The How-To: Choosing A Consultancy Service For Your Business CEO and Client Director at Reddal Dr. Per Stenius gives aspects to consider the basics in choosing the right firm, what to look for, and more.
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For entrepreneurs running SMEs to large-scale businesses, it is sometimes necessary to bring in consultants to get processes streamlined, implement cost-saving initiatives, and even when considering brand proliferation measures. Looking to solve problems in your HR department? Not sure what the best way to implement multi-level restructuring is for your company? Consultants can help your enterprise do all this and more. But how do you choose the right firm, and what should you look for?
Obvious aspects to consider are of course the track record of the consultancy, their price point (relative to the potential value of solving the problem), as well as their ability to adapt to a change in the problem statement. Very often during a development project, one finds that the original issue was not the only issue that needed solving- or alternatively it was not the root issue at all. At that point, the ability of the supplier to flexibly adapt to the new situation is very critical.
DETERMINE WHEN AND IF A CONSULTANT IS ACTUALLY NECESSARY (OR BENEFICIAL) TO YOUR ENTERPRISE
What kind of problem are you trying to solve? It is important to try to frame the problem before talking to external parties. Typical framing questions are:
• What is the fundamental question we are seeking to answer?
• Who will be the decision-maker?
• Will the process of solving the problem provide us with valuable learnings we can use in the future?
• Are we trying to develop a unique advantage or just catching up?
As well as questions that relate to the solution choosing process itself:
• What political interests may influence the solution finding problem? This one especially can be important, because if there are a lot of vested interests in the solution selection, there may be a strong bias within the organization, and this leads to a non-analytical process and potentially a poor answer.
• What are the key performance indicators we want to use to measure the solution?
• How important is understanding the problem solving process itself for the execution of the solution?
In topics like strategy, for example, my experience has been that an "external answer" (such as a PowerPoint presentation by a consultant) for a company's strategy often has negative effects on implementation. On the other hand, when the managers and executives have been involved personally in solving the strategic issues and know how the answers were achieved, they also feel much more comfortable and confident in the implementation of the strategy.
CATCHING UP VS. DEVELOPING A COMPETITIVE ADVANTAGE
When setting out your company's needs, determine whether you catching up or if you want to develop a unique competitive advantage? Consultants transfer knowledge between different companies, and thus they are good when one is trying to catch up in a special area that the company doesn't have internal knowledge in, and when hiring or building the required skills will take too long. If you are working on something truly strategic, and you seeking to develop a unique and sustainable competitive advantage, I would be very careful with involving consultants! Incidentally, we see this in our Seoul office– the Korean large conglomerates, like Samsung and LG, were originally very keen on using U.S. top management consultants, but nowadays are switching into a model where they use external parties very selectively, and instead have their in-house consulting teams.
At Reddal, we recognize this problem and want to position ourselves quite differently from consultants- we are very strict about not serving competing companies at all, and rather seek to build long-term partnerships with selected players.
As a result, our model is not really consulting in its traditional sense, rather we are more like an outsourced service, where we build a unique partnership with our clients. Since we do not work with competitors, we can really help our clients both in catching up as well as developing completely new and unique ways of competing and winning.
ASSESS WHETHER THE LEARNING PROCESS IS POTENTIALLY OF VALUE TO YOUR HUMAN CAPITAL
Sometimes solving a challenge that the company is facing is an important learning process for the company's human capital. In this situation, consultants may not be the best solution, simply because few consultants want to give away their problem-solving methods. After all, that is how they make money! So, if a company simply needs an answer quick, and the skill of developing such an answer is not needed in the future, then a consultant can be a good choice.
However, if the problem is likely to come up in the future, and the skill of solving it is valuable for the company, then developing the solution in-house –either by building or hiring the skill– can be a better alternative. We recognize this problem, and we have chosen to offer all our methodologies to our clients in the name of long-term partnership and mutual win-win. Our Reddal Share platform, and the Reddal Academy program are specifically addressing the need of our clients' in-house skill development. Since we are more of a long-term partner, for us this is no trade off– the better our clients get, the more they can grow, and this obviously also provides us more opportunities to work with them. Again, our choice of never serving competing companies drives our thinking in this direction.
REASONABLE TIMELINE AND DELIVERABLE EXPECTATIONS
The timeline and deliverables of what you are asking your consultancy to do depends on the engagement. If you are catching up, and decide to use a premium brand consultancy with a high price point, you can and should of course demand value for money.
In most cases, where the consultancy claims it has experience in solving a specific issue, you should be able to expect results in the matter of weeks or a few months. Most basic engage- ments are between six to 12 weeks, however, personally I think a good approach is to work in iterative cycles, and to have weekly reviews. We, due to our approach and model, work in a very integrated way with our clients. We typically have full access to their systems, and work in their premises together with their staff. This facilitates joint problem solving and learning.
Even though our relationships are long-term, for each individual work area we tend to structure the deliverables into monthly cycles which we call sprints. The concept of "sprint" comes from agile programming, and the idea is that within one cycle one needs to deliver a useful and complete end-product. Its accuracy can be discussed; clearly the "version one" solution is less accurate than the "version three", but the cycle should be short. So we use weekly reviews, and monthly sprints. After one sprint, we then jointly discuss with the client whether the current solution is accurate enough, or whether further refinement is needed. In many cases "80/20" applies, and one to two cycles are enough.
However, there are also some cases which are very sensitive to inaccuracies, such as acquisitions or operating model changes that affect the whole organization, and then multiple cycles are needed. The key point is, however, that the approach is iterative, and that throughout the process there is full transparency on how the solution is emerging and what its accuracy is. This is really the key to the monitoring part, having regular reviews and input opportunities along the process.
A lot of top management consulting is really about maintaining an impressive faade, so that the client feels comfortable; it's a bit like banking, where the impression matters. As a result, many consultancies spend a lot of time in relationship management, and try to appear both impressive and knowledgeable. Having worked at two American consulting firms myself (McKinsey and Accenture), I definitely recognize this and admit myself having been guilty of this behavior. However, from a client's point of view all of this is non-value adding! So personally my preference nowadays is to focus on the value add, and to speak less about myself and our company, and talk more about the clients' business and about concrete ways of addressing some of the issues they are facing.
All in all, to me the relationship management is more about finding various ways to drive impact, and to provide fresh insight, than the traditional relationship management often seen in marketing and sales. If the client sees a number of interesting discussions stemming from the relationship with their service provider, and if many of those relationships are actually going beyond the service provider itself, I think things are working in the right direction.
At Reddal, we address this by often seeking to bring client CEOs together, and it has turned out to be a very powerful way of sharing experiences that our clients really enjoy. After all, a CEO rarely has the opportunity to talk to another CEO in an appropriately confidential setting, and with supporting facilitation to really focus on core issues. This takes much more than just a casual chat over a cocktail! We have organized events we call "CEO Forum", where a select group of our client CEO work together solving problems they are facing. This seems to work very well, and complements the work we do with our clients internally.