Consulting as an Investment: Why Most Organisations Are Still Missing the Point

When I founded Consulting Quest in 2014, a CPO who could not tell you their total consulting spend without running a query in SAP was not unusual. I remember one who had to hang up mid-call to ask his team for the number, and called back two hours later. The category existed below the visibility threshold that would have made the question answerable in real time. Twelve years later, that has changed. Most large organisations now scrutinise consulting methodology, challenge team composition, and benchmark rates with competitive data their predecessors did not have. The progress is genuine.

What has not kept pace is the governance logic applied above the project level. Consulting typically represents between 0.5 and 1.5 percent of revenues, which at a large organisation amounts to a nine-figure budget deployed across dozens of simultaneous mandates. No organisation would allocate capital at that scale without a portfolio review: the question is not whether each project is individually justified, but whether the current collection of projects represents the best use of the budget relative to everything else competing for it. That question is standard practice for capex. It is rarely asked of consulting.

This article takes the progress at face value and asks a narrower question: whether the discipline organisations already apply to capital allocation has yet been extended to consulting as an investment category in its own right, and why the gap between the two has persisted longer than the scale of the spend would seem to justify.

The Portfolio Blind Spot

Few large organisations have a consolidated, real-time view of their consulting spend across functions and geographies. Fewer still can tell you whether the projects currently running reflect strategic priorities, how individual engagements relate to each other, or whether the mix of firms they rely on is the right mix for the problems they are most likely to face in the next eighteen months. Most large organisations can tell you what they spent on a given engagement, while far fewer can tell you what the portfolio produced.

The data exists, distributed across procurement systems, finance approvals, and business unit budgets. The gap is a governance one: no one has been asked to consolidate it, interpret it at portfolio level, or connect it to the strategic decisions that created the demand in the first place. Consulting spend accumulates project by project, approved workstream by approved workstream, while the portfolio question, whether this collection of mandates is the right allocation of resources at this moment in the organisation’s strategy, is rarely asked and almost never answered with the visibility that would make the answer meaningful.

The accounting treatment is a structural contributor, and understanding it matters, because the governance mechanisms built for capex were built for capex and were never extended to a category that shares most of its strategic consequence while carrying none of its accounting classification. A factory investment and a major consulting programme can both move the top line, compress the bottom line, or shift company valuation, with the difference between them being a depreciation schedule rather than a difference in consequence. The accounting convention made the consulting side of that comparison easier to ignore, and most organisations have been ignoring it ever since.

For the practical mechanics of building portfolio-level visibility, read Demand Management for Consulting: The Definitive Guide.

Why “We’re Getting There” Is the Wrong Frame

The standard explanation for this gap is maturity. Consulting procurement is a younger discipline than direct procurement, the argument runs; organisations are on a journey; the leading edge has built sophisticated category management practices and the rest will follow. This is a comfortable diagnosis because it is partially correct, and because it implies that patience is the appropriate response.

CQ’s benchmark data shows that demand-to-sourcing governance consistently trails the other dimensions of the consulting procurement framework, and the gap reflects something more specific than delayed maturity.

The organisations that have built sophisticated project-level discipline have, in most cases, chosen not to extend it upstream, because the extension would require Procurement to engage before projects are formed and to hold outcome accountability after they close, and both moves encounter resistance that a capability investment alone cannot resolve. The portfolio evaluations that do exist in most organisations ask whether a project has budget, where investment logic would ask whether it represents the best use of that budget relative to everything else competing for it. The maturity narrative mistakes a political problem for a capability one, which is why it produces the wrong diagnosis.

A CPO who requests a seat at the conversation where a significant consulting mandate is being shaped, before the brief is written and before the decision to buy has been made, is asking for something that most business sponsors did not offer and that most procurement functions have not previously claimed. The resistance reflects something more specific than organisational inertia: the parties with the most influence over consulting decisions are rarely the ones being asked to improve how those decisions are governed.

Why the Gap Is Structural

Three features of consulting as a category make standard procurement approaches insufficient, and they compound each other in ways that make the gap self-reinforcing, each feature amplifying the others as it compounds.

The first is that value is not fixed at purchase. What an organisation buys when it engages a consulting firm is potential value, whose conversion into actual value depends on how the engagement is scoped, governed, and extracted from once the work is underway. Procurement’s traditional lever, price, captures only a fraction of available leverage because consulting outcomes are determined by two distinct types of value that a rate card measures equally poorly. Technical value, the quality of the methodology, the diagnosis, and the deliverable, is a function of the team’s expertise and how the engagement is governed. Political value, the credibility, relationships, and organisational alignment a firm brings, is a function of context and fit. Two firms at the same price point can produce radically different outcomes because they are delivering different combinations of these, and procurement processes that focus on rate negotiation are selecting on a variable that predicts neither.

The second feature is that the decision moment carries disproportionate leverage, and it sits upstream of where governance typically activates. In most spend categories, the purchase decision is relatively low-stakes compared to how the purchase is subsequently managed. In consulting, the decisions about whether to buy, what to scope, and whom to select determine the majority of eventual value before the first invoice is raised. Governance that enters at contract stage has arrived after the consequential choices, particularly around demand management and sourcing quality, have already been made.

The third is that the feedback loop between project outcomes and future portfolio decisions stays open in consulting in a way that most other investment categories have closed. Without agreed objectives set before a mandate starts and an owner accountable for measuring the result after it closes, each project ends without producing the evidence that would improve the next one. The portfolio accumulates volume without accumulating learning.

These three features interact so that each one amplifies the others: because the right governance moment is upstream and upstream is where resistance is highest, and because the feedback loop that would build the case for change never closes, each year without portfolio governance makes the next year’s extension marginally harder to justify.

These features are common to intellectual services broadly, which is why Consulting Quest advocates for governing the category as a whole. Legal, audit, and executive search face the same value-not-fixed-at-purchase dynamic, the same upstream decision leverage, and the same open feedback loop, and the commercial models those categories have adopted, time and material billing and success fees, solve the billing problem while leaving the value measurement problem entirely open. The porosity between service lines compounds this: a Big Four firm billing simultaneously across audit, tax, legal, and consulting advisory creates a total relationship that no single function sees in full, where the audit dependency shields the consulting work from competitive scrutiny and the tax relationship makes challenging advisory fees politically difficult. Governing each line in isolation produces the illusion of category management while leaving the portfolio question unanswered.

For the practical mechanics of building a panel that avoids this concentration, read The Consulting Procurement Playbook Every Category Manager Needs.

Why It Persists

Structural features explain why the governance gap is difficult to close. They do not explain why organisations that understand the gap have not closed it. For that, the incentive structure is more informative than the capability gap.

What procurement functions consistently report is that business sponsors benefit from the current arrangement in ways that a more governed process would directly constrain. A senior executive who can approve a significant consulting mandate without a portfolio review, a demand challenge, or a formal business case retains flexibility that governance would remove. The consulting relationship is also, in many cases, a personal one: the partner who delivered the last programme is the partner the sponsor trusts, which is a reasonable position from the sponsor’s perspective, and one that a competitive process would force them to justify. The challenge procurement faces is that the people most capable of improving how consulting decisions are made are the same people with the least incentive to change how those decisions are made.

Consulting firms have invested heavily in the relationships that substitute for competitive scrutiny, and the scale of that investment is visible. The major firms have for decades maintained dedicated client relationship infrastructure, from partner-level account teams whose primary metric is relationship depth to hospitality programmes designed to make the next mandate feel like a natural continuation of the last. McKinsey has owned a dedicated client engagement and training facility in Kitzbuhel, Austria since 1999, occupying a former grand hotel it renovated exclusively for the purpose.

The second mechanism runs deeper than hospitality. The major consulting firms have, over decades, placed former partners and consultants into senior leadership positions across the corporate world: McKinsey alone reports more than a thousand alumni in C-suite roles globally, and 47 Fortune 500 CEOs had careers in management consulting before reaching the corner office. A CEO who came through McKinsey, BCG, or Bain carries a relationship with those firms that predates their tenure, shapes how they frame strategic problems, and influences which phone calls they return when a new mandate is forming. The governance question, whether this engagement should be competed, whether an alternative firm might deliver better value, whether this mandate is the right use of the consulting budget at all, is harder to ask when the person who would ask it shares a professional formation with the firm that would answer it.

Outcome measurement compounds this dynamic. Designing a framework that genuinely captures whether a consulting programme delivered its expected return requires a detailed understanding of how consulting engagements are scoped, staffed, and extracted from, which is knowledge that sits primarily with the firms. The organisations best positioned to build rigorous measurement standards are the ones with the strongest interest in keeping those standards vague, which is why the industry has produced decades of methodology on how to sell and deliver consulting and almost none on how to evaluate whether it worked.

Procurement functions that push upstream into demand management encounter resistance from all of these directions simultaneously. The business sponsor who has not previously been challenged on whether a mandate is necessary does not generally welcome the challenge, and the consulting firm whose relationship would be subjected to competitive scrutiny has every incentive to reinforce the sponsor’s preference for continuity. The result is that procurement teams that have successfully built project-level discipline often choose not to attempt the upstream extension because the organisational cost of attempting it and losing the political confrontation exceeds the cost of leaving the gap in place.

The path forward is narrow. CPOs sit outside the executive committee in most large organisations, which means extending governance upstream requires a mandate from the CFO or CEO, who are themselves among the most active consumers of consulting from the firms whose relationships procurement would be challenging. The organisations where procurement has successfully extended into demand management are generally those where a visible governance failure, a programme that significantly overran, a portfolio review that revealed concentrated dependency on a single firm, or a year-end spend figure that surprised the CFO, created the political opening for a different conversation. Absent that kind of catalyst, the extension is available through patience and data: building the portfolio visibility that makes the cost of the current arrangement quantifiable, and waiting for the moment when the CFO finds the number uncomfortable enough to act.

The opex classification sustains all of this at the accounting level, as the financial expression of an organisational preference for consulting to be managed as an operational cost rather than scrutinised as a capital deployment, reinforced by every year in which the alternative was available and not chosen.

What It Costs: Two Illustrations

The cost of the governance gap is most visible at moments of concentrated consulting demand, when the volume of decisions is highest, time pressure is greatest, and the absence of portfolio visibility has the largest consequence. Both illustrations below are drawn from patterns observed across multiple CQ client engagements.

Post-merger integration

The pattern CQ observes consistently across integration engagements is one where governance fails through fear as much as through negligence. Integration managers operate under acute career pressure: a failed integration is visible, attributable, and career-defining in ways that routine operational failures rarely are. Under that pressure, the rational decision is to engage the firms the organisation already knows, whose work is defensible to the board, and whose relationships with senior sponsors provide political cover. Incumbent consulting firms understand this dynamic and exploit it. They hold advantages in organisational knowledge, political relationships, and awareness of previous work that a new entrant cannot match in the time available, and they use those advantages to position themselves as the safe choice before competitive alternatives can be properly evaluated. Consulting mandates accumulate workstream by workstream, each individually defensible, without a portfolio view that would make the aggregate visible or a governance owner with the standing to challenge it. The organisation pays a relationship premium at the moment when it can least afford to, and the evidence that would allow it to negotiate differently next time is never assembled.

Large transformation programme

The failure mode in a major operational transformation looks different because governance structures are present and visible. The business case was approved, the programme board meets monthly, and each consulting mandate was competitively sourced. The pattern CQ observes in these engagements is that governance is designed around delivery units, and consulting firms are scoped to delivery units, so the interfaces between workstreams, where the real integration risk lives, fall outside every individual mandate and inside none of them. A finance transformation and an operating model redesign running simultaneously across the same organisation will each have a consulting firm accountable for delivery. Neither firm is accountable for the overlap, for the decisions each workstream makes that constrain the next one, or for the cumulative consulting spend across both. The programme board sees delivery status while the portfolio question goes unasked. When the programme closes, the outputs are present and the outcomes are missing, and the gap between them is attributed to execution by a governance design that was never built to see across its own boundaries.

The Investment Lens

The organisations that manage consulting as an investment apply the same logic they already use for capital expenditure, R&D, and M&A, with adjustments for consulting’s structural features rather than exemptions from the underlying discipline.

Applying investment logic to consulting starts with being precise about what type of return a mandate is expected to generate. Capital allocation practice distinguishes three return types, and each maps directly onto consulting when the category is governed as an investment.

Financial return, the most familiar, covers cost reduction, revenue acceleration, and margin improvement. It is measurable in advance, trackable during delivery, and verifiable at close, which makes it the easiest return type to govern and the one most organisations default to when they attempt outcome measurement at all.

Capability return covers speed to market, knowledge transfer, and the building of internal competency that persists after the engagement ends. It is harder to quantify than financial return but often more durable: the internal team that emerges from a well-governed transformation programme carries capability the organisation did not have before, whose value accumulates across subsequent initiatives.

Strategic return covers alignment, risk reduction, and decision quality in situations where the cost of a wrong decision exceeds the cost of the advisory investment. M&A, major pivots, and market entry fall into this category. The return is real but rarely captured in a measurement framework, which is part of why strategic consulting mandates are simultaneously the hardest to govern and the most consequential to get wrong.

The questions that investment logic requires before any significant mandate is approved are straightforward. What specific return do we expect, expressed precisely enough that we will be able to measure whether it was achieved? Is this the best deployment of our consulting budget given everything else currently in the portfolio? Who is accountable for confirming that the return was realised, and when will that confirmation happen? Any CFO would recognise these as standard capital allocation discipline. The same CFO, in most organisations, has never been asked them about a consulting programme.

The practical mechanics are less complicated than the governance gap might suggest. A consulting portfolio mapped to strategic priorities, with a demand review that sits upstream of individual mandate approvals, requires a different relationship between Procurement, strategy, and finance than most consulting procurement functions currently hold. What it requires is a decision about where in the decision sequence the portfolio question gets asked, and by whom, a change in position rather than a change in infrastructure.

Portfolio visibility of the kind that makes these questions answerable in practice requires consolidating intake management, demand governance, spend analysis, supplier performance, and project management in a single view. What CQ observes consistently across client diagnostics is that even organisations with consolidated spend data at group level spend more time cleaning and reconciling it than acting on it, because the data was assembled for reporting and was never designed to support in-year decisions. Consource is built to close that gap, giving procurement and finance teams a real-time portfolio view where the decisions that matter can be made when they still have consequence, not reconstructed after the financial year has already answered them.

For organisations ready to move from spend reporting to portfolio decisions, maximizing consulting ROI starts with having the right view at the right moment.

The organisations that have implemented portfolio-level governance consistently report a pattern that goes beyond cost reduction. Consulting spend does fall: CQ’s benchmark data indicates that between 20 and 30 percent of projects in ungoverned portfolios could be eliminated, as mandates that survive on historical budget allocation or sponsor influence, disconnected from strategic merit, are stopped or descoped. The more significant change is in how the remaining budget is distributed. The directions that genuinely need consulting receive it, often for the first time at the scale the work requires. Projects are scoped around optimum ROI, with briefs that have been challenged before sourcing begins. The persistent frustration that weak governance produces, the sense that money was spent and little changed, diminishes because the projects that proceed carry a clear connection between investment and expected outcome. Portfolio governance changes what consulting competes on: from historical spend and sponsor influence to ROI and strategic intent, which produces a smaller portfolio with a higher aggregate return.

Where Better Governance Begins

Every organisation reading this already possesses the governance instinct this article describes. They apply it to capital expenditure, acquisitions, and R&D. The consulting category has been allowed to operate outside that logic through a combination of accounting convention and organisational convenience, reinforced by the pressure each individual project creates to answer the immediate question rather than the portfolio one.

The organisations that have made the extension, that have moved Procurement upstream into the demand conversation and built outcome accountability into the engagement standard, have generally found the governance mechanics straightforward once the organisational decision was made. The difficulty was the organisational decision itself: that a consulting request with budget attached and a senior sponsor behind it is not automatically the right use of consulting resources at this moment in the portfolio, and that someone with the authority and the visibility to make that assessment should be in the room before the brief is written.

That is the question the portfolio blind spot prevents organisations from asking. Closing it requires less investment than the current gap costs, and the organisations that have closed it have found that the discipline compounds. The consulting spend that follows a portfolio review tends to be better directed, better measured, and more likely to produce the return that justified the investment in the first place.

Ready to close the portfolio blind spot in your consulting spend? Book a free consultation with Consulting Quest.