Consultants can bring wide-ranging experience, commercial and creative insight, and a fresh perspective to bear on problems. They are able to do this partly because they stand apart from the organisations they serve. Indeed, the value of consultants is grounded in their objectivity.
But this objectivity disguises a hidden weakness: a lack of skin in the game. Should the solution advanced by the consultant lack merit, he will rarely experience the consequences as profoundly as the client. Beyond professional disappointment (which will likely be blamed on others or buried), reputational damage (easily dwarfed by brand equity, particularly within large consultancies) or lost revenue (replaceable), the damage is limited. Meanwhile, organisations and the individuals that work for them might still be counting the cost years later.
This raises two questions for leaders: how do you spot consultants whose advice will be sound? And how do you set the consulting relationship up for success?
During initial conversations, most consultants will focus on their greatest hits. This is fair enough – presenting a strong track record can build confidence. But it is often more revealing to examine the failures that they have been party to, and part of.
When meeting prospective consultants, ask them to detail two failed or problematic projects from the last two years. Ask them to explain what went wrong, and why – including their own contribution to the issues. Doing so will help you discover how honest they are (a consultant who claims never to have failed should not be trusted), their level of humility, and their ability to understand the dynamics of different organisations.
Related point: it is also worth asking your consultants what they need from you in order to be successful. It is remarkable how few clients bother to do this.
The perceived need to spend weeks or months on project scoping rarely stands up to scrutiny. The same holds true for diagnosis processes (a beloved cash cow for mediocre consultants who want to forestall the obligation to start solving actual problems). With the right techniques, it is possible to gather a basic understanding of the issues and to define a start-point for change, fast.
The principle of starting small involves identifying one problem that can be solved well, then doing so as a containable project with no further obligation on either client or consultant. There are many advantages to working this way: it checks chemistry fit, ensures tangible results for a finite initial investment, avoids mission drift, reduces commercial risk, grows advocacy within a business, and builds momentum. The best consultants will insist on starting small for these exact reasons.
Payment by results (PBR) is attractive in theory, but in practice many finance departments have limited appetite for it. This is partly because of the budgetary uncertainty it presents, and partly because isolating the factors behind success can be difficult. But PBR is a worth considering: it can be motivating and negates the lack of skin in the game.
Other types of incentive are possible. For example, you might stage-gate projects so that budget only gets released on the completion of specific milestones. Or agree to deliver coveted referrals from your network, subject to successful delivery.
Conversation not presentation
Many consultancy projects involve remarkably little actual consultancy. Instead, they default to displacement activities that appear to add value but in reality consume time and effort (the consultant’s) and hard cash (the client’s) for minimal return. By far the biggest offender in this regard is the PowerPoint presentation.
Before your consultants start creating the “deck” that they seem so keen to bestow upon you, like the gift it probably isn’t, examine whether its purpose could be better served through the lower-cost medium of conversation – or perhaps a one-page debrief or structured data download. You might also want to ask your consultants to break down the per-hour cost of preparing said presentation. Such analysis can help focus the mind on ROI.
Of course, the tragic reality is that some organisations only feel able to embark on internal conversations via the medium of PowerPoint. But the best consultants will not allow money to be spent on activities that don’t deliver an exponential return.
Co-create a reality in which your consultants focus all their time on actual problem-solving, and watch your return on consulting spend soar.