LEADERSHIP STRATEGY: MAXIMIZE THE ROI FROM CONSULTING INTERVENTIONS

Engage consultants effectively

Consultants should be used selectively; they should not be considered as surrogate managers—a substitute for competent corporate managers. They are used effectively however, as a complement to management when the company is facing an inordinately complex situation or assessing unfamiliar opportunities. Consider the value a consultant brings—appropriate engagements are investments not an expense. The proper application of consulting expertise can intensify a company’s agility and accommodate faster project completion—the realization of a project’s benefits will be accelerated. Greater revenue generation, significant cost reductions, improved operational efficiency, and enhanced customer service are typical outcomes when consultants are used correctly.

by LSI contributor Doug Martin 

Situations where consultants have a track record of providing value:

• Doing something for the first time or undertaking a project larger than normal.
• Increasing the potential of success and confidence in a new strategy.
• Accessing expertise that it is not cost effective to maintain on staff.
• Meeting corporate objectives that could not otherwise be met.
• Seeking independent objectivity to stabilize a situation.
• Having a trained coach to help resolve situations or capitalize on a negotiation.
• Expanding operations while maintaining productivity and quality.
• Retaining a temporary executive until a permanent replacement is found.

Understand the difference between a consultant and a  contractor:

Do not confuse a consultant with a contractor. If you intend to plan, manage, and oversee work performed by external person(s), then you should engage a contractor. You hire a consultant to lead, manage, teach and review the work performed by company employees and/or other contractors. Hiring the right person in the wrong role usually results in less than optimal outcomes. If you expect a contractor to perform as a consultant you will be disappointed. Conversely, managing a consultant as a contractor will impede their capacity to deliver results.

Selecting/Qualifying  Consultants:

Once you determine that you need a consultant, the next issue is finding the right one. Selecting a consultant should be treated with as much care as in selecting other strategic providers. You want to interview your prospective consultant, not only from a skills perspective but to ensure good “chemistry” with your management team and other employees. The following are some questions to ask prospective consultants:

• Do they have the requisite functional skills?
• Do they know your industry (including best practices)?
• Do they know your market (including customers, suppliers and competitors)?
• Do they know consulting (methods, techniques, tools, etc.)?
• Do they know and employ change management practices?

Compensating Consultants:

Consulting fees can be based on an hourly rate, a fixed or not-to-exceed price for a project, contingent upon one or more performance goals or a combination. Determining the consultant’s fee structure should be related to the work to be performed. When the task is undefined with respect to structure, outcome, or timing then an hourly based fee is appropriate. If a project has a well-defined structure, deliverables, timeframes, and resources, then a fixed or not-to-exceed fee is the better choice. If the potential outcome of the project is significantly greater than the effort to be expended by the consultant then a contingent or performance-based fee might be considered.

Managing Consultant  Expenses:

Consultants should not be required to absorb expenses for your project they would not have otherwise incurred. Conversely, you should not absorb any consultant expenses connected with his general services. Unless otherwise agreed to in advance, consults should adhere to their client’s expense policies. Timing of invoices should match the fee structure if hourly, semi-monthly, or monthly invoices are the norm. If the project is well structured, invoices may be tied to deliverables.

Managing Consultants:

There are three critical success factors you must employ to receive maximum value from a consulting intervention:

1.  Really listen to what your consultants have to say and manage them properly.  Listening to your consultant is important—for many executives this can be difficult. You engaged them for their expertise and while you may not always like what they have to say you, should be prepared to consider what is being said with an open mind. Don’t let your ego get in the way when evaluating their recommendations. It could be the turning point for your company and a fabulous learning opportunity for you. Executives often resist what would be best for them—that’s why they haven’t acted on their own.
2. Managing a consultant does not require micro-management. If you plan to do that, you should have hired a contractor. Managing a consultant is a function of ensuring that the project’s scope is well defined. Typically this encourages the review and discussion of progress/status reports at regular intervals. For unstructured projects, establish periodic reporting—determined by the speed of the project’s expected progress. Progress reporting for structured projects should be tied to deliverable milestones.
3. Agree on what the status reporting format will be and establish procedures for changes in project scope before starting. In addition to formalized reporting, you should view your consultant as a time dated contributor to your team—not as a member. Consultants perform best when they are visible (on-site). Beware of off-site work and turnkey-type projects, especially if they are not not well-structured and fixed in terms of fee.

 Intellectual Property:

The ownership of any intellectual property should be agreed to in advance. The consultant will often bring proprietary methodologies, techniques, tools, etc. to the project that should be protected by non-disclosure. You will be sharing sensitive corporate information with the consultant that should not be disclosed either. However, these are the simple items. What about new ideas, processes, techniques, tools, information, etc. developed, discovered, created during the course of the project? The ownership of these items must be negotiated prior to starting work. As a rule of thumb, anything that is developed during the project that provides the company with strategic differentiation or tactical advantage should belong to the company or at least there should be a time limit on using knowledge or techniques. It is not uncommon to negotiate reduced fees in exchange for the consultant’s use of a project’s output.

Summary:

Consultants are a valuable resource when used appropriately, selected wisely and managed effectively. Effective consultants deliver independent objectivity and focused expertise. To secure a good ROI:

• Verify that your situation could benefit from an independent opinion
• Ensure the consultant has the required expertise;
• Evaluate the consultant’s compatibility with your cultural
• Develop a clear definition of scope
• Negotiate fair compensation
• Provide an appropriate level of management
• Keep an open mind to the consultant’s suggestions.