A Model of Management Consultants
Posted: 11 Aug 1999
Date Written: May 1999
Abstract
This paper creates a model of how management consultants aid clients in their cost reduction programs. It shows the impact of four distinct types of consultants. Brains consultants increase the number of potential options and improve the pool of possible cost reduction techniques. Procedure consultants reduce the cost of installing techniques and allow the firm to attempt techniques with lower potential payoffs. Grey hair consultants provide two distinct types of guidance. Grey hair customization consultants increase the benefit from successfully installing a technique and raise the expected value of all techniques. Grey hair evaluation consultants provide improved information about the firm's possible options. Improved information can have two potential effects: it can weed out unfavorable techniques, or it can allow the firm to place greater reliance on its information and attempt more marginal techniques.
JEL Classification: D80, L84, M40, M46
Suggested Citation: Suggested Citation