Consultants

by Peter Parkes

Selecting a consultant

Good advice is something a man gives when he is too old to set a bad example.

Francois de La Rochefoucauld

When you move to the selection process, give both yourselves and the potential partners a period in which to get to know each other. For the sake of fairness, you must be even-handed, and if one party asks a question it is good practice to share the additional information with all interested parties.

For a true consultancy engagement – in other words, where you are looking for a quality resource to provide an innovative solution – then you need to offer the consultant an information-gathering period, during which they may decide not to bid, and a qualification period, allowing you time to assess their capability before you commit to the formal selection process. This is especially important in the case of larger and more complex projects.

Never take the advice of someone who has not had your kind of trouble.

Sydney J Harris

Selection needs to be on the basis of ‘best value’; in other words, it should not be on cost alone but also on the consultant’s ability and experience, and on innovation in the proposal to secure business benefits and reduce risk on the project.

It is unethical to ask consultants to expend significant resources and costs to bid unless they have a reasonable expectation of winning, so don’t put them through the cost of the process when you have already made your choice.

What to look out for

The table below lists some factors to watch out for.

Standard consultants Value consultants
They have a set of case studies for their practice, produced by their marketing department. Assigned consultants have personal experience of your situation.
Have standard references. Are referred by advocates of their work.
Tell you what they will do. Listen to your problems.
Treat your managers as stupid. Behave inclusively with your management team, recognising that they have other priorities and skills.
Offer to give you their standard proven product or methodology. Respond to information-gathering by offering a tailor-made and innovative proposal - one neither party would have come up with without a process of enquiry and co-creation.
Send you standard terms and conditions, with invoices presented on completion of timesheets. Link their reward to yours - share some of the risk.
Firm celebrates revenue. Joint team celebrates success.
Ask you to sign-off a case study. Ask you to recommend them if you are happy with their work.

Professional bodies

Commitment to Best Practice and professional standards are important differentiators in today’s competitive marketplace for individuals and practices.

Lynda Purser, Director, Institute of Management Consultants

Professional bodies provide a measure of quality assurance – is your consultant suitably trained and experienced, perhaps a chartered member, or are they going to seek chartered status at your expense on this engagement? Aside from the relevant professional body for the skill – such as IT, HR or Project Management associations, for example – there is the overarching Institute of Management Consultants, which is now recognised by the Office of Government Commerce, which represents the 40 per cent of GDP spent by the public sector.

There exist approved government supplier lists, which are compiled from the big players through a protracted process every few years. However, these lists, though good in principle, preclude the niche players.

Do I need one of the big name consultants?

There used to be a saying that ‘no one ever got fired for buying IBM (computers)’. From the fact that IBM no longer makes computers, we may infer that other players had more innovative value propositions. Perhaps many IBM buyers were motivated by risk avoidance rather than value creation. The same applies, but even more so, when buying intangible services to which it is difficult to apply strict quality criteria.

In 2006, management consultancy was a £60B global business, characterised by a small number of large businesses with fee incomes of over £100M. However, the bulk of consultancies are niche businesses with a turnover of between one and £10 million. In 1980, the forerunner of one of today’s ‘big four’ firms, Ernst & Whiney, had just 20 consultants!

Many receive advice, few profit from it.

Publilius Syrus (ca 100 BC)

Many people refer to ‘the big four’ consultancy firms, but this is in fact a misnomer, as the bulk of the work of these firms is internal and external audit, and their ‘advisory services’ are an opportunistic use of cross-selling from the failures discovered through the financial audit process.

Advantages of the big firms

The big firms offer certain advantages over smaller outfits:

  • They provide a level of quality assurance, and a degree of resilience; in other words, they are less likely to disappear, and if the person doing the job does disappear, then they have plenty more resources, even if these are only generalists.
  • Sometimes, only the big names will do: when a report is being checked by the National Audit Office of the Audit Commission, then the name of one of the big accounting firms gives a level of quality assurance.
  • Equally, if you need a new strategy for a major company, then the shareholders will take more comfort from a report with the name of one of the major strategy houses on the cover.

There was a massive amount of publicity around these [large consultancy] bandwagons, but too much work was done with too little thought.

Ian Watmore, The Government’s Chief Information Officer

Advantages of smaller firms

The government white paper Smaller supplier... better value? (PDF link) points out that smaller consultancies are usually sector- and skill-aligned and have a more flexible approach to the requirements of the client, rather than providing ‘one size fits all’ solutions.

With partners in the biggest accountancy-based firms averaging £1m packages, the fees for smaller consultancy houses can be less than half those for the bigger houses, while at the same time they may be using better qualified and more experienced staff.

In any case, the big four often pull in niche consultancies and freelancers under their business card to undertake specialist delivery for them – after they have won the business.

Freelance consultants used to work for small- and medium-sized businesses. Now big firms are just as willing to hire a sole trader or a small niche player

Vicky Wright, Chairman of the Management Consultants Association (1998)