In an effort to weather the great recession, many companies have significantly cut expenditures on consultants. Consultancy is perceived to be an easy place to save large amounts of expenditure, even at the risk of curtailing business plans and jeopardising long term positioning. Instead of simply abandoning strategic initiatives, companies should consider how to make their consultancy budget go further. Here are five key things that companies can do to extract more value from consultants.
- Establish the business outcome
Before hiring a consultancy, spend the time to clearly define what you want to them to do, and more importantly, what the outcome (based on one or more metrics) of their activities should be in terms of your business. Make sure that the stakeholders are in agreement before engaging the consultancy, as nothing is guaranteed to waste the time of a consultant more than conflicting instructions from a feuding management team. Make sure that the consultant understands that they are expected to deliver the business outcome, and embed that in their contract.
- Don’t buy the pyramid
The business model for almost any consultancy is the same. A few experienced knowledgeable experts, and a lot of junior consultants who are in the process of acquiring the knowledge to make them the future experts. The value comes from the former, but most consultancies will propose a pyramid-shaped team that is heavily weighted towards the latter. Buyers should not simply accept the consultancy’s proposed project team.
Instead, they should define the roles that they need the consultancy to fill only after they have confirmed the roles that they can fill with internal resources, or other lower-priced contractors. Besides the cost factor, an integrated team of consultants and your personnel will achieve far more than a team of consultants alone. The internal staff will facilitate the rapid collection of data, steer the team through any political obstacles, engender greater buy-in from the company at large, and they will learn some new and valuable skills.
- Buy on capabilities not brand
Consultancies spend inordinate amounts of money on branding and advertising, but the brand does not deliver the project. Individual consultants on the engagement will and despite impressive lists of client logos, if none of the consultants assigned to the project actually worked on those clients, these credentials will do little to guarantee the project’s success. Buyers should not hesitate to interview all key consultants being proposed to the project to make sure each is qualified their role.
- Improve capabilities for managing consultants
Few companies keep a corporate scoreboard of the consulting engagements they have commissioned. They have no idea how often their expectations were met, and what accounted for missed or met expectations - but it is not too late. Start now, and you will soon be able to match the sophistication of the consultants’ client relationship management with your own consultant relationship management process. Do this by appointing a central person or team to oversee all consultancy selections and projects. Their role is to disseminate knowledge related to consultants across the organisation, providing advice, best practise and an independent assessment of each consultant engagement. Take back control of the consulting relationship and you will be in a position to accrue far more value on each engagement.
- Pay for results not time spent
Consultants usually estimate their fees based on the hours they expect to apply – this is fair enough, but as a client you should not simply be paying them for the time as they apply it; you are looking for a specific business outcome. Therefore, tie payments to measurable progress, not hours worked, and the consultants will look for ways to become more efficient, and you will be paying for outputs not inputs.
Make the most of your consulting spend
Follow the tips above and expect to reduce your overall consulting expenditure, but not cut back on your projects and initiatives. Control consultants and apply them to the most value-adding roles, and you will find that your consulting budget goes a lot further.
Gordon Perchthold and Jenny Sutton are authorities on selecting and managing consulting firms/consultants to realise greater business value at reduced consultant spend. Their recent book Extract Value From Consultants: How to Hire, Control, and Fire Them , represents the perspectives of the buyers and users of consultants.