Every year, billions of dollars are spent on consultants that organizations hire with the goal of achieving greater levels of business performance. Too often, these consultants produce underwhelming results for overwhelming fees.
Gordon Perchthold and Jenny Sutton, partners and co-founders of the RFP Company and authors of Extract Value from Consultants: How to Hire, Control, and Fire Them, believe the executives or managers who selected and managed these consultants and their projects are somewhat at fault for allowing this to occur.
Organizations that hire consultants have failed to recognize these changes and the need to adapt their approaches accordingly.
“We sincerely believe the right type of consultants, used for the right reasons, have the potential to provide significant value to organizations in challenging and structuring thinking, overcoming the status quo, and turning ideas into actions,” said Perchthold. “But managements’ lack of experience in effectively using consultants and the conflict of interests within consulting firms often conspire against this happening.”
By focuses on three goals, Perchthold and Sutton believe companies can add thousands to millions of dollars to the bottom line, depending on project size. This would be without any major additional investment and would allow the company to continue its existing business practice of engaging consultants:
- get greater business results from using consultants;
- reduce total fees paid to consultants; and
- increase internal capability by learning new skills from consultants.
These goals may not seem easily attainable, and they are not unless the consultants are effectively managed and controlled. Too many organizations have conceded control to the consultants and now must take the power reins back into their hands by:
1. Defining the problem.Too often, executives leave it up to the consulting firm to define the problem. But consulting firms will view each client’s problem through the prism of their own capabilities and solutions. Executives must understand the desired results of the project and ensure the consultants are focused on finding the specific solution to their problem.
2. Dictate how to structure the project.Consulting firms will always attempt to maximize the consulting headcount for the projects they propose. Commonly, buyers complacently accept the project structure that comes along with the proposal. However, most projects underuse the resources in the buyer’s organization. From the first draft of a proposal, buyers need to analyze what is being offered, look into their own organization for dollar-saving opportunities and challenge the proposed approach and team composition with their own recommended changes.
3. Oversee the execution of the project with adequate direction.Consultants should be managed just as any other team reporting to the manager, and should not be allowed to reschedule work, redefine scope, substitute resources or make significant decisions without the knowledge and agreement of the client manager.
4. Ensure the desired results are achieved before consultants walk away with all their fees.Without proper management and evaluation, consultants too often get paid for just putting in the work hours instead of producing the results. Buyers must create a stronger tie between fees paid to consultants and the benefits a business receives over the mid- to long-term to ensure they are receiving maximum value.
Consultants are a valuable management tool, but companies must learn to use them more effectively. Given the huge sums of money being spent on consultants, through more effective selection, negotiation, project structuring and knowing when and how to release consultants it is quite easy to reduce the consulting fees for a proposed consulting engagement.
Through better alignment of goals and incentives as well as more effective management and control of consultants during the execution of their projects, companies can extract significantly better business results.