07 June 2011

When should you not use consultants?

In my previous blog-post I described how you can decide whether a project is complex and therefore either should be outsourced to experts (i.e. external consultants) or be carried out by an internal team, but given special care and attention. Once you have decided that the project you are considering is complex, the next question is therefore how to carry it out.

I have led consulting teams carrying out a broad range of complex projects across Europe for LEK Consulting, PwC, and A.T. Kearney (where I ended up a Partner). The projects I carried out always added value to my clients, but I am convinced that the clients I worked for could have carried out a fair portion of these projects themselves.
What did these projects have in common? Essentially, the answer boils down to the companies in question not having a truly good reason for using the external consultant. In my view companies should only use external consultants when they provide something (knowledge, experience, tool/process, etc) which the company does not have itself. At LEK I carried out numerous projects that helped companies identify and value potential acquisition targets in other countries. This was clearly a task which required local knowledge and specific experience which the clients usually did not have. At A.T. Kearney a number of companies hired us to carry out a cost benchmarking using an extensive database that had been developed by A.T. Kearney. This was clearly an activity which a company could not do itself.

Sometimes there are political reasons for using an external consultant. Examples of this are companies that use a report from a well-known consultant to either get a "quality-stamp" on their plans or to have somebody to blame ("according to Consultancy-A we have to reduce staff by 2000 employees"). While "political" has a certain association with something unsavory,   I do not see anything intrinsically wrong in this type of use of a consultant if it helps speed up decision making and the implementation of difficult change.
The projects I felt that could have been done by the clients themselves where the projects that did not fall in one of the two previous categories. In my opinion, in these cases, the only reasons for bringing in an external consultant (i.e. a team led by me) was doubts about the ability of an internal team to structure the issues, carry out the required analytics, develop conclusions and recommendations, and communicate these in such a way that buy-in and action is created. If this is the case, the focus should then be on understanding why your company does have these abilities and capabilities, and what can be done to improve this situation.

If the key issue is basic capabilities, then there are organizations specializing in improving the capabilities of companies to carry out complex projects. An example in Europe is ICS, based in Belgium but working internationally. If the problem is not so much the available skills and capabilities but rather the ability to define and carry out a successful project then my input is probably better suited. Please go to www.teambasedconsulting.com to get a better understanding of why internal projects tend to underperform, and what to do to improve this situation. Another possibility is to take a look around this blog, as I have written about a large number of specific issues and challenges and how these can best be dealt with.

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