MC Quizlet Part 2

attractiveness leverage (increase profitability)

- increase in perceived value in two ways a. increase of invoiced fees per time units sold b. decrease in relative paid fees per time units sold both lead to an increase in project margins and an increase in EBIT

non-project costs

1. Indirect Professional Costs - number of consultants - consultants mix - average cost per time unused - time units unused 2. Staff Costs - number of people - average salary 3. Depreciation - investments 4. Development Costs - training - communication costs 5. Structural Costs - rental cost - telephone - other costs

tips for effective presentations (2013 Killer Presentation HBR Reading)

1. frame your story ○introduce the topic, explain why they care about it, and convince the audience they should as well ○ People do not care about organizations they are not a part of - instead, tell stories and about the problems you are solving 2. plan your delivery - three ways to deliver a talk a. Read it directly off a script b. Develop a set of bullets of what you want to say in each point c. Memorize your entire talk 3. develop stage presence a. eye contact is most important b. breathe 4. plan the multimedia a. slides, prezi, video, etc.

four strategies to allow for faster growth (Balancing the Professional Service Firm - David Maister reading)

1. the firm can devote more attention and resources to its hiring process so that a higher proportion of juniors can be routinely promoted to managers. 2. the firm can attempt to hasten the "apprenticeship" process through more formal training and professional development programs, rather than the "learn by example. 3. Accelerate its target growth rate is to make use of "lateral hires": bringing in experienced professionals at other than the junior level. 4. Modifying the project team structure is the final strategy for accommodating rapid growth without throwing out of balance the relationships between organizational structure. promotion incentives, and economic structure.

step 2. analyze the audience (components of strategy for effective presentations)

1. type of relationship with the audience - formal or informal 2. general attitude among the audience towards the meeting - friendly, hostel, neutral, unknown 3. preparation among the audience to our communication a. knowledge of the topic - profound, limited, none b. level of interest - very interested, quite interested, neutral, indifferent c. willingness to change - willing to change, a certain resistance to change, determined to not change 4. likely reactions to the communication - will agree, will disagree, neutral, unknown

management levers to increase profitability

1. volume leverage 2. consultants mix leverage 3. attractiveness leverage 4. efficiency leverage on projects 5. network leverage 6. corporate efficiency leverage

review case from review guide

Arther Anderson case

4 main components of a consulting company

Business development service delivery professional staff financial results

argument structure (organizational framework)

Logic Test: ● Is the statemen in the second box a comment on the statement of the first box? ● Is the statement in he third box the only conclusion that it is possible to draw from previous boxes? Advantages: ● Shows that no other solution works, except for the suggested one ● Allows a presentation of all conclusions and recommendations at the same time Disadvantages: ● If the audience does not agree with the first statement or the comment, the reasoning is not convincing ● It is necessary to keep the audience's attention for a long time before reaching the conclusion

step 1. defining the objective (components of strategy for effective presentations)

Push for action? Obtain information?Change points of view? Neutralize or overcome resistance? Change behavior? Secure understanding? Reach an agreement?

Number of consultants

Subcomponents Relational skills Professional competences Knowledge of an industry Managerial competences Age Mix Mix of levels: partners, managers, associate Grade Fee Dependent on what level you are correlated with -- service delivery (positive correlation) and marketing & support activity (positive correlation)

Marketing & support activity

Subcomponents Publications Survey & research Conferences Contact management tools - calling companies and asking what they are working on, issues Networking & lobbying Academic relationships Sponsorships correlated with -- Number of new projects - (positive correlation)

step 4. determining the governing thought (components of strategy for effective presentations)

The 30 seconds test ● What question does the communication answer? → question ● What do we want the audience to know, think and do after the communication → answer ○ The answer is the governing thought

PSF Market (Balancing the Professional Service Firm - David Maister reading)

The PSF competes in two markets simultaneously "output" market for its services and the "input" market for its productive resources - the professional work force. It is the -need to balance the often conflicting demands and constraints imposed by these two markets that constitutes the special challenge for managers of the professional service firm.

generating revenues (Balancing the Professional Service Firm - David Maister reading)

The firm can obtain higher rates for the juniors' efforts because they are combined with the expertise and guidance of the seniors. The successful leveraging of top professionals is at the heart of the success of the PSF. While the services of a PSF are generally not as highly price sensitive as other business enterprises, most PSF industries are increasingly facing price competition Billing multiple: Average billing multiple is between 2.5 and 4 The market for the firm's services will determine the fees it can command for a given project. The firm's costs will be determined by its ability to deliver the service with a "profitable" mix of junior, manager, and senior time. If the firm uses the same project team structure as its competitors and thus must pay similar salaries. then it will achieve only the -standard" industry multiple. The "external value" problem (whereby experienced junior and middle-level professionals can obtain more on the outside than on the inside of the PSF) is more common in some industries than in others.

vertical logic (pyramid principle consulting method)

The same as we read a story top- down, we read one sentence after the other. We start with the main idea, than a question is raised, we answer the question and so on. Exhibit 1 shows an example of a question-answer dialogue represented by a vertical or hierarchical structure.

promotions and career trajectory (Balancing the Professional Service Firm - David Maister reading)

Two dimensions of career opportunities play a large role: 1. normal amount of time spent at each level and 2. odds of getting the promotion

organizational structure chart (Balancing the Professional Service Firm - David Maister reading)

Two primary influences on the organizational structure of the PSF: mix of project types and target utillization Typically three levels within consulting Junior consultant, manager, vice president seniors (partners or vice-presidents) are responsible for client relations; managers, for the day-to-day supervision and coordination of projects; Juniors - for the many technical tasks necessary to complete the study. In the vernacular, the three levels are "the finders, the minders and the grinders" of the business

grouping structure (organizational framework)

advantages: ● Fundamental points are easy to remember ● Very efficient for a type of audience which is action-oriented ● If the audience does not agree on an assertion (reason, action), the intrinsic power of the other assertions is till valid disadvantages ●It could be too "direct" for some types of audiences

strategy structure finished product

components of an effectively written communication

Financial dynamics: main drivers

contractual terms invoicing terms - how often can we invoice the client payment terms - bills should be paid after __ growth rate number of new consultants investments in development investments in geographic/territorial/expansion

network leverage (increase profitability)

decrease in time units unused --> decrease indirect professional costs --> increase in EBIT

Brains (Balancing the Professional Service Firm - David Maister reading)

definition: the client's problem is likely to be extremely complex, perhaps at the forefront of professional or technical knowledge. The PSF that targets this market will be attempting to sell its services on the basis of the high professional craft of its staff. In essence, this firm's appeal to its market is "hire us because we're smart." The key elements of this type of professional service are creativity. innovation, and the pioneering of new approaches, concepts, or techniques - in effect, new solutions to new problems Project team structure: projects are usually denoted by an extreme job-shop operation. involving highly skilled and highly paid professionals. Consequently, the ratio of junior time to middle-level and senior time on Brains projects tends to be low.

procedure (Balancing the Professional Service Firm - David Maister reading)

definition: usually involves a well-recognized and familiar type of problem, at least within the professional community. While some customization is still required, the steps necessary to accomplish this are somewhat programmatic."Hire us because we know how to do this and can deliver it effectively." project team structure: projects usually involve the highest proportion of junior time relative to senior time, and hence imply a different organizational shape for firms that specialize in such projects. The problems to be addressed in such projects, and the steps necessary to complete the analysis, diagnosis, and conclusions, are usually sufficiently well established so that they can be easily delegated to junior staff

grey hair (Balancing the Professional Service Firm - David Maister reading)

definition:Grey Hair projects may require highly customized "output," but they usually involve a lesser degree of innovation and creativity than a Brains project. The general nature of the problem is familiar, and the activities necessary to complete the project may be similar to those performed on other projects. Clients with Grey Hair problems seek out PSFs with experience in their particular type of problem. The PSF sells its knowledge, its experience, and its judgment. In effect, it is saying: "Hire us because we have been through this before. We have practice in solving this type of problem." project team structure: some of the tasks to be performed (particularly the early ones) are known in advance and can be specified and delegated. More juniors can be employed to accomplish these tasks, which are then assembled and jointly evaluated at some middle stage of the process. Unlike the "pure job-shop" nature of Brains projects, the appropriate process to create and deliver a Grey Hair project more closely resembles a disconnected assembly line.

Service delivery

deliver project results - they ask questions, and we answer

Operating Income

gross profit minus operating expenses

horizontal logic (pyramid principle consulting method)

headings of each slide convey your story including the findings and a call to action

from top to bottom (organizational framework)

helps discover missing links

turnover (Balancing the Professional Service Firm - David Maister reading)

high turnover rate also allows a significant degree of screening so that only the "best" stay in the organization. Young professionals view a short period of time at such a firm as a form of "post-postgraduate" degree, and often leave for prime positions they could not have achieved (as quickly) by another route. Indeed, most of the prestigious PSFs following this strategy not only encourage this, but also provide active "outplacement" assistance.

1. promote a higher proportion of juniors 2. promote them more quickly

how to grow faster team target growth rate

consultants mix leverage (increase profitability)

increase in % of junior consultants --> increase in time units sold --> increase EBIT if: margin per senior time unit x senior time units sold <= margin per junior time unit X junior time units sold

volume leverage (increase profitability)

increase number of projects --> a. increase in total margin of projects b. easier planning of resources --> decrease in time units unused

pyramid structure (pyramid principle consulting method)

introduction - situation - complication - question - answer why? how? or in what way? supporting arguments conclusion

Professional staff

make slides, assist others

Business development

marketing, looking for new clients

MECE

mutually exclusive, collectively exhaustive

core variables of a consulting firm

number of consultants service delivery completed projects stock of projects marketing & support activity new projects gap of resources

brains, grey hair, and procedure (Balancing the Professional Service Firm - David Maister reading)

project types

Constraints

quality constraints a. gap of resources i. number of consultants b. completed projects i. profits ii. stock of projects c. reputation i. new projects number of consultants a. marketing & support activity i. new projects b. profits c. service delivery i. completed projects

Financial results

revenue and profits from services

Margin by project

revenue per project - project costs = margins by project

Economics of the PSF (Balancing the Professional Service Firm - David Maister reading)

since most PSFs have few fixed assets, they only required capital to fund account receivable and other working capital items. Consequently, the vast majority of revenues are disbursed in the form of salaries, bonuses, and net partnership profits

New projects

subcomponents Direct & indirect contacts National & international bids Feasibility studies Past experiences correlated with -- gap of resources (positive correlation)

Gap of resources

subcomponents Sold time units Staffing problems Rule of thumb → 3 projects/person Freelancers or recruitment

corporate efficiency leverage (increase profitability)

two options: a. decrease in staff costs b. decrease in structural costs both lead to an increase in EBIT

efficiency leverage on projects (increase profitability)

two ways a. decrease of time units sold --> decrease of project price --> increase of number of projects (see volume leverage) b. decrease of time units sold --> increase (time units sold / unit units used) --> increase in margin per project --> increase EBIT

from bottom to top (organizational framework)

used for drawing conclusions

introductory flow (pyramid principle consulting method)

○ Situation - establishes a time and place for the listener ○ Complication ○ Question ○ answer

Lecture summary (economics of the consulting firm)

● An MC company has only two basic activities: service delivery and business develop,ent ● Human resources allocation between the two activities is a key decision in a MC firm ● Focusing on service delivery increase billing and profits but reduce the portfolio of projects; focusing on business development gives you the chance of winning new projects but oblige to verify if the staff can afford a different level of activity ● Reputation and quality constraints influence, on one side, the number of completed projects and billing, and on the other, the likelihood of succeeding in winning new projects ● Margins by projects and time unit used/time units are sold are the most important managerial leverage

introductions (developing effective communications)

● Capture the attention: ○ Clarify the objective of the communication ○ Present the governing thought ○ Emphasize the value for the audience ○ Present how the document/presentation is organized The introduction is a story ● Situation (what are we talking about) → Complication (why are we talking about it) → Question (what is the governing thought)

components of strategy

● Defining the objective ● Analyzing the audience ● Choosing the most appropriate medium ● Determining the main message

effective communication

● In order to make the recipient ○ Understand it, share it, see the benefit of it ● It is necessary to: ○ Explain the main message upfront ○ Support the message logically: all ideas are the synthesis of he underlying supporting ideas ○ Have ideas that are homogenous, exhaustive, and not overlapping

conclusions (developing effective communications)

● Is a synthesis of the main points of the communication ● Highlights the value for the audience ● Conveys a perspective: ○ "Next steps" ○ Implications

components of structure

● Organizing the contents of the communication in a logic frame ● Inductive logic: grouping structure ● Deductive logic: argument structure

lecture summary (making effective presentations)

● To develop an effective written communication you need to have a communication strategy, a structure for your communication and a finished product that materialize it ● For your communication strategy you should define the objective of your communication, analyze the audience, choose the most appropriate medium and determine the main message ● In the structure of your communication, you should use a logic frame: inductive logic (grouping structure) or deductive logic (argument structure) ● To get the finished product - finally - you need an introduction and a conclusion with their components ● Corporate communication should be, concise, balanced, precise