Why You Should Stop Buying External Consultancy
When should you use external consultancy? Are you wisely bringing in wider expertise, or wasting your money on people who won’t be around to see the consequences?
I’ve mentioned before the need to build the reputation of your team, to mitigate the risk, of external voices being listened to instead.
But, in this post, I want to turn to the topic of consultancy itself. I’m sharing these thoughts with a foot in both camps. I have decades of experience as a senior leader within a FTSE100 business. In that role, I have seen external consultants both add value & be a waste of money.
Now, as a founder of my own business, I am choosing to take a different approach to consultancy. I advise people not to buy my consultancy by itself. What am I thinking?!
Why consultancy often fails
Just like the evidence of most change projects failing to deliver the benefits expected, so too, consultancy often fails. Why is this and what does it fail to achieve?
Having experienced both sides of this equation (client & consultant), a few reasons spring to mind:
- Poorly defined expectations (lack of consistent understanding of goals)
- Scope-creep, insufficient time/resources (shared responsibility)
- Internal stakeholders not managed (‘politics’ are often blamed for lack of stakeholder management)
- Lack of knowledge or skill required by consultant (less common)
- Consultant has ‘textbook knowledge’ but lacks ‘real world’ experience/pragmatism (too often the case from large management consultancy firms)
- Results poorly communicated to key decision makers
- Lack of knowledge transfer or capability embedding
All of those can be pitfalls to avoid, when using a consultant, whether for technical or management/people work. It is worth using the above list of risks, to filter your selection of consultants to work with. Can they demonstrate experience of those risks & how to mitigate them?
But, the most pernicious problem that I have seen with consultancy, is the last one on that list. As with projects, the problem with consultants can be they finish/leave. When that happens, businesses can fail to realise any value from the engagement, if others are not skilled as needed. It can end up as just another report on the shelf.
So, is there a better way? Well my experience of working with some wise clients suggests that there can be.
What can help consultancy succeed?
The solution, at least in my experience, goes back to the initial ‘contracting’.
It requires more than defining the outputs of a consultancy engagement in terms of advice needed or format of outputs. Spend time to think, not only about the decision needed, but actions following.
If the consultancy is to identify capability gaps or investment needed, who will need to put this in place? If you cannot yet identify people (yet to be hired), is there a business manager/leader who will need to oversee the change?
The key is to identify who will need to act on & manage the knowledge required. If you like, the person who will need to become an internal ‘expert’, once the consultant has left. Then, in my experience, the missing piece of the puzzle is training, coaching or mentoring.
I’ve written previously, on the benefits of training & coaching. Sadly, it sometimes feels like businesses are quicker to invest in technology, than in developing their people. Even when that IT spend is larger. This is a false economy. In Data Science, or wider Customer Insight, it is so often the people skills & leadership skills that make the biggest difference.
From a watch to a compass
I’m sure you’ve heard the phrase, “borrowing your watch to tell you the time“. It is often, damningly, used to describe consultants. Those who appear to be paid well, only to inform the leaders of a business what some of its own managers already knew. Although, to be fair, this is more a criticism of weak knowledge management or engagement by executive teams.
Anyway, I was recently sharing with my business mentor, these convictions about consultancy. He, usefully, suggested that I think of transforming the above story to a new narrative regarding consultants. Instead, think of “borrow your watch to teach you how to use it as a compass“.
[As an aside, you can do this, by pointing the hour hand at the sun. Then, navigational South is halfway between that location and where 12 noon points. This only works for your natural timezone, like GMT is in the UK. But, if you are at a time of year that uses daylight saving (eg BST), then adjust accordingly.]
Back from that aside, I valued the analogy. Consultancy needs to move on. From taking advantage of borrowing the watch (or that perception), to achieving knowledge transfer. Leaving businesses generally, insight leaders in particular, able to continue using new skills themselves.
Improving is a joint responsiblity: clients & consultants
To move forward, towards this more positive value-add from consultancy, will need work by both sides. As suggested above, clients need to avoid short-termism. Think beyond pressing decisions or projects to be completed. Any change or advice sought, should be converted into an ongoing capability. One nurtured within the organisation (including its wider value chain of partners/suppliers).
Just as I have learnt with regards to recruitment, “hire in haste, repent at leisure“. Take time to be sure that your use of external expertise or services is not missing the knowledge transfer to continue to add value in future.
With regards to consultants, I know many who care passionately about their work & care about adding value. But, the profession as a whole has a problem. I recommend take a leaf out of the book of executive coachingprofessional bodies. When I qualified as a leadership coach, and signed up to a professional body, I was committing to not creating dependency. Engagements were to help the client achieve their goals & avoid ongoing dependency on the coach or mentor.
Just like teachers, our goal as consultants, should not be for clients to stay at school. Our joy should come from them graduating. From the client no longer needing your services, because they now have a thriving internal capability or leader.
What is your experience?
I hope this post comes across in the right spirit. I am not seeking to moralize or condemn any individuals. Everything I am suggesting comes from learning the hard way. In other words, the times I have got it wrong, on both sides of this relationship.
Taking this approach can be brave for a consultancy. It can mean declining work when a prospect is not interested in also investing in the knowledge transfer needed for success. That is something I seek to practice.
So, I’m interested to hear your opinion. If you are a consultant, does this ring true to you? What is your take on how to fix the reputational risks of our profession?
If you are a client, do you still buy consultancy alone? If so, how do you ensure the organisation is able to realise the benefits on an ongoing basis? What is your best solution for knowledge transfer? How do you avoid being dependent on consultants to move forwards?
Editors' Choice: Why These Articles Were Great!
Here's a a look at what we thought was great this past week.
Happy Sunday ... and please help each other, and be social with your choices!
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You’re going to feel things that aren’t planned and aren’t pretty, and it’s unsettling. Kimberly Davis tells us we'd better Start Paying Attention to What Your Insides Are Telling You.
One definition of trust is the absence of fear. Your clients and prospects can’t fear you will put your interest before theirs, to sell them something they may not need or want. In Are you Big Time or Small Time? Scott Messer wants to know.
Back in the mists of time, Paul Bates read that, “In order to find the life that is waiting for you, you have to leave the life that you have.” In Where You Are May Not Be Where You Need to Be he gives a bit of wonderful life advice.
Jennifer Goldman says we can talk about great efficient processes until we are blue in the face. However, the most important process that growing firms need is the client off-boarding process. Take a look on how to part with a client in The Crucial Process Most Firms Avoid: Off Boarding Clients.
The ability to trick us into believing things today that are NOT true is incredible, so watch out. Chris Skinner explains why Technology Firms Will Be Regulated Like Banks in Future.
How to Treat Your Investments Like Private Equity
Treating Your Investments Like Private Equity
Private equity consists of investments in private (non-traded) companies. They are often available through limited partnerships to institutions and high net worth investors. The partnerships require large buy-ins and have significant restrictions. These constraints create a challenge for average investors to participate in private equity investments. But that doesn’t mean we can’t incorporate some of their characteristics to increase our investment returns.
Most investors value both liquidity and real-time information. Both of these are lacking in private equity investments. However, investors can utilize these strategies in their public investments to enhance overall investment return.
Create a Liquidity Constraint
Investments in public companies are mostly liquid. We can buy and sell them at any time. While on the surface, this can be viewed as a positive, the reality is that liquidity may actually cause worse performance. Behavioral economists believe that having some sort of commitment period or locking into an investment for a period of time could be beneficial for our long-term performance. I see two reasons why this may be the case:
1) If we know we can sell an investment at any time, we may not thoroughly consider our buy decision. Most investors buy because they expect some security to go higher; there is seldom conviction behind any purchase. If we were to instill a minimum hold time for each security purchased, we would likely put a lot more thought into why we are buying something to begin with. That exercise alone could help us make better investment decisions.
2) If we can’t get out of an investment, it takes knee-jerk trading decisions out of our hands. It prevents us from acting on emotional impulses. And this could be very beneficial for us. Case in point. Let’s assume we were going to buy a security and wanted to treat it as private equity. We restrict ourselves from selling it for 10 years. We purchase the S&P 500 Index (SPY) on Mar 1, 2008. Because of the financial crisis, just one year later the investment would have lost 34%. Things were looking very bleak. If we could have sold, we probably would have. But our hands were tied. And thank goodness. By the time we could sell on Mar 1 2018, our return would have been 207%, and that is not even accounting for dividends. Most investors have long-term goals, the problem is that we get so focused on short-term outcomes that we don’t allow the long term to occur. Creating a self-imposed liquidity constraint may help.
Don’t Look at Prices
Because investments in private equity are private, prices aren’t readily accessible in the marketplace. So when we invest in private equity, we really don’t have any idea of the value at any given point in time. Together with the liquidity constraint, we just go about our day and hope that when the investment fund matures, it will have increased in value. There is little temptation to abandon or second guess private investments on a daily basis because prices are not known.
The stock market is a constant quotation machine. We can know how we are doing relative to yesterday and that plays with our emotions, and ultimately may influence our decisions. The bottom line is that we, as humans, are influenced by change. It is in our nature. So the best antidote to this, is to simply not look. It is your choice to turn on the financial media and look at your portfolio values. Or you can choose to “set it and forget it.” There have been ample studies showing that the best returns at brokerage firms had something in common – those investors had forgotten about the accounts. They set it and literally forgot about it.
Easier Said Than Done
There may not be an easy way to transform a public equity investments into private ones to protect yourself from yourself. But if your end goal is to make more money, it may be worth your time. I suggest partnering with someone to create and adhere to a durable process. Have some accountability. Just like going to a gym. Some people need a trainer to hold their hand when times are tough and keep them accountable. The same thing can be said in the financial industry.
Remote Employees: To Be Or Not To Be
With research studies attributing positive results to employees working remotely, you may be wondering why you aren’t assigned such a schedule.
You’re not alone with 80 percent to 90 percent of the U.S. workforce saying they would like to telework at least part-time. And forty percent more U.S. employers offered flexible workplace options than they did five years ago. Still, only 7 percent make it available to most of their employees.
These statistics are good news if you plan on generating a case “to be a remote employee.” And yet wherever there is controversy, there is an equally persuasive argument to the “not to be a remote employee” discourse.
Large companies such a Yahoo, Aetna, and Bank of America are eliminating telecommuting positions from their employment rosters. Recently IBM withdrew a considerable number of remote employees from their ranks—not to mention Apple and Google who chose never to be the mix. In fact, data from the Bureau of Labor Statistics American Time Use Survey shows the number of U.S. workers who worked partially or fully from home dropped to 22 percent in 2016.
Research attributes many of the corporate headaches originate from process breakdowns. Yes, people are part of the problem; however, when you drill down, lack of systems is the real culprit. Three reasons companies point to remote position failures:
- Poor policy rollout
- Immaturity of workers
- Restricts collaborative relationships
Let’s address proactive overcoming tactics to shift corporate attitudes:
- Environment Commitment:
- Workspace: Create a designated office in your home to produce a productive environment for yourself. It should be a quiet, interruption-free space.
- Desk-or-not-to-Desk: What is best for you? Some prefer stand-up workspaces; others favor sitting at a regular office desk; while still others aren’t keen on a desk at all. Choose what will have you feeling comfortable and productive.
- Accountability Commitment:
- Production: Initiate dialogue around the expectations your company has of a remote employee with explicit descriptions connected to each. Then, record it, so you, your boss, and human resources have a copy. And update it regularly as assignments are modified or added.
- Accessibility: Managers typically lead through proximity check-ins. It’s your responsibility to stay connected, so your boss never questions your allegiance and contribution. Be proactive too much is never too much!
- Relationship Commitment:
- Success is always about relationships—it’s even more imperative when you’re working remotely. Staying out of the office isn’t entirely an option. How often do you intend to drop-in to be considered emotionally—not merely on paper—a team member?
- Make video conferencing your friend. Building trust and connection with employees is essential to your continued success. It has to be a priority on your calendar. How frequently with whom?
The bottom line is you’re accountable for becoming a boon to your business. And the success process begins as you think through how you, as a remote employee, will benefit your company—not just your lifestyle. Intentionally plan what systems you need to put in place that will lead to advantages for your company as well yourself. And then connect, connect, connect at all levels of the organization to garner a “can’t do without” status.
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