Management Consulting and Ethics - Essay Example

?Management consulting-To what extent is it realistic to expect consultancies to act ethically? Table of Contents Management consulting-To what extent is it realistic to expect consultancies to act ethically? 1 Table of Contents 2 Introduction 3 Critical Analysis 4 Conclusion 7 References 8 Bibliography 10 Introduction The present business environment has been often described as the age of turbulence. Business organizations are therefore trying to analyse means to generate competitive advantage. Consulting has therefore become a common practice with business firms to take have a deeper analysis of their business strategies before making a vital decision. Consulting is defined as a practice that involves use of multiple talents and expertise to help solve issues in organizations. In the present business environment business consultants have a very important role that provides them with a good influential position in an organization. This has given rise to many ethical aspects that have emerged after a series of frauds that have come to light recently over the few years (Wang, 2008, p.56). The recent case of Mr. Rajat Gupta involved in a series of corporate frauds and unethical practices illustrates the aspect of unethical practices being used by consultants worldwide. The famous and influential consultant who happened to be the managing director of Mc Kinsey and Co illegally and unethically started a parallel consultancy that had his family members in the top management. Mr. Gupta reportedly indulged in unethical practices like leaking sensitive information and insider trading to get unexercised options worth 1.3 million dollars from GE’s subsidiary arm Genpact (Monadnock Research, 2011). It has also been reported that it is the middle management persons that are most often involved in cases of frauds and unethical practices in business organizations (Monadnock Research-a, 2011). These incidents have sparked of a major debate among various circles with regards to the aspect of maintenance of credibility and ethical nature of business consultants. The present study would try to analyse the extent to which consultants can be expected to act ethically in their work culture and predictions. Critical Analysis It has been stated and believed widely that consulting is a practice that aspects for engendering trust. In the age of capitalism it has often been stated that consultants and consultancies largely act as certifying agents. The auditors largely acted as an assurance agent for external investors and general public towards the aspect of ethicality and trustworthiness of the business organizations. This aspect in itself has given considerable powers and high status to the consultants who normally act as auditors for business organizations (Sikka, 2009, p.3). With the passage of time since the industrial revelation the world has seen many reforms that also include better surveillance and control by the regulatory authorities on public organizations as well as the financial institutions like banks and stock markets. The growth of business organizations was also followed by a commensurate growth in the consultancy industry. However the aspect of regulations and monitoring was completely absent for this sector that has perhaps led to the growth of unethical practices in the industry (Mahoney, 2011, p.5). The aspect of unethical aspect in the consulting industry has been often traced to the aspect of individualism in the industry. It is a common practice in the consulting industry to make individual consultants accountable for their activities that also includes the aspect of providing accolades for their performances. This has been identified as one of the major reasons for the growing influence of the consultants that in turn has given rise to unethical practise in the industry. This aspect of unethical means has also led to the growth of a popular feeling with regards to the trustworthiness of the consultants with regards to their practices in the industry (Mahoney, 2011, p.3). The trustworthy perception of consultants and consultancies has been in question since most of ethical aspects have been just incorporated as recommendations rather than a code of conduct that is expected mandatorily. This has been one of the reasons that have led to the growth of a popular perception that has questioned the trustworthiness of the consultants worldwide (Hauser, 2009, p.83). This aspect has perhaps led to growing consensuses among the firms as well as the consultancies to adopt strict codes or maintain ethics in their activities. Firms have also become more stringent towards the aspects of ethics in the consultants to be hired. This is primarily because of the growing public opinion in which investors are looking for ethical aspects before investing in a company. This opinion has become even more pronounced following the unethical means adopted by many consultants such as in the case of Enron and Lehman Brothers (Gouin, 2007, p.8-10). The incorporation of these codes of conduct has perhaps instilled some faith with regards to the trustworthiness of consultancies to act in an ethical manner. The question of trustworthiness of business consultancy firms also arises due to the fact that business consultancies work as consultants for rival firms. This aspect acts as a factor that induces consultants working in the business consultancies to indulge in unethical activities. Moreover the absence of any regulatory body as well as specific codes of conduct for business consultancies also makes these organizations less trustworthy among the various sections of the market audience. The managers need to identify and understand the ethical values of the organization and managerial decisions must influence the performance of the firm. But this independent control of the managerial issues in one hand gives self confidence to the management but on the other hand sometimes fragile or faulty approach fail to identify the ethical existence of the company and its society (Sturdy et.al., 2006, p. 854-855). In order to carry out ethical consulting services the employees of the company are needed to act ethically. Honesty within the management plays a very crucial role in carrying out business without any ethical conflict but this need to influence the subordinates also for following their way and act accordingly. Ethics can’t be managed rather it can only be a strong moral influence to the employees which are reflected to the substantial improvement to the society (McNamara, n.d.). But this ethical practical are not always carried out by the companies due to several reasons. Unethical practices for consulting firm are not always for gaining self profit by intentional manipulation in the auditing but in most cases it’s done in order to grow the interest of the stakeholders and the business researchers to meet the demand of the firm’s business need. Often political and social pressure over the firm force them to act responsibly with their moral values but with the increasing demand in the business process the firms face paradoxes and conflicts to act ethically. The company need to identify their own interest but in the consequence should not also forget the social interest and should maintain a proper balance between the right and the wrong decision for the problems that arises (Gray, Carr, n.d., p. 1). Strategic thinking from the management is not always doing the right things by the consulting firm but on the other hand it should be doing things right in a responsible manner (Despard, 2002, p. 13). Unethical sometimes are unavoidable on several instances for critical decision making to cope with certain business challenges but companies should keep in mind it should not affect the social environment for the sake of performance improvement of the firm only. The recent financial crisis and the inability of business consultancies to predict the same, has triggered a massive debate over the trustworthiness of business consultancies. It is often argued that business consultancies including auditors acted unethically and did not show the accurate picture of the financial aspects of the organizations. Timely and ethical action by the auditors and the business consultants could have somewhat helped in mitigating the effects of the financial crisis (Arthur W. Page Society, 2009, p.6-10). The example of the fall of the Indian IT giant Satyam was also an outcome of unethical practices. It was also found that other than the owners of the firm the auditors of the company also had knowledge of pilfering of funds and the misinformation and fund diversion by the management of the company. The aspect of auditors and consultants being silent spectators to such a major issue shakes the faith over the business consultancies (Wharton Network, 2009). The facts largely provide a general idea that consultants and business consultancies cannot be fully relied upon with regards to their aspect of ethical considerations and trustworthiness. Conclusion The analysis of the topic of study leads to a conclusion that in the present set of conditions and considering the previous records of consultancies, it is very difficult to rely on their trustworthiness. This is largely because of the fact that unlike business organizations and financial institutions that are very closely regulated and monitored by regulatory authorities, there is no such provision for supervision of the business consultancies. This leaves huge scope for frauds and unethical means to be adopted by the consultancies (Jones, Parker & Bos, 2005, p.18-20). In order to generate trust among the individuals it is necessary to cover these organizations under specific monitoring authorities and ensure accountability to the business consulting firms so as to prevent malpractices in the industry. Ensuring code of conduct and effective motoring can surely go about a long way in ensuring trust and confidence among the business consultancies that has of late taken a severe beating on their image. References Arthur W. Page Society. (2009). The Dynamics of Public Trust in Business— Emerging Opportunities for Leaders. [Pdf]. Available at: http://www.darden.virginia.edu/corporate-ethics/pdf/public_trust_in_business.pdf [Accessed on June 23, 2011]. Despard, T. (2002). Performance Avenues. Xulon Press. Gray, B., Carr, A., (No date). Choosing Between Right and Right. [Pdf]. Available at: http://conferences.anzmac.org/ANZMAC2007/papers/B%20Gray_1a.pdf. [Accessed on June 23rd 2011]. Gouin, B. (2007). Security Design Consulting: The Business of Security System Design. Butterworth-Heinemann. Hauser, A. (2009). Ethics in Management Consulting: An Examination of the Extent to which the Principles of Integrative Consulting Ethics are Incorporated in Management Consulting Firms in Germany. GRIN Verlag. Jones, C., Parker, M. & Bos, R.T. (2005). For business ethics. Routledge. McNamara, C. (No Date). Complete Guide to Ethics Management: An Ethics Toolkit for Managers. [Online]. Available at: http://managementhelp.org/businessethics/ethics-guide.htm. [Accessed on June 23rd 2011]. Monadnock Research. (2011). Rajat Gupta and Anil Kumar Ran Side Consulting Business While Serving as McKinsey Senior Partners. [Online]. Available at: http://www.monadnockresearch.net/members/login.cfm?hpage=1049.cfm [Accessed on June 23, 2011]. Mahoney, J.O. (2011). Advisory Anxieties: Ethical Individualisation in the UK Consulting Industry. [Pdf]. Journal of Business Ethics 2011. Monadnock Research-a. (2011). Most Canadian Fraud Perpetrated by Mid-Career Male Non-Management Staff. [Online]. Available at: http://www.monadnockresearch.net/members/login.cfm?hpage=472.cfm [Accessed on June 23, 2011]. Sikka, P. (2009). FINANCIAL CRISIS AND THE SILENCE OF THE AUDITORS. [Pdf]. Essex Business School University of Essex Working Paper No. WP 09/04. Sturdy, A. et.al., (2006). Management as a (Self) Confidence Trick: Management Ideas, Education and Identity Work. [Pdf]. Available at: http://org.sagepub.com/content/13/6/841. [Accessed on June 23rd 2011]. Wang, C.X. (2008). Being Ethical in Instructional Technology Consulting. [Pdf]. Available at: http://www.sicet.org/journals/jetde/jetde08/paper05.pdf [Accessed on June 23, 2011]. Journal of Educational Technology Development and Exchange, Volume 1, No. 1, November, 2008. Wharton Network. (2009). Scandal at Satyam: Truth, Lies and Corporate Governance. [Online]. 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