The decision framework for choosing the right management consultant can be enhanced: Knowing your own organisation and its capabilities can often be more important than what you need to know about the consultant.
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Most clients know what you can get consultants or a consulting firm to do and why they are used but are less clear of the outsourcing options and the different payoffs of success versus the cost of the job failing to deliver the desired outcome. In Part I of this three-part series, it was illustrated that the net expected payoff for each option, whether it is assessing expertise through training your staff, by employing the expertise or hiring external consultants, will also depend on whether the job is ‘simple’ or ‘complex’.
In Part I, I pointed out that for ‘complex’ jobs typically involving more critical business problems there is usually greater potential upside and net payoff likelihood from using consultants or a consulting firm compared to the higher opportunity cost of using other options. In this circumstance of complex jobs, the importance of aligning and choosing the right management consulting capability becomes equally critical.
However, in making your choice of strategy management consultants or consulting firm for the job, there are two questions you will need to consider:
- First, are you clear about what you want and your own organisation’s capability to deliver the work themselves or alternatively work with and guide the consultant’s work?
- Second, what is it you need to know about or ask of the consultants to ensure you have chosen the right ones?
(i) Are you clear about what you want and your organisation’s capabilities?
Among the important elements are:
Objective: what is the problem you want solved? The problem must be defined and articulated clearly to your internal team and to the consultants. It is important to separate symptoms from the cause or causes of the problem you want addressed.
The four-step process we use to help our clients and ensure ourselves that we are solving the right problem is to (a) separate the situation the facts of which you are aware from (b) the complication or problem to be addressed. Then, (c) the issues arising from the complication provide the critical questions to be examined that will result in (d) the resolution to the problem being not only the right one but the only one.
The ‘situation’ includes all those things that are known to you whereas the ‘complication’ is the thing that is not known and needs to be understood to solve the problem. To illustrate the difference between the situation and the complication, you as the client may say, for example, that your problem is falling market share. But that’s not the problem because you know your sharing falling. I ask you if you know why it’s been falling and you say, yes, because we have a weak product offering in some segments. That’s not the problem either, because you know and have just admitted that your product offering is weak. So I ask you what is wrong with your product offering and in which segments is it weak. You say the offer is not competitive, which you also know. But you then go on to say that the complication is that you are uncertain about how to find the right mix among product specification, pricing and service levels that will provide a superior competitive offer to customers in each segment of the market and maintain pricing integrity across the segments. Now I know what your problem is and how to begin thinking about the issues to investigate that will allow me to resolve the problem.
If we had focused on falling market share we would have wasted a lot of time. Reversing the slide in market share is still important but now the focus of effort is on the right issues. This logic structure for problem identification overcomes the approach and trap of some consultants to ‘boil the ocean’ to find the fish, which wastes resources and time and worse still can prevent the real insights of the solution being revealed.
Why is the job needed? What is the event that triggered the need and why do you feel consultants are needed? Is it best outsourced and answered using external resources?
To what degree does your organisation have the capabilities to solve the problem? Are internal resources and skills available to do the job or will a combination of internal and external resources achieve a better result? How will your skills complement those of the consultant? It is important to be honest about where your team can contribute to the overall job. For example, clients often want one of their team on the consulting team but it is quickly revealed that the internal resource becomes distracted by internal demands or finds himself out of his depth.
Either way, you will need to make a commitment of internal resources (especially during the implementation stage of a job) and management’s time to provide input, leadership/guidance, and to review and challenge the findings and recommendations. At a minimum, some resources will be needed even to guide and manage the job. Resources will also need to be available if you want a transfer of knowledge, learnings, and skills from the consultants to your team during and at the end of the job.
Data availability: The first question is do we have the internal data required to get the job done? Second, is it readily available, or do we have to ‘dig’ it out and transform it, or collect and assemble it from primary sources? The resources required internally and externally will reflect the effort needed; for example, in activity-based costing projects or with a client’s own customer-product segment profitability analysis the availability and quality of the data is critical to the effort required.
What is the nature, form and timing of outputs you want? What are the findings and recommendations inputs to? Are the outputs of the job to be quantitative and/or qualitative? For example, are they being used in a financial model of the business, business plan, board paper, or an acquisition evaluation? Ultimately, the outputs will be central to senior management making a decision, so the outputs must be aligned with your need to make that particular decision. For most business strategy assignments for senior management, quantitative and probably financial outputs will be required.
Regarding the outputs and referred to above, it may be important to you that ‘knowledge, processes and the ‘learnings’ are transferred from the consultants to you and your team. If this is the case then this requirement must be explicit and factored into the timing, resourcing and costs (if it is material) and you must make available the staff you want to benefit from the transfer when it is efficient to do so.
Timing and cost of the job also are important ingredients to the nature and quality of the outputs. If the time is too short or the budget inadequate then this will be reflected in the quality of the outputs. It is not uncommon that a drop-dead completion date has been set and the proposal of work provided only to find delays with the approval and availability of people the client wants involved before the job could be started.
Scope: what’s in and what’s out of scope. If this isn’t clear, then scope ‘creep’ can occur on both sides of the proposal. Besides, you want to ensure that you provide the right information and data to the consultants to do the job expected.
Related to scope is the type of job you want done. You need to consider, probably with the consultant’s input, what type of job you want the consultants to do. As outlined above in Section 1, you may want them only to find data and specific information and then you will analyse and interpret the findings using your internal resources. Alternatively, you may want the consultants to find the data and then go on to use the data to answer the question or solve the problem you have identified. After that you will need to decide whether you need the consultants and their output for the next stage of implementing the solution and recommendations? The more complex the job the more important it is to have the consultants closely involved in each of the three stages of the job.
What is the nature and structure of the working relationship you want with the consultants: To ensure a successful outcome and a good working relationship, you will need to consider the level of collaboration, the structure and level of control vs guidance by you and your team, the review process and frequency, and who’s involved from your side day-to-day and for reviews of the work at major milestones.
An open and trusting relationship is important to getting the best outcome. The consultant’s job is to find the answer and deliver it objectively. How that information, the findings and recommendation are used and handled is the responsibility of the client. The chemistry of the relationship is critical here.
The reporting structure of this relationship can also have a critical impact on the effectiveness of client-consultant interactions, and on how findings are discussed and revealed to the wider organisation. With a large steering committee review process there might seem to be transparency but there is also less control and more importantly, an atmosphere that is often less conducive to testing or pre-wiring ‘emerging’ ideas and challenging company orthodoxies and sacred cows. This ability to road-test underdeveloped ideas is important to seeking creative solutions without the risk of unanticipated negative reactions from a wider group. A small group is essential with highly sensitive issues of changes in strategic direction and particularly with organisational reviews and restructuring where anxieties and uninformed expectations need careful management.
Shaping the brief and proposal: A lot of time and effort can be avoided in the process of preparing a proposal of the work to be done. Some clients like or are required to have the consultant do this totally independently and at arms length. This is often a mistake and can lead to confusion and at worst conflict down the track. My strong recommendation is that you develop the brief and the proposal together with the consultant. When you and the consultant totally agree with what is in the proposal, that is, the objective, the scope, the approach and the nature and shape of the outputs, then you and the consultant are in the right place to consider the timing, resourcing and costs. If the timing and costs are not to your liking then you have a clear basis for revising the job and resourcing to what you want.
(ii) What is it you need to know about or ask the consultants?
Normally, you will want to know the experience and background of the senior team members. You will also want to know the teams overall skills and capabilities to do the job you have in mind.
Referrals and references will give you some insight into their track record with other clients and other jobs. In one case the CEO made the choice, among several firms that had done assignments for him, to work with us based of the surprisingly simple criteria of who had delivered on what they agreed to do, and had delivered on time and on budget.
However, experienced consultants will be aware of the need to guide the client through many of the issues highlighted in the section above. They should also be sensitive to your need to have certain background knowledge of the consultant and to ensure you feel comfortable with the initial interactions you have when outlining your needs for assistance with a particular job.
Besides familiarising yourself with the profile, experience and capabilities of the firm and the individuals you are likely to be working with, you may want to feel comfortable with some of the less tangible but important aspects of the consultants and the job to be done. These would include some of the following:
- Are they listening and have they understood the problem you want solved and your overall objective within which this job a key part. Have they understood the complication you want resolved or are they latching on to a symptom of your problem and not the root cause?
- Are they challenging your understanding and raising relevant concerns and questions?
- Do they show objectivity in these discussions and are they open to alternative approaches and options or are they to willing to accept your thinking unchallenged?
- Are there any potential conflicts of interest perceived or real that need to be resolved and what approaches have they to put forward for managing these potential conflicts satisfactorily?
It is also valuable, given the array of management consultants to consider, having a close appreciation of:
(a) The balance between senior and junior members of the consulting team. The business model of each firm, how they are structured, the typical size and composition of a team will reflect the involvement of senior people and who will be working on the job? In a highly leveraged model you will see the senior people only during the sales process, the start of the job and at the end, and where the team that does the work predominantly comprises junior analysts and ‘newly minted’ MBAs. You have to feel comfortable with this mix. The highly leveraged model often reflects a strong emphasis on data collecting and analysis. The risk here is that you may get a ‘boil the ocean’ approach to problem solving and limited access to senior level experienced thinking.
(b) The balance between quantitative and qualitative information and outputs also needs to be considered. Given the target market of strategy management consulting is the CEOs, CFOs, division heads and as input to Boards the findings and recommendations will be driven towards change and probably with quantification of the financial impacts. This typically is the case for example, with an evaluation of an acquisition target or the impact of a competitor’s strategy on the business or with entry into a new market or market segment. Looking at a sample of the consultant’s work will reveal whether they are:
- distinctive in their approach and methodologies for identifying, collecting and analysing customer, competitor and market data
- analysts who tend to provide a ‘data dump’ of data, analysis and findings or are advisors who are results oriented and tend to use the analysis to logically structure recommendations
- able to persuade management or the Board of their logic and benefits from adopting the recommendations.
(c) The willingness or ability of the consulting team to do smaller as well as large assignments. Short-term ‘rifle shots’ on key issues that are difficult for the client to resolve or chase down can be as valuable to a client as undertaking a large job. For some larger consulting firms, their business model economics do not lend themselves to doing smaller jobs or to having one or two team members to stay on after the end of a job to assist with specific issues, or the transition of results or learnings from the job.
Perhaps as a tip to ensure the integrity of the consultant’s findings during the transition and implementation of the recommendations, it is often important that you and the consultants are able to stay in touch at least for a short period at the end of the assignment. This may involve inclusion of a key member of the consulting team on the integration team to facilitate an effective translation and transition during integration or implementation.
If you would like to find out more and how this issue might apply to your business then contact us via the Contact Form.
