How to Get Value From Consultants

Research on over 25,000 consultancy projects has shown that about one third deliver what was promised and the other two thirds end in embarrassing and expensive failure. Yet it is not difficult to get truly high value from consultants. But for this to happen, all of the following nine conditions must be met. Too many clients embark on costly consulting and IT systems projects without checking that these commonsense elements are in place.

1. Your people cannot solve the issue
If you are thinking of buying consultancy to redesign your processes, develop a new organisation structure or whatever, you must ensure that nobody in your organisation is capable of doing the job and establish exactly how much consultancy help you need. Would it be enough just to buy one or two experts’ time to help guide your own staff? If so, then you should not let the consultancy sell you an army of “warm bodies”. Firstly, because this will be a huge waste of money. And secondly, because employees are more likely to accept changes to which they themselves have contributed and are more inclined to reject changes forced upon them by young inexperienced consultants who will not be around to bear the consequences of the changes they are proposing.

2. Your management team has correctly identified that issue
The next question to ask is whether you and your management team could in any way be responsible for the situation with which you want your consultants to help you. It is unusual for an organisation to have a problem that is not in some degree related to the way management leads the place. If you are able to make a reasonably honest and objective assessment of your own role in creating a situation where you believe you need consultants’ help, you are much more likely to buy the correct consultancy.

3. Your consultancy is selling a solution and not a product
Before hiring a consultancy, you need to be aware of what they can and cannot offer. In particular you need to assess whether they are genuinely trying to provide a customised solution to your situation or whether they are trying to foist some pre-made service on you. And if your consultants are in any way connected with an IT systems house, all the warning bells should be sounding. It is probable that they will be under great pressure to flog you some IT – make really sure you need it before they convince you to buy it.

4. Your consultancy has the right skills
When a consultancy shows interest in working for you, there is nothing wrong with insisting on seeing the CVs of the consultants who will be running riot in your organisation. Many consultancies will resist this request – if they do, they are probably not the kind of consultancy you would want to work with anyway.

5. The consultants with the right skills will work for you
When your consultancy is trying to sell to you, they will probably give you loads of face time with their experts with the skills relevant to your situation. Too often, once you have signed the contract, the experts become scarce and you’re left mostly with inexperienced “billing fodder”. You should demand that the consultancy includes in your contract a firm written commitment as to how many days per week the experts will be on site working on your project. And you should not ever accept bland assurances that their experts will always be available on the phone to help your “billing fodder” out and give them guidance when necessary.

6. Your consultancy agrees to a fixed timeframe and fixed budget
Look closely at the contract your consultancy offers you. In particular, check whether the total fees they plan to charge you are fixed and whether they clearly commit to how long your project will take. Many consultancy contracts, especially those including some IT systems work, may at first look like they are offering a defined service for a fixed price within a fixed timeframe. But if you look in the small print, you will often find several “get out of jail free” clauses that allow the consultancy to charge an awful lot more and take considerably longer than they initially promise.

7. Your consultancy agrees to base part of their fees on results
There are few consultancies that will risk basing any significant part of their fees on the results they achieve. They will normally give all kinds of excuses – they cannot be responsible for external events in the market, the economic situation might suddenly change, one of your major customers might move to another supplier, a competitor might implement a new more aggressive strategy affecting your profits and so on. While there is some validity to all these excuses, you should still be able to find some performance measures that will indicate whether your consultancy delivered the dreams they promised. If they do refuse to base at least thirty percent of their fees on their results, you should consider giving the business to someone else.

8. Your consultancy charges ‘reasonable’ fees and expenses
Your consultancy will probably try not to tell you how much they pay their staff and they will attempt to give you an overall price for your project rather than revealing what each consultant will actually cost you. However, you can reckon that a junior consultant is getting paid somewhere between £30,000 and £50,000 a year, an experienced consultant £60,000 to £80,000 a year and a project manager £100,000 to £150,000 per year. So if your consultancy are paying a junior consultant less than £1,000 a week and yet appear to be charging you £8,000 a week for their time, then this 800% gross profit margin may be excessive. Likewise, if they are paying an experienced expert around £2,000 per week and you are forking out £15,000 a week for them. Then look out for extra administration charges, excessive travel expenses and only pay for consultants’ time spent working on your project.

9. Try adapting existing IT systems before deciding to build new ones
If you think you may need to improve your IT systems, most IT consultants will recommend you build a completely new system. Their argument will be that your needs are unique, so to give you the best solution, they need to design something exactly matching your needs. It may be true that overall the system they propose is different from other systems in existence. However, if you split your required system up into its individual elements, you will probably find that most of these already exist in other organisations. You will save many millions and huge organisational effort by thinking creatively about how existing systems can be adapted to serve your needs. And always ask yourself the question: with over 700 million people living in the developed world, is it really possible that your organisation is so unique that there is no other organisation in existence that has similar IT system needs to yours?

David Craig is the author of “Rip-Off! The scandalous inside story of the consulting money machine” which exposes how consultants fleece their business clients and “Plundering the Public Sector” which reveal