Monday, January 28, 2013

I never thought I'd See This: Consultants are, gasp, Good?!

In a recent Slate article, we read that management consultants are actually a boon to business!

A recent experiment by World Bank and Stanford researchers illustrate the dramatic impact of management “technology” on the way companies are run. The researchers randomly assigned a management makeover to a handful of Indian textile firms, while at the same time following a set of control textile factories to benchmark the effects of good management.
Out of chaos, order arose: Supply closets were no longer strewn about with yarn, factory floors were cleaned up, inventory and control processes improved production line efficiency. The benefits of good management were such that Accenture’s services—which were provided to the companies for free as part of the experiment—would have paid for themselves through greater profitability within a year: The researchers estimated a profit increase of more than $300,000 annually as a result of management improvements, as compared with the $250,000 market price of the consulting services they received.
What brought about these changes? Exactly the sorts of things that the managers of Davos are good at: designing incentives, ensuring clear and well-defined assignments of tasks and responsibilities, putting in place protocols to manage and track inventory and production. These are not new ideas. They have been the standard protocols of much-maligned managers since they first appeared on the scene with the advent of transcontinental railroad. It’s just that management, despite its age, is not evenly distributed around the world.

Slate's assertion: Better management stands a far greater likelihood of making the world wealthier and healthier. And that's a good thing.

- Posted by Tom/Bluedog

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