There’s lots of money to be made (and lost) in prolonging the problem!

There’s a poster about consulting at the website www.despair.com that is both funny and painful. It reads, “Consulting – if you’re not a part of the solution, there’s good money to be made in prolonging the problem.”

There are many companies that have used consultants and can make a good argument for that sentiment. However, there are many more who have realized great benefit from consultants to help solve problems and overcome challenges.

Why have they profited from consulting services whereas others have not? Here are eight keys:

1. Recognize why you need consultants. Start with understanding the reason(s) for retaining consultants. If the objective is to obtain an independent or objective perspective and new ideas for solving a problem, then using consultants makes sense.

It also makes sense to hire consultants if the project or challenge to be addressed requires skills and knowledge that cannot be found in the company. However, if the issue to be addressed is one that utilizes core skills within your firm’s staff, and those resources have availability, it’s almost always going to be more effective to use internal resources – they cost significantly less and possess an in-depth understanding of the company’s culture and processes that external consultants may never achieve. Be careful, however, to recognize that the people who created a problem may not be the right ones to solve it.

Management should also be on the lookout for instances when a consulting firm is being retained as a device to shift blame should a project not be successful.

2. Identify the right consultants. It may seem obvious, but many companies make the safe choice by selecting a “name” consulting firm rather than finding the consultants that can best address their issues. Examine and confirm the consultants’ familiarity with the nature of the issue, possession of the disciplines and functional knowledge that are relevant to the challenge, and depth of experience and seasoning to rapidly define the problem(s), identify solutions and start to work on execution and improvement of the company.

It’s also important to seek consultants whose personality and approach are a fit for the company and its culture. Owners’ or management’s feeling comfortable with the consultants and having a high level of trust is often the lynchpin of a successful consulting engagement. Industry familiarity may not be relevant; it may be more important to consider the consultants’ ability to view things from a distance and bring a fresh and creative perspective, unburdened by traditional approaches to a particular industry or situation.

3. Develop a work plan that extends from problem identification to solution development through execution/implementation. Work with your consultants to craft a plan that includes milestones at which the engagement can be evaluated for its progress and value, and a decision can be made whether to continue. Regular reporting by the consulting team of work done, findings to date, issues raised, obstacles to efficient performance of their work (e.g., client staff completing their work in a timely and effective manner), and next steps can assure that an engagement is progressing satisfactorily. You can’t always envision where an engagement will lead; it’s okay if some later portions of the plan are more general and detail is added at the appropriate time based on findings to date. 

4. Clearly communicate the reason for engaging consultants to affected company employees. The failure to clearly articulate the reasons for the retention or presence of consultants inevitably leads to suspicion by employees of a hidden agenda. It’s critical that the rationale for, and goals of, a consulting engagement be communicated to and understood by company employees so that they can assist openly in the consulting project’s success and not seek to undermine it for the wrong reasons.

5. Deploy internal resources to augment and support consultants. Many companies complain about the cost of consultants but make no effort to mitigate the cost by using internal resources for tasks that don’t require the consultants’ expertise, such as gathering of factual data or performing certain analyses. The expertise and experience of consultants is where the added value is realized; heavy involvement of less experienced consulting staff instead of internal resources usually results in heavy expenditures without concomitant return.

Furthermore, it’s important (except where an independent, objective perspective is being sought from the consultants) to team internal resources with consultants. Not only does this reduce the outlay for consulting services, but it also allows for a transfer of skills and knowledge from consultants to employees such that the company can better utilize internal staff on future projects of a similar nature. While it may not always be appropriate or feasible, company management should inquire about the ability to incorporate skills transfer/training for its own employees into the engagement when designing a consulting project.

6. Don’t surrender control to the consultants. Everyone recognizes the importance of appointing an in-house project manager to oversee the work of the consultants, whether it’s a mid-level manager or the CEO. In addition, the designated individual needs to be a champion of the project that utilizes the consultants’ services.

However, equally important is that management knows the company best and what may or may not work in resolving problems. It’s critical that a company’s management or ownership makes the decisions based on the recommendations of the consultants. Consultants can make recommendations and support them with facts and rationale, but only company owners and managers can or should decide what to implement.

7. Ask for detailed invoices and review them. Detailed invoicing and the review thereof allow a company to assess the value of the work being done for the cost being incurred against plan. Be sure to agree before the start of a project as to what out-of-pocket costs may be incurred and charged for by the consultants, and which require advance authorization from company management before being incurred. If the consulting firm is traveling from a distance to the company, consider requesting four 10-hour days on site each week (Monday – Thursday). It saves one night’s hotel cost. Also, ascertain whether travel time is to be billed or absorbed by the consulting firm; it will vary from firm to firm and project to project.

8. Conduct a post-project evaluation with, and independent of, the consultants. Identify the lessons from each use of consultants. Were the engagement’s goals achieved? Why or why not? What could have been done to improve the project or lower the cost? What could the company have done itself without the use of consultants? How could the consultants and company members worked together more effectively? Answering these questions when a project is just completed will enable your company to utilize consultants more cost-effectively the next time.

Consultants, when used appropriately, can provide considerable benefits for clients providing objective, fresh and creative solutions to seemingly intractable problems on a cost-effective basis. It’s important to learn how, and develop a plan, to extract the value before engaging a consulting firm.

About Ken Drossman

Ken Drossman is a Managing Director at Oak & Apple Partners, LLC. Ken has spent more than 35 years demonstrating practical financial acumen by leading, advising and guiding privately-owned, small and middle-market companies through financial and operating challenges. He has in-depth experience in all phases of financial, strategic and operating management from hands on cash flow budgeting through acquisition financing, from divestiture of business units to reorganizing and leading newly formed companies. Prior to co-founding Oak & Apple Partners, Ken has been the principal at Lakeview Business Consulting, LLC, which assists entrepreneurial business owners and their companies in achieving their business vision. Ken earned both his undergraduate and graduate degrees from The Wharton School of the University of Pennsylvania. Before founding Lakeview Business Consulting in 2006, he served for 18 years as CEO, COO and/or CFO at several privately-owned companies, in industries including financial services for hospitals; digital document storage and outsourced back-office services for professional service firms; design and distribution of personal business accessories through big-box retailers; capital goods manufacturing for national and regional retail chains; and information services for beverage alcohol manufacturing and marketing companies. Previously, Ken was a Partner at Grant Thornton, LLP, where he provided management consulting services to such companies as AT&T, Baxter Laboratories and GTE-Sylvania, as well as many middle-market companies.
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