Booz–Allen & Hamilton Essay
Worker, employees and managers, or universally known as human resources, are often identified as the most important resources of modern companies. Furthermore, the term human capital has increasingly been used in these modern times, implying that employees’ skills and capabilities are treated as measurable resources of the company. Owners and managers are increasingly aware that enhancing their corporate value also means increasing the quality of their human capital. However, human capitals are not as easy to manage as other form of corporate resources.
For one, they are more responsive to the conditions of their surroundings and therefore, require more attention in order to maintain the quality of their contributions. Discussion about human resource management is getting intense and extend into areas that seldom explored by human resource professionals. Currently, the globalization phenomenon has been identified as the main factor that influences the design of modern human resource management. Companies around the world are connecting and integrating their business to foreign markets, in ways that only few can predict.
Among others, global-level managers and employees are considered to be important factors that triggers the rapid internationalization of businesses worldwide. Thus, human resource management researches have been focusing in this issue for sometime now.
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The company is already a well-known corporation providing thousands of medium-sized and large companies with managerial solutions to their problems. However, the new millennium brought new issues regarding company’s human resource management. Managers of today’s corporations have identified the need for changes and have performed several effort of making that change happen. However, several issues have emerged and required immediate attention. After identifying corporate strategy and issues within that strategy, I will provide alternative of solutions to the company’s problems.
The alternatives will be based on several human resource concepts and researches. II. Corporate Background History of Booz-Allen & Hamilton can be divided into several chapters. The company is a well respected US-based management consultant company created in 1914 by Edwin Booz. In 1930, James Allen and Carl Hamilton joined the company and together they take advantage of the growing economy after the World War II to develop their business. Within its operations, the company worked together with several US agencies, one of them is the Department of Defense.
Within this first chapter of the history, Booz-Allen and Hamilton maintained its private nature for 11 years after it was proclaimed the best management consulting firm in the world by Time Magazine in 1959. The second chapter is when the company decided to go public in 1970 and sell stocks to the public. Booz-Allen and Hamilton did not seem like the kind of company that would be comfortable running their business with interference by dominant shareholders. Therefore, in 1976, the company performed a buyback action, even if it cost a considerable fortune.
In order to deal with the massive deficit account from the re-privatization, partners and managers of the company decided to change the company’s organizational structure in order to promote profit development. Therefore, in the third chapter of corporate history, the Booz-Allen & Hamilton performed a decentralization campaign, which divided the company into numerous regional offices, each responsible for their share of profit generation. III. Corporate Strategy III. 1 Error of the Old Ways The strategy of decentralizing offices into regional segments has seemed to have considerable negative side effects.
Partners, evaluated by the amount of engagements they produce and the amount of profit resulted from those engagements, are reluctant and threatened by the presence of another partner within their engagements. They were afraid that the other partner might try to steal away their client and the profit generated from that client. First, the condition was considered acceptable as the company was focusing on gaining more profit. This is because despite the organizational problem mentioned above, the structure boosted partner’s motivation to find new engagements.
However, as the company was entering new stage of business, several partners identified the need for a change. The new millennium has brought the company into an age of specialization, where clients were mostly multinational corporations having high expectations toward Booz-Allen & Hamilton’s performance. One of many causes that triggered this is trend is the increasing activities of mergers and acquisitions performed by large companies to diversify their business lines and minimize their business risks.
Furthermore, the increasing level of competition presented intense demand for Booz-Allen & Hamilton to enhance their performance quality. Many times, in order to satisfy a certain client, considerable level of cooperation was required between partners of different regions. Ironically, these activities were made difficult by the presence of the decentralized structure. Managers believed that a new system that fosters higher level of cooperation between partners was required to face client’s expectations. III. 2 A New Vision After an intensive review performed by the partners, a new vision for the company is formulated.
Principally, the vision was taking into account the need for cooperation between partners of the company and provided a responsibility structure that was more integrated and centrally coordinated. In practical terms, responsibility of the profit and loss account was divided between nine responsibility centers based on geography, function and industry. Geographically, responsibilities were divided between the Atlantic segment, the Asia-Pacific-Japan (APJ) segment and the Latin America segment. All of these segments contained specialist of each of the following functions: strategy, operations and information technology.
However, the APJ and Latin America segment were considered to small to foster their own separate administrative structures, thus, these function based responsibility centers do not appear within the segments. One of the key features of the vision was to divide the Atlantic segment into five responsibility centers based on industry practices. The five-industry-based segments are: Financial Services and Health Care industries, Engineering and Manufacturing industries, Energy, Chemicals and Pharmaceuticals industries, Marketing-intensive industries, and Communications, Computing and Electronic industries.
A part-time partner-in-charge who had the support of a full-time group director of operations (GDO) leads each of the nine segments above. They were responsible for individual engagements. The structure were designed based on professional communities, which means that the goal of the vision is to have people of the same professional community to work with one another to produce the best services to clients. Within this vision, there are also details about how staff performances are measured and how the entire strategy should help the company to solve problems.
Some of the important points are: III. 2. 1 Compensation Under the old structure, compensation and incentive received by partners were according to the amount of new engagement they created and the revenue that they obtain from those engagements. Furthermore, using the old structure, performance measurements of non-partners were performed by a single superior they work under. These evaluation systems were all changed by the new structure. Under the new structure, partners are no longer evaluated based on the new engagement they produce, but from their contributions to the group.
In practical terms, evaluation was made using five dimensions of measurements contribution to staff development, client and market development, quality of works for clients, financial contributions to the firm and adherence to partner values (like cooperation and respect). Partners gathered every period to give each other points base on the merits mentioned above. Each partner evaluated would leave the room as the other assess his/her performance during their period. Incentive and compensation were made based on these evaluation points.
Partners could gain larger portion of the revenue compare to the last period depends on how they contributed to the company. On the other hand, they could also receive lesser portion of the team’s revenue if they were assessed to decline in their contributions to the company. In terms of non-partners, senior member that has not worked with them during the last year evaluated them. The evaluator was then obligated to contact 8 to 12 staff of partners who had been working with the subject, to discuss how the subject was contributing to corporate activities within the last year.
The new evaluation system was intended to increase accuracy and value in evaluating staff. Under the old system, seniors evaluating a staff member generally became inaccurate, because they work with many different staff. Many partners believed that the new system of evaluation would prevent such bias, because assessments are made based opinion of people who had worked closely with subject within the period. III. 2. 2 Integrating the Vision into Corporate Structure In order to make the vision a part of the new structure, partners are assigned to mentor junior partners and staff in operating based on the group’s vision.
Mentors were expected to take active roles in monitoring how their mentees develop in term of integrating the new system. Staff and partners are also provided with a guidebook that contains corporate values and visions an how mentors should interact with mentees and vise versa. To integrate the system in practical terms, the group provided staff and partners with a list of requirements of the ‘necessary skills’ for all consultants and staffs. Within the skills, include communication and teamwork skills and also understanding toward the firm’s values and expectations. III. 2. 3 Sharing Intellectual capital
To assist partners and staff in meeting client’s expectations, the firm established a system that would allow the sharing of intellectual capital across the global business lines. This system is enabled by online network across the firm’s offices, open and facilitated communication lines between professionals of the firm. Furthermore, the system also contains database of corporate paper and knowledge centers that could be accessed on the firm’s network at all times if required. III. 3 Benefits of the New System The new structure allows better teamwork between partners to satisfy clients.
It made easier for issue brought by the client to be handled by the best people for the specific issue, despite the fact that those people might not be centered in nearby offices. Partners and staff are no longer reluctant to engage in cases outside of his/her engagement because they knew that they would not be evaluated based on the number of engagement they produce, but from their contribution to the firm. Global best practices could actually be performed for any client entering a contract with Booz-Allen & Hamilton because partners and staff are assigned to jobs most suitable for their skills and experiences.
There are evidences that the increasing global integration performed by the company resulted greater satisfaction among clients. Furthermore, revenue statistics indicated that the average revenue generated from clients in 1994 increased ten from 1990. This indicated that the focus strategy as mentioned in the vision strategy was successfully achieved. Several partners believed that the vision 2000 has been working so far and further global integration is required. III. 4 Problems of the New Structure
Despite the increasing average revenue per client, several partners argued that the new structure would hamper partners’ motivation to obtain new engagement with clients. The previously high revenue is expected to experience significant downturn if the new structure is to be maintained or intensified. Moreover, recent development indicated that the new structure resulted from the implementation of the Vision 2000 resulted in teh higher turnover among professional staff. It is also accused to wear down staffs performance and goodwill toward the tasks.
Several partners argued that this is possible because using the new system, partners, and staffs are burdened with frequent long distance travels and uncertain working hours. For example, within the new structure, a staff that has just settled in with their family could be offered a task in another country, which required him/her to move to the location for several months and even years. Not to mention the possibilities that a staff might be contacted by his/her working colleagues sometime in the middle of the night due to the time differences.
The difficult lifestyles implied by the new structure is a considerable problem facing the firm. IV. Suggestions of HR Plan According to my personal opinion, the most important concern when managing a business should be clients’ satisfaction. Therefore, the vision 2000, which put clients’ satisfaction above others, should be maintained and furthermore, developed. However, the issues within the concept should not be ignored. Two main issues can be concluded from the elaboration. 1.
First, the vision 2000 structure caused partners to loose their motivation to seek new engagements. This is caused by the fact that they are no longer evaluated and compensated based on the number of engagement they produce. 2. Second, the global integration between professionals of similar areas of expertise causes frequent international travels and international calls, which lead to difficult lifestyle for partners and staff. The data revealed that the rate of employee turnover increased slightly several years after the vision 2000 was deployed.
Taking account of the problems stated above, I believe that the firm should not cancel or stop improving the Vision 2000 structure, but instead, it should modify its current compensation plan and enhance its information /knowledge capital sharing among professionals of the company. IV. 1 Compensation General theory on human resource management stated that ‘we get what we valued’. This contains the understanding that manger of the firm should assume that employees and staff would not perform anything unless they are compensated. Important points that needed to be considered in designing compensation plan are as follows:
• The compensation plan should be based on achievements and should include all employees. Limiting certain compensation plan to certain employees will also limit the company’s potential. • The amount of the compensation should not be limited because it would make employees think that they are limited in terms of achievements. Keeping the compensation plan open will encourage employees to keep contributing for the company. • There should also be long-term incentive programs like stock options to maintain the sense of appreciation within the firm.
• Keeping the window of feedback open. It is important to let employees understand that if there is something wrong with the compensation plan, it can be fix or altered. • Taking into account various types of compensation, including non-cash compensation. There is almost no limit of what a company can provide for their productive professionals. Some companies provide employee assistance program, ranging from psychological counseling, discounts on company products, the use of company cars, or simply a time-off for certain achievements of their employees. (Colletti, 2006)
The points mentioned implied there are several changes Booz-Allen & Hamilton should make. The vision 2000 altered the previous structure, which compensate partners based on new engagements produced, into a new structure, which compensate partners and staffs based on their contributions to corporate goals. In my perspective both of these compensation plan has benefits. The old compensation plan encourages partners to seek new engagements and increase corporate profit, while the new compensation plan conditioned partners to enhance cooperation to satisfy clients.
Therefore, both of these compensation plans should be deployed with respect to one another. Partners and staff should be awarded points in order to value their teamwork efforts and their contributions to satisfying clients. However, partners who introduced new engagement to the firm should also be awarded points, which can considerably increase their bonus from the overall revenue generated from the engagement. This way, partners would not loose their motivation to seek new clients because they will also get bonuses from the achievement.
On the other hand, they would also have considerable interest to maintain their contribution to the firm to prevent them from loosing points due to negative assessments by other partners. Therefore, both the need to increase corporate profitability and encourage cooperation will be achieved. The firm should also take into account the important points mentioned above. The form of compensation should not strictly financial, but could also in the form of corporate assistance or a time-off from job.
This particular compensation strategy is also related to the issue of difficult lifestyles stated by several partners. Giving holidays and the choice of task according to personal preferences for productive partners and employees could increase their morale and motivation to do their job. Using the compensation plan, partners and staff should be maintained within the sense that their achievements are not limited. Staffs should also know that their feedback regarding the compensation plan is appreciated.
This compensation structure should be developed to fit the culture of the firm and promote the best working environment for partners and staffs. IV. 2 Employee Retention and Knowledge Sharing As previously stated, the global integration between Booz-Allen & Hamilton’s professionals around the globe caused partners and staffs to be burdened with frequent international travels and inconvenient international connections. Therefore, the best solution for employee retention purposes is to enhance corporate knowledge sharing in order to reduce the need for frequent traveling for partners and staffs.
Studies of best practices identified several factors that would enhance corporate practice of managing knowledge sharing. I will state the factors along with their implications toward Booz-Allen & Hamilton’s knowledge sharing program. • Best practices organizations share knowledge to solve practice business problems or achieve specific business results (Womack, 1999). Therefore, it is important to maintain detail rules, arrangement in corporate database management in terms of what information is required, and how should they be displayed.
• Knowledge sharing of best practices corporations is tightly linked to a core cultural value of the organization. The ‘style’ of knowledge sharing approaches usually matches the style of the organization as a whole (Womack, 1999). Thus, the firm should not design their database management without consideration of partners and staffs’ preferences. • Best practices companies have an apparent reward and punishment toward employees’ practice of knowledge sharing. Within these companies, people who do not adopt the knowledge-sharing concept are often ignored or fail to be promoted (Womack, 1999).
Thus, Booz-Allen &Hamilton should also adopt similar culture in order to encourage partners and staffs to promote the knowledge sharing practices. • Best practices companies had the support of their leaders and managers, which displayed apparent interference in supporting the program (Womack, 1999). • Best practices organizations generally enable informal networks without formalizing them. Thus, Booz-Allen & Hamilton should not overemphasize on rules and procedures that would make the knowledge sharing processes difficult (Womack, 1999).
Bibliography Bernardin, H John. 2002. Human Resource Management and Experiential Approach. McGraww Hill. ISBN 0072432357 Colletti, Jerome A. Fiss, Mary S. Briggs, Ted. Sands, Scott S. Sales Compensation Essentials. WorldatWork.. ISBN 1-57963-143-6 Womack, Alexandria. 1999. ‘ Creating a Knowledge Culture’. APOC International Benchmarking Clearinghouse. Retrieved May 19, 2006. from http://www. providersedge. com/docs/km_articles/Creating_a_K-Sharing_Culture_-_APQC. pdf#search=’knowledge%20sharing%20for%20business’