Using Internal or External Consultants – manage ‘Why?’ by asking ‘When?’ and ‘How?’

Including a checklist of questions to assess whether you are ready to take on a more active role

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William Johnson, Managing Director, PSfPS

It’s time to get smart about when and how to use consultants…

The Why?

There are those in organisations who would happily say “Good riddance” to consultants. In particular, those who believe consultants cosy up to management, learn at a company’s expense and take the results with them.

There are others, however, who have had far more positive experiences and are willing to defend the use of consultants against the tough stance that the Board, the Audit Committee and other stakeholders may take.

With protagonists on both sides, decision makers in both the private and public sector should continually re-assess when it is right to use consultants – and what they can do to use them more effectively.

Asking: “When?”

One question buyers of consulting services do not ask often enough is “When?”

In the many consulting projects that I have been involved with — as a consultant, a trainer or advising how to manage consultants — it’s the other questions that consume an organisation’s time and attention.

“How much?” and “Who?” always lead — in fact, some organisations never get past these two questions. While they deserve attention, the first questions ought to be more fundamental ones:

“Do we need consultants?” followed by “When do we need to bring in consultants?” Ultimately, these questions will be followed by “How do we best use and manage the consultants?” and “How do we measure results?”

On every project, there are portions of work that an organisation could perform itself. It’s not an all or nothing, consultants or us approach. Understanding how the work will be planned and which portions of work an organisation can perform itself is key.

It’s a bit like building a house. Suppose you had basic building skills and wanted to do some of the work yourself. By managing the project, you retain control and gain a detailed understanding of the suppliers, schedules and budgets. This knowledge would enable you to tackle the jobs you were capable of (thus saving money), keep an eye on the builders and resolve problems as they occur.

On the downside, you’d have to know something about construction (or be willing to learn) and be a good project manager, which takes skills and time.

Let’s say you asked an architect to manage the project for you instead. Assuming you found an architect willing to let you do some of the tasks, your position would be fundamentally different. Though you would occasionally work alongside the suppliers, you wouldn’t vet them. When work fell eight weeks behind schedule, you wouldn’t know why. When costs overran by 30%, you’d have to rely on your architect for an explanation and hope it wasn’t just unreliable suppliers.

Like any analogy, comparing management consultancy to house building can only take you so far. However, at heart it’s a trade-off: fewer hassles for less control and knowledge.

What can you do yourself?

All consulting projects have discrete stages, with entrance and exit points. To identify them, you need to know something about how consultants work. The three general stages of consulting are: insight (defining the problem), planning (developing the solution) and implementation (making change happen).

In practice, most organisations give consultants a free rein in defining the problem and developing the solution, then phase out consultancy support during implementation — but is this the best way? When following this path, common complaints include high fees, poor knowledge transfer and uncertainty over accountability for results.

Instead, why not perform the diagnosis and solution development stages yourself?

After all, external consultants would be drawing significantly on internal knowledge. However, that’s not to say it’s a straightforward case of data.

The other advantage external consultants bring to analysis is a structured, audited, objective process and it’s something PSfPS has taught successfully to ‘non-consultants’ around the world for many years.

Organisations that adopt a DIY approach to project management and these first stages of work can expect to have more control, reduce their consulting bill and increase organisational knowledge.

Analytical thinking, project management and communication skills can all be taught, provided an organisation is willing to invest in training. Your people can use these skills to work more effectively with consultants or to build an internal consulting group.

With appropriate guidance and the right calibre of people, internal teams are more than capable of producing a solution equivalent to that of any external consultant. Although there will always be those who argue that external consultants are more likely to be objective, the use of a proven analysis process with external validation can counter those objections.

Taking a more active role should benefit both the organisation and any consultants it chooses to use. The organisation develops a deeper understanding of the consulting process and how to put together a clear ‘request for proposal’, should it decide to seek outside help. It progressively strengthens internal capabilities, leaving it better prepared for future change. The consultants benefit from a more defined role and a more effective working environment.

Questions to consider:

Below are some questions to enable you to assess whether you’re ready to take on a more active role.

In the end, it’s a move towards independence or dependence. Why waste the opportunity to build internal capabilities on projects and retain the skills, when the alternative is to remain forever in the hands of external consultants?

Questions to consider (DIY)Questions to consider (external consultants)
Stage 1

Insight: defining the problem

1. Professional fees are expensive. Why pay consultants for a scoping study when the knowledge resides in your organisation?

2. Do we have the right calibre of people?

3. Are we willing to invest in training them?

Although DIY may be a better long-term solution, it will take longer – if you need speed and efficiency or are in crisis, consultants may be the answer.

1. Is the solution time sensitive?

2. How can we ensure that consultants won’t be misled by the political agenda of the person commissioning them?

Stage 2

Planning: developing the solution

1. Once you have diagnosed the problem, it should become clear whether you need outside expertise.

2. Do we have the knowledge, skills and resources to solve this problem internally?

3. Can we free people from their current roles to take on project responsibility?

Consultants are often valued because they are outsiders with experience across a range of firms. Sometimes they are brought in to do the ‘dirty work’. Do we need:

1. Distance and lack of local politics?

2. Technical skills we don’t possess and can’t gain in a reasonable time frame?

3. Benchmarking information?

Stage 3

Implementation: making change happen

1. Internal people usually have a better understanding of key players and how to make change happen.

2. Do we have the resources and capability to implement the solution ourselves?

If consultants have not earned employee buy-in, employees will have limited interest in pushing through, and sustaining, change.

1. Have we placed sufficient emphasis on knowledge transfer and change management?

PSfPS have helped develop internal consulting groups, from 5 to 5,000 people for leading organisations and professional services firms around the world.

Should any of the ideas in this article strike a chord, please get in touch. We would be delighted to start a conversation with you.

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