How to Get Value From Consultants

Research on over 25,000 consultancy projects has shown that about one third deliver what was promised and the other two thirds end in embarrassing and expensive failure. Yet it is not difficult to get truly high value from consultants. But for this to happen, all of the following nine conditions must be met. Too many clients embark on costly consulting and IT systems projects without checking that these commonsense elements are in place.1. Your people cannot solve the issue
If you are thinking of buying consultancy to redesign your processes, develop a new organisation structure or whatever, you must ensure that nobody in your organisation is capable of doing the job and establish exactly how much consultancy help you need. Would it be enough just to buy one or two experts’ time to help guide your own staff? If so, then you should not let the consultancy sell you an army of “warm bodies”. Firstly, because this will be a huge waste of money. And secondly, because employees are more likely to accept changes to which they themselves have contributed and are more inclined to reject changes forced upon them by young inexperienced consultants who will not be around to bear the consequences of the changes they are proposing.2. Your management team has correctly identified that issue
The next question to ask is whether you and your management team could in any way be responsible for the situation with which you want your consultants to help you. It is unusual for an organisation to have a problem that is not in some degree related to the way management leads the place. If you are able to make a reasonably honest and objective assessment of your own role in creating a situation where you believe you need consultants’ help, you are much more likely to buy the correct consultancy.3. Your consultancy is selling a solution and not a product
Before hiring a consultancy, you need to be aware of what they can and cannot offer. In particular you need to assess whether they are genuinely trying to provide a customised solution to your situation or whether they are trying to foist some pre-made service on you. And if your consultants are in any way connected with an IT systems house, all the warning bells should be sounding. It is probable that they will be under great pressure to flog you some IT – make really sure you need it before they convince you to buy it.4. Your consultancy has the right skills
When a consultancy shows interest in working for you, there is nothing wrong with insisting on seeing the CVs of the consultants who will be running riot in your organisation. Many consultancies will resist this request – if they do, they are probably not the kind of consultancy you would want to work with anyway.5. The consultants with the right skills will work for you
When your consultancy is trying to sell to you, they will probably give you loads of face time with their experts with the skills relevant to your situation. Too often, once you have signed the contract, the experts become scarce and you’re left mostly with inexperienced “billing fodder”. You should demand that the consultancy includes in your contract a firm written commitment as to how many days per week the experts will be on site working on your project. And you should not ever accept bland assurances that their experts will always be available on the phone to help your “billing fodder” out and give them guidance when necessary.6. Your consultancy agrees to a fixed timeframe and fixed budget
Look closely at the contract your consultancy offers you. In particular, check whether the total fees they plan to charge you are fixed and whether they clearly commit to how long your project will take. Many consultancy contracts, especially those including some IT systems work, may at first look like they are offering a defined service for a fixed price within a fixed timeframe. But if you look in the small print, you will often find several “get out of jail free” clauses that allow the consultancy to charge an awful lot more and take considerably longer than they initially promise.7. Your consultancy agrees to base part of their fees on results
There are few consultancies that will risk basing any significant part of their fees on the results they achieve. They will normally give all kinds of excuses – they cannot be responsible for external events in the market, the economic situation might suddenly change, one of your major customers might move to another supplier, a competitor might implement a new more aggressive strategy affecting your profits and so on. While there is some validity to all these excuses, you should still be able to find some performance measures that will indicate whether your consultancy delivered the dreams they promised. If they do refuse to base at least thirty percent of their fees on their results, you should consider giving the business to someone else.8. Your consultancy charges ‘reasonable’ fees and expenses
Your consultancy will probably try not to tell you how much they pay their staff and they will attempt to give you an overall price for your project rather than revealing what each consultant will actually cost you. However, you can reckon that a junior consultant is getting paid somewhere between £30,000 and £50,000 a year, an experienced consultant £60,000 to £80,000 a year and a project manager £100,000 to £150,000 per year. So if your consultancy are paying a junior consultant less than £1,000 a week and yet appear to be charging you £8,000 a week for their time, then this 800% gross profit margin may be excessive. Likewise, if they are paying an experienced expert around £2,000 per week and you are forking out £15,000 a week for them. Then look out for extra administration charges, excessive travel expenses and only pay for consultants’ time spent working on your project.9. Try adapting existing IT systems before deciding to build new ones
If you think you may need to improve your IT systems, most IT consultants will recommend you build a completely new system. Their argument will be that your needs are unique, so to give you the best solution, they need to design something exactly matching your needs. It may be true that overall the system they propose is different from other systems in existence. However, if you split your required system up into its individual elements, you will probably find that most of these already exist in other organisations. You will save many millions and huge organisational effort by thinking creatively about how existing systems can be adapted to serve your needs. And always ask yourself the question: with over 700 million people living in the developed world, is it really possible that your organisation is so unique that there is no other organisation in existence that has similar IT system needs to yours?

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New Labour Goes Consulting Crazy

When the Labour Party were in opposition, they lambasted the ruling Conservative government for spending up to £500m a year on management and IT systems consultants. This was, they thundered, “a disgraceful waste of taxpayers’ money – money that should be spent on frontline services like hospitals and schools” rather than being handed over to a few already wealthy consultants. Now New Labour are in power, they seem to have changed their minds. However, New Labour have not just spent a mere £500m a year on consultants – they had much more ambitious plans than that. In their grand plan to modernise the delivery of public services, they seem to have sidelined the Civil Service and have decided to both make their new policies and implement them using their favourite management and IT systems consultants. This is turning out to be an expensive exercise – it will cost us, the taxpayers, well over £70bn – more than £20bn for management consultants and at least another £50bn for IT systems consultantsThe vast amounts of taxpayers’ money being handed over to consultants could be seen as evidence of a dynamic, forward-looking government investing in modernising their country. At least, it would be positive were these massive investments successful. However, experience to date is less than promising. Judging by what has happened, New Labour’s investments in management and IT systems consulting appear to have just been a series of unmitigated and shameful disasters. So bad was the situation, that in an all-party committee of MPs criticised the British Government for both wasting taxpayers’ money and trying to cover up the truth about its financial mismanagement. The committee concluded that the British Government’s record on IT consulting projects was ‘an appalling waste of public money which Whitehall was trying to conceal behind a cloak of commercial confidentiality’. There have been so many disasters like the Child Support Agency – £1bn wasted on consultants, the National Offender Management Service – about £300m wasted and the Ministry of Defence – at least £500m spent on consulting that gave absolutely no results. The most shameful project of all must be the new NHS IT system which was planned to take 3 years to complete and cost just £2.3bn – it will actually take over 10 years, will cost over £12bn and won’t even work properly.IT’S A MORAL, NOT JUST A MANAGERIAL, ISSUEManagement and IT systems consultancies are businesses. As businesses, their aim is profit maximisation. This means they must try and sell as much of their product as they can at the highest price possible. Just like any other business – manufacturers of soft drinks, breakfast cereals, photocopiers, paperclips, cars, burgers, cigarettes or whatever. When you sell management or IT systems consulting to another commercial company like a bank, insurance company or an oil company, you are playing a commercial game, where you both know the rules. You try and get as much of their money as possible by thinking up all kinds of ‘essential’ services and new IT systems you can sell them and you charge them as much as you think you can get away with. As everybody knows, that’s how business works. And anyway most banks, insurance companies and oil companies are hugely wasteful bureaucracies that have more money than they know what to do with.However, having spent over twenty years selling consulting to many companies and government departments, I believe that this situation changes when a profit-maximising company like a consultancy sells its services to public sector organisations. Because here, every hundred million that is channelled into management and IT systems consultancies’ pockets means a hundred million less that can be spent on providing essential services in areas like health, defence, schools, social services and police. So if a management consultancy knowingly sells a project where it places twenty to thirty to forty inexperienced consultants in some government department or other, when two or three experienced consultants could have done the project more quickly and much more cheaply, you have to ask whether this is just nifty business or whether the consultancy could be accused of unethical practice. Similarly, if an IT systems consultancy manages to convince a government department that it should spend say £400m on building a completely new IT system, when it knows that an existing system could have easily been upgraded for less than £40m – is this just a case of the consultancy being canny businessmen or is it closer to theft of public funds? Moreover, if these consultancies also systematically overcharge the Government for their consultants’ time, bill for fictitious administration, charge the Government the full cost of travel expenses while retaining kickbacks from travel companies and make the Government pay for time consultants and their managers spend on internal consultancy activities – again the question, is this merely smart business or a fraudulent rip-off?There is another dimension to the moral issues arising from how consultancies work in the public sector. If a consultancy or systems provider fails to achieve the promised results for a private sector company, nobody really gets hurt. But if inexperienced junior consultants set meaningless targets for the health service which lead to ward closures and less patients being treated. Or if consultancies produce IT systems fiascos for government departments that prevent people from travelling due to them not having passports, that leave over 176,000 immigrants stuck in limbo for months because their applications cannot be processed, that prevent courts prosecuting criminals, that cause families to lose their homes or that impoverish hundreds of thousands of low income households, then it seems reasonable to question the ethics of consultancies that are happy to take the cash and yet are seemingly impervious to all the suffering caused by their incompetence and greed.THE PEOPLE AT THE TREASURY ARE NOT STUPIDAt a dinner recently, I was sitting next to a gentleman who shall remain nameless. He had a knighthood and at various times had been a professor at a leading business school, a director of the Bank of England, a former member of the Cabinet Office Central Policy Review Staff (the ‘Think Tank’), a director of the Treasury and a director of a major bank. I started talking to him about my concerns over the amount of taxpayers’ money being handed over to consultants and the series of catastrophes that had ensued. I then suggested that the Government was being taken for a very expensive ride by its consultants. The gentleman looked disdainfully at me and said dismissively, ‘I find your arguments fallacious and lacking in intellectual rigour – the people at the Treasury and the Bank of England are not stupid’.Having seen so much consultancy sold to so many government departments yielding so laughably little in the way of results, I’ve written a book to tell the story of what really happens when management and IT systems consultants are paid to bring their magic into public sector organizations. Now taxpayers can make up their own minds about the gumption or otherwise of the people at the Bank of England, the Treasury and the 2,500 other government departments who are contributing so generously to the welfare of already wealthy management and IT systems consultants by giving them almost unbelievable amounts of our money.