"That's how they drive up their own revenue," he says.
It's difficult to distill a lot of the lessons Perchtold and Sutton have for those who hire consultants based on a half-hour conversation, but the essence is that most clients haven't stepped back and analyzed whether they're getting the most value out of the engagement. The authors have some fairly simple rules to follow when purchasing consulting time and talent:
1. Define the problem yourself
Too often, executives leave it up to the consulting firm to define the problem. But consulting firms will view each client's problem through the prism of their own capabilities and solutions. Executives must understand the desired results of the project and ensure the consultants are focused on finding the specific solution to their problem.
2. Dictate how to structure the project
Consulting firms will always attempt to maximize the consulting headcount for the projects they propose. Commonly, buyers complacently accept the project structure that comes along with the proposal. However, most projects underuse the resources in the buyer's organization. From the first draft of a proposal, buyers need to analyze what is being offered, look into their own organization for dollar-saving opportunities, and challenge the proposed approach and team composition with their own recommended changes.
3. Oversee the execution of the project with adequate direction
Consultants should be managed just as any other team reporting to the manager, and should not be allowed to reschedule work, redefine scope, substitute resources or make significant decisions without the knowledge and agreement of the client manager.
4. Ensure the desired results are achieved before consultants walk away with all their fees
Without proper management and evaluation, consultants too often get paid for just putting in the work hours instead of producing the results. In today's economic climate, there is greater expectation and governance surrounding pay for true performance over the mid to long-term. Buyers must create a stronger tie between fees paid to consultants and the benefits a business receives over the mid to long-term to ensure they are receiving maximum value.
Further, you need a check on your employees who might hire consultants, including yourself, Perchtold says. It's good practice to form an independent review committee to make recommendations about consulting work, chaired by the chief financial officer, who should know exactly how much the organization is spending on consulting as well as have some idea of the value gained, independent of any analysis the consulting firm is conducting. It's also never a bad idea to have a board member on that committee who understands consulting and value.
Second, never sign a contract for follow-on work to an existing consulting engagement without putting it out for competitive bidding. Watch out for consulting firms that define your problem, rather than having a relationship that starts with you or your people defining the problem and bringing it to the consultant in the search for solutions.
After all, it's your organization's money. Don't depend on a consultant to tell you whether you're getting the right value in spending it.