EXAMINATION OF PERSONNEL DEVELOPMENT STRATEGIES
Master thesis, Msc. Human Resource Management University of Groningen, Faculty of Economics and Business
final draft May 2010 MAURIJN BAKKER Student number: 1333364 Brugstraat 25 a 9712 AB Groningen Tel.: +31 (0)6 41 21 11 74 e-mail: m.bakker20@student.rug.nl Supervisor F. Walter
Acknowledgment: Helpful comments on earlier drafts of this thesis were given by Dr. F. Walter, for which I am grateful. I also want to thank all the participating consulting firms and respondents for their time and effort in providing me with adequate data. Finally, I would like to thank the faculty of Economics and Business for giving me the opportunity
THE INFLUENCE OF BUSINESS STRATEGY ON HUMAN
RESOURCE STRATEGY IN CONSULTING FIRMS:
AN EXAMINATION OF PERSONNEL DEVELOPMENT STRATEGIES
MAURIJN BAKKER University of Groningen
ABSTRACT
This research paper presents an inductive study that examines the influence of business strategy on personnel development strategies in consulting firms. The research draws on evidence from in-depth interviews held among three consulting firms in the Netherlands. The findings suggest that dimensions of business strategy, such as level of expertise and standardization of solutions, and market influences determine personnel development strategies. Based on the findings a model is designed that proposes a dual linkage with personnel development strategies. This implicates both a direct, reactive link between market influences and personnel development strategies, and a indirect, proactive link between these variables, through business strategy. In addition, the findings imply that there are more formal and informal approaches towards personnel development strategies. Formal approaches are characterized by firm expertise and standardization of solutions, whereas informal approaches are characterized by individual expertise and custom-made solutions. Finally, implications of this research are discussed as well as limitations and recommendations for future research.
INTRODUCTION
business, public authorities, and journalists (Domsch & Hristozova, 2006). Consequently, a broad variety of topics related to the consultancy sector have been explored in detail. However, only few of these topics touch upon personnel or human resource management. Domsch and Hristozova (2006) declare two possible reasons for this lack. First, they proclaim that due to the consultancy’s uniqueness and strategic importance, information about human resources has been treated with a great deal of confidentiality. Second, human resource management in consulting firms has just recently gained a more explicit and formal character, thus attracting the interest of researchers and practitioners. On the topic of personnel development strategies in consulting firms (i.e. plans that help consultants to develop their ability to perform; Human Resources, 2010), literature briefly discusses general reasons for training and developing consultants. Kubr (2002) states that despite excellent educational backgrounds of entrants to the consulting profession, additional training and development is required. Kubr identifies a set of rationales for this. First, consulting on how to do a job is different from actually doing that job. Second, the level of technological knowledge required to advise generally surpasses academic knowledge. Third, new recruits will mostly start lacking any consulting experience and fourth, each firm has its own philosophy and strategy, consultants have to be accustomed to.
contributing to the consulting firm’s success, by developing and executing the human resource strategies and practices (Noe, Hollenbeck, Gerhart & Wright, 2003; Ruta, 2009). Accordingly, the importance of personnel development strategies is stressed by Alvesson & Kärreman (2007). As described before, consulting firms are considered to be typical examples of highly people-oriented companies since they depend heavily on the expertise of their consultants (Apostolou & Mentzas, 1999). Consequently, the primary resource in consulting firms is the competency of the work force. Hence, consulting companies should be in the forefront of thinking about how to educate consultants and develop effective personnel development strategies and practices (Apostolou & Mentzas, 1999; Savary, 1999).
However, what is missing in most of the literature is a clearer theoretical understanding on how influences between business strategy and human resource strategy in consulting firms operate (i.e. how the business strategy actually exerts its influence on human resource strategy), and subsequently what particular personnel development strategies and practices consulting firms execute to manage their consultants based on those influences. Also, empirical work on personnel development strategies in consulting firms is scarce, due to the relative lack of empirical research in the field (Gratton, Hope-Hailey, Stiles & Catherine, 1999). Consequently data is lacking on how consulting firms actually develop and execute personnel development strategies (Becker & Huselid, 1999). With existing research indicating that a clear-cut alignment between the business strategy and the human resource strategy can provide better organizational performance (Liao, 2005), it would clearly be fruitful to examine the respective linkages between business strategy and personnel development strategies and practices in consulting firms.
strategies are formed from a business strategy perspective. The intent is the development of a conceptual model displaying the alignment of business strategy and personnel development strategies and practices and to uncover the influences on these strategies and practices.
THEORETICAL BACKGROUND
In this section, the research question will be elaborated by discussing theories and definitions regarding the key variables of this research - business strategy, human resource strategy, and personnel development strategies and practices - and the relationship between these variables.
Business Strategy
According to Tyson (1995:1) business strategy can be defined as: “ The attempt by those who control an organization to find ways to position their business or organizational objectives so that they can exploit the planning environment and maximize the future use of the organization’s capital and human assets”. Given the high level of innovation, the responsiveness to unique client demands, and the unpredictability of which projects will be won by consulting firms, strategic management can hardly be centered around the development of long term strategic plans. That however does not mean that the development of a business strategy is impossible (Løwendahl, 2005). Hence, different types of business strategy in consulting firms can be characterized. Løwendahl (2005) established three business strategies regarding consulting firms, partly based on the on the generic strategies of Porter (1980):
• The individual firm, primarily focused on individual expertise, individual reputation, and individual client networks.
• The professional bureaucracy, primarily focused on firm level expertise, firm reputation, routines, and methodologies.
To further describe the above generic business strategies of consulting firms, it is useful to draw on three different dimensions. These dimensions are autonomy vs. hierarchy, individual expertise vs. firm level expertise, and standardization of solutions vs. customization of solutions for clients (Løwendahl (2005). Hierarchy is considered to be typical for large firms, whereas autonomy holds more true for smaller firms. This then corresponds with the smaller, individual firm, and the larger professional bureaucracy. Individual expertise accordingly, resembles knowledge and skills from individual consultants, which is typical for the individual firm. Firm level expertise on the opposite, is concerned with knowledge and skills that are inherent to the firm as a whole and is typical for the professional bureaucracy. Standardization of solutions finally, resembles the modularized solutions applied by the professional bureaucracy, whereas customization of solutions stands for solutions pointed at unique client demands and is typical for the expert firm.
Table 1 exhibits traits of the different types of business strategies existing in consulting firms.
*** Insert Table 1 about here ***
Human Resource Strategy
Human resource strategy is concerned with those decisions that have a major and long-term impact on the employment and development of people in the organization and on the relationships that exist between management and personnel (Storey, 2002). Human resource strategy is defined by Greer (2001:128) as: “Human resource strategies are essentially plans and programs to address and solve fundamental strategic issues related to human resource management”.
According to Richter, Dickmann & Graubner (2008), human resource strategy in consulting firms is characterized by HR-related issues such as recruitment, promotion, and termination of employment. However, often no formal rules or policies exist: the strategy is conducted under overarching values of the firm and carried out by partners and seniors. In some cases, however, Richter et. al. (2008) argue that formal human resource strategy occurs and is designed to support explicit market strategies of consulting firms. Human resource strategy then exhibits a strategic business partnership role, where it is closely linked to business strategy goals (Teo, Lakhani, Brown & Malmi, 2008). However, while many authors argue that human resource strategy typically follows the business strategy (Domsch & Hristozova, 2006), Tyson (2005) adopts a different approach, namely the interdependence model. Here, the demand for skills and knowledge of employees is seen as a function of the business strategy. This means that the organization’s long term plans are pointed at matching the knowledge and skills sets of employees with demands from the market. At the same time the human resource strategy conditions the business strategy. This is because only certain business strategies can be considered, in view of the constraints and opportunities provided by the human resource strategy.
Personnel Development Strategies
Personnel development strategies can be defined as the framework of plans for helping employees develop their personal and organizational skills, knowledge, and abilities (Human Resources, 2010). Research has discovered that the majority of consulting firms are facing many personnel development challenges. Additionally, a large number of consulting firms remain largely unsure how to proceed with these development issues (Ambos & Schlegelmilch, 2009). Other research discovered that personnel development strategies are a key factor to drive the consulting industry in coming years (Apostolou & Mentzas, 1999).
One of the few empirical studies on personnel development strategies in consulting firms comes from Alvasson & Kärreman (2007). This study proposes different strategies of personnel development: soft or high-commitment and hard or low-commitment personnel development strategies. Soft or high-low-commitment development strategies are characterized by long-term, caring relationships and personal contact. Here room exists for extensive feedback by peers, trainers and coaches. Examples of practices that form soft or high-commitment development strategies are group training sessions, mentoring, coaching of consultants on an individual level, and closely monitoring the development of individual consultants (Alvasson & Kärreman, 2007). Hard or low-commitment development strategies, on the other hand, are characterized by less personal contact and short-term relationships. Here communication is less reciprocal and more one-way. Examples of practices that form hard or low-commitment development strategies are online courses consultants can follow, instruction manuals on how to use certain tools, and information from databases.
development strategies refer to knowledge that is articulate, codified, and can be stored. Hence, this knowledge can be transferred to other consultants easily. Examples of practices that form a formal personnel development strategy are manuals and documents (Swart & Kinnie, 2010).
Concrete practices and policies on personnel development in this research paper are examples of how personnel development strategies are implemented. Richte, Dickmann and Grauber (2008) distinguish training programs for small and medium sized firms to be primarily through direct observation and experience, supported by workshops mostly led by consultants at senior level. For larger firms, training exists through both on-the-job training and formal workshops involving human resource staff, external specialists/trainers, and some consultants at senior level. Other studies confirmed the difference in training (Carvalho & Cabral-Cardoso, 2008). Bigger consulting firms were more in the forefront of the implementation of formal courses designed for each career stage uniformly, while smaller firms directed their efforts to combined standard courses with on the job training and monitoring individual consultants, resulting in a more uneven access to training by individual consultants (Carvalho & Cabral-Cardoso, 2008). The tools that are typically used for training and development programs, regardless of firm size, are face-to-face meetings, presentations, brainstorming sessions, on the job training, and learning by observation (Ambos & Schlegelmilch, 2009).
When relating these different training and develop practices to personnel development strategies, a linkage exists. It seems that small and medium sized firms tend to more frequently posses a soft or high-commitment personnel development strategy with more personalized forms of training. In contrast, bigger firms tend to more frequently posses a hard or low-commitment personnel development strategy that is characterized by more formal and standardized forms of training.
development strategies (Alvasson & Kärreman, 2007) and informal and formal personnel development strategies (Werr & Stjernberg, 2003).
METHODOLOGICAL FRAMEWORK
Data Collection and Sampling Approach
This research is based on empirical data from three consulting firms in the Netherlands. As it is notoriously difficult to gain access to consulting firms for extensive in-house data collection (Ambos & Schlegelmilch, 2009), references from university acquaintances were used first to negotiate access to consulting firms in the Netherlands. This resulted in one participating firm. The other two firms were acquired through extensively calling and e-mailing a diversity of consulting firms. Due to reasons of anonymity and confidentially, participating firms were not described by using their full names, hence aliases were given resulting in firm X, firm Y, and firm Z. The researched consulting firms were selected on the basis of their different focus in their service portfolios and size (Løwendahl, 2005). The reason for this approach is to catch potential variance between the researched firms and to create a broader basis for developing inductive theories. Firm X was operating primarily in procurement and operations consulting, whereas firm Y was focusing on management and strategy consulting. Firm Z finally, was maneuvering around the area of consulting practices in human capital and human resource services. An overview of the participating consulting firms is presented in Table 2.
*** Insert Table 2 about here ***
consultants, were interviewed. At firm Y the human resource manager, an associate partner, and a partner were interviewed. Finally, a senior consultant and the CEO of the business unit human capital were interviewed at firm Z. The data collection was performed by in-depth interviews (Emans, 2002) focusing on actual events, problems, and examples firms dealt with concerning the research topic (see Table 2). Motives for this approach were the discovery of concrete personnel development strategies and practices, rather then opinions and beliefs of respondents on how things should be or work. The same approach was applied for acquiring information around the topic of business strategy. Previous to each of the interviews with the consulting firms’ respondents, the websites of the researched firms were examined to acquire background information about the firms and if possible, the respondents. The goal was to get supplementary information before conducting the interviews.
Each interview consisted out of 16 questions (see appendix B). The structure of the questions was as follows. First questions around the variable of business strategy and its dimensions were introduced. Additionally, questions regarding personnel development strategies and practices were addressed. Finally, questions on linkages between business strategy and personnel development strategies and practices were asked. The length of each interview was on average around 70 minutes. The order of questions was structured to start with broader, somewhat general questions and to proceed to more specific, detailed questions. Additionally, interviews were conducted as such that after the outlined interview questions, follow-up questions were applied to elaborate on the given interview data with the goal to make the information from respondents’ statements more specific. In order to accomplish high validity of the interview data, the interviews were conducted in the form of a dialogue (Sandberg, 2005). During the interview the core of the data provided by respondents was written down per question. After each interview session the answers to the questions were elaborated into more complete and comprehensible pieces of text.
Data Analysis
Following the transcribing of the data, the interviews were analyzed. In general the process of analyzing was progressed as such that analysis shifted from a more superficial level to a more detailed investigation of data. The raw bulk of data of each respondent was placed in maps, that is grouped on the dimensions of business strategy and personnel development strategies and practices. Mapping here helped managing the data on the key concepts in this research: business strategy and personnel development strategies and practices. The purpose of mapping the interview data was to uncover information that is relevant for the research question. It is pointed at capturing significant information with all its contradictions, different underlying priorities, and contextual explanations (Cassel & Symon, 2004). Mapping of the data proceeded as follows. First the respondents’ statements were grouped in each dimension of business strategy and personnel development strategies and practices. Second, the data was arranged according to the relevance and priority given by the respondents. Third, the identified and grouped statements of the different consulting firms were linked to each other, that is to link statements concerning similar topics. This process of mapping individual statements of the respondents was performed by grouping them in tables. After the initial mapping and grouping the focus of analysis was placed on uncovering similarities and differences between respondents both within the same firm and between different firms. The focus here was aimed at exposing linkages between business strategy on one hand, and personnel development strategies and practices on the other hand.
RESULTS
Business Strategies
Here the business strategies conducted by each of the researched firms will be described as well as the different dimensions that characterize the different strategy types (Løwendahl, 2005), which were discussed in the theoretical background section.
Firm X. At this firm the business strategy is to integrate the core businesses of procurement, operations, and accounting, while involving their clients deeply in the consulting process. That is solving problems with the client throughout the entire project. In addition, focus is placed on the market of project management (e.g. procurement) that has relatively few competitors.
“...Our strength and strategy is the integration of our three core businesses: procurement, operations, and finance. This is unique compared to our competitors…” (Firm X: senior
consultant)
Firm X is not organized very hierarchically. In addition, the firm has a relatively flat organizational structure, were short lines exist and the board is easily accessible. Regarding autonomy, senior consultants possess a high level of autonomy whereas junior consultants possess somewhat less autonomy, although there are opportunities for own ideas and initiatives. Concerning the level of expertise, this firm has a moderate individual approach. On one hand consultants can use their own ideas to create solutions for clients. On the other hand, firm wide methods are used of which the application is the same for each consultant. Examples of this are procedures and tools. The following statement explains this moderate individual approach.
“… The development of basic methods is not a form of standardization in the extreme sense, and is not intended to be so. The idea is that consultants develop their creativeness from within those methods. We acknowledge the tension here between individual creativity and firm’s methods and processes…” (Firm X: senior consultant)
However, the first stages of a project are relatively general and can be applied at different clients. Respondents reported that the degree of customization of solutions intensifies when projects mature and when client involvement is higher.
Firm Y. Here business strategy is pointed at delivering innovative solutions to complex and unique business problems. As with firm X, clients are closely involved during projects. In addition, firm Y has a strong network of (potential) clients.
“… It is the unique combination of our people and network that differentiates firm Y from our competition. This makes sure that our clients are being helped with their strategic issues and the realization of their execution issues…” (Firm Y: partner)
Firm Y is not organized very hierarchically. However, some implicit hierarchy is acknowledged, i.e. differences in status between senior and junior consultants. In general consultants operate relatively autonomously.
“…The high level of autonomy can be explained twofold, firstly we have high demands for our consultants to work independent. Secondly, consultants love to work at our firm, largely because of the work content and freedom the profession convenes…” (Firm Y:
human resource manager)
Regarding the level of expertise, the focus at this firm was extensively placed on the individual: consultants were enabled to fully use their own ideas and methods, rather than using approaches on firm level that can be applied to a wide range of clients.
“…We do support our individual approach by a (name of firm Y) framework of thinking, but not by methods and techniques like the Big 5 do…” (Firm Y: partner)
Firm Z. The business strategy of this firm is to sell packages of solutions to clients by helping their clients with their human resource management issues. Firm Z combines the different expertise of consultants to deliver one integrated solution in a pragmatic way. This means that the focus is to deliver solutions for practical and operational issues, rather than strategic ones.
While the previous firms were not very hierarchically, firm Z acknowledges a moderate level of hierarchy. Consultants are autonomous in creating ideas and solutions, however consultants’ decision ability is rather restricted. In addition, the autonomy of consultants in this firm is regarded lower than in the other two firms.
“…Hierarchy does exists in forms of seniors having more authority than juniors. Accordingly, seniors have more decision power than juniors do. Furthermore, implicit hierarchy exists between older and younger partners, about who acquires the most turnover. This is characteristic but not been put out explicit in the organization…” (Firm
Z: senior consultant)
With regard to the level of expertise, firm Z is considered to operate at firm level, since the organization applies commonly developed knowledge, tools, and techniques to solve client’s problems. A statement to underpin this is:
“…We are generally proposition driven and sell increasingly firm-based expertise. However, our teams are composed of consultants with different personality, experience and knowledge which is also brought into the propositions we sell…” (Firm Z: CEO)
Concerning the dimension of standardized vs. custom-made solutions, this firm offers a high degree of standardized solutions, especially digital applications. Although solutions are not always uniform, the firm delivers mainly standardized approaches to solve problems of clients.
*** Insert Table 3 about here ***
In conclusion the described business strategies all tend to be somewhat general, pragmatic, and focused on the short-term, since respondents predominantly discussed how business was conducted at the moment, rather than discussing long-term plans. This accordingly might support the argument from Løwendahl (2005) that strategic management in consulting firms is rarely centered around the development of long term strategic plans. Concerning the dimensions and classifications of generic business strategies by Løwendahl (2005), firm X can be regarded a rather individual firm, since focus is on client relationships and a high degree of autonomy. However the level of expertise is not completely individual as well as the solutions, which are not entirely custom-made. Firm Y tends to be more of an expert firm, since their focus is on solving unique problems and have individual consultants working highly autonomous. Firm Z finally, possesses the characteristics of firm level expertise and provides standardized solutions which best suit the professional bureaucracy. As shown, each of the researched firms can be placed in one of the three categories of business strategy (Løwendahl, 2005). However, they do not match the respective categories completely.
Human Resource Strategy and Personnel Development Strategies
In this section the approach the researched firms take on to human resource strategy in general and personnel development strategies and practices will be described. Afterwards the influence of business strategy on these strategies and practices will be explained in the following chapter.
Human Resource Strategy
“…People make the difference, quality of consultants counts…” (Firm Y: partner)
Arguments for this lack of formal human resource strategies were the relatively small size of a firm or separate, somewhat independent operating business units in the firm, which lacked the need for formal human resource protocols.
“…Because short lines exist, managing people and processes is moderately straightforward…” (Firm X: HR manager)
An added argument was that firms operate pragmatic, leaving less room for explicit strategies or that the typical short term considerations that are inherent to the consulting industry left little space for formal strategies, since this might threaten the flexibility and maneuverability of the firm. Accordingly the pragmatic considerations are made explicit by a HR manager.
“…No one has ever thought about how the HR strategy should look like, because everyone at our firm is much more operating in a pragmatic way. Nothing is made explicit, it are the basics HR deals with, for example how do we acquire the right consultants…” (Firm Y: HR manager)
Personnel Development Strategies
Here an overview will be presented of personnel development practices occurring in the researched firms. These practices reflect a strategic development decision, even if firms do not have an explicit strategy. Hence, certain approaches towards personnel development practices, such as training methods and techniques, uncover some framework of plans towards the development of consultants’ skills, knowledge, and abilities.
Firm X. This firm has one best way of educating consultants, which is through a classical, rather informal master-apprentice relationship. This close and personal relationship can exist between a junior and senior consultant, or a senior and a group. Here junior consultants are closely and individually trained and monitored by senior consultants.
“…Trying to make tacit knowledge explicit by documenting and recording is not
effective, since it is time consuming and leaves room for interpretation. Consulting can be only taught through this classical approach…” (Firm X: senior consultant)
Learning processes at firm X were pointed at competency development and understanding of basic organizational processes of junior consultants, ‘apprentices’, through an on the job approach led by a senior consultant, ‘master’.
Firm Y. In contrast to firm X, firm Y has a slightly more formal approach to development practices. The workforce of consultants is monitored continuously and close examination determines where which skills and competences are required. An example is a database were track is held of consultants’ development and expertise areas. By doing so, demands from the market can be directly linked to training and development needs of consultants existing in the database. Additionally, training sessions are often held in groups. In accordance, the role of human resource management is stressed here.
The personnel development strategy here is to connect business demands directly to training and development practices, in which human resource management plays a significant role by developing instruments for executing the personnel development strategy (e.g. mapping the various skill sets of consultants employed at the firm). The pragmatic approach, characteristic in the consulting industry, becomes apparent here by linking market demands directly to training and development practices. This is seen in the increasing focus on ICT in consulting services. If clients display an increased need for ICT solutions, consultants are almost immediately trained in that field.
Firm Z. At this firm the approach to training and development is rather formal. An example of this is the systematic approach to learning materials (i.e. information of clients, articles, and shared practices) which are often codified and stored in online databases. Other examples of formal practices are MBA training programs, publishing articles on projects, and partnerships with external organizations where consultants learn new approaches and techniques. Here training and development of consultants fulfills a twofold purpose, namely that of ensuring the excellence of consultants and second, to generate intrinsic motivation among consultants (to motivate and retain consultants). Once more, demands from the market influence development strategies.
“…Our clients are increasingly demanding integrated solutions, which can only be achieved by high performing teams, consisting of strong individual specialists. Hence this induces implications for our development strategies: focus should be placed more on the individual and at the same time at team roles…” (Firm Z: senior consultant)
“…Another point is training, we should consider more carefully which kind of training and coaching consultants need and to what degree. Often a ‘bigger plan’ is lacking…”
(Firm Y: HR manager)
The above statement also shows that respondents recognize the pragmatic and short-term considerations of the consulting industry.
While the respondents claimed that their firms did not have explicit personnel development strategies, implicit strategic development decisions do exist. Firm X exhibits a soft and high commitment development strategy (Alvasson & Kärreman, 2007) that has an informal character as well (Swart & Kinnie, 2010), since their master-apprentice relationships between senior and junior consultants display personal contact and intense coaching. Firm Y, by contrast, demonstrates a more formal development strategy (Swart & Kinnie, 2010), since training and development is institutionalized through organizational structures, systems and processes. In addition firm Y displays a relatively soft or high-commitment personnel development strategy, because training methods at this firm are often given in groups. Firm Z, finally, has a more formal personnel development strategy that is characterized more by hard or low-commitment then the other two firms, given its frequent use of databases and standardized training courses.
FACTORS INFLUENCING PERSONNEL DEVELOPMENT STRATEGY
Business Strategy Dimensions and Personnel Development Strategy
Here the link between business strategy dimensions and personnel development strategies is presented. In accordance, the dimensions of expertise and the level of standardization of solutions (Table 3) influence personnel development strategy.
range of clients and problems (i.e. standardization of solutions). The opposite is true as well. When knowledge and skills arise from the individual (i.e. individual expertise), a more informal approach to personnel development exists. The same holds true for accommodated solutions to individual client problems (i.e. custom-made solutions), which also have a more informal approach to personnel development (Werr & Stjernberg, 2003). At firm X, for example, the relatively small firm size, its individual expertise approach and reasonably custom-made solutions provide the opportunity to apply a development strategy were consultants are individually and informally trained and monitored, without the need for formal development approaches. At firm Z the opposite is true. Firm level expertise and standardized solutions create formal approaches here, that lead to more standardized training and personnel development methods for consultants. The influence of expertise and level of standardized solutions at firm Y finally, is related to a moderate formal approach towards development strategies and practices. In that sense this firm balances between the other two firms. Figure 1 displays the relationships discussed here.
*** Insert Figure 1 about here ***
Market Influences and Personnel Development Strategy
Besides business strategy dimensions, the environment also influences personnel development strategy. This becomes apparent through market factors. A distinction can be made between general market influences and labor market influences. These two will now be discussed.
Accordingly, clients can exploit this information to resolve their business issues themselves.
“…The amount of knowledge that is available in general is growing. This means that clients can acquire more information and knowledge themselves. A consequence is that we need to give real added value to our clients that they cannot do themselves…” (Firm Z:
senior consultant)
Second, specific information of markets and organizations is gaining more significance, since clients’ problems are more diverse and not clear-cut. Therefore, more in-depth knowledge of clients is required. Third, the focus has shifted more to ICT consulting. Finally, more specialization in consulting services is required: the focus is increasingly placed on solving rather distinctive and complex problems, rather than straightforward and common business problems.
Labor market influences. In addition, the researched firms commonly noticed labor market issues that have a direct impact on both business strategy and personnel development strategies and practices. Often addressed issues are turnover concerns and a future labor shortage of highly educated employees. The consulting firm industry is characterized by high turnover rates (i.e. a relativity high percentage of employees leave the firm after a relatively short period). A respondent comments.
“…The current turnover rates in the consultancy industry and the future labor scarcity of potential entrants to the consultancy industry, causes the need for a different approach towards the labor conditions of our consultants…” (Firm Z: senior consultant)
“…We are moving from the ‘up or out’ principle of career making to that of ‘perform or out’…” (Firm Z: senior consultant)
Here the focus moves from career making towards performance, by focusing more on results consultants provide. The future labor shortage together with the mentioned turnover concerns, causes firms to put effort in retaining consultants by focusing on performance, rather than career making.
In Table 4 an overview is given of the different market influences impacting business strategy and personnel development strategies.
*** Insert Table 4 about here ***
THE DUAL LINKAGE MODEL
This research has discovered that both business strategy dimensions and market influences impact personnel development strategies and practices. Based on these findings, I argue that personnel development strategies in consulting firms can develop both in a rather proactive manner (with the market environment indirectly translating into personnel development strategy by influencing broader business strategy) and in a more reactive manner (i.e., directly influenced by the market environment). These two links (see Figure 2) are more closely examined in this chapter.
*** Insert Figure 2 about here ***
The Proactive, Indirect Link
influence personnel development strategy. As an example, when market circumstances demand more specialization in consulting services the level of expertise will shift towards a more individual level and solutions will be less standardized, i.e. more custom-made. Hence, consultants are trained and developed as such that they become more specialist type consultants. Regarding the business strategy dimensions, this could implicate that more individual expertise and custom-made solutions are needed. In accordance, this indirect link can be considered to be proactive since the dimensions intentionally shape the company’s overall strategic direction, which in turn, influences personnel development strategy. An example of this is a business strategy that is focusing on close cooperation with clients. In correspondence, consultants are trained intentionally and proactively in managing relations with clients. In this example, the overall business strategy is changed first, as a result of environmental developments. Based on this changed business strategy the personnel development strategy is adjusted.
The Reactive, Direct Link
The other linkage that this research has discovered is a direct link between market influences and personnel development strategies. Market influences impact personnel development strategies directly, due to the short-term and pragmatic considerations of the consulting industry. This means that swift adaptations are necessary for consultants to cope with market changes and remain competitive as a firm in the industry. In contrast to the proactive, indirect link, the firm here responds to market influences in a largely reactive and somewhat ad-hoc approach towards personnel development strategies. These strategies are adapted to changing market conditions, even if the overall business strategy is not (yet) adapted accordingly. A good example accentuating this is given by a respondent.
Another important conclusion the model entails is the approach (formal or informal) towards personnel development strategies. As discussed before, increased firm expertise and standardized solutions are related to a more formal approach towards personnel development strategies. The opposite, that is an informal approach, exists when increased individual expertise and custom-made solutions occur.
Finally, it remains somewhat unsure to what degree general market influences and labor market influences differentiate in their impact on personnel development strategies. Questions concerning whether general market influences or labor market influences have a more direct or indirect impact on personnel development strategies remains yet unanswered.
DISCUSSION
towards personnel development strategies. A formal approach occurs when firms displays relatively more firm expertise and standardized solutions as dimensions of business strategy. An informal approach occurs when firms shows relatively more individual expertise and custom-made solutions as dimensions of business strategy.
This paper has illustrated how business strategy influences personnel development strategies. In accordance, this research is one of few that touches upon human resource management issues in consulting firms (Domsch & Hristozova, 2006), therefore contributing to a broader understanding of human resource strategies and practices. This study has not only examined the various concepts of this paper, such as business strategy, human resource strategy, personnel development strategies and practices, but also environmental factors that shape these concepts. Consequently this paper provides an overview of thoughts and actions that occur in consulting firms and shape personnel development strategies and practices. In conclusion, this research provides a clear linkage on how personnel development strategies are formed from not only a business strategy perspective but also from a broader, environmental perspective, namely the occurrence of market pressures. Therefore this research contributes to initial clarity on the current research gap (Ruta, 2009) concerning the unknown link between human resource strategy and personnel development strategies.
Implications
factors pressuring the organization and how to deal with those factors in terms of their influence on the business strategy.
With regard to theoretical implications, literature (Domsch & Hristozova, 2006) suggests that many consulting firms argue that human resource strategy should follow the business strategy. The findings of this research paper suggest a different approach, namely an interdependence between the business strategy dimensions, market influences and personnel development strategies. Therefore, this research could contribute to new ways of thinking about the role of human resource strategy and its relationship with business strategy in consulting firms. The need for more interaction between human resource strategy and personnel development strategy is stressed by Hansen, Nohria and Tierney (1999). This research, however, has shown that without a formal human resource strategy, personnel development strategies exist. Therefore, academics could examine whether more interaction between human resource strategy and personnel development strategy, would lead to more effective or efficient personnel development strategies and practices. Finally, the findings provide an answer on what the market developments are, that impact the consulting industry (Sorge & van Witteloostuijn, 2004).
Limitations and Future Research
Suggestions for new research avenues are recommended. First other dimensions or constructs of business strategy (Løwendahl, 2005) can be examined and how these challenge personnel development strategies and practices. For example how different knowledge management practices (Donnely, 2008) interact with personnel development strategies and how these knowledge management practices determines a formal or informal personnel development strategy. Second, exciting research could be to investigate other market influences and to uncover whether similar market influences exist in the consulting industry, and in accordance, how these impact personnel development strategies and practices. For example the question could be, whether these other influences have a more direct or indirect impact on personnel development strategy. Third, the effectiveness of the linkages from the model can be researched. Will focusing on the direct, reactive link result in more effective personnel development strategies and practices or will the indirect, proactive link be more effective? In addition, consulting firms are regarded as pragmatic oriented organizations with short-term considerations (Alvasson & Robertson, 2006). Literature on the other hand (Løwendahl, Revang & Fosstenløkken, 2001), argues a more formal and planned approach in linking training and development to strategic management. The question should be whether it is effective for consulting firms to bother about these bigger plans or stay focused on their core business. Lastly, the researched firms argue that more explicit training and development of consultants is needed and that structure is often lacking. Future research could elaborate on how to better structure training and development of consultants and accordingly make training and development practices more effective and efficient.
In conclusion, future research should test the proposed model and examine the recommended research avenues regarding consulting firms.
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APPENDIX A: TABLES AND FIGURES
TABLE 1
Generic Business Strategies in Consulting Firms
Individual firm Professional bureaucracy Expert firm
High degree of autonomy
Consensus based decisions
Minimum managerial authority
Minimum overheads
Difficult to expand or internationalize
External focus: client relationships
Invests heavily in development of routines and methodologies
Often offers modularized solutions
Invests heavily in
socialization and education of professionals
Has a formal hierarchy of authority
Can grow very large and may be global
External focus: Selling solutions
Described as ideal by many professionals, but very difficult to maintain in the long run, as tensions pull both towards A and towards B
Individual and highly autonomous experts backed by more routine-dependent junior staff
Requires extremely good senior managers -respected professionals with strong leadership skills
External focus: Solving unique problems
TABLE 2 Researched Firms
Firm X Firm Y Firm Z
Year of foundation 1998 1973 1997
Workforce 85 450 120
Location Amsterdam Amsterdam Utrecht
TABLE 3
Dimensions of Business Strategy
Autonomy vs. hierarchy Individual expertise vs. firm expertise Standardizatio n of solutions vs. custom-made Business Strategy Firm X autonomy moderately individual moderately custom-made Individual firm Firm Y
autonomy individual custom-made Expert firm
Firm Z
moderate hierarchy
firm standardized Professional bureaucracy
TABLE 4
Influences Affecting Personnel Development Strategies
General market influences Labor market influences
FIGURE 1
The Formation of Personnel Development Strategies
FIGURE 2
The Dual Linkage Model
Market Influences Business Strategy Dimensions
APPENDIX B: INTERVIEW
Purpose
The goal of this interview is to examine the human resource strategy in consulting firms and the influence of the business strategy. First existing literature on the topic is studied, then the empirical research part will be completed through interviews. Finally, this will lead now new theory building on how consulting firms manage their human resources.
Authority
This research is conducted through the Rijksuniversiteit Groningen, faculty of Business and Economics. Its purpose serves the writing of a Master Thesis in Msc. Human Resource Management.
Researcher
Mr. Maurijn Bakker. Supervisor Dr. Frank Walter
Publication
This interview will be held confidential between the researcher and supervisor. The interview will be used to complete the Master Thesis. The exact answers of the interview will not be published. If necessary there is the possibility of not making the Master Thesis public.
Anonymity
No interviewee names will be published nor the names of consulting firms that participated in this research.
Language
Questions in this interview can be answered in either English (preferred) or Dutch, depending on your liking.
Benefits
A copy of the research report will be send to each participating consulting firm. The research provides an overview of theories and practices on how consulting firms deal with human resource management in their firms.
Duration
Questions
1. What is the core business of the firm?
2. How would you describe the business the firm is in?
3. What is the competitive advantage of the firm?
4. What can be changed about the business strategy and why?
5. How is autonomy and hierarchy distributed in your firm?
6. To what extent is focus placed on individual expertise of consultants?
7. To what extent is focus placed on firm level expertise of consultants?
8. Are solutions for clients standardized or custom made? To what degree
9. What is the HR strategy of the firm?
10. How are the business strategy and the HR strategy related?
11. What can be changed about the HR strategy and why?
12. What are key strategic HR development issues faced in your firm?
13. For which purposes are training and development methods/techniques/strategies used?
14. Who carries out the training and development?
15. How are personnel development strategies related to the overall HR strategy?
