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Do You Have What It Takes to Fire Your Consultants?

Philip Betbeze, for HealthLeaders Media, June 4, 2010

Why don't you fire your consultants? It's a provocative question and its tough to answer, but CEOs, you're part of the problem. In fact, when it comes to getting value from your multitude of consulting engagements, you're the main problem. The simple truth is that you don't often fire your consultants because you depend on them. They nurture that dependent relationship, in fact. It's just good business for them.

So says Gordon Perchthold, co-author of Extract Value from Consultants: How to Hire, Control, and Fire Them. Perchthold, a consultant himself, says overreliance on consulting talent can mean a lot of wasted money for the widget manufacturer as well as the hospital or health system. Overconsulting can as well mean lackluster results and lower morale from lieutenants and the rank-and-file. Right, you're saying. So tell me something I don't know.

OK, try this contention on for size: CEOs get addicted to consultants, and no matter how savvy they are, top executives often get roped in by tricks of the trade that sometimes stretch a consulting engagement for a relatively small matter into a years-long relationship that's more beneficial for the consultant's employer than for, you, the client.

Like substance abuse, says Perchtold, the first step to getting help is to admit you have a problem.

"Consultants do have a role," he says. "Organizations have execs who build up silos that work against change and consultants can help with that. But as soon as they are on board, consultants start working the relationship. They spend quite a lot of time to persuade the execs take actions that the consultants want and that usually results in follow-on work."

So why are Perchtold, and his coauthor Jenny Sutton, spilling the secrets of the trade? First, they do have a book to promote, and they've seen the way some consulting firms build long-term relationships with clients that may not serve the client as much as the consulting company. A lot of CEOs are former consultants themselves, so they might be familiar with "problem creep." That's the practice of consultants working to find engagements for their colleagues back in the office who are looking for billable gigs. But that makes consulting engagements inefficient at least and borderline unethical at worst.

"A lot of CEOs are former consultants and what happens is they bring in their former employer," Perchtold says. "We've challenged that because there's a conflict of interest in the selection process."

But who's watching to make sure the client is the one who's benefitting from the relationship? In many cases, no one, Perchtold says. He's careful to note that he's not trying to denigrate the profession or to contend that something illegal or unethical is going every time a certain group of consultants gets ingrained into an organization's culture. Consultants are often brought in to cure inefficiencies or find ways to cut costs. The irony is that the consulting budget may be among the most bloated and inefficient of all categories of spending within an organization.

Perchtold contends that a few large organizations have such a poor grasp on how much they're spending on consultants across the board that they sometimes have to hire a consultant to figure that out.

"A lot of times the consultants will be one of the highest-spend categories, but they do all they can to minimize the truth that they are one of the major categories," he says.

The issue with a lot of consulting spending is that the employees who are doing the work with them in the organization come from the operational side.

"They never learn about managing the consultants, and what you have is inexperienced operations people matched up with consultants who come from the best business schools and who manage their own consultant colleagues every day. The result is that they are good at managing clients for their own objectives."

The idea isn't that you're being swindled, rather that most consulting firms will deliver something, but not as much as they could, because they have "leveraged" themselves into activities over which they have less and less knowledge over time.

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