Responsible consultancy for economic recovery

Chairman’s speech Ezio Lattanzio Responsible consultancy for economic recovery On the occasion of this fourth general meeting of management consultin...
Author: Jacob Owen
1 downloads 1 Views 258KB Size
Chairman’s speech Ezio Lattanzio

Responsible consultancy for economic recovery On the occasion of this fourth general meeting of management consulting, Confindustria Assoconsult turns its gaze towards Europe as it hosts the International FEACO conference “Growing Europe: The role of management consulting”. To start with, the crisis is an opportunity for businesses and public administration alike. We need to have another approach to the consulting sector and the contribution it makes to improving economic results and promoting the optimal use of resources. The management consulting industry must take a leading role in initiating processes of growth and innovation. On one hand, Management consulting must optimize investments and reduce waste; on the other hand, it is crucial that we support businesses in penetrating and gaining competitivity in new markets. At last year’s general meeting in Italy, we emphasized the added value of consulting as a tool for feasibility, for granting concreteness to the choices that institutions and politicians are called on to make as they work to modernize their country systems. And we were right: the projects carried out supported the public administration to implement

the decisions made by

politicians, who defined the objectives yet leaving those who must put them into practice to their own devices. 1

In Italy, Confindustria Assoconsult has formulated dedicated guidelines related to this for April 2013 political elections. These guidelines, reported extensively in the Italian press, were drawn on successful international lessons learnt. They arise from a reflection on how to reform public administration: - what would be the best model for Italy? - How best to sow a culture of results and meritocracy? - How to play a driving role in the European decision making system and how to intercept and spend European funds? - What model of justice system should be our goal? - How and where to invest in digitalization? - What measures s should be adopted to improve quality expenditures? In the past few weeks, the press reported on our ideas about justice. A justice system that does not function causes a competitive delay for the country as a whole and dissuades investment by foreign companies. A reform of the justice system led by organizational consulting would entail multiple advantages. To this end, Italy has drawn up an agreement signed by the Ministry of Justice, the Ministry of Public function and the Conference of the Regions that allocates 30 million Euros from the European Social Fund to ongoing projects of reforming the courts in all the Italian regions. And just the last weekend, Manuel Barroso, president of the European commission,

issued an appeal for a better use

(commitment and spending) of EU funds in all member states.


Stimulating growth in Europe In Europe, management consultancies are drivers



economies that have suffered less from the crisis, namely Germany, Great Britain and France. It is no coincidence that these countries made the most significant investments in organized consulting. Against this scenario, we have chosen the title “responsible” for the conference’s Italian title. What is needed now are quick decisions and concrete results: a purposeful management of governmental budgets, liberalization, a reduction in expenditures, privatization, administrative simplification, the modernization of PA as well as digitalization. Consulting offers an indispensable contribution to any medium- or long-term national development plan, which means improved competitiveness







administrations alike. In Europe, a strategic mission

for FEACO and the national

associations in the years to come will be spreading an awareness of the added value that management consulting brings as a GDP multiplier. Consulting must be promoted as a vehicle of growth throughout the Union. FEACO works to provide rigorous and scientific proof of consulting role as a catalyst for development in individual businesses and economies as a whole. This awareness must be fostered and 3

maintained with energy and purpose. Our objectives are to foster domestic





networking and ensure the attention of public administration and institutions. There are no doubts that professional consulting is able to improve competencies and to quickly generate concrete change. However, this is not enough. The best results can be achieved when clients, individuals or organizations, know how to choose consulting services with an awareness of the value it offers. Through continuos updating and thank to facing various situations in divergent contexts, consulting organizations are able to propose and implement solutions that a public or private organization of any size would have trouble developing on its own. The crisis must be approached as a challenge for enterprises and public administrations. Just imagine

what public administration

sectors from health to justice could accomplish if guided by consultancies using tools such as the European Social Fund. To this respect , Management consulting in Europe must take on the responsibility for initiating process of growth and innovation.

Management consulting as a contribution to the national scenario


It is largely recognized that there is a significant overlap between the characteristics of management consulting and the domestic economy in each country. Wherever it concentrates on industry, the economy in question displays positive results. In Germany, for instance, whenever public administrations have made a larger investment in consulting along the lines of the British example, they show tangible results. MC penetration in domestic economies varies greatly from member state to member state, as outlined in the FEACO annual survey. Management consulting makes an average contribution of 0.52% to the GDP, but there are significant differences since it makes up a larger percentage in some countries such as Germany (0.80%) and Great Britain (0.78%). Some countries display a more average level, such as France, where the domestic economy has suffered from the effects of the crisis and consulting contributes 0.37% to the GDP. At the end of the list we find Italy and Spain, where the contribution of management consulting to the GDP represents 0.20% and 0.17% respectively, and the national economies are facing considerable challenges. The same situation can be seen in relation to fees as well. The average annual professional turnover per professional is


184 K €, but here as well we see higher consulting fees mainly in the countries that have been less heavily affected by the crisis: aboveaverage fees are reported in Germany, Austria, Switzerland, France and the United Kingdom; while below-average fees are found in Italy, Spain, Portugal, the Balkan and Eastern Europe.


In the countries with better economic performances, there is more demand for MC, higher fees and better development of the MC industry. . Processes of Europeanizing and internationalizing policies and economies have called into question strictly domestic logics, isolated national practices and self-referential cultures; it is now more and more clear that these processes are decisive in stimulating change. At the European stage, there is a pressing need to develop clear strategies and to be flexible, innovative and internationalized. Carefully analyzing the data, it is evident

that the problems of

consulting in Italy are also widespread in other settings due to the global character of the crisis. In France, there are concerns about an increasingly unpredictable market. In Greece, the economic crisis and funding cuts make it highly difficult to act and mount a reorganization of the private and public sectors. Throughout Europe, Management Consultancies’ development means internationalization, the ability to establish networks, profitability, relations with the institutions, strategic alliances, the presence of multinational corporations, innovation, measures to prevent unfair competition, relations with

university and the

domestic market.

Public administration: the prerequisite for growth Reforming public administration is a crucial step, an essential prerequisite of any project for growth. In Italy, it is often seen as ‘the


mother of all reforms’: if PA is effective, businesses can begin to grow as well. Public administrations in all European states need Management consultancies to help identifying areas of waste and selectively cut excessive expenditures. To do this, public administrations must undergo a profound restructuring of their internal processes and competences as well as a re-organization of their management models. In order to avoid impacting public services such as health care or imposing new taxes, this must go beyond surgical microcuts. There are no shortcuts for reducing inefficiency; processes themselves must be re-organized and management consulting is fundamental in this endeavor. Management Consultancies are an important resource for reducing costs without impacting public services. They offer an irreplaceable contribution to the spending review process in terms of identifying areas for improvement as well as areas for concrete savings (organizational implementation). In response to the logics of the system, these changes necessarily give rise to immediate and positive effects for businesses, which in their turn must embark on a long, difficult path. Management consulting can play a crucial role in quickly and safely supporting, facilitating and accompanying them along the way. The Italian case is a paradox, with high public expenditures on consulting services and an underdeveloped market. Only a minimal part of these expenditures are allocated to entities organized as firms. In general terms expenditures are spread among a myriad of micro assignments granted to individual people, with a 7

dubious return in terms of added value. Then, the level of transparency is among the lowest in the whole Europe: it has been estimated that only 22% of all public spending is allocated through public procurement. Last but not least, the in-house phenomena continues to run rampant in such a way that public administration continues to purchase consulting services from itself. There are no real data available about this and the media grants it almost no attention. It should be recalled that in other countries, such as Germany, PA is allowed to resort to in-house services only if these are truly less expensive than other market alternatives. In Italy, Confindustria Assoconsult has proposed that in-house entities should be privatized, that mandatory plans should be filed outlining professional collaboration needs, and that barriers to access should be reduced, all of which would improve the competitivity of market dynamics. We have also proposed that companies are certified by the Supervisory Authority for Public Contracts, that mechanisms of public procurement should be revised, that standards for documenting calls for tenders are harmonized and that payment procedures simplified, all of which would foster freer access to the market. And, eventually , we have proposed that: -







internal/external auditing tools are introduced in purchasing processes, that the consultancies above the threshold procedures should be preferred to the ones below the threshold,


- consulting expenditures are allocated to legal persons rather than physical individuals, - there is rotation among purchasing positions, - and economic operators adopt ethical codes, all of which would







Internationalization and development of the third sector: focusing on businesses The 20.8 million SMEs in Europe employ two-thirds of the EU’s workforce. According to the 2008 Small Business Act, the EU has launched a program of intelligent regulation. Antonio Tajani, Vicepresident of the Commission and Commissioner responsible for Industry and Entrepreneurship, has stated that SMEs are the key for wresting free of the crisis. European legislation must be designed with SMEs by keeping entrepreneurs needs in mind. SMEs have been especially hard hit by the economic crisis and the crisis in liquidity. Unlike larger companies, they often suffer from structural and managerial insufficiencies that prevent them from purposefully and systematically controlling key processes, from marketing planning to organizational processes and training. A cultural shift is needed to transform a manufacturing system that is currently vulnerable to international competition. SMEs are asked to think and act in international terms. This does not mean working alone. Management consultancy has the tools and knowledge


needed to support businesses during their internationalization processes. One myth that needs to be dismantled

is that organized

consultancy is constitutionally predisposed to intervene only in managing the complexity of large-sized companies alone. This might be the result of habit, so to speak, or that fact that consultancies and SMEs have only lately begun to work together. What is certain is that SMEs are no less complex or able to benefit from consulting services than are large businesses. Management consulting can help SMEs through areas of action including vision, strategy,







information and services, partnerships, aggregation, networking, protecting forms of innovation and communications. In the knowledge economy, Management consulting must guide small and large businesses alike in using the tools of innovation and competitivity that are increasingly based on knowledge, intangible resources, unique competencies and know-how to consolidate their place in the market. MC can support enterprises as they manage, circulate and use knowledge and information.

FEACO’s role in supporting the MC sector in Europe The federation is active on multiple fronts. First of all, it engages a constructive dialogue with the European Commission, which is estimated to be the most significant buyer of management consulting services in the world with approximately 2 billion Euros per year invested. 10

FEACO, in its position as consulting body to the EC, firmly believes that the European Commission must achieve more openness in relation to the market for qualified consulting. The lion’s share of the market is currently held by firms specialized in the bureaucratic process of public procurement but unknown in the markets outside the EU. Many associations that make up the foundations of the various member states, representing the skilled consulting, end up penalized. This is due to the fact that the prerequisites for participation in calls for tender work to exclude consultancies that would be able to ensure concrete results, thanks to the investments they

made in studies and

research. This comes at the expense of the European Commission and the beneficiary subjects in particular, not to mention the concrete outcomes of the initiatives. In order to mitigate the European Commission engagements with the consulting sector, we increased the lobbying activities of the Working Group on Procurement-ECIC. One tangible outcome is the group’s contribution to the new 2013 edition of the Practical Guide (PRAG). The PRAG outlines the contracting procedures to be applied to all EU contracts for external assistance (services, work and supplies) financed through the European Union general budget and the European Development Fund (EDF). A PRAG that does not “discriminate” against businesses is a pre-requisite for ensuring competitiveness In supporting an international network of firms that are working so hard in each of their domestic contexts to broaden their horizons, it is clear that the boundaries of consulting are changing and


becoming more permeable. In order to promote this trend through cross-fertilization among associated companies as well, we seek to support knowledge-sharing activities: among the others through the framework of the new EC’s Erasmus Program for entrepreneurs, funded










internationalization among consultancies. To diffuse best practices and activate a process of ideas-sharing, we have just completed a project aimed at spreading these practices among the various national association members. FEACO has conducted a benchmarking study involving nearly all the EU member states as well as China and the USA. This survey shows the role each association plays in its domestic consulting market and the many successful initiatives that deserve to be shared with a view to stimulating future growth. This is a useful platform to share new ideas and support the implementation of these new ideas in various contexts. For nearly two decades, FEACO has also worked to diffuse the results of its annual survey on the state of the European market, a project that has garnered appreciation from sector operators and market analysts alike. With an eye to improving the quality of this survey, FEACO has the goal of reviewing the research structure beginning with the 2013/2014 edition. There are multiple issues to be faced: the sector’s scope of action; process, in which every country has developed its own methodologies; content, in order to add new subjects that are not currently included; and technological support, to facilitate participation by the smallest countries through a web-based platform that allows the digital entry of data and provides intermediate results. 12

As far as the KIBS (Knowledge Intensive Business Services) are concerned, business services that are closely tied to knowledge consulting, communication, market research, public relations and digital content - clearly play a decisive role in contemporary markets. The SYNTEC association in France is already working along these lines. Inspired by this example, in several countries there are ongoing projects of aggregation among associations. In Italy, Confindustria Intellect has been established to bring together the most knowledge-intensive components of the advanced tertiary sector. This represents a model to be pursued within FEACO as well and eventually could lead to joining with ECSSA, the European Confederation of Search and Selection Associations, which already represents many of the same associations, such as the Italian, French and German ones.

Ethics, reputation and the size factor: how to valorize the MC sector Public opinion sometimes has a rather ambiguous view of management consulting. This is true in Italy as well as in other countries. MC is seen as a cost rather than an investment and a key resource for fostering growth. This idea arises in part from media coverage that described consultancy as a waste and, in the case of public administrations, a misuse of public funds. Indeed, the media has never drawn a clear distinction between good and bad consulting, between the consulting industry represented by reputable firms and the services offered by individual people, with the exception of rare cases of excellence. 13

When we speak of MC sector, we mean








the firms.

this distinction involves facing a thorny cultural

problem that has caused the underdevelopment of the sector in several countries including Italy and which certainly does not help in fostering a positive image for the MC industry as a whole. Consultancies do not consume value; rather, they create it, ensuring better results at a lower cost. This is guaranteed as long as the client knows how to choose consulting services. The MC sector must be aware of its own capabilities and the responsibility it bears. It must recognize that changing processes cultures and mentalities entails having an impact and modifying organizations, which must then find a new equilibrium. The objective is to improve results. If consultancies develop an awareness of this, the entire process is made easier and companies and PAs can collaborate in and open themselves up to change processes. In this way, tools and objectives find their best articulation and the transformation no longer appears frightening. Building MC’s reputation means facing up to the question of what to do and how to do it without hesitation or evasion. On one side there are ethical considerations, on the other side there is the capacity to rapidly raise levels of professionalism. At the same time, valorizing consultancy also means gaining a clear sense of national objectives and the challenges that have been identified and agreed upon by the business community, the citizenship, and the political sphere itself and being ready to face them. 14

There are, however, some areas of weakness spread throughout the various member countries: the size of MC firms and levels of internationalization. Growth in size must be an objective of all consultancies, and this objective is linked to the

capacity for

innovation and organize, specifically in terms of presence in foreign markets. It is no coincidence that the large firms, the only ones to have grown in terms of turnover in all EU countries, are the ones to have increased their revenues from foreign markets. In other words, any firm that seeks to grow must increase its market share outside national borders. And let us not neglect the importance of the client. An increased awareness on the part of clients allows them to discriminate more effectively among consulting services, distinguishing between those who can bring added value to the business and those who cannot, between organized and non-organized consulting. While at the dawn of this profession it was still possible to propose approaches and tools that clients could then implement by themselves, at this point consulting must contextualize its interventions and contribute to the value chain in its relations with clients. Better







synonymous with higher quality services and, ideally, ethical competencies as well: these traits are recognized and rewarded in the marketplace. For this reason, I would like to conclude with an invitation: let us follow

the path of professionalism and knowledge-based skills,

seeking out new ideas as we go.


The consulting market depends not only on the overall economic situation; it also depends on the capacity to generate new ideas, concepts, and products. This is our role for growing Europe.