Wednesday, 22 July 2009

Cutting the Cost of Management Consultants


The Thinking CEO in an article by Lynda Purser, head of the Institute of Business Consulting (a part of the Chartered Management Institute) and David Moorhouse of Moorhouse Consulting cites the Cabinet Office research into the relationship between consultancy and competitiveness, as having recognised that given the number of consultancy projects which fail to live up to expectation, procurement will increasingly attract attention.

The researchers are quoted as believing that professional credentials are only part of the answer to poor procurement outcomes. They believe it is also crucial for clients to engage more effectively with consultants throughout the project, and to develop more sophisticated procurement techniques and processes.

From time to time, most organisations have felt the need of a little outside help. Sometimes this is because there is not the expertise in house, or maybe there is expertise but not enough time. Today, as the Cabinet Office research shows the old ways of buying in that help, typically from brand name consultancies and, in the public sector at least, via rigid framework contracts, are broken. They may still work when you need to focus on large transnational teams, but otherwise they mean that both companies and public authorities:

1. Pay over the odds, often paying more for a day from a very junior consultant than they do for a day from their own Chief Executive

2. Get tied into long term delivery contracts paying high level advisor rates to do detailed delivery work

3. Experience significant delays because of procurement rules

4. Are often paying expenses that would even make an MP blush

The current economic situation means that most budgets are increasingly being tightened and that you have to get the most output from every pound spent and you have to be able to react quickly. It also means that the balance of power has swung from the suppliers to the purchaser. You now have much more choice of expert resources available to you than ever before and, through the Internet, much better access to information about those resources.

The three key factors that have most influence over obtaining that elusive best value are:

Setting out Clear, Realistic and Well Specified Deliverables

With a close understanding of the types of problems that you are facing, it may be possible to sharpen and clarify initial briefs to get more focused results or to adopt different types of strategy, for example, delaying specifying deliverables until information is clearer by splitting the work into different phases. This often also means that you can move away from a single big procurement that is complex to negotiate, contains high levels of risk and can trigger all sorts of policy and legislative barriers and delays, into a series of smaller, inherently more controllable support arrangements.

Balancing risk and cost in your procurement approach

How this vital, and usually overlooked, factor works can be seen in two examples. In the first, you may insufficient knowledge in the organisation to supervise a subject matter expert and need to rely on the supplier to do so. In the second, you have the time and skills to supervise a consultant but insufficient time available to undertake the work internally. Understanding this could lead you to select a procurement route to a consultancy in the first case but to an interim agency or an independent in the second.

Appropriate Management Arrangements

Having agreed the scope of the work, selected and contracted the external support it is necessary to ensure that you have appropriate controls over the delivery process. These will vary according to the source of the support. If you are being supported by a major consultancy different controls and remedies will be appropriate to those required for an agency sourced contractor or an independent.

What should you do now?

Order a review your current use of external help without delay:

Consider how much of your budget are you spending or planning to spend on outside help

Review how they are delivering to time, cost and quality

For each contract ask yourself Is there a way to do this that is cheaper and at least as effective and how quickly can we move to it

Ensure all procurements currently underway have arrangements for ensuring best value put in place before they are signed off

Make sure that you have set up mechanisms for transferring in knowledge and skills to your staff and for monitoring that the desired transfer has happened

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