New findings from one of the first large scale studies of internal management consultancy in the UK reveal strength under considerable client pressure and scrutiny. In the current economic climate, there are lessons here for its external counterpart, long seen as the more successful and robust side of management consultancy.

The research, conducted by academics at the University of Bristol and Oxford Brookes University, examined how internal consultants contribute to the management of a firm's human resources. The study involved almost 100 participants from internal consultancy units in 24 organisations across a range of sectors.

As businesses and government seek to cut costs, expenditure on external management consultants is an obvious target. But organisational innovation is still needed, so what are the alternatives? Internal consultancy is one option and is no stranger to prospering in hard times. Always having to justify its existence to clients, it provides valuable lessons about sustainability in a change agency role.

The key findings from the Economic and Social Research Council (ESRC)-funded study provide important insights for managers and policy makers:

• Internal consultancy has to compete with both external firms and line management for credibility. Despite this tough environment, some units are surviving and even expanding. Key to this is managing relationships with clients and either diversifying their services or specialising.
• This has implications for external consulting firms who can no longer rely on an exclusive status, specialist knowledge or unlimited client budgets.
• The fragile existence of internal consulting units is also a warning however, for those, in Human Resource Management (HRM) for example, who see consulting as a route to a secure and strategic position.

Lead researcher, Professor Andrew Sturdy of the University of Bristol’s School of Economics, Finance and Management, said: ”Internal management consultancy has only one main source of clients and lacks the mystique of external firms. Units are highly vulnerable to being broken up or closed down.

“This means that successful ones must sustain a strong reputation. This serves as a model for managing innovation and for external firms who have, until recently, experienced comfortable growth.”

Dr Nick Wylie of Oxford Brookes University added: “The pressures on internal consultancy operations are not only a sign of resilience, but of how hard it is to survive as change management specialists. This is not always recognised by those such as HRM managers who see the success of external consulting as something they might replicate inside organisations.”  

The research, entitled ‘Internal Consultants as Agents of Change’, will be presented at a seminar at Cass Business School, London on Monday 24 October 2011.