Many organizations struggle to get value from their use of consultants. This is because they have the wrong idea about consultants. Read and learn.

The brand name consultancies and many of their smaller competitors like to think of themselves as ‘advisors’ rather than what they see as the more down-market term of ‘consultants’. Their consultancy divisions are often called “Advisory” to reinforce the point.

But lipstick on a pig does not change the fact it is a pig.

Billings, billings, billings, billings

These consultancies are built to

  • Bill time (not deliver value)
  • Leverage young, inexperienced consultants to earn large margins (billings) for over 200 days of the year
  • Spread the partner’s time (billings) over many jobs (so they can spread the impact of their excessive fees)
  • Win follow-on work (billings) again and again.

That’s the consultancies’ business model.

Please note “the client” does not appear in this list of priorities.

Client = payee

Of course consultancies will be ‘appalled’ at my list. “Of course we’re client oriented otherwise they would not ask us back to do more work.” Not true. Clients use and reuse brand name consultancies for the protection they provide if (or when) they fail—the “No one got fired for buying IBM” syndrome.

In one bank the client executive wanted to use a boutique organization that had all of the skills and experience they desired. But, “Unless they are known at the board level, they are too high a risk to retain.” As a result, mediocre brand name consultants were used to deliver a mediocre result again.

Now, so far, I’ve laid most of the blame at the consultancies’ door. But the client is to blame too.

Client = culprit

Buying a brand name consultancy means

  • You don’t need to think – there aren’t many brand-name consultancy firm options
  • You don’t need to ask any hard questions – if they say they can do it you can rely on them being able to do whatever it is you want done – relevant skills, track records, proof of results are not asked for
  • You don’t need to take any risks – who will blame you when they ‘stuff up’?

It is the lazy-man’s approach and usually delivers mediocre results.

Mediocre and impractical

Most brand name consultants are mediocre. They may be intellectually bright, but most have one great impediment — that their staff have only ever been consultants. They have never held a ‘real job’ where they have had to perform with limited resources and within the culture and politics of an organization. This can make them impractical.

Too often brand name consultancies’ recommendations are superficial, mediocre, standard off-the-shelf solutions (whether applicable or not) or just plain impractical. They walk off with their fees and the client is left trying to make sense of the, too often, un-implementable report.

All worthwhile consultants have had one or more real jobs.

The former Managing Partner of a strategy firm was asked to work in a large organization for a few months to help them out. It was his first time in a line position. He really, really struggled. He could no longer pronounce and walk away, he had to deliver results. This was alien territory for him.

Only when you have performed with in-house staff, navigated the realities of an organization and had to produce a result—do you know what real life is. Then you can temper your recommendations to what will really work rather than what looks good in a spreadsheet.

The most important attribute you need of a consultant is practicality.

A senior strategy partner opposed a junior manager’s survey of the ideas and concerns of the client’s middle management, “It was a waste of time as it did not help us come up with the solution.” But the junior manager countered, “No, but it helped us sell it.” Too many strategy consultants are more interested in the ‘bright idea’ than its practical implementation.

For an expose on how consultants think and operate, read our entertaining ebook, "Consultants.CON"


Open check-books

Too often organizations give their consultants an open check-book. They agree to an hourly or daily rate. Now the consultancy is incentivized to go slow, extend the time, bring on more and more consultants. When you are paid by the hour or day your focus is on maximizing the number of hours/days.

Now there are some assignments that cannot be predefined to a point where a fixed price can be given, but these should be the exception. Clients should insist on fixed-price contracts for fixed outcomes.

Now consultancies are reluctant to sign up to such contracts as the risk of time and cost overruns now rests with them. Where they do sign such contracts they try to ensure that there are enough clauses in the contract to allow them to wriggle out of any obligations and to increase the cost if at all possible.

When you break an assignment down into a series of steps – simplify requirements, produce business case, generate project plans – you can ask for a fixed time, duration and cost for each. The only caveat you need to agree to is that if you—the organization—cause the project/step to be delayed, then the cost increases by the daily cost for the length of the delay.

Most consultancy assignments should be fixed-price – it sure sharpens the minds of the consultants.

Implementation = value

You want whatever the consultants recommend to be implementable. Not implementable in theory but by your organization with its (limited) skills, tools and processes. Many strategy consulting firm’s recommendations are totally beyond the skills and abilities of the client organization to successfully deliver. History is littered with failed organizations that tried to implement the recommended strategy and foundered.

Only if you can implement the ideas, recommendations and decisions the consultants have given you is their advice of any value. Strategy firms have in the past tended to shy-away from detailed implementation. Brand name consultancies have armies of juniors to take care of that stuff.

But the client also needs to be implementation-aware. No client should commission any consultancy assignment unless they know who is going to implement the outputs and how.

Should you give it to the project managers to implement?

Project manager departments are some of the worst at implementing recommendations. They are all ‘experts’ and therefore want to ‘do their own thing’ rather than follow the change plan or adopt new processes. Although you would think a group of project managers would be able to implement a change plan on themselves, in too many situations they cannot. As they say, the hardest people to change are the change people.

The ‘high flyers’

Of course there are some good consultants (or advisors). People who really know their stuff and can give organizations advice and strategies that will really move them forward and increase their success. But such people are rare and expensive. Even in the largest consultancy organizations there are only about 10-to-20 such people. The rest are ‘journeymen’.

Think of any football sport. Most players at the top level are good, but there are always a few ‘high flyers’ that stand out from the crowd. The likelihood of your team (organization) getting one of these ‘high flyers’ is next to nil, so you need an alternative solution that delivers high-flyer results.

Be careful what you pay for

What are you really buying when you buy a consultant (sorry, advisor)?

  • Their and their firm’s knowledge.
    However, this knowledge can be homogenized and gleaned from internal databases rather than personal experience. NB Even the top strategy firms have their standard solution ‘themes’ that they try to fit every assignment into. (See our ebook, "Consultants.CON" on this topic.)
  • Their and their firm’s experience across many firms and industries.
    This is often why consultants seem ‘bright,’ they’ve consulted to and therefore worked in many different organizations and have seen other firms come up with alternative solutions that they can now present to you as their own.
  • Their ability to implement and deliver value.
    This is where they really come unstuck. The senior partners certainly do not want to get their hands dirty doing ‘implementation’ and the junior staff have little idea what they’re doing – except what they’ve read in their internal guides.
    (NB most brand-name consultancy's change managers are contract staff.)

So this is not an overwhelming list of attributes that warrant paying premium prices for.

In-house knowledge

The one thing you cannot buy from any consultancy is in-depth knowledge of your specific business. They may have a good insight into your industry and be able to bring a fresh perspective and challenge some of the in-house assumptions, but they’ll never know your business as well as your internal management and staff do.

As a result, the first few weeks of most consultancy assignments are consumed with trying to get the consultants up-to-speed with your organization’s specifics. In other words, you are paying them to learn what you already know. As one senior banker once observed, “I seem to spend my life educating consultants in banking.”

Your in-house management and staff know your business in detail—you just need to enable them to bring this knowledge to the surface so it can be used to advance the business.

Your in-house staff can have radical ideas for improvement but no forum in which to promote them (without potential ridicule).

Jan Carlzon in his book “Moments of truth” tells of going to Boeing to ask for radically different types of cabin layout for a plane. The senior management was skeptical as to the proposed designs’ merits; the aviation engineers merely brought out their pre-existing drawings of what was possible that they had already produced but no one above them would consider. The staff had already addressed the cabin redesign issue and designed workable solutions.

In-house execution

You need to unleash the intelligence, ideas and commitment of your own staff. Given the opportunity they can often outperform any consultancy.

But they do need to be given license to challenge the sacred cows. Every aspect of the business that is deemed ‘off-limits’ can compromise the eventual result. NB In most cases consultants won’t consider any aspects of the business ‘off-limits’. Nominating any area as ‘off-limits’ is a short-sighted move.

One of the hallmarks of Apple Computer is that it obsoletes its own products faster than its competitors can catch up. When it brought out the iPhone it did not try to protect the iPod, it recognized that the iPhone would take sales away from the iPod; but if Apple didn’t do it, some other competitor would. Contrast that with Kodak that stopped work on the digital camera as it would cannibalize the sales of highly-profitable film.

Some 25 years ago our research found that the worst performed element of any project was the effective implementation of change. How to manage and execute change successfully was not understood. Since then a whole new profession has sprung up – ‘change management’ – to address this deficiency, with mediocre results.

The most successful change we have seen over the past 25 years has been in-house staff led. When your own staff define and deliver the change, practicality and results go up and resistance to change goes down. What your staff need is to be shown how to define and deliver change. Change is really quite simple when you focus on the activities to be done.

Capability transfer

To address this ‘show the internal staff how to do it’ need, some clients ask their consultants for ‘capability transfer’. Firstly consultancies increase the fees for this ‘additional work’ and put in some nominal transfer steps. BUT, remember, transferring their capabilities to their clients is totally against their business model. They protect and preserve their methods and tools. The last thing they want to do is transfer them to make the client independent of them. Remember the “Win follow-on work (billings) again and again” imperative.

Packaging expertise so that it is transferable to clients is very different to making it available for internal (to the consultancy) use. Brand-name consultancies don’t do it because they don’t want to do it. Boutique consultancies don’t do it because they don’t have the resources, time or inclination.

Yet, capability transfer is a critical area where a consultancy can add real value to its clients. Every consultancy should be aiming to uplift their clients’ skills, knowledge and processes - but few do.

Desired outcomes from a consultancy

You want two outcomes from a consultancy assignment, two sets of results:

  • Implemented solution that increases your organization's productivity, competitiveness and profits
  • An increased organizational capability to further increase your productivity, competitiveness and profits.

The first on its own is okay; only the two combined makes the price of advice worthwhile.

So your measures of success for any consultancy should be

  • The recommendations are understandable, practical and can be implemented by your organization.
  • They are provided for a fixed price – no nasty fee-increase surprises.
  • The core tools, techniques and processes are also transferred by training your staff to do the work, implement the solution and own the results. (Having them ‘work alongside the consultants is not enough, ever. Your staff need to be defining the outcomes, executing the activities and delivering the results.)

To achieve these measures of success you need to

  • Be clear what you want, what the assignment’s desired business outcomes should be
  • Insist on a fixed price without multiple consultant-required caveats and other clauses that give them wriggle  room out of the fixed price
  • Provide the in-house staff to work on, own and deliver the project and its results.

Then you’ll 'bank' progressively greater results with or with out consultants in the future.

In Conclusion

The prize of good advice is the development of your own capabilities to increase your productivity, competitiveness and profits.

It really is that simple.

Topics: Capability Development, Consultants

Further Reading



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Revision History

First published: Simms, J. (Jan 2016) as "The Price of Advice - How To Buy Consultancy"

Updated: Chapman, A. (March 2020), Revisions and Corrections