Getting the Best Out of ConsultantsThe University of Chicago Booth School of Business

20 May 2010

Gordon@RFPCompany.com

www.ExtractValueFromConsultants.com

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

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

2

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Everyone uses consultants for key initiatives…

3

Source: IBIS World; Management Consulting in the US, February 2010

Consulting* Spend in the U.S. = $396 billion

22%

19%

11%11%

10%

9%

9%

9%

Healthcare

Manufacturing

Financial Services

Other Private Sector

Management Consulting Spend by Sector

* Management and IT Consulting in 2009Consumer Products

Energy/Utilities

Government

Telecom

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

… across management and IT domains…

4

Systems Integration Network

Management

Technical Consulting

ApplicationIntegration Custom

Application Design

Systems Design / Development

Other Services

Technical Support ProcessManagement

CorporateStrategy

ITStrategy

HR Benefits

Organization Design

Marketing/SalesFinancial Advisory

Management Consulting

ITConsulting

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

… with minimal training and experience

5

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!

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Underwhelming outcomes for overwhelming fees

July 8, 2002

Inside McKinsey Enron isn't its only client to melt down. Suddenly, times

are trying for the world's most prestigious consultant

Wayne E. Cooper, CEO of Kennedy Information, a research and

publishing firm that keeps tabs on consultants, says "There was so

much smoke coming out of the Andersen smoking gun that all the

fire-fighters went after that one. McKinsey was lucky. They dodged

a bullet

The bad news, however, is that Enron, which was paying McKinsey

as much as $10 million in annual fees, is just one of an unusual

number of embarrassing client failures for the elite consulting firm.

Besides Enron, there's Swiss-air, Kmart, and Global Crossing--all

McKinsey clients that have filed for bankruptcy in relatively short

order.

All of which raises uncomfortable questions about the world's most

prestigious--and enigmatic--consulting firm. Did McKinsey's

partners get caught up in the euphoria of the late '90s and suffer

lapses of judgment? And if so, what does that say about the quality

of its expensive advice? Did it stray from its core values? What

accountability does it--or any consulting firm--have for the ideas

and concepts it launches into a company?

6

January 23, 2010

The public sector has had

its fill of management consultants Management consultants have been hopping all over the public

sector for years. The growing pressure to get “more for less”

persuaded governments to turn to the private sector for inspiration.

And the challenges of adopting information technology prompted

them to turn to IT consulting giants such as IBM and Accenture.

….

Consultants are nothing if not ingenious in getting their feet on the

fender. The Obama administration looked like a perfect mark when

it came to Washington, DC, on a wave of hope and hype. McKinsey

actually scented an opportunity in the credit crunch: an article in the

consultancy’s house magazine urged that governments needed to go

in for “whole-government transformation” if they were to cope with

the mess.

……

They have frequently left devastation in their wake and have treated

the public sector as dumping grounds for airy-fairy ideas such as

“transformation” that have been rejected by the private sector. They

have built overly elaborate management structures that make it

harder for people to do their jobs. And they have demotivated

people who like to feel that they are working for the public good.

The government has wasted huge amounts of money on botched IT

projects designed by consultants.

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Consulting spend is not tracked nor value managed

7

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

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

What’s gone wrong? Consultants’ model changed!

Partnerships Public companies

Prior to the 1990sConsulting as a ‘Profession’

Post 1990Product Marketing Organizations

(Re-engineering, ERP, Y2K, eBiz, CRM, SOX…)

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 active Partner involvement

Large body shops maximizing leverage of Partner expertise

Becoming a Partner

Projects in millions of dollars as part of tens of millions relationship

Being the ‘Rain Maker’

Projects in the hundreds of thousands of dollars

8

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

What’s gone wrong? Clients failing to play their part

1. The consultants are working on the wrong problem

Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness

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

9

Due to time constraints, only selected points will be highlighted – more details in the book

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Consultants add value when used in the right roles

Technical Expertise Functional area Industry knowledge Methodologies and approaches Project management

Consulting Process Structured thinking Facilitating change

Third Party Perspective Independence, objectivity External practices

10

Resource Augmentation Research & data gathering Documentation Repetitive tasks Administrative activities

Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness

HIGH VALUE ADDED LOW VALUE ADDED

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Use consultants where their capability is strongest

12

Consultants regularly pursue and rarely turn down work that is outside their core capability

Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness

2010 ©

Extr

act

Valu

e F

rom

Consultants

: H

ow

to H

ire,

Contr

ol, a

nd F

ire T

hem

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Example: Which consulting firm is being described ?

13

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.

Project Management for Information and Communications Technology (ICT)

Source: Australian Government Information Management Office, List of Suppliers, ICT Project Management Methodology category. March 2010

Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Select for Merit and Value – see beyond the brand

14

Capability to Deliver

Commercial Relationship

Don’t be fooled by scope games Discount client logos Configure the combined team Focus on skills / experiences of

individual consultants understand the true involvement of key

resources (pyramid scheme) make sure they will be assigned

Make sure you align project vs. engagement objectives

Normalize fees & hours Scrutinize expense policy Base ‘your’ contract on business

outcomes, not just limited liability

Align your internal stakeholders Educate stakeholders with a RFI Pre-define the selection criteria Your RFP sets the tone & result Run a disciplined RFP process Control the communications

Potential Value = fn

Individuals, not firms, will do the work and deliver the results

Wrong Problem Wrong Consultants Undelivered Skills Ineffective Control Lost Effectiveness

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Client must manage project for value not completion

15

Control the consultants or they will control you!

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

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Proven methods to undermine your consultants

17

Cram eight consultants into a room designed for two people

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

Withhold promised resources

Assign your poor performers to the project team

Be unavailable or unprepared for update and steering committee meetings

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

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?

logi

stic

sex

ecu

tio

np

arti

cip

atio

nsp

on

sors

hip

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

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

18

The cost of the book is less than three minutes with a typical global consulting partner

E X T R A C T V A L U E C O N S U L T A N T SFROM

© 2010

Questions

19

17 Chapters reflecting 50+ years of experiencePart 1: Understand How Consultants Make Money from YouPart 2: Sourcing Value from ConsultantsPart 3: Successfully Realizing the Value

15 Consulting Case StudiesAustralia, 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 FormsHow 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 AsiaBuyer Beware: Become an informed buyer

Features of the Book

Gordon@RFPCompany.com

www.ExtractValueFromConsultants.com

Getting the Best Out of ConsultantsThe University of Chicago Booth School of Business

20 May 2010