External consulting special report


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External consulting special report

  1. 1. Stop Throwing Money Away on External Consulting! 4 Benefits of Using an Internal Consultant
  3. 3. Table of ContentsInternal Consultants provide objective, cost effective solutions………………………………….. 2Internal Consultants keep confidences……………………………………………………………. 3Internal Consultants do not rely on the latest fads………………………………………………...4Internal Consultants do not deliver empty promises……………………………………………… 5IntroductionEstablish the relationship, find or concoct problems, extend the engagement as long as possible,maximize fees, and move on when the well runs dry.Isn’t that the way things often seem to go when you engage external management consultants?While there are certainly ethical and effective external consultants in every industry, externalmanagement consulting firms have often been accused of unethical practices. Hiring managersshould be aware of the potential pitfalls of consulting that could cost a company millions ofdollars before considering engaging the services of external consultants.This report seeks to describe the conditions that hiring managers may encounter when dealingwith external management consultants and to identify the benefits of using qualified internalconsultants instead. Internal consultants provide objective, cost effective solutions; keepconfidences; do not rely on the latest fads; and deliver what is promised.Management consulting firms serve multiple clients concurrently. While a client would like tobelieve that his company always receives the highest priority, the most talented and experiencedconsultants, and the best consulting rates available, there are strong forces at work in preventingthis from happening regularly and dependably.Some experts accuse consulting firms of being not much more than glorified “temporaryworkers” whose goals are to stay at the best hotels, eat at the best restaurants, and to charge theclient the most fees conceivable. It’s been said that the availability of this temporary manpowermay be the most important factor in driving sales for consulting firms.Question 1: How much more are you spending on external consultantsbecause you’re not employing an internal consultant?In his book, Consulting Demons: Inside the Unscrupulous World of Global CorporateConsulting, Lewis Pinault, describes being part of an early 90s consulting team assigned toPhilips Electronics. The company was fearful that Japanese competition would wipe out its 3 Ken Hicks - kmhicks@msn.com - (714) 670-2711 http://www.linkedin.com/in/kenhicks
  4. 4. consumer-electronics business, just as the Japanese had done with RCA and Zenith in America.The consultants fee for the first year of the five-year project was $20 million. Yet, says Pinault,even if the consulting firm had assigned all its most senior officers to the project at the highestpossible billing rates, they could not have justified fees of half that amount. Never mind thatPinault felt that Philips could exhaust his knowledge of the industry within a week.1Contracted rates can often be in the range of $200 to $350 per hour or more and the rates are thesame astronomical amount whether the consultant is attending a meeting, gathering information,or writing a report. If overtime is paid, the expense is beyond imagination.Clients can ask to review the resumes and qualifications of the consultants who will be assignedto the project prior to its initiation; however, the identification of the specific consultants thatwill work on the project is very seldom an integral part of the contract. Some clients have feltvictimized and considered situations such as this “bait and switch” tactics.Many companies find that once an external management consultant makes a recommendation,they still need an internal resource to implement the project. If an external consultant were toimplement the project, the costs would be tremendous and the consultant has little or no vestedinterest in the success of the project due to the short-term nature of consulting agreements.Benefit 1: Experienced internal consultants provide an objective, cost-effective way tocontribute process improvement solutions to companies. They focus on a manageablenumber of clients and projects with the advantage of being able to heavily invest time inthe client’s interest, rather than those of the management consulting firm. Internalconsultants have better awareness and ability to deal with environmental issues such aspolitics, cross-functional impact, and budget and resource limitations.Question 2: Is your confidential corporate information being kept private?You don’t know your consultants the same way that you know your employees. Employees havea vested interest in maintaining high ethical standards, integrity, and in keeping confidences thatperhaps may not be shared by all of your external consultants.In fact, the situation might be worse that you could have imagined. Can you envision a situationwhere a consultant that you have barely met has access to valuable inside information that ifexposed to your competitors could cause irreparable, and perhaps catastrophic, damage to yourcompany and its reputation?What if your trade secrets are used as a benchmarking approach to analyzing your competitor’soperations? Couldn’t an unethical person easily divulge what made your process improvementproject a success to underscore the salability of management consulting services to another oftheir potential clients – and perhaps your competitor?Or suppose that an unscrupulous management consultant approaches your competitor with aninvitation for them to participate in an “industry study” that in reality is a sales tool for theconsultant to drum up new business. Ken Hicks - kmhicks@msn.com - (714) 670-2711 4 http://www.linkedin.com/in/kenhicks
  5. 5. Although professionals such as attorneys, auditors, and financial managers are heavily regulatedand monitored, the same is not true of management consultants. They may have little or noaccountability for their actions.Benefit 2: Trustworthy internal consultants have access to confidential, business criticalinformation and adhere to the highest ethical standards, operate with integrity at all times,and keep confidences.Question 3: Does your external management consultant rely on the latest fadrather than adequately addressing your specific need?Taco Bell’s Disappointing Experiment with Self-Management:During the early 1990’s, Taco Bells management wanted to open thousands of new restaurantsand kiosks at various locations. However, there was a shortage of qualified managers. Taco Bell,working with external consultants from a well-known, major consulting firm, decided to createfewer, higher-paying management positions. In addition, the external consultants proposedtraining thousands of entry-level workers to manage themselves.The idea was that Taco Bell would then be able to assign one manager to several stores andincrease the span of control for area managers from about ten units to several times that amount.Under the "self-management" initiative, employees were trained and provided technology to hire,train, and supervise workers; manage store inventory; and deal with personnel problemsthemselves under supervision of a "floating" manager responsible for several locations.Management received above-market pay, partially in performance incentives 2The self-management management fad proved to be a disappointment because Taco Bell lackedthe ability to create a platform to deliver and sustain the self-management concept. The changefrom the traditional system of management control to self-management required a higher amountof communication and effort than anticipated. This demonstrates that one solution is not alwaysappropriate for all companies.Benefit 3: Internal consultants typically do not face intense pressure to propose andimplement “leading edge” solutions, which may be untested, unproven, or inappropriate toa company’s particular situation. Instead, they can implement new concepts as an industryfollower rather than taking on the riskier and more uncertain role of technology or processinnovator. Internal consultants can often implement smaller proof-of-concept studies orpilot projects quicker, easier, and less expensively than external consultants.Question 4: Does your external management consultant deliver only emptypromises? Ken Hicks - kmhicks@msn.com - (714) 670-2711 5 http://www.linkedin.com/in/kenhicks
  6. 6. Many unsuccessful engagements begin to unwind when the external management consultantovercommits. They sometimes do not estimate or allow sufficient time for the engagement to beproperly completed, or the firm does not possess the manpower or expertise that is truly needed.This overcommitment can easily happen when the partners and senior managers act asspecialized sales people and they are far removed from the day-to-day activities needed tosupport the engagement. The sales team may not have the necessary knowledge of workeravailability, skill sets, experience, and commitments on other projects to honestly and accuratelydeliver what they propose.Benefit 4: Internal consultants provide realistic and thorough assessments of project scope,schedule, and resource availability and expertise prior to starting a new project. Theyprovide a regular, periodic reassessment of performance to plan and they tell managementthe whole truth when project plans need to be revised. About the AuthorKen Hicks is an award-winning internal management consultant. Since 1982, he has usedindustrial engineering and process improvement techniques to help companies ranging from a200-person start-up energy services provider to a major mortgage lending company thatoriginated over $60 billion in loans annually.Ken has advised clients including Rockwell International, Home Savings of America, EdisonEnterprises, the First American Corporation, Toyota Motor Sales USA, Commerce EnergyGroup, and New Century Mortgage Corporation.He created process improvement training programs, instructed nearly one hundred people, andlead teams to identify innovative ways to increase revenues, introduce new products andprocesses, reduce operating costs, improve productivity, reduce employee turnover, and mitigaterisk.Ken has analyzed and improved functions including accounts receivable, accounts payable, callcenters, procurement, sales, back-office processing, human resources, labor scheduling,collections, sales commissions, customer service, information technology, operations, facilities,manufacturing, compliance, and test.Following his Bachelor of Arts degree in Business Administration from California StateUniversity, Fullerton, Ken earned a Master of Business Administration degree from theUniversity of La Verne located in La Verne, California.Ken lives with his family in Buena Park, California. Ken Hicks - kmhicks@msn.com - (714) 670-2711 6 http://www.linkedin.com/in/kenhicks