Getting Maximum Value from Consultants

By Gordon Perchthold and Jenny Sutton

Organizations spend billions of dollars annually on consultants with the goal of boosting business performance. The right consultants, contracted for the right reasons, can provide significant value to organizations. They can help challenge and re-structure thinking, overcome the status quo, and turn ideas into actions. Unfortunately, too often consultants produce underwhelming results for overwhelming fees.

Why? Many organizations have ceded too much control to the consultants they hire. They can take the reins back into their hands by focusing on three goals:
1. How to reap increased business results from consultants
2. How to reduce total fees paid to consultants
3. How to increase internal capability by learning new skills from consultants

These goals are not easily attainable, but businesses can progress toward effectively managing consultants by taking the following steps:

• Define the problem. Too often, executives leave it up to the consulting firm to determine the problem. Consulting firms, however, may view each client’s situation through the prism of their own capabilities and solutions. Executives must determine the desired results of the project and ensure that consultants focus on finding the specific solution to their problem.
• Dictate the structure of the project. Consulting firms may attempt to maximize the consulting headcount for the projects they propose. Clients may 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 on, 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 recommendations.
• Provide adequate project direction and oversight. Consultants should be regarded in the same way as any other team reporting to the manager. The consultant should not be allowed to reschedule work, redefine scope, substitute resources, or make significant decisions without the knowledge and agreement of the client manager.
• Ensure that the desired results have been 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 results. In today’s economic climate, there is greater expectation and governance surrounding pay for true performance over the mid- to long-term. Clients must emphasize the correlation between fees paid to consultants and the benefits brought about by work.

Consultants can be a valuable addition to a management team, but companies must learn to use them more effectively. Given the large sums of money being spent on consultants, companies must increase their return on investment by practicing more effective selection, negotiation, and project structuring. They must determine when and how to release consultants and take steps to keep costs in line. 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 enjoy significantly better business results.

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