Bluerock Supplement : August 2004

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Bluerock Supplement - August 2004 (116k)
Getting the Most Out of a Consultancy
keywords: management consultancy niche supplier partnership professional services


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Getting the Most Out of a Consultancy Introduction How to make most effective use of management consultancy resource remains a hoary question. Although perhaps there is some unanimity amongst the more enlightened buyers of such services in that consultancies should be treated as business partners rather than simply as suppliers. This article takes a look at how to get the most from the use of management consultancies. Why use a consultant? The reasons for using a management consultancy are multiple and diverse, with each individual engagement subject to its own set of objectives and motives. Consultancies tend to be used to fill a gap in an organisation’s resourcing profile, typically where an organisation doesn’t want / can’t afford to have specific skills in-house, or where its resources are already occupied, e.g. as a result of multiple parallel programmes of change. Alternative reasons for the use of management consultancies include the ability to gain access to: a fresh perspective untainted by internal preconceptions; the latest creative thinking; or people who’ve seen how things are done in competitor organisations and/or in different industries. Although not typically given as an explicit reason, management consultancies are often engaged for the multi-faceted reasons, of delivering hard outputs, often critically - as a Trojan horse to initiate change, or as a bearer to break bad news. Choosing your consultant Consultants come in all shapes and sizes (literally!), and it is easy to be overwhelmed by the choice available. It is probably fair to say that “stickiness” does appear to matter, with organisations typically choosing their consultants based upon prior experience and/or knowledge, often accumulated by senior management across a number of organisations. This stickiness is further augmented when a buyer has previously worked for a consultancy, and their alma mater is a potential supplier of consultancy services. Particular examples of this include the McKinsey network and the Accenture “old boys” culture. However, this approach can stunt innovation and doesn’t necessarily result in the organisation getting the most cost effective solution. The big boys It used to be said that nobody ever got fired for buying IBM, and the tendency of buying from “brand names” has, to a degree, been extended into the procurement of consultancy services. However, the star of some of the large consultancies is on the wane, particularly after their headlong rush into the provision of outsourcing, BPO and IT development services. In doing so they have, in large measure, retreated from traditional “impartial” business advisory services, choosing instead to provide packaged “build” and “operate” services out of the traditional “think / build / operate” consultancy model. This is driven in part by the need to have a more stable set of revenue streams than available in the notoriously cyclical mainstream consultancy, particularly for organisations that have gone down the public listings route, and partially by a recognition that it is difficult to appear impartial when your own organisation may be a major provider of delivery and/or outsourcing work arising as a direct result of your own advisory work! The niche players The past year or so has seen a move towards smaller, often niche, consultancies filling the void left by the larger consultancies by offering more carefully tailored service offerings, available in a more nimble manner, and often at significantly lower rates. These organisations are often staffed with experienced consultants hired from the bigger consultancies. Hence, they are able to provide small teams of highly effective consultants who all have solid consultancy grounding – often with specific industry focus – on a more competitive basis than their larger peers. As few of these organisations have formal relationships with service providers and are not looking to sell on large implementation teams, they are often able to provide a more objective approach during the consulting engagement. . Sole contributors Contract resources are the final piece in the jigsaw. These resources are typically acquired on a point basis, often on fixed length contracts of 3, 6 or 12 months duration. Many such contractors have work experience at the larger consultancies or within client organisations. Rates are typically lower than those charged by consultancies, but they lack any of the back-up that might be expected of a consultancy. Hence, they are generally unable to bring additional knowledge and resource with them, or to access offsite support. Also, contractors lack access to external quality assurance processes. What type of relationship? The dynamics of the relationship an organisation has with its supplier(s) of consultancy services – like those with any supplier – dictate how effectively the two organisations work together, and consequently how much benefit is gained. Whilst the old “win / win” cliché is trotted out whenever supplier relationships are talked about, there is a great deal of truth in this statement. This is particularly so where outputs from the relationship are both tangible and intangible. Figure 1: Customer / Supplier Partnership Model What is considered “win / win” for one type of relationship, however, may not be considered the same for another. For example, an organisation purchasing low value transactional services (Figure 1 - Customer / Supplier Partnership Model; lower left quadrant) would probably not be prepared to pay a premium in order to acquire access to “value add” services such as competitor and market analysis from that supplier. Returning to management consultancy, purchases of such services are generally project based, often sporadic in nature, and typically have a large intrinsic value to an organisation. In these cases the need to ensure a strong relationship is generally more apparent to the consultancy (Figure 1; upper left quadrant) as it will be seeking to gain repeat business and other follow-on work. Where there is no unique factor, e.g. access to unique skills, research, tools or significant knowledge of the customer’s operations, the customer is typically in a position of strength. This represents a significant challenge for the consultancy, particularly where the results of their work may be unpalatable for some in an organisation. As a result of this imbalance, organisations purchasing consultancy have in the past often taken a “hire and fire” approach, particularly during the leaner years of the early twenty-first century when consultancies were contracting and consequently eager to do work at almost any price. However, this has often resulted in an erosion in the degree of partnership between the buyer of consultancy and the consultancies themselves, as the consultancies have been less prepared to invest in “value add” activities when they may not gain the opportunity to recoup their costs. This doesn’t mean to say that consultancies – particularly those who are relationship rather than proposition focussed – have let slip their desire to form partnerships with their customers, rather these relationships have become more buyer / supplier focussed and less formed around the notion of a true partnership. Building a partnership When taking stock of any relationship it is important to understand where you are now in terms of the type of relationship currently in place and where you want to be. The Customer / Supplier Partnership Model shown in Figure 1 provides a tool for this gap analysis. Only once you understand these two places can you start to determine how to get from one to the other. In order to obtain maximum benefit from this process it is recommended that you undertake your gap analysis working with the largest / most critical vendors first. Figure 2: Relationship Change Framework Moving a supplier from one quadrant of the Partnership Model to another is not an easy task. However, models such as the Relationship Change Framework, shown in Figure 2, allow for analysis of the relationship and thus identification of points of weakness (and of strength). Having identified these it is possible to determine methods by which these will be addressed. Finding the Balance When determining the actions to be taken it should be noted that there is no “one-size-fits-all” approach to supplier management and what may be appropriate for one supplier may be totally inadequate for another, or inappropriate for a specific piece of work. For example, a large consultancy may be asked to provide strategic advice and guidance at board level, whilst at the same time providing a managed business process outsourcing (BPO) operation from somewhere like India. The amount of management time and overhead managing the offshore BPO relationship will be significantly different to that required to manage the strategy consultancy. As the Financial Services market continues to improve - and the market for consultancy does likewise – this is the ideal opportunity to build upon existing relationships and take these forward in the form of a partnership. Investing now will ensure that consumers of consultancy services continue to obtain premium levels of service whilst consultancies will be able to build on sound footings and invest in appropriate talent and value adding activities.