Management consultants: Paying someone to read your watch & tell you the time or real value?
You’ve probably heard that old joke about management consultants charging clients to read their watch and tell them the time. But is it true?
Well, of course the first thing consultants do when they start a project is to gather information on your company and its problem. They ask for lots of data and meetings with key staff. Basically, they take up a bunch of your time while charging you to do it.
Is it worth it?
In this article, we’ll cover the top 5 ways management consultants can add value while helping companies to solve tough business problems. These include:
- Getting the executive team aligned on the problem they need to solve,
- Providing pattern recognition from having solved the same type of problem in other firms and/or industries,
- Providing M&A, organizational restructuring, and other specialists that many companies don’t have on staff,
- Having the arms and legs to staff up quickly to solve critical problems without needing to hire more staff for the long-term, and
- Gaining the leadership consensus needed to implement a recommended course of action.
Aligning the Management Team Aligned on the Problem that Needs to be Solved
Many business problems look different depending on where you sit.
If profits are declining, the sales organization might point a finger at operations and say that costs are too high or customers’ required delivery timelines are not being met. The operations organization might point a finger at sales, saying that they’re negotiating prices that are too low or not closing enough contracts.
Who is right?
It could be sales, operations, neither, or both. Having an independent third party to put data behind what’s going on in the marketplace and how the company’s results compare to that is an important first step in solving a critical business problem.
Consultants also use issue trees to break business problems down clearly and keep everyone on the same page. This clear communication and data-based decision making are critical because you can’t solve the problem while you’re arguing over what the root of the problem is.
Providing pattern recognition from solving business problems at multiple firms or in multiple industries
It’s true that consultants don’t know their clients’ business organizations nearly as well as the client’s own staff does. But what consultants do know is how similar problems have played out at other clients in the same industry and/or different industries. This ability to leverage best practices from one client or industry to another is an important way that management consultants add value. It enables them to get to the heart of the problem quickly and move forward to the solution.
It’s important to note, however, that if a consulting company serves direct competitors, information will not be shared between the teams serving them to prevent conflicts of interest.
Providing M&A and other specialists that many companies don’t have on staff
If a company does not engage in mergers and acquisitions on a regular basis, they don’t have a department staffed with M&A experts. When an opportunity to buy or sell a business unit arises, should they hire a full M&A team?
If they don’t expect to acquire businesses regularly, then transactions are infrequent and hiring a consulting firm such as Bain & Company could be the better option. While consultants at firms such as Bain may have a high price tag, it is not as high as staffing up and having a full payroll for a department you need infrequently. This is like hiring a personal full-time dentist to be by your side when you only need to see them every six months.
This goes not just for M&A professionals, but other experts that are important to organizations but don’t call for a fully staffed team to be on payroll all year, such as corporate restructuring or sales force optimization
Providing the arms & legs to staff up quickly & solve big problems
Similarly, companies sometimes have time-sensitive problems that require analyzing a significant amount of data over a short time period to identify the right course of action. Should the company hire a squad of analysts and implementation experts?
If the project is short-term in nature, it probably makes more sense to hire a consulting firm that can put a team on the project for only the duration they are needed. Another benefit to hiring consultants is that you’ll be able to begin work right away rather than having to wait to interview many people for a project that will only take a few months to complete.
Gaining leadership consensus to implement a recommended course of action
The problem isn’t solved when someone finds an answer. It’s solved when the organization as a whole is sold on the answer and will take action on it.
This is another way management consultants can be helpful. They build inter-business unit consensus so that the solution is accepted and the company can move on to implementation and reap the benefits of the business improvement.
So, do consultants come in and use your watch to tell you the time or do they add real value?
The bigger a company’s problems are, the harder it is to define the problem, find people who have solved that type of problem before, gather the arms and legs that can crunch the data and figure out the right course of action quickly, and ensure the entire organization on board. When they do this, management consultants are worth their high billing rates. The value they bring, the time they save, and the overhead costs they save outweigh their high billing cost.
But if after running internal calculations you realize that the time and cost savings aren’t worth it, then your project might be too small and better served internally.
For more on What Consultants Do and How They Add Value to their Clients, see our article on this topic.
Davis Nguyen is a former Bain & Company consultant and the Founder of My Consulting Offer which has helped 500+ people start their careers in consulting at McKinsey, Bain, BCG, and other top management consulting firms. When he isn’t helping others get jobs in management consulting, Davis enjoys doing escape rooms (>80 rooms to date), speaking at Toastmasters, and spending time at the gym.
