Consulting Network » Bain http://www.consultingnetwork.co.in Fri, 13 Jan 2012 04:39:53 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 BCG already did it, Now Mckinsey and Bain to help L&T http://www.consultingnetwork.co.in/bcg-already-did-it-now-mckinsey-and-bain-to-help-lt/1172/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/bcg-already-did-it-now-mckinsey-and-bain-to-help-lt/1172/#comments Tue, 18 Aug 2009 04:47:20 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=1172 Consulting biggies, BCG, Bain and Mckinsey are back in the limelight.

Engineering and construction giant Larsen and Toubro (L&T) has already implemented two five-year plans to reposition the company, which was heavily into engineering, procurement and construction segments, with a large exposure to commodity businesses such as cement and ready-mix concrete, to a more focused, value-added engineering company

L&T had earlier sought help from BCG to devise a five year plan, as per the plan, L&T divested its cement business in favor of the Aditya Birla Group. Recently, L&T also divested its ready-mix concrete business in favor of Lafarge SA.
The second five-year plan will get over by March 31, 2010. As per the second plan, L&T’s target was to reach a business volume of Rs 35,000 crore annually. L&T had managed to complete Rs 38,000 crore last year and expects to cross Rs 42,000 crore this year. Thus achieving 15-20 per cent more than the proposed target.

L&T will initiate its third round of major business restructuring in 2010 and has appointed consultants McKinsey and Bain to guide it, as also in the succession plan, Further, L&T’s chairman A M Naik also plans to retire in September 2012

Following News Media Article were referred for this story

 L&T restructuring plan to be implemented next year


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]]> http://www.consultingnetwork.co.in/bcg-already-did-it-now-mckinsey-and-bain-to-help-lt/1172/feed/ 0 Open Forum: Skills Required to Break Into Consulting/Strategy Roles http://www.consultingnetwork.co.in/open-forum-skills-required-to-break-into-consultingstrategy-roles/966/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/open-forum-skills-required-to-break-into-consultingstrategy-roles/966/#comments Tue, 07 Jul 2009 09:32:37 +0000 Mohit http://consultingnetwork.co.in/?p=966 Following is an open forum discussion picked from our Group.

Mayank Gupta asked :

What all skills do I need to build to get through Consulting/Strategy industry. I am an MBA Marketing and B.Tech (Mechanical and Automation Engineering) fresher with no prior experience.

In these times of recession, every where I read they have been telling to build up your skill sets. I want to work in the companies involved Management Consulting/Corporate Strategy and Planning for eg. AT Kearney, McKinsey, Bain & Co. But the jobs in these kind of companies are hard to come by these days, esp. for a fresher.

I am an MBA (Marketing) + B.Tech (Mechanical and Automation Engineering) graduate with no prior experience. I would like to know what all skills do I need to build and also, what all software programs do I need to know. Please provide your valuable suggestions

Prashanth Krishnaswami, Management Student, Content Developer replied…

I am no expert but what I’m going to be telling you here is reliable hearsay. I think it is close to impossible for a fresher to break into any of the companies you’ve listed above unless that fresher is from a country’s top 5 business schools.

However, sometime down the line (say around 6-8 years), after you’ve worked with some tier 2 business consulting companies and have networked with a lot of people in the consulting business, you can break into any of the biggies. But all that depends purely on what you do in that time (6-8 years). The 6-8 year period is only a safe period I’m quoting here for you. If you are exceptionally good, you could do it within half that time too.

Some more reliable hearsay tells me that McK has cut recruitment numbers even in IIMs by a significant percentage. So, now would be a really bad time to try to break into any of the biggies, anyway.

Think on those lines. You would understand my point.

Akil Laxman, Consultant  replied…

I would concur with most of what prashant has said. The strategy consults that you want to get into recruit only from IIM-ABC and that too in small nos . If this is the path that you want , I suggest that you develop yourself as a area expert by working with a few tier 2-3 consultancies and apply to them once you have a lot of relevant experience .

As I am aware of your current situation ( I read another thread) , I would suggest that you join a start-up consultancy for now . The pay might not be great but It’ll definitely put you on the path to where you want to go. Start-up consultancies are mushrooming all over the place. Be sure to choose one where the founder is backed by good experience in the industry.

Ashish Mishra, Freelance Consultant at odesk.com replied …

Well I agree with the views expressed here regarding your query. But just brand is not the only consideration to select people. Brand does not ensure success.

What these companies look at is your own personality and how you have grown and developed yourself as a professional to accomplish what you look for in life.

I would suggest you to understand their philosophy behind hiring people. They look for leadership qualities the way this term Leadership is taught as a separate course in top universities in North America. I hope that might help you. And needless to say that you need to expand your network and collect views from the people from different background and experiences.

Moreover McKinsey has a separate knowledge center where you can apply for the jobs.

Ashok Shastry, Founder – ConsultGenie replied…

On big consulting firms I have nothing to add to what others have already said. I believe there’re millions of individuals who have great talent and can make superb consultants on their own.

First thing I suggest is to find a mentor and do a bit of internship if possible. It could be an individual or a small consulting firm. If this is not possible then find a job you like but keep trying to find a mentor and learn the nuances.

End of day it takes great focus and experience to be a consultant. If you’re sure of what you want to specialize in, at least to a small extent, I can try and connect you to a few consulting firms I know.

Dilish Kuruppath ,webMethods Consultant at Software AG replied..

Practically, its all your will to decide where you want to end up. You can stop at any position in your career and stop growing (or) you could keep moving.

Again, the possible path (for who ever, whatever degree it be) would be – get into an industry (anything), gain experience starting from the basics and grow to different levels, changing companies help too – it gives you more exposure. Once you are comfortable with quite a decent understanding (with in-depth hands on of what happens in the ground) of almost all the aspects of the industry, get into consulting.

Remember, you need to keep looking at the bigger picture for whatever you are doing at any point in time. Once you have the right credentials ( in terms of experience), you can get in and become successful. Spend at least 5-8 years to start off. You wont regret it.

Got an opinon to share? email us or reply in comments section


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]]> http://www.consultingnetwork.co.in/open-forum-skills-required-to-break-into-consultingstrategy-roles/966/feed/ 2 Recent MBA and still Unemployed? http://www.consultingnetwork.co.in/recent-mba-and-still-unemployed/890/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/recent-mba-and-still-unemployed/890/#comments Wed, 10 Jun 2009 09:56:50 +0000 Mohit http://consultingnetwork.co.in/?p=890 A friend of mine, a recent graduate from one of the premier business schools in India, called me, his predicament, he is an engineer from a tier-2 engineering college in India and an MBA, and yet, he has not managed to even remotely come close to a job offer

His business school finished the placement season few months back, after managing to place approximately 50 percent of the batch. He has knocked doors for most of the companies and yet has been unsuccessful.

Following is the advice I gave him, feel free to add your pointers or point mistakes in my advice in the comments section.

1. My friend LinkedIn – Firstly, remember that a professional networking site like LinkedIn is your best bet for landing a job in a tough market, If you don’t have a LinkedIn profile, it serves you best to create one, your LinkedIn profile serves as your public resume, secondly start using the LinkedIn Signature option in your emails. Lastly, scout for recruiting professionals, send them a polite message and cross your fingers.
2. Join a Non Profit – Do you feel strongly about a particular cause? Then this is the best time to support your favorite cause.  Run a project for a non profit, running a project end-to-end is equivalent to any high end job and provides you great exposure.
3. Build Brand “you”, Voice your opinion – If you feel strongly about a particular industry then why not start blogging about it?  Each one of us is a brand, and you are building that brand by writing about the industry you care about. This works for two reasons, firstly, it keeps you updated on events, a job search can be tiring and demotivating, especially if you are a recent MBA blogging/writing about your preferred industry or learning new skills keeps you in the game. Secondly, published content adds a lot of value to your resume, hence makes you stand out from your competition
4. Join/Build communities – Best place to network are focused communities in your area of expertise/interest, so if you are looking to break into the consulting industry, then Consulting Network India could be your first stop, similarly, if you’re interested in the marketing products/services, then go ahead and find a community focused on marketing professionals.
5. Follow the entrepreneurial route – Want to make it big? Great! , there are no jobs? Even better! Downturn can actually be a great time to visit your entrepreneurial roots. Think of possible small investment businesses, create a detailed business plan to support it, and start your venture. You don’t have anything to lose.

Remember, your job prospects may be low for now, considering the worldwide downturn, however, eventually, the job market is bound to get better. Your best bet is to survive the downturn and showcase your strength when the opportunity comes knocking.

Please feel free to email me at mohit.kant@consultingnetwork.co.in


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]]> http://www.consultingnetwork.co.in/recent-mba-and-still-unemployed/890/feed/ 2 Indian Consulting Market: An Insight into the Factors Restricting Growth http://www.consultingnetwork.co.in/indian-consulting-market-an-insight-into-the-factors-restricting-growth/857/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/indian-consulting-market-an-insight-into-the-factors-restricting-growth/857/#comments Tue, 02 Jun 2009 15:13:51 +0000 Ashwin T Ananthakrishnan http://consultingnetwork.co.in/?p=857 The Indian Consulting Industry has been experiencing a resurgence in the last few years. This industry has been making rapid strides in the Indian market over the last decade and has witnessed a significant increase in the number of new entrants in this field. The solitary objective of the participants in this market has been to gain maximum market share in this highly consolidated and  competitive environment, primarily by capitalizing on the apposite factors driving it.

The Asia-Pacific (APAC) consulting industry generated revenues worth $33.5 billion approximately in the year 2008 and registered a compound annual growth rate (CAGR) of nearly 4.1 percent from 2007. The market is further expected to experience steady growth and is anticipated to generate revenues of approximately $39.2 billion by the end of 2012. Japan has dominated the APAC market by contributing the maximum revenues with a share of nearly 67.2 percent. Out of the APAC total market, India’s contribution stands at $1.81 billion approximately with a share of approximately 5.4 percent of the total APAC market size. Information Technology (IT) including e-commerce, telecommunications and so on followed by Corporate Strategy, Outsourcing Services, Human Resource Management, and Operations Management have been some of the prominent business divisions in the consulting market. The below graph (Figure 1) portrays the percentage split of the total APAC revenue across difference business units:


Why Consulting?

The necessity of moving ahead in the competitive structure or chain and gaining optimum market share in today’s highly competitive markets has made companies across verticals opt for third-party consulting and advisory services. This has made consulting an indispensable function for companies these days. The differentiating factor that each company puts forward in order to achieve competitive edge over their rivals has been one of the important factors of success for all the companies, specifically in the Indian market, and this is impossible with out the knowledge of market trends and behaviors. Moreover,  the fact that this success can be achieved only by implementing the right strategies from time to time and by taking pertinent decisions considering the market scenarios they cater to have prompted companies to subscribe for the products and services offered by consulting firms. The primary reason behind this urge is because consulting firms interact or are involved with the all the market participants or industries participants on a regular basis and are very well informed about the market happenings in each of the sectors. This continuous market tracking service coupled with technical industry know-how facilitates consulting firms to help clients take the right decision at the right time as well as relieve them from the pressures like ‘time-to-market’ a new product or production planning or in fact any challenges in any business divisions. In a nutshell, need for the appropriate market facts, the urge for companies to face the market trends by applying third party & unbiased thoughts, the call for a complete 360 degree view of the market that each company participate in, and the requirement to take apt decisions by companies to outpace competition are some of the factors that drive the growth of this industry.

Challenges Faced by Emerging & Boutique Consulting Firms

Acquiring the right set of talent challenges the firm in matching the client’s requirements:

Providing meaningful insights with optimum clarity and offering strategic advisory solutions on diverse subjects based on the analysis done are the two important aspects of consulting. These are also the two essential factors that each company looks out from the consulting firms. Even though, delivering all these factors together bind a consulting firm’s success, this can only be achieved by having the right set of manpower and appropriate pool of talent. Acquiring the right set of people to match every client’s broad range of requirements has been one of the challenges that smaller consulting firms in the Indian market face. This challenge has resulted in a change in the trend of hiring manpower in consulting organizations of late. Previously, consulting firms were primarily looking at hiring specific industry expert or any individual market expert. Even though some firms continue to sustain this model of hiring, most of the emerging firms in the country focus at hiring individuals who are flexible and those who can analyze any market or industry at a given period of time. This trend is expected to crystallize in a few years down the line. The reason for the same is two fold. One, the firms can leverage on their mixed pool of talent and assign any projects to any one individual or more and secondly, this facilitates the firm to considerably cut costs of engaging a single market expert.

This factor is even more risky for smaller and boutique consulting firms compared to the established ones, as they are much smaller in terms of their size, operations, and financial capabilities. Although, these firms offer only niche market services compared to other traditional firms, some of these boutique firms also face powerlessness to train their new employees due to the lack of proper resources, which restrains the firm’s growth further.

Increasing rate of attrition affects the organizational growth:

One other challenge that Indian consulting firms, both established as well as emerging ones face is the increasing rate of attrition. This can be associated with multiple reasons like the increasing growth opportunities in the market for consultants, attractive compensation packages, or correspondingly the cost cutting measures that companies adopt, and also on the cost- benefit ratio from the companies stand-point although the latter is applied only during acute market crisis. However, better remuneration packages on offer and better career prospects available are the two most common factors that consultants give importance to. Apart from these two factors, other common reasons range from dissatisfaction of their job role to the simple reason of lack of post-graduate sponsorships available with in the firms they work. All together, a suitable work-life balance, greater leadership roles in front, with better remuneration and benefits are some of the common factors which consultants expect in each company and with consulting becoming more mainstream today, the rate of attrition in this industry is expected to gradually slow down in a few years down the line. The impact of this factor is comparatively low on established firms because they have the best set of experienced consultants who can act as a back-up in case of an emergency situation. However, the impact is pretty severe on smaller firms as they are small in size and operations and also due the fact the time taken for smaller firms to replace a consultant with a new one is longer compared to the bigger firms. The below table shows the common reasons for attrition and what companies should do to retain talent:

Common reasons for attrition

What companies should do to retain talent?

Poor Pay

Better Organization Management

Poor Career Development

Career Development

Better Opportunities Else Where

Flexible Benefits

Poor Projects

Salary/Bonus/Incentives

Office Politics

Extended Ownership

Poor Management

Profit Sharing

Better Offers

Support Structure

Work/life Balance

Better Management Leadership

Source: Top-Consultant.com

Maintaining long-term relationships with clients affects the long-term existence of the firm:

Maintaining long-term relationships with existing clients is one other key challenge that the small and emerging consulting firms face. This is largely due to the fact that the Indian consulting market is more or less a buyers market. More than convincing the companies to sign-up proposals, factors such as cost-benefit ratios, value added services and so on play a pivotal role. Numerous market participants and increasing market entrants with a variety of project deliverables have leveraged organizations by giving them the option to choose the right consulting firm for the right price for a project. However, this factor should be perceived on a different notion when it comes to a proposal with bigger and established consulting firms who are the pioneers of this Industry and who have proven success record in delivering results.

Highly competitive market influence firms in gaining market share:

Smaller and emerging firms also face the challenge of gaining market share. Regional consulting firms have lesser market share compared to the bigger established firms who always top the competitive chain, even in the Indian market. Like wise, global players such as Bain & Co., McKinsey & Co., Boston Consulting Group and so on dominate the market for strategy consulting with nearly three-fourth of the market share in their hands, leaving the rest to the smaller and emerging firms. On a related note, most of the above mentioned business divisions are being monopolized by the big guns there by leaving very little scope for the smaller and emerging consulting firms. However, a noticeable trend in the recent years is that the smaller and niche firms are gradually taken seriously than the bigger ones. Of late, companies have started experimenting with niche firms by working with them on smaller regional projects but at the same time partner with the trusted bigger ones for the larger and other global projects. Nevertheless choosing the right consulting firm largely depends on the bids or request for proposals (RFP) that companies put forward and the proposals they receive from these consulting firms. While attracting new clients will always be an easy task for the established consulting firms due to their proven success and credibility, this factor acts as a major barrier on emerging firms as developing and converting a relationship into a business deal is comparatively tricky for these firms owing to their poor strategic alliances, lesser corporate experience and so on.

Off shoring/Outsourcing to India acts as a challenge as well as driver:

Off shoring back-end functions to India has obviously been a market driver, not only for the consulting industry but for the country as a whole. However, from a consulting firm’s perspective, though this factor helps expansion and globalization, some companies feel that it restrains the company development and growth in the outsourced regions primarily because of cultural differences and other barriers related to work. Professional dissimilarity, differences in attitude, adjusting to time zones, accent’s, and differences in a person’s commitment to work have been some of the factors that American & European counterparts consider as challenges, when it comes to off shoring work to India. And these are also some of the challenges that small and emerging consulting firms in India face, due to which the company brand name and public perception is most likely to be hampered. However, this can be overcome if the firm acquires the right set of people, train them on flexibility and motivate them to work better.

‘Market’ as a Challenge affects routine businesses:

One of the other challenging factors which impact consulting firms, smaller ones especially is the volatile market conditions they experience. Even though this factor affects both the established as well as smaller emerging firms, the former have the capability to sustain and overcome the market downfall in a better efficient way due to their long-term existence and familiarity of the market, than the latter. One such situation to be quoted is the recent sub-prime crisis which more or less created a win-win situation for both bigger and smaller firms with respect to acquiring new projects, i.e., it created a situation where in the boutique firms could possibly capitalize on the market conditions to win a project over the bigger ones, primarily because of their reduced pricing and other cost saving offerings. However, a fact is that, such situations are real good opportunities for the boutique firms to prove their capability and credibility but in general most of the companies, totter in such situations.

Threat of Substitutes impacts new business development:

‘Threat of substitutes’ is one other key challenge that smaller and boutique firms face. Although the penetration rate of new entrants entering the market has been moderate for now, companies still has a lot of options when it comes to the RFP process for projects. Apart from the presence of big four consulting firms, there are numerous smaller and emerging firms in India who are yet to prove their credibility and who offer services at a reduced price compared to the others. Coupled with the reduced pricing, every new entrant into this market is coming up with differentiated consulting models and methodologies for attracting new businesses, and this again acts as a threat to the other firms. Existence of numerous firms, differentiated offerings, reduced pricing and so on has impacted the smaller firms in India by hampering the customer loyalty and also by making this market, a highly price sensitive one.

Conclusion

Although, factors like globalization, off shoring and outsourcing have made India a suitable destination for various companies, creating vast employment opportunities for the increased pool of talent, the regional smaller and emerging firms still face a lot of challenges such as the ones highlighted above. The firms catering to the Indian market alone are on a rough terrain compared to the bigger established firms who have global roots. This is primarily because global firms who are eminent and well-known have a better probability of converting proposals into projects compared to the emerging firms with in India who are yet to prove their credibility and offerings. However, the growing level of uncertainty in today’s market, increasing competition, consolidation, the scope for various business’ in India and so on will drive the growth and is expected to make the Indian consulting industry’s future, a promising one.

Ashwin T Ananthakrishnan can be reached at ashwin.ananth@gmail.com


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]]> http://www.consultingnetwork.co.in/indian-consulting-market-an-insight-into-the-factors-restricting-growth/857/feed/ 1 Engineers and Consulting – Likely/Unlikely Combo? http://www.consultingnetwork.co.in/engineers-and-consulting-likelyunlikely-combo/824/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/engineers-and-consulting-likelyunlikely-combo/824/#comments Wed, 27 May 2009 16:14:06 +0000 Mohit http://consultingnetwork.co.in/?p=824 One of the popular career choices for engineer’s these days is consulting; I would back that statement with full throttle since I am an engineer myself. 

One of the prominent reasons for engineers wanting to carve a career for themselves in the consulting industry is that unlike a technical job (which can be monotonous), consulting provides a challenging learning experience. Most of the technical jobs are pre-defined and checklist driven. Consulting engagements bank upon not only the technical know-how but also the business acumen.

If Fiat wants to manufacture most fuel efficient engines in the market, then they would call automobile engineering experts, on the other hand, if Fiat wants to improve its market share in the Indian market, they would bank upon consultants to do the job.

From a monetary point of view, both engineering and consulting jobs are equally rewarding, provided you consistently perform well.

The main drivers for engineers opting for consulting are
- A consulting career helps engineers acquire business acumen
- A consulting career provides excellent networking opportunity and helps consultants develop long term business relationships
- A consulting career can help engineers become excellent orators and presenters
- A consulting career is just as monetarily rewarding (if not more) as an engineering career.

However, carving a consulting career is not easy for engineers. It is even tougher to carve a consulting career in India if you do not belong to a top institution such as IIT.

As an engineer, you can take two paths in the consulting universe,
a) You can either become use your technology expertise and support consulting engagements by applying skills learned during your engineering. Most of the big consulting firms like Mckinsey, BCG, Bain, EY, KPMG, and Deloitte have a strong technology practice.
b) You can enter other consulting areas which rely more on research and creative problem solving. Transaction advisory, strategy consulting, Process advisory etc. are popular areas where engineers are used. 

Challenges that engineers face are:
- They lack business knowledge; business and management are not the focus areas during engineering
- Engineers are thought to be less dynamic; often recruiters will stereotype you as a timid, bookish and shy individual.
- Engineers lack basic accounting and financial knowledge.

What are the areas of strength for engineers?
- Most engineers are logical thinkers and are able to effectively dissect through a problem effectively without hesitation
- Engineers have strong analytical skills
- Engineers are quick learners.

As aspiring consulting from an engineering background has to focus on following things
- Handle leadership roles during your college life, take up charge of events during college fest, organize quizzes/debates, raise funds etc.
- Showcase your teaming skills by participating in teaming events in college. Teaming is utmost priority for consulting recruiters
- Focus on your presentation skills. Excellent speaking skills are a perquisite to a successful consulting career. Develop these skills by practicing mock interviews, interacting with people from varied backgrounds. A good conversationalist is always in demand.

Remember the following things:
- Getting into your dream firms doesn’t always happen immediately, it’s a step by step process. Get into a boutique consulting firm get the required experience, and then make a switch to the firm of your choice.
- After 1-1.5 years of consulting experience, background has little significance. An engineer is as good as a commerce graduate.
- Lastly,  don’t lose hope and weigh your time and keep trying till you suceed.

Author can be emailed on mohit.kant@consultingnetwork.co.in 

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]]> http://www.consultingnetwork.co.in/engineers-and-consulting-likelyunlikely-combo/824/feed/ 1 PE firms will fill the funding gap in capital-intensive projects http://www.consultingnetwork.co.in/pe-firms-will-fill-the-funding-gap-in-capital-intensive-projects/728/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/pe-firms-will-fill-the-funding-gap-in-capital-intensive-projects/728/#comments Tue, 28 Apr 2009 17:21:25 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=728  A year ago, when equity markets had started sliding, closing out a funding avenue for companies, pundits had predicted that private equity, or PE, funding would gather pace in six-eight months time by when cash-starved companies would have little option but to lower valuation expectations and accept such financing.

In those eight months, the equities market—measured by the Bombay Stock Exchange’s benchmark index, the Sensex— shrank further by some 45%, but there was little sign of revival in PE funding. Venture Intelligence, a Chennai-based tracker of PE and venture capital deals, says PE firms invested about $526 million, or Rs2,630 crore, across 36 deals in the March quarter, an 87% drop from the year-ago quarter.
In a phone interview, Sri Rajan, head of consultancy firm Bain and Co.’s PE practice in India, draws this trend to a few reasons: companies tightening belts and reining in capital expenditure (capex) plans, PE investors facing liquidity issues as also waiting for the uncertainty on earnings to clear, and the lack of larger deals that would boost returns. Edited excerpts:
What are the factors hindering PE flows?
One clearly is that the equity markets are down and the number of IPOs (initial public offerings) that have happened in the last one year are not encouraging. The second issue is liquidity. That will probably become better over the next few months.
Liquidity issues?
Many LPs (limited partners, who invest capital in PE funds) around the world are hurting because values of their portfolios have come down. In many instances, LPs have had to revise their private equity allocations downwards, because they have a fixed percentage allocated to private equity. Because their investments in the equity markets have come down, their overall portfolio value comes down, and then they have to reduce the value of the PE exposure. The other issue is that the value of the PE exposure, when you mark it to market, has come down as well.
Are LPs defaulting on commitments?
More than defaults by LPs on the commitments they’ve made, what I hear is that they’re asking their general partners not to make too many investments till there is some more stability in their own balance sheets. However, what is interesting is that because the buyouts market in the US and western Europe has completely dried up, growth capital remains an area of interest for a lot of limited partners, especially in economies that continue to grow, and very specifically India and China.
Any risks that could hinder investments into India?
What may not make India as attractive is that the cash-on-cash returns that’s possible from deals is small, because of the smaller value of deals here. The simple math is that if you put in $1 billion, and you make a 20% return, then you make $200 million; if you had a $50 million investment (in a company in India), a 20% return gets you only $10 million. And smaller-value deals will continue to exist in India in the foreseeable future.
On the supply side, isn’t there also the factor that LPs prefer more liquid assets these days than PE?
There is an issue about liquidity in PE assets, but people also understand that at some level, the risk, compared to hedge funds, might be somewhat lower. It is certainly higher-risk than pure equity investments, but people also understand that you make returns if you put money into a solid private equity firm. Despite whatever has happened in the recent past, I don’t think people have written off PE as an asset class. There will be a demand for different asset classes, and clearly PE will be one of those.
From where do you see demand for PE coming in?
There are certain sectors where the ability to service the interest obligation is affecting earnings at firms. These are sectors where PE could potentially come in. There are other instances where capex has been announced; which, in some instances, you really can’t postpone. If you’re in the middle of a power project, where you’ve already put a lot of money, it becomes difficult to postpone capex. Power and infrastructure projects are seeking capital and PE money is coming in to fill the gap.
So when can we see a revival then, if at all?
My sense is that there will come a time, if the markets continue in the way they are and the liquidity issue persists, there will be no recourse (for promoters). At that time, valuation expectations of promoters will come down to a level private equity investors find attractive. What I can say is over the medium term—I can’t time it—India will still remain a pretty attractive market for private equity.

Source : LiveMint


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]]> http://www.consultingnetwork.co.in/pe-firms-will-fill-the-funding-gap-in-capital-intensive-projects/728/feed/ 0 Beijing is well-positioned to weather global economic storm – Bain & Company http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/#comments Mon, 20 Apr 2009 17:47:26 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=692
Boston-based management consultants Bain & Company believes in gauging success in terms of their clients’ financial results. It can’t be otherwise as the company very often accepts rewards in the form of equity in the firms it advises. In an interview, Steve said anything the Indian government could do to drive liquidity into the market is very essential now.

What is your take on course of the global economy in the near to medium term? Have we begun seeing early signs of a turnaround?

Anyone venturing to make specific predictions on the global economy now would clearly be putting himself at great risk. The fact is, we’re witnessing absolutely unprecedented levels of turbulence and uncertainty. Latest estimates are that global GDP would contract by 0.5-1% in 2009.

The magnitude of the current downturn is far greater and it is also much more pervasive than other worldwide recessions in the past 30-40 years. The leading indicators are relatively useless at this juncture.

India, despite its exports-imports to GDP ratio being not very high, is seriously impacted by the crisis.

Obviously, India is not insulated from the global crisis. It can’t be. There is a serious slowdown in India’s exports and the FDI inflows are also adversely affected. Together, these account for a significant portion of the GDP. Frankly, relative to many other countries, the challenge to employment growth posed by the crisis is more serious for India because 15 million enter the country’s job market every year.

This is a unique challenge. So, anything the government can do to drive liquidity into the market is essential. In addition to coaxing banks to lend, the government also needs to take steps to boost the corporate bond market.

With the high fiscal deficit, there is little space left for providing fiscal boost to the economy but there is still room for monetary easing. Banks here are at best supporting working capital needs of companies, much akin to how their counterparts in Germany, UK, Brazil, Japan etc are behaving these days.

Because of herd behaviour among potential lenders, credit is simply not forthcoming for major capital investments, which is necessary for overcoming the crisis. There is a glaring absence of risk appetite among the lenders, despite plenty of money in the global system. The money is not finding its way from the lenders to the people who need capital. It is also the question of dearth of borrowers in markets affected by dampened demand.

How feasible is to enhance intra-Asia trade in an expedient manner to partly offset the impact of decline in demand in the west on the aggregate demand for Indian goods and services?

Intra-Asia Pacific trade should be a priority for policymakers here. But given the level of purchasing power of the consumers in the region where half of the world population live, any plausible increase in intra-Asia Pacific trade would not make up for the western slump. A retreat to regionalism is not the solution. What is required is more rapid acceleration of the world trade.

West’s protectionism could undermine the ability of countries to salvage economies.

Reneging on the promise of liberalising the world trade is good for none. There may be instances of some (protectionist) legislations in the US. But I hope this would not constitute a trend. Protectionism will doubtless impair the ability of economies to come out of the recession.

The current crisis has goaded the governments and regulators in the world to collaborate and coordinate. Much more synchronised banking regulation, which the crisis has enabled, will provide long-term benefit to the global economy in terms of an increased ability of financial sector regulators to take concerted, swift actions to defuse and pre-empt crises.

So, even though it might sound ironical, the improvement in the quality and effectiveness of regulatory interventions is a positive outcome of having a crisis of such magnitude and spread. The G20 meeting beginning in London from April 2, I hope, would be marked by a definite plan for reviving the world economy and prompt follow-up action.

How able is China to weather the storm?

I’m pretty bullish on China’s ability to withstand the crisis. The combination of political communism and economic capitalism that China has adopted as a strategy is working for that country. Export contribution to Chinese economy might be bigger than of many other countries, but with its huge reserves and rapidly growing middle class, Beijing is well-positioned to weather any storm without major dislocations.

Chinese authorities exercise much greater control than their counterparts in most other countries and are in a position to provide fiscal stimuli to the economy in ample measure. Frankly, China’s ability to provide centrally managed fiscal incentives to the economy and thereby prop up demand is enviable. Of course there is the question of finding employment for those migrating to the urban areas.

To get them employment, the country need to have at least 8-9% growth. During these turbulent times, one concern of Beijing could be about $1 trillion of its nest eggs invested in US treasury securities.

Source: Economic Times


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]]> http://www.consultingnetwork.co.in/beijing-is-well-positioned-to-weather-global-economic-storm-bain-company/692/feed/ 0 Know when to quit a job -Sri Rajan,Partner,Bain & Company http://www.consultingnetwork.co.in/know-when-to-quit-a-job-sri-rajanpartnerbain-company/688/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/know-when-to-quit-a-job-sri-rajanpartnerbain-company/688/#comments Mon, 20 Apr 2009 17:38:22 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=688

An interesting article highlighting the due diligence process

Hindalco industries, which paid $6 billion for Canada’s Novelis in 2007, is scouting for copper mines in South America while pharmaceutical producer, Biocon, is targeting overseas acquisitions.

A newly confident India Inc is using its muscle to expand abroad. A recent Bain & Company study shows that Indian outbound deals in January-October 2007 touched a record $34 billion, more than a three-fold jump over 2006, and greater than the combined value of the outward M&A from Russia and China during this same period.

Globally, the total value of announced M&A deals in 2007 rose to an all-time high of $4.3 trillion. This surpassed the 2006 figure by around 20 %, despite concerns about the stability of the credit markets.

For Indian companies, the strong rupee is also making overseas acquisitions more affordable. As your company gains more confidence in competing for overseas targets, having an excellent idea of your investment thesis and what will happen after a deal closes tells you whether to pursue a bidding war.

Indeed, making the right calls about acquisition targets is a challenge that more and more top executives face, and it’s getting harder. When Bain & Company recently surveyed 250 senior managers with M&A responsibilities, half of them said their due diligence process had overlooked major problems, and half also found that targets had been dressed up to look better for deals.

Overall, only 30 % of executives were satisfied with their due diligence processes. A third acknowledged they hadn’t walked away from deals despite nagging doubts.

What can companies do to address these common shortcomings? For a start, they can rid themselves of their assumptions. Private equity firms tell us their acquirers’ advantage lies in being industry outsiders: they force themselves to ask basic questions about how an acquisition will truly make money for investors. Indeed, such coldly realistic calculations lie beneath a rising tide of private equity backed mergers and acquisitions across many parts of the world, including in India where our analysis shows the PE market has more than doubled from 2006 to 2007 and is likely to grow at a very healthy pace going forward.

Top corporate buyers take a similarly rigorous approach: “When I see an expensive deal, and they say it was a ‘strategic’ deal,” says Craig Tall, vice-chairman of corporate development at US mortgage firm Washington Mutual, “it’s a code for me that somebody paid too much.”

Develop your investment thesis

Due diligence starts with verifying the cost economics of the proposed deal. Buyers must ask such questions as: Do the target’s competitors have cost advantages? Why is the target performing above or below expectations? To arrive at a business’s true standalone value, all accounting idiosyncrasies must be stripped away.

To put these questions in the right context, potential acquirers need to be clear about the deal’s strategic rationale — its investment thesis. Is the deal intended to be an active investment of the type that PE firms specialise in? Then the attention should be on the stand-alone cash flow.

If it’s a scale deal, then the due diligence teams should zero in on the integration costs and the question of scale economy as well, to help decide if a target is worth pursuing. For an acquisition aimed at increasing scope, the analysis should also include revenue and customer synergies.

This all sounds obvious but many acquirers have seen deals fail because of a vague investment thesis developed late in the process.

Our survey of senior managers showed around 50 % of failed deals did not have an early and well-developed investment thesis while over 90 % of successful ones did. The survey also noted a clear co-relation between a lucid and well-developed investment thesis and the ability to accurately estimate synergies: 80% of respondents who accurately calculated synergies of a proposed deal had a very clear investment thesis. Those with a vague strategic rationale fared badly in comparison: only 20 % were able to make a precise assessment of synergies.

Acquirers need to hammer out their investment thesis first and then send out due diligence teams to look beyond the reported numbers and test the target’s fitness: whether it will live up to the objectives of the investment thesis.

Use the fine comb

That’s what Cinven, a leading European PE player, did before acquiring UK theatre chain Odeon Cinemas. Rather than simply reviewing aggregate revenues and costs, Cinven’s analysts combed through the numbers of each cinema. They painted a rich picture of local demand patterns and competitor activities, including data on attendance, operating costs and likely capital expenditures. That microexamination revealed that estimates of sales growth at the national level weren’t justified by local trends. Armed with the findings, Cinven negotiated to pay £45 million less than the original asking price.

Indeed, successful acquirers create a detailed picture of their target’s customers. They begin by drawing a map of the target’s market—its size, its growth rate and how it breaks down by geography, product and customer segment.

Bridgepoint, another European private equity firm, is particularly adept at this kind of strategic due diligence. In 2000, Bridgepoint was considering buying a fruit-processing business that we’ll call FruitCo. As the leading producer of the fruit mixtures in yoghurt, it seemed a good bet. Western consumers had been spending between 5 %t and 10 % more each year on yoghurt, and the market was growing faster still in the developing world, particularly in Latin America and Asia. FruitCo looked like a winner to Benoît Bassi, the managing director of Bridgepoint. Yet, just four weeks later, Bassi killed the deal.

What happened? During those four weeks, the due diligence team had discovered many figurative worms in the FruitCo apple. For instance, when the team tested Fruit-Co’s price and revenue forecasts, they found that although the market for fruit yoghurt was indeed growing, profitability in many markets was falling rapidly. Further, consumers told Bridgepoint’s researchers that they were unlikely to tolerate increased prices.

Next, the team examined the capabilities of competitors. They found that while FruitCo boasted considerable global scale, regional scale turned out to be the more relevant driver of costs. That was because the economics of transportation and purchasing made the global sourcing of fruit—a major cost component—unfeasible. At the same time, advanced processing technologies enabled FruitCo’s competitors to achieve competitive economics at the country level.

By performing painstaking due diligence, Bassi said he came to recognise that, “What we thought we knew turned out to be wrong.”

What Bassi and other successful acquirers realise is that the ultimate goal of due diligence is to determine a walk-away price. And, for this price to have meaning, it can’t be academic. Successful deal makers are willing to walk away and often do. In the end, effective due diligence is about balancing opportunity with informed scepticism. It’s about testing every assumption. It’s about not falling into the trap of thinking you’ll be able to fix problems after the fact. By then, it’s usually too late.

Sri Rajan is a partner with Bain & Company and leads its M&A and private equity practices in India. Karan Singh is a partner in the Bain India office.

This article was published on 15 Feb 2008 in Economic Times


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]]> http://www.consultingnetwork.co.in/know-when-to-quit-a-job-sri-rajanpartnerbain-company/688/feed/ 0 Interview with Greg Brenneman, Chairman, CCMP Capital http://www.consultingnetwork.co.in/can-you-pass-a-ceo-test/518/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/can-you-pass-a-ceo-test/518/#comments Thu, 19 Mar 2009 06:17:58 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=518

Q. What do you consider the keys to effective leadership?

A. The most important thing is that you treat everybody incredibly well and lead with a bit of humility. I’ve found that when I go into a company to lead it’s important to have a plan and to make that plan a simple one that everybody can understand. So even before I go into a company, or even if we’re looking at a business here at CCMP, I’m constantly asking the question, “What are the two or three levers that, if done right, if pulled correctly, will really turn this business?” Then what I do is take that and put it into a one-page plan.

I learned back in the days when I was consulting at Bain & Company — and before that when I was at Harvard Business School doing case studies — that they give you more information than you could possibly read. So you needed to quickly step back and say, “What are the two or three things that really matter?” And I find in the world that people don’t really do that often. They just dive into all this detail and start using acronyms and buzzwords and they don’t step back.

For example, when Gordon (Bethune) and I took over Continental, the first thing we did was we sat down at his dining room table, and I just had out a notepad and we started drinking wine, and we switched to Scotch, and we just started to endeavor to write down everything that was brain-dead about the airline, everything that was wrong.

And that ultimately, very quickly, within a week or less, got put into a plan called the Go Forward Plan, which was a market plan called Fly to Win, a financial plan called Fund the Future, a product plan called Make Reliability a Reality, and a people plan called Working Together. And it all went on one page, and even underneath each of those items it was all just stuff that was very easy to understand, like: “The fastest way to make money is to stop doing things that lose it.” And so we stopped flying to places that lost money.

Q. Is there a magic number of points for a business plan?

A. I’m not sure there’s a magic number, per se. I’d divide the page in quadrants: Market, Financial, Product and People. And if I can’t simply put what needs to be done on one page, I probably haven’t thought through it very well.

There’s a great saying: “I didn’t have time to write a short letter, so I wrote a long one instead.” I find that in business a lot people take the time to write the really long letter, but they don’t take time to write the short one, and it even applies to doing investments.

When one of our guys is presenting an investment, you always kind of know they have it if they can explain it very quickly. And if it takes a really long time and you’re into the square root of the price of oil in Uzbekistan, you probably know that it’s gotten too complicated, and that’s when I start asking questions — when people start having trouble simply saying, “Here’s the idea.”

Q. On your first day at a new company, what is your goal, what do you want to communicate to the staff?

A. On the first day it would be more like, “I am proud to be here with you and appreciate what you have done; here are some observations about the business and some rules for how we’re going to treat each other.” Shortly thereafter we would roll out the one-page plan.

I tell everyone that my e-mail’s always accessible and I’ll always respond within 24 hours. You don’t need to feel like you’ve got to come up through the ranks; you can always e-mail me. Something that we’ve used ever since the Continental days when we started it there is to leave a voice mail for the troops every single Friday. Usually it revolves around the plan. Here’s what we told you we were going to do, here’s what we did, and here’s where we’re headed next week. So a lot of communication on that first day is just kind of breaking down communication barriers, firing people up and putting people at ease by letting them know what to expect.

Q. When you are hiring, or evaluating a management team, do you have one or two or three acid-test questions?

A. Yes, and I’ll phrase it in terms of what I look for and then maybe we can go to questions. Right now, CCMP has about 50 portfolio companies. Fifteen companies make up about 80 percent of our economics, and I’m actually mentoring C.E.O.’s of some of those companies.

My job now, which I love, is a little different than running a company because I interact with so many C.E.O.’s. And I really test for two things. One is, are they smart enough to do the job? Do they have enough capability to find those two or three levers that really make a difference in a business? And I call that the I.Q.-dipstick test; if you stick the I.Q. dipstick in and it comes out two quarts empty, there’s nothing else we can do. Thankfully, the vast majority of CCMP C.E.O.’s I have met pass the I.Q. test.

Q. And how do you …

A. I’ll start asking questions. What really drives this business? If I told you I’d love to see earnings up 20 percent, what would be the levers we could pull to do that? Right now, it’s actually a different question, which is, how is your revenue forecast coming out? And then you just listen.

Some C.E.O.’s will say, ‘I’m gonna do one, two, three, four, five.’ And you sit there and listen and you say, ‘Yeah, that makes sense. I got it.’ But then you have some that look at you like you came from Mars — and I worry about those guys. Or you have some that will just filibuster you for 30 minutes with stuff you just don’t understand — this buzzword, that buzzword. I worry about those guys even more than the guys that just give you a blank stare.

The second thing I look for is if I were to get on an airplane with this guy or gal, would I want to fly across the Atlantic with them? Are they nice people to be with? Do you want to be with them? Because I find that people that don’t relate well to anybody, from owners or board members to peers to direct reports to folks that actually work for a living in the trenches, they don’t succeed very well. You can usually tell that by asking, “What do you enjoy doing? What do you do as a hobby?” And ask a few questions to the people that work around them, and you get a pretty good sense pretty quickly.

Q. How do you run meetings?

A. We tend to run meetings a bit like a food fight here at CCMP. Anybody can have an idea or a thought, and the best idea wins. And so there’s not a lot of formality or pomp and circumstance around it, at all. It’s a very informal and very free-flowing dialogue.

Q. Is it ever an issue for you that you want to make sure you’re getting straight talk from your direct reports?

A. Yes, no question. Some people that were brought up in the hierarchy of life have trouble with that. But they don’t survive very long, honestly, in the companies I’ve run. I usually tell people upfront what to expect, and that I really want their feedback and their ideas, and if they think I’ve got a hair out of place or food stuck in my teeth, gosh, I want to know that.

Q. Was there an insight you had that, looking back, put your career on a different trajectory?

A. Some of it was luck. But I remember something that Mitt Romney told me at Bain. He said: “Greg, in any interaction, you either gain share or lose share. So treat every interaction as kind of a precious moment in time.” And I’ve always remembered that, because I think it’s really true. So what I’ve tried to do is have more conversations where I’m gaining share than losing share, to try to add value to everything. I pass on any opportunity I see that I can’t add value on.

Q. Tell me about your as-good-as-it-gets moment in business.

A. Being able to hand people checks, whether it was an on-time bonus to say thank you for helping us be on time, or whether it was a car for having perfect attendance, or just being able to hand employees checks. At Burger King we were able to do that, too. We had some big moments financially where we were able to just hand out checks to employees who helped us get there. Those are the best days, I think.

Q. Is there an effective time-management technique you’ve developed?

A. Nothing incredibly impressive, other than to never allow meetings to last very long. So we start on time and end on time. I think probably the biggest time-management thing is being on time. I do not run late. Growing up on a farm you’re just not late when it’s time to do chores or go to work. I grew up Mennonite and so that work ethic and timeliness was just ingrained in me from a very young age. It seems like if you run meetings on time and you don’t schedule them for too long, that time management kind of takes care of itself.

Q. And is there an ideal length of a meeting?

A. It depends a little bit on the meeting, but an hour at the most. Shorter is generally better.

Q. Do you have a favorite gadget?

A. I’m pretty addicted to the BlackBerry. I love the iPhone technology, and I’d like to find a way to switch completely to Apple because I think they’ve so figured out computing. It’s hard in business to make that leap when you’ve distributed systems that use I.B.M. and Microsoft so much. But I’m pretty addicted to that BlackBerry.

I started taking them away in meetings at Quiznos, but the C.F.O. there is just addicted to it, beyond probably what most people are, and he was just watching that light, and he wouldn’t answer it because I said you couldn’t answer your BlackBerry in this meeting. But he’d look at the light and the light would drive him nuts, so I had him turn it over. And then, of course, I took it. He was doodling during the meeting as we were talking, and when he got up to leave the room I grabbed the paper he was doodling on, and he had doodled a complete, to scale, picture of a BlackBerry. Subconsciously, he doodled one while we were sitting in the meeting. That’s how addicted he was to it. I actually still have this. I’m going to give it to him framed.

The technology can become a bit of a slave driver. It is so efficient, though. What I like is when the plane’s coming down, you can actually get the messages coming in and you can answer them while you’re taxiing in, and then you’re done. That piece of it is really nice.

Q. What do you do to recharge your batteries?

A. My kids are 20, 18 and 16, so we love spending time with them. We have a house in Beaver Creek, so we like going up there in summer and winter to spend time skiing, hiking, mountain biking, that kind of thing. Play a little bit of golf. Just really hanging out and trying to spend some time with them. I exercise at least an hour every day, if not an hour and a half or two hours. Mostly either running, or I can read on the Stairmaster, so I do the Stairmaster a lot, and then some situps and weights and stuff.

Q. Back to your e-mails that the staff at various companies have sent you — was there an e-mail that you remember that was the toughest? The most memorable?

A. If you are C.E.O., you get flame-thrower stuff constantly. Some e-mails are very heartfelt and moving, too. I’ve saved a few of those. Answering customer and employee e-mails keeps you grounded a little bit, because you’re in these meetings, and you can get a little bit in the ivory tower, and it keeps you kind of focused.

I’ve heard everything. I tell folks — because folks will often write a really nasty e-mail, and then write one back later and say, “Gosh, I’m sorry, I didn’t really mean it.” I say you really can’t offend me. I used to stand in the break room with the mechanics in Gate 86 in Newark. They were great guys but they were tough and had pipe wrenches in their hands. You can’t be any tougher.

One thing that I have very rigorously reacted to is absolutely no nasty e-mails from executives back to employees or back to franchise owners. Or to each other. If I intercept one of those, it’ll be a bad day. Another bad day for somebody is if you don’t respond to an employee or franchise owner within 24 hours. That is a very bad day. I had one lawyer who did that. He decided it wasn’t important, he had so much to do that he couldn’t respond within 24 hours. And I went and sat down with him and said, “It takes you just as long to respond quickly as it does slowly. It’s not a time management thing for you.” He just couldn’t get it, so he’s working somewhere else.

Q. If you had to choose another profession, what would it be?

A. I’d have probably gone into the ministry. I’d have probably gone into a profession where I feel I could help other folks. I’d like to say I’d have played on a P.G.A. tour, but that’s a remote possibility given my golf game.

Q. What’s your handicap?

A. I played in high school to about a four or five, and I probably play now to a 13-15. But I can get lower than that if I just play. I don’t play much. During ski season in particular, if I get a chance to go golfing for a weekend or going skiing for a weekend, I’ll always opt to go skiing.

Q. If you were interviewing different C.E.O.’s, what question would you ask to get some insight into how they manage and lead?

A. How are they motivating employees and managers at this particular juncture in the business cycle? And what do they consider to be important, in terms of what I’ll call the “shadow of the leader” that they cast over the organization at this difficult point in time.

Q. Now can you …

A. Answer your own question? I think it’s important to talk to people about how we’re in a fundamentally different world. Ask the question, “If compensation isn’t going to be the same for a while, where do you get your fulfillment in life?” Certainly, work is a big piece of that and work is rewarding well beyond compensation. But faith, family, friends and hobbies create real balance. The conversation I’ve had with a lot of people, both in large groups and small, is make sure you have balance in your life and make sure that all your fulfillment doesn’t come out of economic gain.

I’ve talked to a lot of people on Wall Street where their entire fulfillment came from the answer to, “Is my bonus bigger this year than last year?” Or, “If I worked 100 hours a week this year, can I work 101 next year?” It’s actually a great time for us as leaders to help people to step back and ask the question: “Where do I get the fulfillment in my life? And how do I make sure my job is a big piece of that?” I’ve found that employees who are fulfilled on a much broader basis in their lives usually do a much better job of work than those that are completely, single-mindedly focused on and get all their value out of work.

I think that’s one of the bigger questions we have as a society. We’ve gotten so used to every generation doing better economically than their parents. Are our kids going to do better than we’ve done? I hope so, but I’m not sure. So it seems like we ought to tell them that socioeconomic wealth is not the only, or even the most important, metric of personal happiness.

Source :  The New York Times


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]]> http://www.consultingnetwork.co.in/can-you-pass-a-ceo-test/518/feed/ 0 Mantra for global consultancies in India: Heal thyself! http://www.consultingnetwork.co.in/mantra-for-global-consultancies-in-india-heal-thyself/474/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss http://www.consultingnetwork.co.in/mantra-for-global-consultancies-in-india-heal-thyself/474/#comments Tue, 10 Mar 2009 08:57:54 +0000 Knowledge Seeker http://consultingnetwork.co.in/?p=474

Sourced from Business Standard article dated 10th march 2009

On September 6, 2001, a crack McKinsey team led by Indian-born Rajat Gupta, its global CEO at that time, made a presentation to the NDA government on how to double India’s GDP growth rate to 10 per cent. Legend has it that at the end of it Atal Bihari Vajpayee, the prime minister at that time, sighed: “Woh to theek hai Guptaji, lekin yeh sab hoga kaise(This is all very good, Mr Gupta, but how can all this be done)?”

At that time, many thought the remark odd. Old timers recall that in the mid-1990s, Indian companies’ stock prices used to move up when they announced that their next restructuring plan would be by McKinsey. Where was the room for doubt? In the light of the numbers Business Standard has unearthed, Vajpayee was prescient.

The truth is that for all the advice McKinsey and other big management consultancy firms have dished out, they are themselves in need of some serious consultancy, insofar as their Indian operations are concerned.

Data collected from the Registrar of Companies, or RoC, show that The Firm, as McKinsey is reverentially referred to, has been making steady losses in India since 2004-2005, except in 2006-07. It ended 2007-08 with a loss of Rs 2.26 crore, which was a lot better than the figure in some of the earlier years.

When contacted, the McKinsey spokesperson said: “As a matter of our global policy and as a private firm, we do not publicly discuss our workings.”

When it comes to dismal financial performance in India, McKinsey is not alone; it has the company of its global peers.

Accenture, which has been in India for two decades and considers the country one of its largest developing markets, has a profit and loss account that shows a net loss before tax of Rs 18.6 crore for the year ending March 31, 2007, which was an improvement over the Rs 48.8 crore in the previous year. The firm did not reply to an email query.

Bain & Company, which has grown from four consultants in 2006 to over a 100, made a loss of Rs 15.9 crore in 2007-08. An email sent to the firm remains unanswered.

Deloitte and Boston Consulting Group (BCG) are better placed, though their profits are measly — Rs 15 lakh in 2007-08 for Deloitte and Rs 5 lakh for BCG in 2006-07. In the earlier years, they, too, were in the red. While BCG declined to share their financial statements, since it’s a private partnership, Deloitte also didn’t offer its comments


 

(How the Indian operations of global consultancies have performed)
Financial year 2003-04 2004-05 2005-06 2006-07 2007-08
MCKINSEY
Income 147.3 163.5 245.3 N.A N.A
Profit/loss* -8.7 -23.9 -11.3 17.3 -2.26
ACCENTURE          
Net loss before   N.A -48.8 -18.6 N.A
tax as per profit & loss          
DELOITTE          
Income (NA) 15.9 25.8 35.2 95.1
Profit/loss (NA) -0.0016 0.9 -0.35 0.15
BAIN & CO.          
Income       35.1 59.2
(services fee+other income)          
Profit/loss       -0.518 -15.9
BCG          
Income** NA 35.2 58.64 83.19 NA
Profit/loss NA -3 2.02 0.05 N.A
*Excess of revenues over expenses including taxes  (Figures in brackets are losses)
** Professional charges alone Source: Registrar of Companies                           

 An executive of a large public sector company, which has been advised by one of these firms, was surprised to hear that they were not really well off themselves. He said it was ironical.

Rajeev Karwal, founder of Milagrow, which focusses on advising small and medium enterprises, said, overstaffing, overpaying and a matrix style of working ailed consulting firms. While they advised companies to be lean, they did not live by the principle.

There could, however, be a twist in the tale. According to the head of a global consultancy firm, the financial position may have a bit to do with the imperative to evolve a tax-efficient model.

“All consulting firms,” he says, “make 25 to 30 per cent profits, and losses are unheard of. There could be many factors if a firm is showing losses, which could include issues such as at what rate revenues are coming or the cost of manpower


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