Have you ever hired a consultant or been asked to work with one? If not, you're a distinct minority. Management consulting is a $160 billion industry, projected to grow at over 6 percent per year. In the U.S. alone, there are 258,239 listings for management consulting firms, with the largest capturing only 3.1 percent of the market.
The question is: Are consulting services worth the expense? There is very little objective data on the subject, partly because when evaluating a project the consulting firm can almost always claim success based on completing the project plan, while "implementation" and "getting results" is the responsibility of the client. And clients will usually report that they've received good value because otherwise they would be perceived as having wasted time and money. It's a wonderfully collusive arrangement, in which both parties always look good.
Being a consultant myself, I am not of course saying that consultants are a waste of money. However, like any investment, consultants need to be deployed for the right reasons and in the right ways. To do that, managers need to pay attention to two success factors: The first is to understand the different types of consultants and what they bring to the table; the second is to appreciate that hiring a consultant is not a passive activity -- it's an investment that requires active management. Without hiring the right kinds of consultants and working with them in the right ways, the investment is likely to yield very little.
For example, some consultants are merely arms and legs. These consultants are essentially hired as temporary workers. Often called "contractors," these people fill in on projects because the organization does not have enough full-time people to do the job. Sometimes -- when not managed properly -- contractors become "permanent-temporary" workers, particularly when they are used to get around head-count restrictions. To avoid this situation (which often represents a substantial cost) you should set strict time limits on the use of contractors. In addition you need to consider whether the work they are doing could be redesigned so that your full-time people would have the bandwidth to do it.
A second type of consultants are technical experts, who are brought in to develop or install a system, conduct training on a particular subject, or solve a well-defined problem. Technical experts are particularly useful when you require certain expertise, but don't need to have it permanently. The challenge for managing experts is that they know more than you do (they are the "experts," after all). As such they tend to find ways of expanding their work and becoming permanent fixtures. In one particular financial services company, for example, IT experts were brought in to update a client management system. At every key milestone they would recommend further work to enhance not only the client management system but other systems as well -- and ended up turning a six-month engagement into an in-house IT shop. Similarly at a large pharmaceutical firm, many of the expert strategy consultants outlasted their departmental clients -- which made them indispensable to the new managers. What was worse was that the new managers asked them to refresh the strategy that these same consultants had previously developed, which allowed them to start the cycle all over again.
But not all consultants try to create an ongoing presence. In addition to "arms and legs" and "experts," there are partner consultants. These are people who bring their talents and experience to the organization by working side-by-side with clients, helping them achieve their goals in new ways while building their clients' capacity. Leadership coaches, team facilitators, and some management consultants fall into this category. Partner consultants -- including experts who make their inputs in a collaborative way -- give you an opportunity to change the collusive dynamic mentioned earlier. The main vehicle for doing this is to hold them accountable -- along with you -- for the goals that you are aiming to achieve. If they are truly working with you hand-in-hand, then they will want to have a stake in the business outcome (even if it makes them uncomfortable), and not just in the completion of their assignment. Results will then become the true measure of success.
Hiring the wrong consultants or mismanaging them can cause severe problems in organizations -- unnecessary expenditures, low morale, and misdirected efforts. By bringing in people with the right roles and keeping them focused on the right goals however, you stand a better chance of getting your money's worth.
What's your experience with consultants?
Cross-Posted from Harvard Business Online