Why Use Consultants?

ABSTRACT

Anyone can hang a shingle on the web.  As well, there are multinational companies that employ hundreds of thousands of people with the consultant title.  There is no shortage of consultants pitching their expertise as the solution to your problems.  How do you decide when you should use them?  If you are going to use them, then what should you look for and where do you find the right people?

There is an enormous range of potential needs for consulting support and an equally large number of available skills and capabilities within the industry.  Here are some practical guidelines that can be used when navigating this environment to achieve the best result to your situation.

WHEN TO BRING IN HELP

There are three main situations where bringing in an outside consultant should be considered: 1) you don’t have the internal competence for a one-off activity; 2) you need a fresh perspective; and, 3) an outside voice is needed to generate change.

The first rule for using consultants: if you don’t have the knowledge in-house and you don’t expect to have to repeat the process, it’s better to use consultants.

Rule 1: If you don’t have the knowledge in-house and you don’t expect to repeat the process, it’s better to use consultants.

A typical large company’s information technology department is full of consultants.  This is because of the need to constantly update systems and a lack of internal capabilities both for managing the change and to master the new technology.  It’s better to use an experienced system integrator to implement a system for you than to struggle for years with a process that you are going through for the first time and that you will never repeat.

This thinking doesn’t just apply to technology consulting.  The same logic applies to business changes such as supply chain redesign, major reorganizations, shared services implementations, and other types of change that, for most business, don’t occur every day.  On the other hand, if you expect to repeat the process, then don’t use consultants.  It’s better in repeatable circumstances to develop the right capabilities in-house.

The caveat is when it comes to capabilities that you need to develop but don’t yet possess.  For example, if you recognize that having a market intelligence department would be useful to your company but you don’t have the skills in-house, you may use consultants to provide the service until you have acquired the capabilities.  In this scenario, leverage the first instance of consultant services to build your teams competence. The consultants can be used to design the processes and reports and then transfer these over to internal resources.

The second rule for using consultants: if you want an alternative perspective, a consultant can provide this; an internal resource cannot.  Even if you are going through a process that you repeat regularly, if that process ends in an important decision being made, then it may be worth bringing in an outside perspective to make sure that your thinking is sound.

Rule 2: If you want an alternative perspective, a consultant can provide this; an internal resource cannot.

This is commonly the case when developing alternative strategies.  A strategy is just an approach to achieve a goal, something that managers do every day, but there is a risk of missing alternatives or of making implicit assumptions based on corporate norms when the people involved are all internal to the organization.  This is why companies often involve consulting firms when making major strategic decisions.  It’s not that the consultants have a greater knowledge of the industry or a greater understanding of the options; they simply provide an alternative perspective, one that is often honed from having gone through the same process multiple times before.

The third rule for using consultants: bring in outsiders if they are needed to get the message across.  There are many times when an internal manager is trying to accomplish something but keeps hitting a brick wall due to corporate inertia.  Depending on the culture, more respect may be given to external resources, even though the message is the same.  There is a simple truth expressed in the phrase: “culture eats strategy for breakfast”.  An outside consultant can help to offset the impact of culture if that is one of the barriers to realizing your goals.

Rule 3: Bring in outsiders if they are needed to get the message across.

SELECTING THE RIGHT CONSULTANT

The fourth rule for using consultants: employ consultants only if the approach they propose is simple to understand and meets your needs.

Rule 4: Employ consultants only if the approach they propose is simple to understand and meets your needs.

What this means is that the consultant’s resume may not tell you what you need to know about their capabilities.  Asking them how they will perform the work will provide a much better assessment of their suitability.  The better consultants will be able to provide an approach in simple English that makes sense to you.  The weaker ones will hide their lack of capabilities behind buzzwords and hyperbole.  If someone starts to quote Porter, Sun Tzu, or Hamel, it’s time to close the meeting.  Similarly, if their approach is based on an off the shelf framework (Five Forces, Seven S’s, etc.), then they are grasping at straws.  Not that Porter, Sun Tzu or Hamel didn’t have extremely useful things to say, and many of the models, even those containing numbers in the name, are useful, but they don’t solve your problem directly.  What you need to look for, as the client, is for the consultant to bring a process or structure that will get you to where you need to be.  This is something that better consultants can adapt to the client’s specific needs.

Should you use a small local consulting firm or should you reach out to one of the large global firms for help?  The fifth rule for using consultants: size may matter but not necessarily for the quality of the result. There are many elements to consider and it is important to understand these before deciding on the right solution for your consulting need.

Rule 5: Size may matter but not necessarily for the quality of the result.

The large global firms employ armies of specialists along with a few generalists.  When you already know what you need and you want to be sure of getting the person or team who has done this a dozen times before, these firms should be your first choice.  There are a few downsides though:

  • The ‘hammer looking for a nail’ problem becomes more acute with increased specialization. If you know that you have an issue but don’t know the root cause, then you also don’t know what the solution should be.  Specialists may drive you towards using their hammer even if it’s not appropriate.
  • You have to pay for the infrastructure of the large corporate entity, plus travel fees for consultants to fly in from all over the country.
  • You may get wonderful resources or you may get whoever is available. This problem is more acute if you are a new client for the consulting firm as priority is given to those clients with whom the consulting firm has a long term relationship.

On the plus side:

  • The large firms normally come with a process that works. They invest the time in developing methodologies and have enough combined experience to test them thoroughly.
  • There is someone to sue if things go badly. Hopefully this won’t be necessary but there is some assurance from working with a large entity that has the financial heft to settle with you.
  • You won’t get fired if you buy IBM. Only, it’s not just IBM these days. You won’t be seen to be taking a risk if you opt for a recognized consulting name.

Small local firms are often staffed by people who left the large firms, so you may be getting the same resources but with a lot more flexibility in terms of pricing and project structure.  There are some downsides though:

  • Small firms are limited in the breadth and depth of their offering, although this can be mitigated through alliances and informal networks.
  • The departure of one or two key individuals can severely impact or even shut down the consulting firm. This isn’t a risk with the big firms, which often have turnover of 15-20% per annum and can backfill project staff easily.
  • With self-employed consultants, you don’t always know if you are getting a true consultant or someone who just hung out a shingle while looking for another job.

On the plus side:

  • Small local firms have an incentive to perform quality work, as their business model is predicated on getting repeat business from you.
  • Costs are lower as you don’t normally have to pay for travel and accommodation and you aren’t paying fee rates that are inflated to cover the cost of corporate offices and executive staff.
  • Many small firms are highly specialized. They are small because they focus on only one thing, which they do better than anyone else.

GETTING STARTED

There is one other factor that has to be in place for the use of a consultant to be effective and this one is related to you as the client.  The sixth rule when using consultants: bring in outsiders only if their views are going to be respected.  This doesn’t mean that the consultants are seen as infallible, only that their views won’t be rejected just because they are outsiders.

Rule 6: Bring in outsiders only if their views are going to be respected

Some corporate cultures are welcoming of external ideas and managers recognize that they don’t have all of the capabilities that they need in-house.  Others are not so welcoming and resist the idea that managers are not experts on all things within their domain.  The not-invented-here syndrome is all too common.  This means that you need to ask yourself if bringing in an outsider is going to work with the corporate culture.  Some of this can be mitigated by a good consultant – the better ones recognize that their job is to make their client successful even if this means not getting any credit themselves – but there is still a risk depending on the culture.

If you have read this far, then there is a good chance that you are considering the use of a consulting firm in the near future.  Your next step is to contact some of them.

Employees who move into your organization may have had great experience elsewhere working with a specific consulting firm and their contacts may still be relevant.  It is easy to find contacts for the larger firms via their web sites, as well as finding out what their specialties are.  Smaller firms are more difficult to make contact with, for the simple reason that you don’t always know that they exist.  A few phone calls and emails to people you know in other local companies may yield some names.  Worst case, you could do a web search.  Most importantly, once you have a list of names, feel free to reach out to the consulting firms and talk to them.  It’s free, it’s informative and it may help you to structure your thoughts around the work to be undertaken.

If you would like to discuss this topic in more detail, please contact us at inquiries@aptussc.com.