The major issues affecting Eden McCallum are not independent; they are interwoven and interconnected. The economic recession is arguably the main event affecting the firm, but it is important to note that not all organizations are impacted by the recession in the same way. In Eden McCallum’s case, the company’s business model, organizational structure, and work culture are all issues that will factor into their response to the recession.
As a consulting firm, Eden McCallum serves companies in financial services, retail, and manufacturing. Each of these sectors has been severely impacted by the economic crisis. This has already affected the firm, as past growth forecasts for 2009 have not materialized. Further, it is not possible to gauge the extent of the impact and the duration of the present recession. In this climate of uncertainty, the firm will find it difficult to develop a balanced contingency plan. Board member Robert Harris estimates that the recession could last for two years. Assuming this, the firm has to devise a strategy that will allow it to balance its solvency with the ability to retain its credibility and competitive edge.
Because the company is a network based consulting firm, it depends on contracts from its relationships with past clients and the three big consulting firms. With existing clients already demanding to cut fees, and the big three consulting firms being affected by the recession themselves, it will be difficult for Eden McCallum to gain new business contracts in the present market. Essentially, the recession will be a challenge to the firm with its current business model, as past clients and contacts might not be available. Another difficulty could be the company’s dependence on a network of independent consultants. Free-lance consultants might opt for the job security offered by traditional consulting companies, which could dry up Eden McCallum’s resources.
Another aspect to the business model is its two-year growth cycle, where investments are made in the first year, and benefits are reaped in the second. While this strategy has benefitted the company in the past, it leaves the company vulnerable to corporate earthquakes, as can be seen in the present, unexpected scenario. The recession has hit when the company was expecting to reap the benefits of its previous year’s investments. Consequently, a situation has occurred where the company is more financially vulnerable, and is no longer certain of securing the benefits of its investments.
Eden McCallum’s organizational structure is another interesting issue to consider. It does not follow the typical ‘up-or-out’ promotion system; instead it brings in lateral hires. This type of organizational structure allows individual members to contribute significantly...