managers, which highlight their need to protect their authority, one might assume that the implementation of anonymous reporting channels would be an acceptable measure. However, voluntary reporting raises the issue of motivation on the part of managers to provide such information. Here, the identified ‘‘laziness’’ of managers indicates that they are not likely to report on their activities anyway. Anonymous reporting channels might enhance individual control through whistleblowing, e.g. if managers decided to report on their colleagues’ consulting activities. However, the identified departmentalism and the intransparent consulting landscape suggest that managers are not sufficiently informed about the consulting activities of their peers.

Incentive-based measures Service-oriented project office One measure that could provide an incentive to managers is a service-oriented project office. As mentioned above, the project office is an institution within the organization that has the personnel and expert capacity to support the managers in dealing with consultancy. In contrast to the idea of a mandatory central project office, ‘‘service-oriented’’ means that its use is voluntary. An institution incorporating these characteristics was proposed in the context of the interviews: ‘‘What I would be interested to see is a place set up in our company . . . where the business-consultant data are saved and evaluated according to ability and usefulness. Then, when I need help, I could say to someone: ‘Hey, I have such-and-such a problem, and need someone to help me out with it.’’’ (IP 11) ‘‘This kind of thing needs to be service-oriented: ‘what can I do for you?’’’ (IP 10) A service-oriented project office would promote the utility of consulting projects. However, with respect to the attitudes of managers, such an institution would have to be designed and used in a way that secures discrete conduct and sensitivity when dealing with confidential information. Informal networks Another incentive could be the encouragement to build informal networks in a way that would allow managers to communicate their experiences in consulting to each other (Haferkamp & Drescher, 2006). This idea — reminiscent of Ouchi’s notion of a clan (1979), which is based on informal social structures and relationships — was also suggested by one interviewee. Confronting other interviewed managers with this idea, the value and acceptance of such informal networks was confirmed:

D. Ho ¨ner, M. Mohe ‘‘The only thing that counts for me is the personal connection to colleagues.’’ (IP 6) ‘‘If you find the right partner, then the exchange about consulting will be very open and courteous.’’ (IP 9) Informal networks would be beneficial in different ways: from a technical perspective, open information would increase the transparency of the corporate consulting landscape, and managers would be given an opportunity to communicate their consulting experiences. Although the board of management would not necessarily participate in this network, it would benefit indirectly from the increasing transparency that results from peer-group control (Ouchi, 1979). From an agency perspective, informal networks would redress the identified counterproductive attitudes of managers, since this variant allows managers to define their own level of activity in such a network. Additionally, one of the effects of such informal networks might be a reduction in the use of external consultants: ‘‘A lot of people in our company complain about consultants. One should also exchange experiences with others. [To this end], a meeting of experts would be a very good thing. . .We’ve got everything we need right here, I don’t need a consultant from the [XY consulting firm]. The expert knowledge we have in this company is more than sufficient.’’ (IP 11) Consulting database As the quantitative findings show, a strong majority of the managers (q), who filled in the questionnaire, would use a consulting database (59.4 percent). Also, most of the interviewed managers (i) stated that they would use such a database: ‘‘A database showing who did what with whom would help. Something like this within our company should be there to connect the managers.’’ (IP 9) However, as it was shown above, most managers would be reluctant to disclose information, document, and evaluate their own consulting projects. Thus, certain incentives have to be devised to promote the active use of a consulting database. In the interviews, one manager recommends the exchange of information on a give-and-take basis: ‘‘. . . that I would get something in return when I pass information to others. If I were to make my project report public, I wouldn’t necessarily want money, but something else of value. . . .When you put something in, then you get something out, when you take something out, then you pay something for it.’’ (IP 2) According to this suggestion, the managers would obtain a certain amount of credits whenever they provided information for the consulting database. In return, those credits could be used to attain information (e.g. lessons learned from other projects) from the database. In this way, a certain value is attached to the contained information, which in turn might encourage the managers to use the database. In this case, control is indirectly achieved through the incentive of using relevant information. Table 4 summarizes the measures discussed above.

What hinders client firms from ‘‘professionally’’ dealing with consultancy? Table 4

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The managers’ evaluation of control- and incentive-based measures.

Modus

Measure

Intention

The managers’ evaluation

Control-based

Formal purchasing rules

Defining standardized processes and behavioural guidelines for dealing with consultancy Institutionalization of central office for purchasing consulting services or a central project office

Do not fit the decentralized structure of the company and the corporate culture

Central purchasing/ project office

Incentive-based

Anonymous/ non-anonymous reporting channels

Monitoring the managers’ consulting activities with management control systems

Service-oriented project office

Provides personnel and expert capacity to support the managers in dealing with consultancy Encouragement of informal networks for managers to communicate their experiences with consultants Voluntary database that provides useful information to the managers

Informal networks

Consulting infobase

Discussion and concluding remarks The findings of this research support the studies of Ba ¨cklund and Werr (2005) and Lindberg and Furusten (2005) on goal divergences between a company and its individual managers when dealing with consultancy. While these two studies arrived at this conclusion by analyzing appraisals of purchasing managers in private organizations or of buyers of consulting services in public organizations, the current study reveals the existence of goal divergences by directly approaching the managers of a private organization who were involved in consultancy projects. Furthermore, the current study reveals the existence of certain attitudes of managers (departmentalism, authority protection, and ‘‘laziness’’), which hinder organization-wide professional conduct with consultancy. This indicates that the topic of client professionalization is neither exclusively a matter of the individual relationship between manager and consultant, nor a matter of the organization’s strategy for dealing professionally with consultancy. As the current study has shown, the analysis of the relationship, which is located inside the client company, i.e. between the managers as agents and the board of management as principal, is at least as important for company-wide client professionalization. This internal relationship needs attention, because the individual attitudes of managers deviate from the company’s goals in dealings with consultancy. Against this background, the question of adequate measures for governing managers so that they behave in the company’s interest was raised. As the literature review has shown, prior research has predominantly identified controlbased measures, like purchasing rules or purchasing policies. Theoretically, these means could attenuate the counterproductive attitudes of managers. The establishment of controlbased measures may be appropriate and accepted by the managers in a company ‘‘which is characterised by being careful and economical and by following rules and decisions’’

Does not fit the decentralized structure of the company and the managers attitude of being responsible for their own projects Do not fit the managers’ demand for discretion regarding their own consulting projects Does fit the managers’ mentality of using support on a voluntary basis Do fit the managers’ mentality of peer-group communication Does fit the managers’ mentality of using support on a voluntary basis

(Werr & Pemer, 2005, p. B4). However, as the findings of Ba ¨cklund and Werr (2005), as well as those of Lindberg and Furusten (2005) have shown, the efficiency of such measures is highly questionable, because managers try to bypass or ignore the rules. This was also confirmed in the current study. As the managers’ evaluation has shown, it is doubtful whether control-based measures would be accepted, since they do not correspond to their demand for discretion, and their mentality of being exclusively responsible for their own consulting projects. This leads to the conclusion that the attitudes this study identified would work against controlbased measures, and that control-based measures would be likely to foster such patterns instead of attenuating them. Concerning control-based measures, another problem occurs, which has not been paid much attention yet: as the board of management uses itself management consultants, it too would have to observe the control-based measures it has established. This problem arises when the board of management itself might have no substantial interest in establishing control-based measures. The current study reveals an interesting by-product of this aspect, as the interviewed managers of the company are sceptical about whether the board members would behave in keeping with such measures: ‘‘Even at the board level, I’m sure . . . that there are projects underway where the people are completely unaware that there is a similar project going on [elsewhere within the company] at the same time.’’ (IP 11) Furthermore, the commitment to control-based measures would affect the board’s flexibility to manoeuvre independently its dealings with consultancy. Again, the interviewed managers are sceptical about whether the adherence to such commitment is realistic: ‘‘No, I don’t think that works in this organization. Who’s supposed to decide that? The board of management?’’ (IP 12)

310 New insights were generated by bringing alternative governance measures into the discussion. Besides control-based measures, the current study identified measures that were subsumed under the term ‘‘incentive-based measures’’. Since agency theory deals predominantly with monetary incentives, these measures have not been discussed in the relevant context so far. In the case of client professionalization, direct monetary incentives are not relevant, since there is no adequate mechanism that ties the managers’ salaries and bonuses to such measures. This assumption is based on two considerations: first, the use of consultancy is an exception to the routines of day-to-day managerial work, and second, the benefits of consulting services are not unequivocally subject to evaluation, because the outcomes are neither distinctly attributable to the intervention of the consultant, nor are they unquestionably attributable to the accountability of either the manager or the consultant (Kieser, 2002). Thus, since the engagement of consulting services is not acknowledged to be a primary managerial task, it is problematic to base such rewards on the managers’ professional conduct with consultancy. However, as the current study shows, incentives could also be generated by providing beneficial information to the managers. This view is supported by Eisenhardt (1989a, p. 65), who states: ‘‘[W]hen boards provide richer information, top executives are more likely to engage in behaviours that are consistent with stockholders’ interests.’’ Therefore, it seems likely that beneficial information is a significant incentive for aligning the managers’ and the organization’s interests in dealings with consultancy. As Haferkamp and Drescher (2006, p. 135) state: ‘‘Employees will be inclined to participate in knowledge transfer activities when the results of such activities make their own jobs easier. Therefore, successful measures will be geared to the information needs of employees.’’ Here, the current study has shown that the managers would value beneficial information provided on a voluntary and service-orientated basis. The incentive-based measures presented here are basically accepted by the managers, and could potentially diminish the identified counterproductive attitudes. This leads to the conclusion that incentive-based measures are more appropriate than control-based measures for governing managers in a way that is compatible with the company’s interest, when dealing with consultancy. Nevertheless, it should be mentioned that even incentive-based measures could fail when managers use consultants because of latent motives on the managers’ part (Kieser, 2002). Additionally, incentive-based measures allow managers the opportunity to ignore them. However, as the findings of Ba ¨cklund and Werr (2005) and Lindberg and Furusten (2005) indicate, managers are more likely to ignore control-based measures. Therefore, it is expected that the organizational goals in dealings with consultancy are more supported by the individual managers, when those measures fit the managers’ mentality as well as the company’s individual structure and culture.

Limitations and implications for future research The empirical data were extracted from a practical project and therefore the case study is restricted by pragmatic considerations. For example, the questionnaire was devel-

D. Ho ¨ner, M. Mohe oped on the basis of a rather pragmatic approach. Gathering basic descriptive statistics was a more important project goal than conducting a complex data analysis. This explains why the quantitative database could not be fully used in the findings section. Nevertheless, the presented empirical data provide interesting insights into the question of what happens behind clients’ doors. The current study confirms that relationships within consultancy settings are particularly ‘‘susceptible to analysis by agency theory’’ (Fincham, 2003, p. 72). However, some of the theoretical principles of agency theory imply certain limitations. The main concerns affect the theory’s inability to incorporate dynamics, which modify the parties’ level of information (Williamson, 1985), and to take into account the cooperative behaviour of the parties (Perrow, 1986). Concerning the latter, the current case study could not supply evidence that the managers would actually behave according to their declared attitudes. Since the managers’ obstructive attitudes identified here are not necessarily an indicator for predicting counterproductive behaviour (e.g. Wicker, 1969), the managers might also suppress their attitudes in favour of adopting a more cooperative behaviour (as suggested, for example, by stewardship theory — cf. Donaldson & Davis, 1991). As management consulting projects are difficult to evaluate (e.g. Ernst & Kieser, 2002b), additional problems arise: the desired outcome is not explicitly determinable; consequently, forecasting the adequacy of mechanisms for monitoring or providing incentives is problematic. For those reasons, the current paper could not adduce evidence that the suggested measures would really work if implemented in day-to-day practice. In this sense, the suggested governance framework has a hypothetical character but is nevertheless helpful in providing empirical suggestions within a sparsely researched subject in management consulting. Besides these limitations, three major implications for future research could be identified: first, to ensure the validity and reliability of the single case presented here, further research is needed to indicate whether the identified attitudes can be confirmed in other companies as well. For example, it cannot be excluded that the highly decentralized structure and culture of the researched company have significantly supported the identified attitudes of the managers and influenced their refusal of control-based measures. In contrast, highly centralized companies might operate under different formal and cultural conditions, which would favour other attitudes or lead to the acceptance of different measures. Future research could examine this hypothesis by analyzing the problem of corporate client professionalization in centralized organizations. Second, the presented case study highlights a certain dyadic principal—agent relationship within the context of clients’ professionalization. Here, the board of management was considered to be the principal. However, it also employs consultants and as such it acts as principal, as well as the agent of the capital owner. Here, the question arises, in what way the members of the board of management approach the status and strategies of professional dealings with consultancy within the company. Therefore, future research could analyze the multiplicity and reciprocity of other agency relationships within complex organization structures and networks (Shapiro, 2005) to capture diverse attitudes and behaviour in the context of client professionalization.

What hinders client firms from ‘‘professionally’’ dealing with consultancy? Third, as this article has contrasted control-based and incentive-based measures, future research could examine possible options for the interplay between these two types of governance. As Werr and Styhre (2002) have discovered, and as it was shown in the current study, the nature of the client is often ambiguous when dealing with consultancy. Therefore, it might be questionable whether one mode of governance is capable of addressing all types of managers. Hence, future research could integrate the relevance of the ambiguous nature of the client, when investigating measures for governing managers.

Implications for practice Besides its implications for future research, this study also has substantial implications for practice. First, following the findings of the case study, it should have become clear, that control-based measures are not likely to succeed. In practice, most companies consider such measures before examining other options. This case study has shown that companies are best advised to re-orientate this approach. In the context of the present results, the ‘‘key for success’’ could be providing managers with the right infrastructure. Second, the collected items of the questionnaire, in particular the improvement measures, tools, and services for professionally dealing with consultancy (see Table 2) may serve other companies as a means of orientation for investigating their own needs for professionalization. Third, the discussed measures provide a framework for companies concerned about their dealings with consultancy. On the one hand, a company can reflect on which of the identified attitudes might prevail also in its own case; on the other hand, a company could examine whether control-based and incentive-based measures would be appropriate for governing or encouraging its own managers, so that they behave in the company’s interests when dealing with consultancy.

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