Listen to this article
Clients are primarily looking to consultancies to fill capability gaps, to independently analyse, review and challenge their business and to bring discipline to major cross-functional projects. These are not new requirements, but Ian Peters, director, customer-facing strategy at Centrica, the energy services company, says the use of consultants is driven by the accelerating pace of change.
“The world is more uncertain than it used to be. Technological drivers are much more dominant, there is far less clarity of outcomes and geopolitics is driving more strategic change,” he says. “That doesn’t mean that consultants know the answers.”
Mr Peters says he has seen too many people hire consultants to validate what they wanted to do anyway, but deemed too difficult to achieve internally, which he thinks is the wrong motivation. He also sees a risk that strategic thinking is outsourced to consultants.
Applying specific expertise not available internally can be controversial. Mark Summerfield, chief executive of The Co-operative Insurance, who has long experience of using consultants, says he can access skills in specialist areas that he does not choose to keep on the payroll on a full-time basis.
He likes consultancies that bring objectivity, rigour, insight and learning from others who have been down similar paths. He has also used firms who have individuals with skills in particular areas.
“What consultants can’t do, and I wouldn’t expect them to, is to drive change from the inside,” says Erich Silhanek, vice-president, global commercial finance and pricing at Sony Mobile, which has been using various consultants for the past 10 years, including EY. “Consultancy projects are very much focused on the here and now.”
He believes that consultants should hand over the project in such a way that the change process becomes embedded in the client organisation. That enables the client to continue to drive change when the consultants have left.
Choosing a consultancy firm with the right fit for both the organisation and the specific project is important to clients. “It is one of the hardest things,” says Mr Silhanek. “You need a cultural fit as well as experience.”
Mr Peters has been employing consultancies for the past 20 years, including Baringa. He has observed a wide spectrum of consultancy styles. “Some are more inclined to ‘work with’ you,” he says, “whilst others ‘do to’ you.”
Everybody agrees that the individual consultants are as important as the firm itself. “It is about their experience and intellectual capability,” Mr Summerfield says.
Consultancy firms are under pressure to deliver greater value for money to clients.
One approach is to invest in pre-packaging specific services, with the cost of development being shared across multiple clients. However, clients do not always see it as a positive trend.
“The behaviour I find unhelpful is the temptation to resell a work product they have created and wish to resell repeatedly,” Mr Summerfield says. “I tend to resist being presented with a package ‘off the shelf’ that is used as a solution, irrespective of what the problem is. When we can, we tend to be more specific about scope.”
Value for money is an important consideration.
A report published this year by Source Information Services found that only 38 per cent of 900 senior executives in multinational organisations think that consultants add value over and above the fees they have charged.
The report says that firms have yet to find a consistent, systematic way of explaining the value they add to clients.
Mr Summerfield believes the set fee approach is no longer appropriate and that payment should relate to the benefits consultants bring to the client.
The last word goes to Mr Peters. “In a world of increasing pace and uncertainty, the need for consultants is rising,” he says. “However, that requires a different participation model.”
Best practice: Key performance indicators should be established early on
The Chartered Institute of Procurement and Supply is dedicated to promoting best practice. Emma Scott, a representation manager, says that the earlier clients engage with their procurement function the more likely they are to get measurable success out of a consultancy project.
“The [procurement] function is quite often brought in at the last minute, as an ‘international rescue’,” she says. She adds that rather than being seen as the police or the gatekeeper or even the box-ticker, a procurement function should have a really strong relationship with the consultant. Ms Scott advises that procurement professionals should be involved early on and set out, in some detail, key performance indicators. This helps not just to match competency, skills and knowledge, but also to measure success. She also advises that clients should seek references for individual consultants, as well as the firm.
“You want evidence-based references of projects that have delivered tangible results.,” she says, “rather than just a marketing brochure full of nice comments.”
The procurement function should keep the project on track, measure success, demonstrate value and identify and deal with scope creep, which happens when the contract is slowly extended.
“The procurement function can show a consultancy how to demonstrate tangible deliverables and value for money,” she concludes. “That is gold dust for them to go on and sell to another business.”