Cases > Case 17

CASE 17 -'-'

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Gary Akehurst

Watkins International is a long established firm of chartered accountants and managementconsultants, with international interests in accountancy and audit services,corporatefinance,insolvencyservices,taxationand managementconsultancy.This caseis concernedwith one division of Watkins International, the Brownloaf MacTaggart Management Consultancy Division, which until merger with Watkins in 1988had been a successful small engineeringconsultancypractice. Moving from being a small, close-knit company to a small, insignificant division in an international corporate empire has createdconsiderabletensions. Managerial control has changed rapidly from one of benevolent dictatorship to one of corporate uniformity. The end result has been a climate of intimidation, of unfair reward and punishment, uncertainty and mistrust, set againsta backdrop of falling profits and plummeting morale. This case1s concerned with issues of managerial control and power among a group of highly qualified and initially, at least, highly energetic and enthusiasticprofessionaJconsultants.Additional issuesinclude changing culture within a rapidly changing organisation and how the position of senior managers can gradually change from one of respect and trust of judgement, to one of fear and loathing.

BACKGROUND Brownloaf MacTaggart (BM) is the engineering consulting division of Watkins International, a large international firm of chartered accountants and managementconsultants. Watkins was established as a chartered accountancy practice in 1893. Following decadesof moderategrowth it entered the managementconsultancy market in 1955primarily as a 'spin-off' from audit and taxation work.

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In the following yearsthis diversification proved to be profitable. What had started as a very small sideline activity has developed into a multidivisional managementconsultancybusinessemploying in the UK alone some 700 people. Worldwide Watkins employs around 70,000people through a network of firms and associatefirms. The international firm has at leastone office in most countries, and in the early 1990shas establishednew offices, particularly in Eastern Europe. Watkins has endeavoured to grow primarily by acquisition and internal growth, but acquisition has beenby far the most successfulstrategy,particularly in the 1980swhen a software development company and BM were acquired. The firm now has five consultancy divisions in the UK covering information technology and software engineering; public sector management; financial services and treasury; leisure and retailing; and general Brownloaf MacTaggart and Co. had started business in 1962as a two engineering. man partnership. Alex MacTaggarthad been a successfulproduction engineer, who had assiduously built up a long list of good contacts while working for blue chip engineeringcompanies.Duncan Brownloafhad been a successfulengineering company salesmanselling diverse products such as hydraulic pit props and mining pump equipment. The two men combined their undoubted strengthsby taking small premisesin Walsall, in the West Midlands. The business flourished and in 1977,now employing 20 people, two additional employees were admitted into partnership Heinrich Grubber, a German national, and William Smallpiece,a native of

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Shropshire. The BM businessflourished, establishing a good reputation for creative and practical solutions for engineering businesses across the world. Projectstended to be fairly small in value, averaging £10,000to £15,000(at current prices), with occasionallarger assignmentsbut clients were prestigious and BM gained a reputation as one of the top three in its specialised field. Successhowever, was to prove to be a double-edgedsword. Having admitted the two new partners, both founder partners were beginning to think of retirement. Duncan Brownloafs health was failing and perhapsit was time for a change.In 1980the companymoved into bigger offices in the heart of Birmingham. One month after the move both Alex MacTaggart and Duncan Brownloaf were gone. It was suggested, although never proven, that both men suffered a 'palace coup' led by Heinrich Grubber. The BM name was continued, after all the goodwill generated was considerable, and Heinrich

Grubber and William

Smallpiece set about

planning for the future. For some time both partners worried about future strategy.Should they stay as a small stand-alonecompany or actively seek mergeror acquisition?In 1988the future directionwas effectivelysettled. Watkins International had been looking to acquire an existing engineering

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consulting company. Merger negotiations were started with BM. These negotiations proved to be unusually protracted. Besidesissuesof partner capital, there were a number of issuessurrounding managerial autonomy. Surprisingly, merger was nearly aborted by the insistenceof the BM partners that young Eric Reliant be admitted into partnership. The partnership qualities of Eric were not immediately obvious to the senior partners of Watkins. A redemptive new age traveller, he tended to be seenas a disorganised blue sky thinker (or 'head in the clouds' visionary). Underneath however, he was an artful schemerwho had carefully flattered and fawned around the BM partners. What he lacked in technical engineering skills he more than made up for in low-life cunning. With agreementreachedon the admission to partnership of Eric Reliant, the way to merger was clear. Following the merger life appeared to continue much as before. BM continued to occupy the samepremises,and to all intents and purposesoperatedas the samecompany.The BM name was retained for the sound commercial reasonsof client goodwill and recognition, but now operated as the BrowruoafMacTaggart Division of Watkins International. For eighteenmonths it was businessas usual. The head office of Watkins was two miles away - in many respects out of sight and out of mind. Surprisingly Watkins did not rein in its new division. Proceduresstayed more or less the same although the house style of reports to clients now had to conform to strict and elaborateWatkins' requirements.The name of the overall finn had changedbut the three partners continued to behaveas if BM was an independent company. Heinrich Grubber was particularly proud of now being a partner in an international finn with all the apparent prestigeand jet travel this implied. THE SITUATION Watkins International began to introduce firm-wide standardisedpractices early in 1990.First the time sheet recording system linked to client billing was changed from a manual system to a computerised system;later, standardisedroutines and forms were introduced for a number of administrative procedures,including holiday requests,staff appraisal,ex~nses and assignment control. All curricula vitae were placed into a computeriseddatabase linked to a propoSal(or bidding for work) administration system.Updating of eachcurriculum vitae takes place after each consultancy assignmentby the project managercompleting the relevantform and sendingit to the marketing department. Surprisingly/despite the relative sophistication of this system, matching the personnel with the requisite experience to project requirements is rather hit and miss/ and depends more on an informal reward and punishment system (consultantswho conform to the company

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culture are rewarded with interesting and prestigious assignments,which may help career advancement,while consultants who do not conform, for whatever reason,can be impeded by a successionof mediocre or difficult projects). BM employeesbegan to recall nostalgically the 'old days' of BM beforemerger. little did they know that more was yet to come. hi May 1991Watkins secured three floors of a prestigious office block located adjacentto their head office in Birmingham. This office block consists of ten floors, four of which are occupied by a commercial bank and architectural practice. All Watkins' management consultancy divisions were located, in Au~t and September 1991,on to one floor of the new office. Some 700 people (including all management consultancy support staff such as accounts,personnel and office management)are housed in a huge open plan office (although partners have individual, if small, offices). Individual consultants are assignedto a desk, each desk accommodatesat least two consultants.If both consultantsare working in the office, working spacebecomesa simple matter of early desk possession.All consultantsare required to log on to a computerised staff locations system,which records contact telephone numbers and physical location for every hour of the working day. The same system acts as a messagerecording point when consultantsare working outside the office. The changefrom a relatively small office away from the main management consultancy to the big company environment came as quite a shock to several BM staff. For many staff there was a realisation, perhaps for the first time, that they were working in a large, rather impersonal, increasingly automated and tightly regulated environment. Above all they were expectedto sink or swim in a fiercely competitive environment. There was also a realisation among staff, and indeed the BM partners, that although they may be well known in the engineering industry, within the Watkins' empire they were minute in terms of size of turnover, number of projects" number of employeesand profitability. The length and severity of recession, not just in the UK, but also in other developed countries was beginning to causedifficulties not just in the BM division but also in the information technology and software engineering division. Many engineering businesses were being taken into receivership, and while managing businessesunder receivership became for a time highly profitable for BM, other more profitable work needed to be generated.The traditional feasibility study and other development type work had steadily becomelesseasy to obtain" and in the early part of 1993 there was virtually no on-going development work. While international work had provided a cushion during the depths of the recession, UKbased work had seriously declined since the beginning of 1993.The BM divisional plan for the five years to 1997envisagesa doubling of turnover from £3.5 million to over £7 million; the number of BM consultancy staff staying the same at 30 consultancy staff (including three partners) and

which rm, for ifficult ofBM ? block :k cont1k and tisions le new upport edina )ffices). lates at .orking nts are 'ecords of the twhen

anagelshock for the 1creasy were ~rewas :hough atkins' rojects, also in just in e engi!n into -ecame Qed to :tt type :>f 1993 ltional

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four support staff, and the averageconsultant utilisation rate (or percentage of employable time charged to a client) increasingfrom just under 60 percent to 65 per cent. At a divisional meeting early in 19938M staff were warned that, although staff numbers were forecast to remain the same, new staff were to be recruited. Many staff saw in this statementan implied threat of dismissal or redundancy for some,while younger and lessexpensive consultantswere to be recruited. In order to improve its competitive advantage in a stagnant management consultancy market (by being seen to conform to the highest service quality delivery standards) Watkins introduced in 1992 a new quality managementsystem, in an effort to secureBS5750Part 1 certification (the British Standards quality award). This new system required a complete rethink of the way consultancy assignmentsare managed,and introduced an essentially mechanistic approach to quality management based on an accountant'sview of correct filing, record keeping and random assignment audits. Elaboratequality procedures becameprogressively refined during 1992and becameencapsulated in a beautifully printed Watkins Quality Manual. This manual was revised five times in as many months, and not surprisingly, many consultants became confused as the quality system appeared to be used by partners as part of a reward and punishment system; it is all too easy to miss completion of a form, completion of a section of a form, neglect to obtain a partner's signature on a form or miss a quality plan review. The threat of periodic quality audits hangs over every consultant and, instead of using the quality management system as a means of improving services to clients, many consultants have become increasingly antagonistic towards it. The whole quality management system has become a bureaucratic nightmare instead of the aide to successfulservicequality and client satisfactionit should be. The following paragraphs briefly describe the organisational structure, recruitment policy, assignments allocations and perceived methods of advancing within the company. At the current time the 8M Division consistsof three partners (Heinrich Grubber, William Smallpiece and Eric Reliant); three associates(Quintin Bottomley, Nigel Redcoatand Rupert Wormwood), four managing consultants; four senior consultants; twelve consultants; two analysts, two technical assistants, three secretaries and one researcher/librarian. Although Watkins International prides itself on ostensibly not having a rigid hierarchy, it is in fact very hierarchical, consisting (for billing and employment purposes) of four grades of technical assistant,one grade of analyst, consultant and senior consultant; two gradesof managing consultant, associateand partner. Having climbed the greasypole to partner in a division, the hierarchy continues remorselessly upwards, and includes divisional senior partner, partner-in-charge of central departments (audit, tax, managementconsultancy, corporate finance and insolvency services),

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partner-in-charge of regional offices, managing partner of regional offices, managing partner of head office in Birmingham, chief executiveand senior partner and chairman of the board. Added to this list are the partners in chargeof offices in eachcountry and of associatedfirms. Recruitment policy within Watkins is generally rudimentary but calculated. There is no shortageof well-qualified applicants.In normal economic conditions the Watkins management consultancy thrives on a constant inflow and outflow of bright young staff, although in the past three years recessionhas generally slowed down this movement such that Watkins has made around five per cent of its managementconsultantsredundant since the end of 1992.The typical management consultant is aged around 30, with a few years professional accounting or industrial experience.He (for the typical consultant tends to be male, although exceptionally gifted women are being recruited in greater numbers) generally has a first degree from a well-known university plus an MBA from one of the top three British businessschools.Occasionally an accounting qualification has also been obtained. He or she is also highly motivated with an almost obsessional ambition to climb the career ladder. Becauseof this obsessionwith success,the typical consultant is prepared to work all hours of the day and night, and working at weekends in the office is thought to be particularly important, provided of course,a partner is made aware of this fact. Entrants to the BM Division are somewhat different to the typical Watkins consultant. A typical BM consultant is aged around 29 to 33; has a first degree in engineering, usually from one of three universities plus membership of a professionalengineering institute, such as the Institute of Mechanical Engineering.Possessionof a higher degreeis rare. As a consequence,the averageBM consultant and partner are lesswell qualified than other Watkins consultantsand partners. A climate of almost anti-intellectualism has therefore flourished in the BM Division, particularly since the merger with the Watkins empire, along the crude lines of 'we're only the oily engineers- ignorant butproud-of it'. To reinforce this somewhatmaverick ethos, and in the rare moments when everyonedowns tools to relax, the BM Division has earned some notoriety in the mammoth drinking sessions in local Birmingham pubs, followed so it is alleged, by dubious parties in far flung suburbs.As with the Watkins company as a whole there is never a shortageof young hopefuls eagerto join the ranks of BM and as such, the BM partners have over the yearsdevelopeda callouSand cavalier attitude to personnelmanagement. Suchattitude by the partnership would have been unthinkable during the time of Alex MacTaggart and Duncan Brownloaf. The Watkins management consultancy personnel function is small and subordinateto the wishes of the partners. Motivation of staff is rarely considered and their well-being is secondary to the business of improving profitability. Heinrich Grubber in particular, takes a cool and calculating approach to staff management.He tends to selectbright new consultants and then invariably burn them out

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Brownloaf MacTaggart- Control and power in a management consultancy193

offices, i senior tners in .t calcu:onomic onstant ~years nwith fay and icularly typical .3; has a .es plus tillite of 1 conse.ed than tellectulnce the >nly the .at mavto relax, ing sesiubious )le there [ and as cavalier ) would Duncan lction is

with sustainedhard work until the next young person comesalong to take their place.It takesaround eighteenmonths to two years of relentlesshard work in the 8M Division for the tnie nature of the situation to dawn on the more perceptive consultant - basically promotion to the next grade is rarer than a Norwegian parrot and, while one or two consultantshave recently been promoted from consultant to senior consultant, only one person in the past fifteen years has been promoted from senior consultant to managing consultant. The allocation of consultancy assignments within the 8M Division is basedprimarily on either 'the warm body' principle (who is available)or as part of a none too subtle punishment and reward system.Generally there is a perceived hierarchy of jobs, ranging from an international assignmentin some exotic location, working for Heinrich Grubber and the well-respected associateNigel Redcoat(rated as a top job) to the managing of a small engineering business under receivership, working for Eric Reliant and the loathed and feared associate,Rupert Wormwood, famous for his unprincipled ways and ill-disguised alcoholic binges (most certainly a low-rated job). A successionof either top-rated jobs for prestigious clients or small insignificant jobs managed by poor job managers, can make or break a Watkins careerin around four months. Advancement in the steadily deteriorating atmosphere of the 8M Division is always likely to be a rather haphazard process.Surprisingly, technical engineering skills per se are not the key to career successin this organisation. Advancement, if it comesat all, may occur by a combination of conformity to, compliance with, and dependenceon the sub-culture of the 8M Division, within the wider culture of the Watkins company. Conformity, complianceand dependencycan be demonstratedin a number of ways - being seento work all hours in the office; flattery of the partners resulting in appalling sycophancy; exercising personal responsibility by undertaking small marketing and selling exercisesdesigned to bring in new assignments;completing already time pressuredprojectsbefore schedule and under budget (which generally can only be achieved by underrecording time expended on a project), and the honing of good old fashioned Machiavellian techniquesof back stabbing. It is againstthis background of difficult trading conditions in an environment that is uncertain, together with the absorption of a relatively small firm into an international managementcompany with all its standardised procedures, and where mistrust, intimidation and fear are common emotions, that this caseis developed. ACTIVITY BRIEF

1 Identify the different ways in which managerial control and power are being exercised in both Watkins International as a whole and the 8M Division in particular.

194 Casesin Organisational Behaviour

2 Havingidentified the different aspectsof managerialcontrol, examinehow appropriate these are in managing the different types of employeesin WatkinsInternational. 3 Explore the nature of the apparent dichotomy and tensionscreated, in allowing highly qualified,creativeand essentiallyautonomousconsultants room to reachcreativesolutions to client problems(often under considerable time pressureswithin an uncertain environment)and the employing organisation'sneedfor order,stability and reliability. 4 Considering the Watkins International approach to quality assurance,which appears to be primarily bureaucratic and perhaps at variance with the image management consultants would wish to present to clients, is this likely to affect the way consultants consider and make recommendations for the implementation of total quality management systemsin client organisations? RECOMMENDED READING

Huczynski, A. and Buchanan,D. (1991).OrganizationalBehaviour,SecondEdition, New York: Prentice Hall, Chapter 22 'Management Control' and Chapter 19 'Leadershipand ManagementStyle'. Sveiby, K. E. and Lloyd, T. (1987) Managing Knowhow.Add Value by Valuing Creativity,London: Bloomsbury. Mullins, L. J,. (1993). Managementand OrganisationalBehaviourThird Edition, London: Pitman, Chapter 17 'The Nature of ManagementControl' and Chapter 20 'OrganisationDevelopment'. Kakabadse,A. Ludlow, R. and Vinnicombe, S. (1988).Workingin Organizations, London:Penguin,Chapter8 'Power:A Basefor Action'. Thomas,K. W. (1976).'Conflict and Conflict Management',in M. D. Dunnette(Ed), Handbookof Industrialand OrganizationalPsychology, Chicago:Rand McNally, pp 889-935 Morgan, G. (1986).Imagesof Organization,Newbury Park, California and London: ~ge, Chapter6 'Interests,Conflict,andPower'.

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