Are Strategy Consultants Worth Your Investment?
Unsure if hiring a strategy consultant is the right decision for your business? Check out these tips to help you make the most of your investment.
Are you considering working with a strategy consultant? If so, it's important to understand how to make the most out of your investment. We’ll look at how strategy consultants can truly help, but also discuss some of the drawbacks of working with them, so you can decide if you are ready to invest and if you do, how to avoid wasting time or money.
In the past three decades of my professional life, I have been on both sides of the coin: a client of consultants, and a consultant myself servicing clients. The switch from client to consultant has been an eye-opening experience—and I’d like to share some perspectives on how to engage with them.
My first encounter with a consultant was during my time at Coca-Cola, where engaging external consultants was common practice. We needed to predict future revenues to guide capital investment and other strategy decisions. Our consultant developed a demand model based on numerous sets of data. It helped us predict sales based on the actions we will take. It looked like a giant calculator with algorithms in the background and a nifty interface where you input your assumptions. Overseeing strategic planning then, it was an important tool for me to have a systems view of all the factors that drive consumption and demand—these 2 are different, by the way—and to simulate the impact of strategy choices.
Another consulting engagement I vividly recall is when our regional team for BPW Asia, the JV of Coca-Cola and Nestle, needed to generate innovation ideas. We flew in a team from the US to run a workshop for us. I still laugh at the out-of-the-box concepts that I recall we generated then. When I found out though how much these consultants cost, I wondered how we could have made the fees worth it.
The global management consulting market was worth $160B in 2019 and employs nearly a million people in the US alone. Given these large numbers, there must be a sustainable raison d'être for the industry. What our clients say they appreciate most from consultants is the unbiased, objective and expert point-of-view which become crucial during major inflection points in a company’s quest for growth and sustainability. But engaging consultants demands a real commitment in time and money. The question now is this: how do you make this investment worth it?
After leading a consulting firm for more than a decade now, I have come to the conclusion that there are several factors that determine whether an engagement is worth the investment or not. A big factor is client profile, and we have determined that there are generally 3 types. Which of these are you?
Client Profile 1: Seasoned Commissioners
The first set of clients are called Seasoned Commissioners. They already see the value in hiring high-caliber consultants who bring external, unbiased points of view and can challenge elephants in the room. Given their exposure to different types of consultants, they need to focus on identifying the most cost-effective options for their specific need on hand. Thus, the starting point to making an engagement truly worth it is to have a very clear brief:
What is the overall challenge?
What are the key business questions?
What are the outputs expected from the consultant?
What is the picture of success for the engagement?
What is at risk if you don’t engage external help?
Answering these questions can help assess the value of what is truly at stake. You’d have to make sure that those who pitch their consulting services have the expertise and track record to answer your brief.The possible trap that you need to watch out for are those who cannot distinguish between the output you truly need versus what’s just nice-to-have. The best way to illustrate this is when they recommend that you buy a Lexus when all you need for now is a Vios. Therefore, a clear brief will allow you to find the most effective and cost-efficient consulting firm that suits your requirements at hand.
Client Profile 2: Unmoved Inertia
The second set of clients are called Unmoved Inertia. They recognize they have unexpected challenges but believe that they can solve the issues themselves. They have yet to recognize the need to hire external consultants.For this set of clients, outsourcing a consultant is simply not worth the time and money, as they are not ready.They will only be motivated to seek external help when a major, earth-shaking, black swan event happens in the business. At that point, engaging consultants become worth it if they choose a firm that can right-size the problem and start (and end) only where the client specifically needs help on. A clear brief will be crucial and casting the net wide in search of the right consultant partner to work with are musts.
Client Profile 3: Uncertain In-betweeners
The third set of clients are called Uncertain In-betweeners. They sense the need for external advice, but they haven’t pinpointed yet exactly where their gaps or issues are. This set of clients are the most vulnerable because professional services firms would tend to fit the problem into their canned solutions—“If all you have is a hammer, everything looks like a nail” as the saying goes. Therefore, hiring a strategy consultant whose approach is to start with a thorough, data-based diagnosis of where the client’s biggest problem could be is critical. Sans this discipline, the clients may end up paying for services that will not really address the issue—leading to wasted time and money.
Apart from the client’s profile being a factor for gauging if it is a wise move to hire a consulting firm, here are other tips to make consulting engagements truly worth it:
Tip 1: Be open and ready to listen to all the good, the bad and the ugly. Good consultants should espouse both integrity and respect. Integrity to call a spade a spade, to ask the tough questions, to call out elephants in the room – but very importantly, to base all these on hard data, not opinions. This is crucial for you to get your money’s worth and not just hear what the consultant thinks you want to hear. Integrity must be coupled with respect – for the client as a company, and for the individual stakeholders. Consultants should not speak and act like they are the smartest people in the room; they must acknowledge the fact that the client has built many parts of the business successfully. Several times in the past, we have had to present some painful findings and recommendations, but we are always careful to deliver them in a straightforward yet respectful manner. In one instance, tears rolled down the eyes of a client after we delivered a presentation that showed what customers were saying about their service. The team was working very hard at a customer service project, but it was only when we thoroughly assessed what they were doing vs customer expectations did the true gaps come out. As painful as it was at the beginning, the engagement became the foundation of a major customer service transformation that eventually saw turnarounds in NPS scores.
Tip 2: Work collaboratively with them, especially in providing data that will complete the entire context. Without the big picture and a substantially complete briefing, consultants cannot do what they are supposed to do, and that is to integrate a large set of data and pinpoint root causes and key drivers that must be addressed.
Tip 3: Choose carefully who you engage to avoid getting dissatisfied. Clients come to us frustrated that they had paid an arm and a leg for other consulting firms, only to receive back just an echo of what they have told the consultants. This happens when the consulting firm does not have clear, established knowledge of the local market or when those who work on engagements are junior associates who have neither expertise nor tools to truly add value to the client’s baseline knowledge.
Tip 4: Even at the onset, the consultants must have a burning curiosity about your business, organization or industry. They should be asking a lot of questions. Why? This is a signal that they will take the engagement seriously and are already beginning to turbo-learn. If they begin to dish out solutions even before asking questions, quickly end the briefing – they are just looking for an audience for their opinions and do not have the discipline to properly do a data-based diagnosis first.
Consultants can help you reach your business goals and will be worth the investment, but only if they are the right partners for your company. Hiring a consultant can either be a major catalyst for accelerated performance and solving challenging issues – or can be a waste of time and money. Take control of which one it will be for you. With the right consultant on your side, you can achieve great things for your business.
About the Author Pauline Fermin
Pauline Fermin is currently the President COO of Acumen Strategy Consultants. She has over 26 years of experience in strategy—both as a corporate executive and as a consultant. She combines her depth of experience in research and marketing with the discipline of finance—applying a broad and holistic view in strategy formulation. She has applied her strategic expertise in helping clients from a wide range of industries, including food and beverage, packaged goods, financial services, pharmaceutical, real estate, retail, telecommunications, transportation, software, and other services.