MANAGEMENT CONSULTANTS: More Bang for Your Buck – A Two-Way Thing

Recent global research commissioned by Ernst & Young on the merits and virtuosity of management consultants offers compelling yet bittersweet message for consultants and clients, depending on where you sit.
Pollster Ipsos MORI last year interviewed 456 people within wide range of large companies in the US, UK, France, Germany and Italy that had recently commissioned projects or who had worked on projects with management consultancy firm. The responses indicated that businesses and government departments around the world are spending unpre­cedented amounts on management consultants. But most of them feel that they see little or no benefit for their investment.
Businesses and governments worldwide conservatively spend about US$150 billion year on consultancy – an increase of 1000 percent in just 10 years. The US is the world’s largest market, followed by the UK where businesses and institutions spend around £12 billion annually on external advisors. The increased spending on consultancy has been driven by the challenges of globalisation, mergers and acquisitions, and especially by increasing investment in IT, systems integration, and disruptive technologies arising from the increasing use of the internet.
So the research clearly shows that clients are spending as never before, but also they are far from happy, leading to the unpalatable conclusion that consultants are failing their clients.
The survey also found there is surprisingly little trust between clients and their consultants – 40 percent would not describe the consultants they used as trustworthy. More than half (53 percent) thought that the work that had been delivered had neither effectively, nor very effectively, improved the performance of their business.
In New Zealand, however, consultants NZ Management spoke to insist they maintain high standards of professionalism and service, and that not to do so would, apart from being rather foolish, drive their businesses into the ground before long.
The managing partner of Deloitte’s consulting business in New Zealand, Matthew Hitch, was particularly forthright about the role large practices like his have in advising big business on major projects.
Hitch said he believed there could be little overlap between large firms like his and smaller, boutique firms operating in more specialist, niche markets.
Major projects of necessity had to be largely the preserve of big firms because that was where the expertise to manage them largely resided, he said.
The earliest developments in management consultancy began in the US in the late 19th and early 20th centuries. In Europe, management consulting grew more slowly. In the 1930s and 1940s the first UK consultancy firms practised the application of scientific measurement to business, and since then, the range of services provided by consultancies has broadened as has the types of consultant. Today, of the world’s 25 leading consulting practices, 16 have primary businesses outside the sphere of professional services.
From the early days of management by objectives and time and motion studies, Ernst & Young says, businesses have grown to rely increasingly on consultancies for help and advice on all aspects of their operations.
As the survey shows, broadly speaking, clients know what they want.
This includes:
•Objective advice.
•Solutions tailored to their needs.
•A firm that will develop close working relationship with them.
•A company with real insight into their business.
•A solution that delivers sustainable performance improvement.
So what clients say they want, it turns out, is what consultancies have been telling them for years that they already supply. But what client organisations say they are getting, turns out to be something different.
The good news in the survey is that most buyers find consultants easy to deal with. What clients like about consultants is the speed at which they work, the range of their skills, their depth of insight and sector knowledge.
The downside is that respondents listed several key problem areas when working with external advisors. These included:
•A failure to fully understand the client’s business.
•Project spend exceeding the budget.
•Projects running over time.
•Consultants proposing solutions that are too generic.
•Solutions that are unsustainable or require too much resource.
•Consultants spending too much time selling their services.
Fewer than half (43 percent) of all respondents said that consultants provide lasting, sustainable and long-term improvements. In addition, nearly half (48 percent) of businesses said that consultants don’t offer value for money.
Fewer than half thought that consultants were objective (47 percent) – although 84 percent of respondents said they wanted objective advice.
The survey found there is clear expectations gap between consultancies and their clients.
“For years, consultancies have told their clients to embrace change; to accept it as an inevitable fact of life and to use it to create sustainable and tangible competitive advantage. Now clients are telling their consultants that it’s time that they changed.”
In New Zealand, Hay Group managing director Ian MacRae couldn’t agree more.
“People don’t always need help, so you shouldn’t try and force yourself on them. The solution might lie in them dealing with the problem in-house. It’s really important that people don’t gild the lily, which is sometimes what some consultants get accused of doing.”
MacRae says for management consultant, flexibility is the key to approaching project or assignment.
“We encourage them to try and involve some of their people, to whom we will transfer knowledge and capability.
“They have to trust you, they have to have confidence that you know what you’re doing. The last thing you want to do is say that you can do something that you can’t.”
MacRae says the worst thing consultant can do after problem-solving exercise is to leave behind weighty report without proposing how to implement it.
“Some clients are so busy they don’t have the time or the resources to do that. They will say: ‘you just need to do it for us’.”
MacRae says predetermined outcomes are not the way to go.
“It’s about designing solution within project. Often we offer various options, and outline the pros and cons of each, and discuss which one makes sense.”
“Sometimes one option might take bit too long. Maybe they just want to do stage one and two and do stage three and four later.
“It’s also about being clear about the what and the why from the start, and then working on an appropriate how.”
MacRae says businesses might often have the in-house capability to troubleshoot an issue, but have an overloaded workforce. They therefore need external help and assistance to complement or supplement their workforce.
He suggests working in partnership with client. “You’re not always going in and doing it to them or for them, you’re actually doing it with them.”
Sheffield NZ managing director Christien Winter says at the start of the process, the most important thing for consultant to is know their client.
“By that, I mean know who is involved in the decision-making, and what their different information needs are. With our services, there is often more than one ‘buyer’, including the CEO, the HR manager, and possibly even project manager,” she says.
“It’s essential that we take thorough brief, and develop open communication so that we have proper understanding of the issues. We would then agree the project milestones, time frames, and outcomes,” says Winter.
Those milestones are important whether it is for executive selection, search, organisational development or reward consulting.
“We need to be sure we’ve met agreed milestones when we said we would, and delivered the results that make difference.”
Winter does not believe any of New Zealand’s consultancies could be considered so large in structure that they aren’t nimble or responsive.
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