Getting the best out of management consultants


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This presentation by the authors of "Extract Value From Consultants: How to Hire, Control, and Fire Them" provides some practical advice on how to maximize value when hiring management consultants.

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Getting the best out of management consultants

  1. 1. Getting the Best Out of ConsultantsThe University of Chicago Booth School of Business 20 May 2010
  2. 2. It’s time to even the odds in favor of the buyer! Over the decades… a) Consulting has shifted from a profession emphasizing client service to a business focused on revenue b) Sales tactics have become increasingly sophisticated and the scale of consulting projects have multiplied c) Buyers have not improved their ability to manage consultants d) Disenchantment with the value delivered by consultants has grown – but little has been done VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 2
  3. 3. Everyone uses consultants for key initiatives… Consulting* Spend in the U.S. = $396 billion Management Consulting Spend by Sector Healthcare 9% Energy/Utilities Financial Services 9% 22% Government 9% 10% Telecom 19% Other Private Sector 11% Manufacturing 11% Consumer Products * Management and IT Consulting in 2009 Source: IBIS World; Management Consulting in the US, February 2010 VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 3
  4. 4. … across management and IT domains… Management IT Consulting Consulting Technical Support Systems Integration Marketing/Sales Process NetworkFinancial Advisory Management Management Organization Design Other Services Technical Consulting HR Corporate Benefits Systems Design / Strategy Development Application IT Strategy Custom Integration Application Design VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 4
  5. 5. … with minimal training and experience1. Managing consultants is not a subject taught in business schools • instead they teach students how to be consultants2. Employees rarely receive training on techniques to manage consultants • they are expected to learn on the job3. Employee assignments to projects involving consultants are typically irregular events • difficult to build and leverage experience4. Lessons learned from consulting projects are seldom routinely captured and transferred across the organization from project to project5. Difficult to find a book on how to manage consultants • but there are thousands of books on ‘how to be a consultant’ Consultants receive extensive training, and have lots of experience at managing their clients – they do it every day! VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 5
  6. 6. Underwhelming outcomes for overwhelming feesJuly 8, 2002 January 23, 2010Inside McKinsey The public sector has hadEnron isnt its only client to melt down. Suddenly, times its fill of management consultantsare trying for the worlds most prestigious consultant Management consultants have been hopping all over the publicWayne E. Cooper, CEO of Kennedy Information, a research and sector for years. The growing pressure to get “more for less”publishing firm that keeps tabs on consultants, says "There was so persuaded governments to turn to the private sector for inspiration.much smoke coming out of the Andersen smoking gun that all the And the challenges of adopting information technology promptedfire-fighters went after that one. McKinsey was lucky. They dodged them to turn to IT consulting giants such as IBM and Accenture.a bullet …. Consultants are nothing if not ingenious in getting their feet on theThe bad news, however, is that Enron, which was paying McKinsey fender. The Obama administration looked like a perfect mark whenas much as $10 million in annual fees, is just one of an unusual it came to Washington, DC, on a wave of hope and hype. McKinseynumber of embarrassing client failures for the elite consulting firm. actually scented an opportunity in the credit crunch: an article in theBesides Enron, theres Swiss-air, Kmart, and Global Crossing--all consultancy’s house magazine urged that governments needed to goMcKinsey clients that have filed for bankruptcy in relatively short in for “whole-government transformation” if they were to cope withorder. the mess. ……All of which raises uncomfortable questions about the worlds most They have frequently left devastation in their wake and have treatedprestigious--and enigmatic--consulting firm. Did McKinseys the public sector as dumping grounds for airy-fairy ideas such aspartners get caught up in the euphoria of the late 90s and suffer “transformation” that have been rejected by the private sector. Theylapses of judgment? And if so, what does that say about the quality have built overly elaborate management structures that make itof its expensive advice? Did it stray from its core values? What harder for people to do their jobs. And they have demotivatedaccountability does it--or any consulting firm--have for the ideas people who like to feel that they are working for the public good.and concepts it launches into a company? The government has wasted huge amounts of money on botched IT projects designed by consultants. VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 6
  7. 7. Consulting spend is not tracked nor value managed Due to the decentralized nature of consulting usage (coupled with lack of training) most organizations do not know: a. How much they spend on consultants across their enterprise ? b. Whether the value promised from each project was actually realized ? What would be the impact to companies or government of an additional: a. 20 % reduction in consulting spend on projects undertaken ? b. Financial return more than twice the fees of the consultants ? There is no executive that has overall accountability for consultant performance VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 7
  8. 8. What’s gone wrong? Consultants’ model changed! Prior to the 1990s Post 1990 Consulting as a ‘Profession’ Product Marketing Organizations (Re-engineering, ERP, Y2K, eBiz, CRM, SOX…) Partnerships  Public companies Client needs first  Stock analysts/partner income first Raise industry standards  Build the brand of the Firm Thought leadership  Packaged product push Frame the problem  Follow the methodology Small consultant teams with  Large body shops maximizing active Partner involvement leverage of Partner expertise Projects in the hundreds of  Projects in millions of dollars as thousands of dollars part of tens of millions relationship Becoming a Partner  Being the ‘Rain Maker’ VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 8
  9. 9. What’s gone wrong? Clients failing to play their partWrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness 1. The consultants are working on the wrong problem 2. The wrong type of consultants have been selected 3. The consultants do not have the promised skills or experiences 4. The consultants are not being controlled or managed effectively 5. The consultants have lost their effectiveness in the organization Due to time constraints, only selected points will be highlighted – more details in the book VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 9
  10. 10. Consultants add value when used in the right rolesWrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness  Technical Expertise  Functional area  Industry knowledge  Methodologies and approaches  Project management  Resource Augmentation  Research & data gathering  Consulting Process  Documentation  Structured thinking  Repetitive tasks  Facilitating change  Administrative activities  Third Party Perspective  Independence, objectivity  External practices HIGH VALUE ADDED LOW VALUE ADDED VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 10
  11. 11. Use consultants where their capability is strongestWrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness 2010 © Extract Value From Consultants: How to Hire, Control, and Fire ThemConsultants regularly pursue and rarely turn down work that is outside their core capability VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 12
  12. 12. Example: Which consulting firm is being described ?Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost EffectivenessProject Management for Information and Communications Technology (ICT)Company Background??? is the distinctive leader in top management consulting with a deep understanding of ICT challenges faced bygovernments. We have an extensive track record for delivering significant value in government ICT projects, andhave a distinctive business-driven approach to ICT in the public sector. We have been serving clients for manyyears, and our professional legacy includes: 1) Professional values and an enduring code of conduct, 2) Topmanagement/integrated problem-solving perspective, and 3) Tailored approach and custom solutions. Ourresults-oriented Public Sector Practice has driven measurable improvements throughout several governmentagencies worldwide. We have a specialised Business Technology Office (BTO) that serves ICT needs of public- andprivate-sector clients through rigorous focus on impact. The BTO has competence and expertise in technology withdeep technical proficiency in systems design and IT architecture. Source: Australian Government Information Management Office, List of Suppliers, ICT Project Management Methodology category. March 2010 VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 13
  13. 13. Select for Merit and Value – see beyond the brandWrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness Align your internal stakeholders  Don’t be fooled by scope games Educate stakeholders with a RFI  Discount client logos Pre-define the selection criteria  Configure the combined team Your RFP sets the tone & result  Focus on skills / experiences of Run a disciplined RFP process individual consultants Control the communications  understand the true involvement of key resources (pyramid scheme) Capability to Deliver  make sure they will be assignedPotential Value = fn Commercial Relationship  Make sure you align project vs. engagement objectives  Normalize fees & hours  Scrutinize expense policy  Base ‘your’ contract on business outcomes, not just limited liability Individuals, not firms, will do the work and deliver the results VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 14
  14. 14. Client must manage project for value not completionWrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness  Continually focus on the desired project outcome not engagement completion  Are baseline metrics pre-defined and subsequently monitored?  At completion, undertake a review of promised versus actual  Ensure an integrated team where consultants are used in value-added roles  Question excessive activity replication and consultant redundancy  Beware the fly-in ‘subject matter expert’  Why should you have to pay extra for quality?  Cannot outsource project management responsibility  Minimize change orders; watch for shifting of activities to subsequent phases  Look out for warning signs that an engagement is in trouble Control the consultants or they will control you! VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 15
  15. 15. Proven methods to undermine your consultants  Cram eight consultants into a room designed for two peoplelogistics  Do not provide any meeting rooms  Fail to provide access to email, internet, and printing facilities  Provide no administrative support  Keep changing the business objectives and scope of workexecution  Withhold promised resources  Assign your poor performers to the project team  Be unavailable or unprepared for update and steering committee meetingsparticipation  Delay decisions; don’t fulfill your project obligations  Fail to assign accountability for executing the next steps  Be penny wise, pound foolish and releasie consultants too soon  Do not secure management and organizational buy-in to the projectsponsorship  Forget to inform members of your management team and staff about the project  Make derogatory comments about consultants to your staff Why bring in high priced talent, but not create an environment conducive to success? VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 17
  16. 16. Top 10 ways to extract more value10. Establish a center of expertise for consultant usage 9. Capture and learn from experiences – internal or at 8. Always issue your own standard consulting contract 7. Tightly control scope increases within projects; and cross-selling of new work 6. Ensure internal alignment around the definition of the problem 5. Make consultants accountable for outcomes with clear metrics 4. Configure the project team – focus on value-added roles of consultants 3. Focus on the capabilities of individual consultants, not the brand 2. Avoid consultant fatigue – give your organization a holiday from consultants 1. “Even the Odds” by distributing our book and educating your organization The cost of the book is less than three minutes with a typical global consulting partner VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 18
  17. 17. Questions Features of the Book 17 Chapters reflecting 50+ years of experience Part 1: Understand How Consultants Make Money from You Part 2: Sourcing Value from Consultants Part 3: Successfully Realizing the Value 15 Consulting Case Studies Australia, Canada, China, Japan, Korea, Thailand, United States 18 Examples & Templates Learn and do 16 Management Summaries For the busy executive or as a refresher 2 Evaluation Forms How well does your organization manage consultants? How well has your consultant served you? - enter your consultant evaluation on Extra Feature: Consultants in Asia Buyer Beware: Become an informed buyer VALUE © 2010 EXTRACT FROM C O N S U LTAN TS 19
  18. 18. Getting the Best Out of ConsultantsThe University of Chicago Booth School of Business 20 May 2010