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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Whilst there are divided schools of thought on whether or not small businesses should use the same management principles as big businesses to be successful, a large portion of existing literature acknowledges that there are indeed fundamental operational differences that create unique business conditions for both small and large firms respectively (Ahire & Golhar, 1996). There is, however, very little empirical evidence that focuses on those fundamental differences when considering the consultancy process, as well as the contrasting implications that may entail for clients and consultants alike. Through both organisational and consultancy-specific literature, this paper examines whether a firm's size affects the approach consultants should adopt when working with small to medium-sized firms as opposed to large corporations. In that respect, the hypothesis presented is that size, status and context does play an important role when establishing appropriate consultancy approaches, as well as consultant-client relationships with client-firms. Subsequently, the essay will attempt to define the unique characteristics of small firms and how they affect client-consultant interactions, before exploring the specifics of consulting for small firms in contrast to traditional consulting approaches, as often seen in and generalised to larger organisations.  

Despite a large amount of ambiguity and criticism surrounding the various definitions of a small business, this essay will refer to the definition provided by the European Commission, which reflects very closely the definition given by the OECD, and states that “the category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or annual balance sheet total not exceeding EUR 43 million” (Extract of Article 2 of the annex to Recommendation 2003/361/EC, European Commission, 2015). It is also important to clarify that employees, turnover and balance sheet total are not the only factors that define an SME. If a company – however small – benefits from access to ‘significant additional resources', either because it is owned by or partnered with a larger organisation, it may not be considered to be an SME (European Commission, 2015).

Beyond being vastly different by definition and structure, small and large firms also face contrasting environmental pressures that ultimately shape the consulting processes in each respective firm. The central distinctions between small and large organisations according to Storey (2006) are “the greater external uncertainty of the environment in which the small firm operates”, as well as “the much greater likelihood of evolution and change in the smaller firm” (Storey, 2006). The second distinction in particular plays an essential part in understanding why different consulting approaches are required between small and large firms, as it underlines the unique nature of small firms, including the multiple-stage changes they face as they grow, which ultimately affect both the structure and management of the organisation in the future (Scott & Bruce, 1987). To further support this argument, Wynarczyk et al. (1993) consider uncertainty, innovation and firm evolution as three essential characteristics that distinguish a small firm from a large one, especially in terms of key implications for dimensions of management and consequently, finding appropriate consulting approaches. They argue that it is therefore vital to consider small firms not as a scaled down version of a large firm, as “it cannot be assumed that the issues facing the smaller firm and its behavioural response to them are the same as those facing a larger firm, other than in terms of scale” (Wynarczyk et al., 1993, p. 26).

Greiner & Metzger (1983) define management consultancy as the following: “Management consulting is an advisory service contracted for and provided to organisations by specially trained and qualified persons who assist, in an objective and independent manner, the client organisation to identify management problems, analyse such problems, and help, when requested, in the implementation of solutions (Greiner & Metzger, 1983). This definition is further developed by Appelbaum & Steed (2005) who emphasise the ‘objective and independent' component of the definition and stress the importance of having complete political, administrative and emotional independence from the client. Interestingly, the pair also imply that traditionally, because resources are what backs management consulting activities, clients are usually considered to be more than a simple individual (Applebaum & Steed, 2005). Interestingly, according to a large part of the literature the characteristics of clients that consultants value the most include: will to learn, brightness, quick understanding, accepting feedback non-defensively, will to take risks and responsibility to follow through (Applebaum & Steed, 2005). Naturally, whilst large firms may fit most of these descriptions, they inherently have a weaker capacity to take high-profile risks, as that could seriously derail the stability and success of their already-established company. Furthermore, large companies have less pressure to follow through with implementation, as they can analyse multiple more angles internally and often have less to lose by not applying consultant input. This, however, can put a strain to the consultant-client relationship in the future.

In contrast to Appelbaum & Steed's (2005) claim that in a traditional consulting approach consultants should be completely ‘objective and independent', Bruckman & Iman (1980) state that “since consultants are often dealing with the ‘life blood' of managers and owners, strong emotional elements are often apparent in the thinking patterns of the client. The client's behaviour must be met with respect. Effective consulting involves more than solving mere technical problems; sensitivity to the feelings and personal needs of clients is extremely important for establishing the trust and understanding which will later be required for developing commitment to a sound course of action” (Bruckman & Iman, 1980). This seems to refute the idea that the process of consulting should be done in a universally systematic way across all industries, and hints that an emotional understanding of a small business owner's concerns is essential for a healthy relationship, which usually leads to more positive results.

Despite a relatively limited body of literature concerning consulting in small firms specifically, certain scholars have further explored the dynamics of small firms, notably regarding interaction and the nature of client-consultant relationships within that realm. Christensen & Klyver (2006) report that certain studies, notably led by Monsted & Fredens (1995), found that small firm owners often felt that on top of being too expensive, consulting services typically did not live up to expected professional standards, attributed to a mismatch in the consultant's capacity to understand the unique challenges of consulting for small companies, as well as the specific context of small firms (Christensen & Klyver, 2006). On the other end of the spectrum, results from the same aforementioned study also revealed that consultants, on the other hand, criticised the small firm's ability to act as professional equals during the consultancy operation, again alluding to the specific dynamics of small firms and a potential engagement gap between client and consultant often found whilst dealing with small firms (Monsted & Fredens, 1995).

Christensen & Klyver (2006) outline that “in recent quantitative analyses (Erhvervsfremme Styrelsen, 1999), it is suggested that there is a significant difference among small and large firms concerning the frequency with which they use management consultants. While 72 per cent of the large private firms (> 500 employees) have used management consultants, this is only the case for 33 per cent of the small firms in a two-year perspective” (Christensen & Klyver, 2006). A possible explanation for this is hinted at by certain scholars, who claim that this gap in frequency can be explained by substitution effects, in that small business owners often look to family, friends and colleagues to seek advice (Johannisson & Lindmark, 1996). This idea further explores both the informal structures and limited resources certain small businesses are faced with, as well as perhaps their need for a more personal approach to their problems, something that is almost never observed in large firm dynamics.

In perhaps one of the very few studies focusing directly on comparing small and large firms in relation to consulting approaches, Rynning (1992) looks at what makes for successful consulting with small and medium-sized clients versus large clients, and how their respective needs can be better met. In defining the important consultant characteristics, the author argues:

“A large firm with better resources and capabilities is more likely to engage a consultant on a temporary basis (e.g. Michelsson, 1980, p. 5; Stahlros, 1986, p. 34). A small business, by contrast is often lacking general capabilities on a permanent basis. Consequently, there is a frequent need for result-oriented practical guidance on a broad basis, accompanied by implementation and follow-up assistance” (Rynning, 1992).

In 1990, leading scholar Edgar Henry Schein presented his three models of consultancy: the expert model (or purchase of information model), the doctor-patient model and the process consulting model. The expert model The different models, whilst not exclusive to either small or large firms still have characteristics that are considered to be beneficial for one more than the other, and consequently emphasise the need for a different consulting approach altogether between different business structures. This is again supported by Rynning (1992), who applies theory to practice in the following way: “A large firm, more likely to engage a consultant to complement its own capabilities or to acquire specialised knowledge on a temporary basis, operates from its own premises and is more likely to appreciate any analytical approach. A small business, by contrast, is more likely to know that something is not right but not exactly know what is needed. Therefore, a process consulting model, which emphasises a close co-operation between the consultant and client, is more applicable” (Rynning, 1992). This again proves that client-consultant relationships are vastly different between small and large companies, as accomplished consultant Nick Freer emphasises: “With much smaller companies, consultants usually get to work directly with the CEO or senior directors, whereas at the larger corporation level, they would probably be dealing with the marketing or PR function rather than the senior managers requesting the change” (Freer, 2016).

In conclusion, it seems appropriate to refer to Penrose's (1959) famous claim that “the differences in the administrative structure of the very small and the very large firms are so great that in many ways it is hard to see that the two species are of the same genus… We cannot define a caterpillar and then use the same definition for a butterfly” (Penrose, 1959). In that respect, we also cannot expect one systematic type of consultancy approach to fit both small and large companies, as the contexts and implications fluctuate far too greatly. In defining small firms, the European Commission make the important remark that SMEs require assistance that other enterprises do not, mostly because they are confronted with a unique set of issues such as market failures, structural barriers (e.g. lack of management or limited knowledge), and scarcity of resources (European Commission). Naturally, not only does this present a set of entirely different problems for the consultant to solve, it also creates an uncertain business environment that requires a much more calculated consulting approach. This further emphasises the idea that it is consequently impossible to apply a methodical approach to consulting when working with a firm that is limited on resources, simply due to the businesses' constantly-changing and uncertain environment. Even Schein (1990) supports this view, by admitting the following: “As I (Schein) began to see what the group was trying to do, and as my curiosity overrode my need to be helpful, I actually become more helpful. Instead of focusing on the dysfunctional aspects of interrupting, I began to focus on the idea that was being cut off. I began to intervene in the ‘real' process of the group, its task process, and allowed myself to get preoccupied with interpersonal issues (Schein, 1990).

Working with large firms can be extremely daunting for consultants, who may find it hard to actually know how to put changes into effect at a firm with such extensive capabilities and sophistication. This results in consultants often never witnessing the fruit of their work being implemented. In fact, according to a study on a large telecommunication firm led by Appelbaum & Steed (2005), the authors found that only a third of respondents agreed that the project deliverables presented by the consultant included an implementation plan, while only 46 percent agreed that the consultant was available for the implementation phase as a whole (Appelbaum & Steed, 2005). Contrastingly, for small firms, Christensen & Klyver (2006) claim that “by far the most clients found the (consulting) process to be terminated when the implementation had been successful” (Christensen & Klyver, 2006).

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