This presentation by the authors of "Extract Value From Consultants: How to Hire, Control, and Fire Them" provides some practical advice on how to maximize value when hiring management consultants.

1. Getting the Best Out of Consultants
The University of Chicago Booth School of Business
20 May 2010
Gordon@RFPCompany.com
www.ExtractValueFromConsultants.com

2. It’s time to even the odds in favor of the buyer!
Over the decades…
a) Consulting has shifted from a
profession emphasizing client
service to a business focused on
revenue
b) Sales tactics have become
increasingly sophisticated and the
scale of consulting projects have
multiplied
c) Buyers have not improved their
ability to manage consultants
d) Disenchantment with the value
delivered by consultants has
grown – but little has been done
VALUE
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3. Everyone uses consultants for key initiatives…
Consulting* Spend in the U.S. = $396 billion
Management Consulting Spend by Sector
Healthcare
9%
Energy/Utilities Financial Services
9% 22%
Government 9%
10%
Telecom 19%
Other Private Sector
11%
Manufacturing 11%
Consumer Products * Management and IT Consulting in 2009
Source: IBIS World; Management Consulting in the US, February 2010
VALUE
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4. … across management and IT domains…
Management IT
Consulting Consulting
Technical Support Systems Integration
Marketing/Sales Process Network
Financial Advisory Management Management
Organization
Design Other Services Technical
Consulting
HR
Corporate
Benefits Systems Design /
Strategy
Development Application
IT
Strategy Custom Integration
Application
Design
VALUE
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5. … with minimal training and experience
1. Managing consultants is not a subject taught in business schools
• instead they teach students how to be consultants
2. Employees rarely receive training on techniques to manage consultants
• they are expected to learn on the job
3. Employee assignments to projects involving consultants are typically irregular
events
• difficult to build and leverage experience
4. Lessons learned from consulting projects are seldom routinely captured and
transferred across the organization from project to project
5. Difficult to find a book on how to manage consultants
• but there are thousands of books on ‘how to be a consultant’
Consultants receive extensive training, and have lots of experience at managing
their clients – they do it every day!
VALUE
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6. Underwhelming outcomes for overwhelming fees
July 8, 2002 January 23, 2010
Inside McKinsey The public sector has had
Enron isn't its only client to melt down. Suddenly, times its fill of management consultants
are trying for the world's most prestigious consultant
Management consultants have been hopping all over the public
Wayne E. Cooper, CEO of Kennedy Information, a research and sector for years. The growing pressure to get “more for less”
publishing firm that keeps tabs on consultants, says "There was so persuaded governments to turn to the private sector for inspiration.
much smoke coming out of the Andersen smoking gun that all the And the challenges of adopting information technology prompted
fire-fighters went after that one. McKinsey was lucky. They dodged them to turn to IT consulting giants such as IBM and Accenture.
a bullet ….
Consultants are nothing if not ingenious in getting their feet on the
The bad news, however, is that Enron, which was paying McKinsey fender. The Obama administration looked like a perfect mark when
as much as $10 million in annual fees, is just one of an unusual it came to Washington, DC, on a wave of hope and hype. McKinsey
number of embarrassing client failures for the elite consulting firm. actually scented an opportunity in the credit crunch: an article in the
Besides Enron, there's Swiss-air, Kmart, and Global Crossing--all consultancy’s house magazine urged that governments needed to go
McKinsey clients that have filed for bankruptcy in relatively short in for “whole-government transformation” if they were to cope with
order. the mess.
……
All of which raises uncomfortable questions about the world's most They have frequently left devastation in their wake and have treated
prestigious--and enigmatic--consulting firm. Did McKinsey's the public sector as dumping grounds for airy-fairy ideas such as
partners get caught up in the euphoria of the late '90s and suffer “transformation” that have been rejected by the private sector. They
lapses of judgment? And if so, what does that say about the quality have built overly elaborate management structures that make it
of its expensive advice? Did it stray from its core values? What harder for people to do their jobs. And they have demotivated
accountability does it--or any consulting firm--have for the ideas people who like to feel that they are working for the public good.
and concepts it launches into a company? The government has wasted huge amounts of money on botched IT
projects designed by consultants.
VALUE
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7. Consulting spend is not tracked nor value managed
Due to the decentralized nature of consulting usage (coupled with lack of
training) most organizations do not know:
a. How much they spend on consultants across their enterprise ?
b. Whether the value promised from each project was actually realized ?
What would be the impact to companies or government of an additional:
a. 20 % reduction in consulting spend on projects undertaken ?
b. Financial return more than twice the fees of the consultants ?
There is no executive that has overall accountability for consultant performance
VALUE
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8. What’s gone wrong? Consultants’ model changed!
Prior to the 1990s Post 1990
Consulting as a ‘Profession’ Product Marketing Organizations
(Re-engineering, ERP, Y2K, eBiz, CRM, SOX…)
 Partnerships  Public companies
 Client needs first  Stock analysts/partner income first
 Raise industry standards  Build the brand of the Firm
 Thought leadership  Packaged product push
 Frame the problem  Follow the methodology
 Small consultant teams with  Large body shops maximizing
active Partner involvement leverage of Partner expertise
 Projects in the hundreds of  Projects in millions of dollars as
thousands of dollars part of tens of millions relationship
 Becoming a Partner  Being the ‘Rain Maker’
VALUE
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9. What’s gone wrong? Clients failing to play their part
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
1. The consultants are working on the wrong problem
2. The wrong type of consultants have been selected
3. The consultants do not have the promised skills or experiences
4. The consultants are not being controlled or managed effectively
5. The consultants have lost their effectiveness in the organization
Due to time constraints, only selected points will be highlighted – more details in the book
VALUE
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10. Consultants add value when used in the right roles
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
 Technical Expertise
 Functional area
 Industry knowledge
 Methodologies and approaches
 Project management  Resource Augmentation
 Research & data gathering
 Consulting Process  Documentation
 Structured thinking  Repetitive tasks
 Facilitating change  Administrative activities
 Third Party Perspective
 Independence, objectivity
 External practices
HIGH VALUE ADDED LOW VALUE ADDED
VALUE
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11. Use consultants where their capability is strongest
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
2010 © Extract Value From Consultants: How to Hire, Control, and Fire Them
Consultants regularly pursue and rarely turn down work that is outside their core capability
VALUE
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12. Example: Which consulting firm is being described ?
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
Project Management for Information and Communications Technology (ICT)
Company Background
??? is the distinctive leader in top management consulting with a deep understanding of ICT challenges faced by
governments. We have an extensive track record for delivering significant value in government ICT projects, and
have a distinctive business-driven approach to ICT in the public sector. We have been serving clients for many
years, and our professional legacy includes: 1) Professional values and an enduring code of conduct, 2) Top
management/integrated problem-solving perspective, and 3) Tailored approach and custom solutions. Our
results-oriented Public Sector Practice has driven measurable improvements throughout several government
agencies worldwide. We have a specialised Business Technology Office (BTO) that serves ICT needs of public- and
private-sector clients through rigorous focus on impact. The BTO has competence and expertise in technology with
deep technical proficiency in systems design and IT architecture.
Source: Australian Government Information Management Office, List of Suppliers, ICT Project Management Methodology category. March 2010
VALUE
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13. Select for Merit and Value – see beyond the brand
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
 Align your internal stakeholders  Don’t be fooled by scope games
 Educate stakeholders with a RFI  Discount client logos
 Pre-define the selection criteria  Configure the combined team
 Your RFP sets the tone & result  Focus on skills / experiences of
 Run a disciplined RFP process individual consultants
 Control the communications  understand the true involvement of key
resources (pyramid scheme)
Capability to Deliver  make sure they will be assigned
Potential Value = fn
Commercial Relationship
 Make sure you align project vs.
engagement objectives
 Normalize fees & hours
 Scrutinize expense policy
 Base ‘your’ contract on business
outcomes, not just limited liability
Individuals, not firms, will do the work and deliver the results
VALUE
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14. Client must manage project for value not completion
Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness
 Continually focus on the desired project outcome not engagement completion
 Are baseline metrics pre-defined and subsequently monitored?
 At completion, undertake a review of promised versus actual
 Ensure an integrated team where consultants are used in value-added roles
 Question excessive activity replication and consultant redundancy
 Beware the fly-in ‘subject matter expert’
 Why should you have to pay extra for quality?
 Cannot outsource project management responsibility
 Minimize change orders; watch for shifting of activities to subsequent phases
 Look out for warning signs that an engagement is in trouble
Control the consultants or they will control you!
VALUE
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15. Proven methods to undermine your consultants
 Cram eight consultants into a room designed for two people
logistics
 Do not provide any meeting rooms
 Fail to provide access to email, internet, and printing facilities
 Provide no administrative support
 Keep changing the business objectives and scope of work
execution
 Withhold promised resources
 Assign your poor performers to the project team
 Be unavailable or unprepared for update and steering committee meetings
participation
 Delay decisions; don’t fulfill your project obligations
 Fail to assign accountability for executing the next steps
 Be penny wise, pound foolish and releasie consultants too soon
 Do not secure management and organizational buy-in to the project
sponsorship
 Forget to inform members of your management team and staff about the project
 Make derogatory comments about consultants to your staff
Why bring in high priced talent, but not create an environment conducive to success?
VALUE
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16. Top 10 ways to extract more value
10. Establish a center of expertise for consultant usage
9. Capture and learn from experiences – internal or at www.extractvaluefromconsultants.com
8. Always issue your own standard consulting contract
7. Tightly control scope increases within projects; and cross-selling of new work
6. Ensure internal alignment around the definition of the problem
5. Make consultants accountable for outcomes with clear metrics
4. Configure the project team – focus on value-added roles of consultants
3. Focus on the capabilities of individual consultants, not the brand
2. Avoid consultant fatigue – give your organization a holiday from consultants
1. “Even the Odds” by distributing our book and educating your organization
The cost of the book is less than three minutes with a typical global consulting partner
VALUE
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17. Questions
Features of the Book
17 Chapters reflecting 50+ years of experience
Part 1: Understand How Consultants Make Money from You
Part 2: Sourcing Value from Consultants
Part 3: Successfully Realizing the Value
15 Consulting Case Studies
Australia, Canada, China, Japan, Korea, Thailand, United States
18 Examples & Templates
Learn and do
16 Management Summaries
For the busy executive or as a refresher
2 Evaluation Forms
How well does your organization manage consultants?
How well has your consultant served you?
- enter your consultant evaluation on
www.ExtractValueFromConsultants.com
Extra Feature: Consultants in Asia
Buyer Beware: Become an informed buyer
VALUE
© 2010
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18. Getting the Best Out of Consultants
The University of Chicago Booth School of Business
20 May 2010
Gordon@RFPCompany.com
www.ExtractValueFromConsultants.com