Hiring a Consultant - Villain or Hero?

11/19/2017

Hiring a Consultant - Villain or Hero?

Are consultants simply someone who “borrows your watch to tell you the time?”

“Veteran journalist Duff McDonald makes a point in his book “The Firm” that McKinsey might be the single greatest legitimizer of mass layoffs in history —although that would be pretty much impossible to measure. Companies do need to lay off workers in tough times, that’s a simple fact. But the whole idea of corporate powerhouses laying off thousands of people during good times simply to juice profits—and, naturally, executive compensation—is something that McKinsey has definitely had a hand in as well. ...That sounds like a vote for evil, to me.”
Source – Time.com

The article on Time.com by Gary Belsky goes on to ask whether McKinsey is a force for good or evil.
With suspicions, rumors, and articles about failures over the years which have McKinsey & Co. within arm’s reach, has it tainted the reputation of other consultancy firms and professional consultants? McKinsey & Co. maintains its reputation on the list of top consulting firms for 2017 on Forbes.

MORE IMPORTANTLY

Overshadowing potential risks consultants may bring is relentless change. By hiring a consultant, clients are hoping to have access to deeper levels of expertise to deal with the impending changes than would be financially feasible for them to retain in-house on a long-term basis.

A recent press release and special report - “The US Consulting Market in 2017” by Source Global Research highlighted how the need for expertise is apparent as the consulting market grows.

In the news published May 23, 2017:

U.S. financial institutions spend $14.8bn on consultants as attention switches to regtech and robotics
U.S. consulting market grows 7.1 per cent to $58.7bn in 2016
Cyber-attacks force U.S. companies to ramp up spending on cyber security consultants to $7bn

In essence, changes in regulations in the financial services industry and the advancement of robotics, led to a need for more expertise from consulting firms in the U.S. financial services industry.

CONSULTING FIRMS ACQUISITIONS

Technology and market changes are not the only trending topics. The Source Global Research report, “M&A: Is it Adding Value?” was released on September 5, 2016, and based on a survey of almost 3,000 senior users and buyers of consulting services. It found that while clients understand why consulting firms buy other firms – they lose expertise – either because good people leave the acquired firm, there are fewer specialist firms to choose from, or the acquiring firm is a generalist, into which niche skills are absorbed.

This transformation via mergers and acquisitions can create new villains, heroes or apathy as the consultants must redefine their role and follow new leadership.

WHO IS A CONSULTANT?

The first consulting firm founded by Arthur D. Little, a professor at MIT, who named the company after himself. Initially, Arthur D. Little specialized in science, engineering, and invention. Frederick Taylor took his emerging theory of Scientific Management and became a management consultant, performing time and motion studies to improve manufacturing processes. Did Mr. Little and Mr. Taylor see the potential of a multi-billion-dollar consulting industry?

The oversimplified dictionary definition: "an expert in a particular field who works as an advisor either to a company or another individual" says that anyone can become a consultant. There is no single qualification to be a consultant other than those laid down in relation to medical, psychological and engineering personnel who have attained a degree in it and professional licenses.

i.e. A legal consultant may be required to be a member of the bar and hold a law degree. An accounting consultant may be required to have an accounting designation, such as Chartered Accountant status. On the other hand, some individuals become consultants after a lengthy and distinguished career.

With such an ambiguous standard, it is more difficult to evaluate and ‘score’ the best/worst or good/evil character of a consultant. Referrals or word-of-mouth continues to be valuable, each with a testimonial or story about their experience.

A consultant typically will have influence over an individual, group, or organization, but will not have direct authority to implement changes.

There are professionals who are not consultants but do provide advice:

Bookkeepers – If you hired the right bookkeeper, they would act as a business partner, not just a data entry person. Though a bookkeeper’s primary role is not as a consultant, the Bookkeeper with 20+ years of experience can offer priceless advice regarding procedures, accountability, cash control, etc. There are limits to what a bookkeeper can offer advice about which is when an accountant or controller is called in.

Accountants - Are responsible for either creating or assessing a company's financial records, ensuring that the company pays its taxes correctly, and evaluating the company's financial records to improve efficiency. Whether an accountant is a consultant or advisor depends on the type of accountant role. An accountant may be an accounting consultant, but other roles include auditors, forensic accountants, public accountants, tax professionals and financial advisors.

Both bookkeepers and accountants can obtain certification through a professional organization such as AIPB (American Institute of Professional Bookkeepers) or the AICPA (American Institute of Certified Public Accountants). As with consultants, the terms “bookkeeper” and “accountant” can be used without certification. It’s important to know what qualifications or certifications people have before hiring them.

Standards – Code of Ethics

Fortunately, there are accredited associations bound by a Code of Ethics which require members to provide practical advice that works. Such associations include:

International Council of Management Consulting Institutes (ICMCI) has about 50 member institutes around the world. This organization offers a variety of membership options based on experience, education, and phase of business or career.

Chartered Institute of Management Consultants (CIMC) is a not-for-profit professional body chartered federally under Letters Patent granted by the Government of Canada and registered under the laws of Delaware, USA.

International Federation of Consulting Engineers (FIDIC) Founded in 1913, FIDIC is charged with promoting and implementing the consulting engineering industry’s strategic goals on behalf of its Member Associations. Today, FIDIC membership covers 97 countries of the world.

Management Consulting Institute (MCI) MCI was founded in 2011, and board members include Directors and Partners from the top Management Consulting Firms such as Accenture, Arthur D. Little, Bain & Co, KPMG, McKinsey, and academics.

Association of Accredited Small Business Consultants® (AASBC) is an association focusing on training and certification of small business and SME consultants to develop proficiency in the specialized area of small business and SME consulting.

Institute of Certified Business Consultants® (ICBC) is a professional organization for business professionals with a global presence and a strong focus on professional values and high ethical standards, plus the opportunity for study and career advancement in the field of business consulting.

WHY YOU MIGHT HIRE A CONSULTANT

Robots, artificial intelligence and dramatic changes in regulations are not the only reasons for hiring consultants. Steve Jobs, the former CEO of Apple, once explained: “We don’t hire consultants. The only consultants I’ve ever hired…is one firm to analyze Gateway’s retail strategy so I would not make some of the same mistakes they made [when launching Apple’s retail stores]. But we never hire consultants, per se. We just want to make great products.”

--- Which is a contradiction because, for the right reason, they did hire a consultant.

Reasons for a company to hire a consultant:

Because of his or her expertise.
To identify problems
To supplement the staff
To act as a catalyst
To provide objectivity
To teach
To do the "dirty work"
To bring new life to an organization
To create a new business
To influence other people

Without an understanding of why to hire a consultant, failures are likely.

POTENTIAL FAILS

Hindsight has 20/20 vision, it is simple to look back and know ‘mistakes’ were made. There are no “do-overs’ where companies can redeem the millions of dollars invested or return to grace with buyers when a brand is tainted. Many are eager to tell their story about the worst consultant in the media. Here are a few examples of why hiring a consultant can fail:

Incomplete Expertise – If a consultant does not thoroughly understand what it takes to research and implement a successful plan, it can result in not preparing the client to make a commitment for successful implementation.

The mantra “fake it until you make it” is not as uncommon as we wish it would be, putting the reputation of other consultants at risk, not to mention the client’s success.

The right consultants have a process for developing new areas of expertise and when needed, bring in outside consultants to provide potential clients optimal service. A less experienced consultant might slip and over-state capabilities due to need, greed, passion or naivety. Be aware of those who have not yet learned to refrain from selling things they don’t know how to do.

Assessing Capabilities – A company that says they want to develop a strategy and hires a consultant who agrees to provide services and a potential solution without reviewing the internal and client responsibilities is risky and may potentially fail.

While it can be difficult, both the client and consultant needs to identify the capabilities of anyone at the company who may be potentially involved with implementation. Without understanding the essential processes and tasks involved with new consulting engagements and the capabilities of those responsible, unexpected barriers can impede success early on. An experienced consultant will know to confirm in the agreement who will do what and what is expected.

Lack of Due Diligence – Those who hire consultants can get maximum value when they have a sense of how the tactics work. There is a trend for companies to hire specialists who can add sparkly new tools or tactics but have no idea of how they work or why they matter.

The responsibility of education can be placed on the client company or can be part of a consulting agreement.

Lack of Internal Support – Regardless of the enthusiasm, passion, and expertise a consultant can bring to a company, when it becomes apparent that those involved are “not all on board” with key implementation approvals and tasks, a lack of success quickly becomes “________’s fault“, (the consultant’s fault). If everyone involved agreed at the start “It won’t work”, it becomes a self-fulfilling prophecy. The consultant is “the devil.” (aka villain)

It makes sense that it is the responsibility of the client company to ensure that ample research is conducted before bringing in an outside consultant.

The client company must map out why they need a consultant, the type of consultant, and who the consultant will work with internally to ensure successful implementation long before an engagement begins. With an outline of the benefits for the team, the departments, and organization in hand before the engagement, the self-fulfilling prophecy is much more positive.

Some leapt into working as a consultant, others were pushed and no doubt a few defaulted to becoming a consultant due to a lack of prospects. Whether they are in this challenging profession by choice or by circumstance, they make an impact more than they may realize.

Measuring character is probably the most difficult aspect and truly separates them as ‘villain’ or ‘hero'. Membership in the associations previously mentioned may not be a perfect reference but certainly shows a more serious commitment than those hanging a shingle and handing out business cards.

Stephen M.R. Covey wrote, "Trust is equal parts character and competence." Consultants will deliver less than optimal results if they lack one or both of those parts.

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