We welcome you to the second episode of our latest podcast series: “How to buy consulting services like a pro.” In this episode, we will look at an often-asked question: What do consultants bring? How can they help you get more out of your business?
But before we get started with today’s topic, here’s a brief recap of what we discussed last week.
We discussed the “when” and “why” clients work with consultants in the previous episode.
Executives typically work with consultants when they want to expand into new markets, grow and expand their businesses, merge or acquire a company or technology, improve product quality, reduce costs, develop the organization, and retain talents, as well as during leadership changes.
Consultants bring an invaluable and independent perspective to the project, utilizing their specialized technical knowledge, problem-solving abilities, and analytical capabilities for data analysis and financial modeling. They are a powerful asset in helping identify the root causes of issues and create implementation plans that ultimately support effective decision-making.
They also help teams by providing temporary extra workforce without onboarding new employees while offering coaching services to develop skills & build capacity within organizations.
Procurement should anticipate executive needs based on maturity levels of functions & team composition along with visibility level for different projects that can impact the type and the quality of consultants needed. They should also consider the relationship between the project sponsor & consulting partners built upon trust & credibility factor which sometimes goes beyond the company’s interest involving career management aspects too.
Lastly, it is essential not to forget that consulting services are not commodities, so finding the right balance between value for money vs. technical capabilities is essential while focusing more on creating positive change through improved efficiency, etc.
Did you miss out on last week’s episode of Smart consulting Sourcing? No worries – our podcast is available in the usual suspects like Spotify and iTunes and posted to YouTube for your viewing pleasure. If audio or visual isn’t what you’re looking for this time, head over to our website, where we’ve provided a full transcript of the show in its Thought Leadership Section! Now. It’s time to catch up with today’s episode.
Uncovering All the Wonders That Consulting Has in Store
Today we’re exploring an intriguing question: What do consultants bring? How can they help you get more out of your business? Find out now as we uncover all the wonders that consulting has in store!
Consultants Bring Value to the Table in Two Distinct Ways. Let’s Find Out What They Are!
On a technical level, their expertise often comes from years of experience and can give your organization an edge for success. But there’s more – consultants are savvy regarding organizational culture and politics; they know how things work on both sides of the fence when introducing new measures or processes into any size operation.
Technical Value
Regarding consultants, what kind of value are we talking about? We hear a lot about the technical expertise that they bring. That’s because this is often where operational projects have their foundation – in-depth knowledge from experienced professionals who know how to get things done right!
So, what is the technical value created by consultants, and what it looks like?
First of all, it can provide outside knowledge.
Consultants can provide valuable data, benchmarks, methodologies, tools & processes. They also have insights into what works and what doesn’t. Through their years of experience, consultants have encountered many situations and challenges in nearly every industry. Your current predicament is likely familiar to them.
The value can come from Accurately Diagnosing a Problem and its Solution.
A consultant can gather, analyze a treasure trove of information, and present it to enable Executives to make effective and optimal decisions for the company. Executives must make intelligent decisions for their companies; a consultant can help them achieve that. Through deep data analysis combined with expertise in the field, consultants provide insights that power informed decision-making – what we like to call “analytical skills.”
Now, the technical value can also come from Building Actionable Plans.
For instance, consultants can help facilitate the generation of a capability improvement roadmap. We can already predict the response of some skeptics: “We worked with consultants who gave us a plan, but we had no idea how to put it into action.” And actually, you are making my point. The consultants you worked with were not good at building actionable plans, but that doesn’t mean some aren’t. You just chose to work with the wrong ones.
And once you have an actionable plan, the consultants can support your plan execution. Here we go. Consultants can help secure and accelerate the execution, bringing project management expertise and additional dedicated resources.
Now let’s look at a few projects demonstrating technical value.
It can be a Supply Chain footprint optimization or a Distribution network design. Or even a Strategy project when you analyze the different markets where you could sell your new technology. You see that, in these cases, the consultants will bring their technical knowledge, experience, and the quality of their methodologies.
Political Value
As we mentioned that there were two distinct ways in which consultants bring value to the table, the second way of value creation relates to political value., What is it?
Political value can take many forms. Consultants can help your organization navigate the organizational culture and politics. And it can be precious if your project is evident to the Board or the investor, for instance.
It can be the stamp of approval for a given decision … or being the scapegoat. You know: “It is not me; it is McBoston. They said that on page 213 of the report. Look!”
Consultants often wield their “soft power” to unite stakeholders and promote agreement on various topics and decisions.
Have you heard the saying, “It’s lonely at the top”? When it comes to senior leadership, that can be especially true. And consultants can provide a much-needed sounding board and act as an advisor for executives.
Ultimately, they can assist in enforcing unpleasant changes during cost-cutting or restructuring projects. These decisions are typically the most difficult for executives to make and execute as no one likes them – am I right?
Examining real-world examples of projects that offer political value, we find them often associated with critical strategic decisions that involve the board or external parties like shareholders and governments. Pivotal choices, you know, such as significant acquisitions that will shape the company’s future, or cost-reduction projects where you apply set industry standards–requiring 8 FTEs per team in this function, according to Mc Boston.
But actually, the majority of projects entail both technical and political values. For example, a project to develop a new organization will require designing the new setup using methodologies such as spans and layers and describing the new organization through processes, org charts, and job descriptions. And at the same time, it will require navigating the waters, getting approval from the board, and the buy-in of the entire organization.
Consulting Is All About Creating Value. But How to Measure It?
So, we all agree that consulting is all about creating value. But it is not always apparent to the customer. or procurement. But we must find out ways to measure the value created by consulting.
At Consulting Quest, we have identified three categories of value: direct value, long-term value, and cost avoidance. These buckets help us to structure the overall worth that consulting generates.
Direct value
It is undoubtedly the easiest to grasp and measure. It can be savings, improved efficiency, or a more effective pricing strategy – all of which are simpler to perceive than other values.
Long-Term Value
This is the second bucket where consultants create value. It may be difficult to measure the immediate value of each project, but you can see the effects of your efforts in the long run. For instance, working on sustainability can open new business opportunities and funding. Changing a commodity company’s organization and business model into a specialty company will improve EBITDA and the multiple. And as a result, the company will have a higher valuation. Working on culture can help create cohesion and increase agility. But these effects can only be measured long after the project.
Cost avoidance Value
This is the third and final bucket of value creation. This is probably the most elusive of the three. Because this is the cost you would have to pay if you had done nothing, this equation is full of ‘what ifs’ and speculation, or for those with a more mathematical background – it has an incredibly high margin of error. Fall into this category, compliance, risk reduction, or talent management.
What Are Some Ways Procurement Can Utilize Insights Into The Value Created By Consulting Services?
Now that we’ve explored all the potential value of consulting let’s dive into what you should do with this newfound knowledge. How can procurement use this insight? Let’s find out!
When we talk about value, we are also talking about price. As a rule, the value created by the project should be higher than the price. Unless you are working on compliance projects, even then, you can see that cost avoidance is the value you get.
As a procurement leader, there are 4 things you should focus on:
Ensuring Expertise and Fit: Building a Selection Process for Hiring Consultants: When you work with consultants, you must ensure they have the right expertise. But you also need to make sure that these consultants fit with your company, your values, and your teams. In other words, your teams should be able to work with them efficiently. And you need to build a selection process that allows you to capture that and make an informed decision.
Defining Impact and Deliverables: Incorporating Stakeholder Buy-In and Clear Expectations: A crucial step when hiring a consultant is ensuring they produce the desired impact and deliverables, including gaining buy-in from any necessary stakeholders and teams. This must be done early on to avoid miscommunications or extra costs. So, you must immediately include this requirement as you develop your project scope so that it can be articulated in both your request for proposal (RFP) and statement of work (SOW).
Agile Sourcing: Strategies for Streamlining the Consulting Procurement Process: Sourcing quickly is just as important. It’s no secret that it is hard to be involved in buying consulting, and executives are often justified in their frustrations! But there’s hope – Procurement teams can create agile sourcing processes, including a fast-track process, with an updated supplier list they can rely on. But success depends on forming strong connections with both internal stakeholders and suppliers. Anticipate, anticipate, anticipate!
Budget Planning: Finding the Right Consulting Firm at the Right Price: Ultimately, you must consider your budget. With thousands of consulting firms offering diverse services, industry knowledge, and prices – you’ll find the perfect match for what skillset you need at an affordable price. So, remember to plan, do your research and stay prepared – this is the key!
Now, Let’s Summarize What We Say Today About the Value Created By Consultants:
Consultants provide technical and political value to organizations, such as providing outside knowledge, accurately diagnosing a problem and its solution, building actionable plans for improvement projects, and supporting plan execution.
Political value provides legitimacy for decisions, facilitates the convergence of stakeholders on various issues and decisions, acts as a sounding board or trusted advisor to top leadership, and enforces unpopular changes in cost-cutting or restructuring projects.
Consulting can be a powerful driver of value creation, but measuring that impact is not always easy. Fortunately, we can quantify the effects our consulting services have on an organization or project in several ways. Direct value includes savings and improved productivity; long-term benefits include sustainability gains and increased valuation over time; cost avoidance measures may indicate how much money has been saved relative to what would otherwise need to be spent.
Procurement leaders have a huge challenge: finding the best value for your organization. But, it’s more complex than choosing the lowest-priced option; cost avoidance and overall deliverables are also essential considerations when selecting consultants to partner with. To achieve success in this endeavor, we recommend you keep four key elements top of mind throughout each search – expertise & fit of consultant teams, securing impactful deliverables from start to finish via detailed RFPs (requests for proposal), sourcing effectively and efficiently while respecting any budget parameters set forth at the beginning stages!
There you go. That’s our takeaway for today. If you have any further questions, please don’t hesitate to reach out!
Next week we come back with an even more scintillating topic: the mysterious RFP! Are you ready to dive deeply into the nitty-gritty of buying consulting? We’ve got all the info coming your way – so take advantage of our series.
Until then, stay safe and happy sourcing. If you have any questions regarding today’s or any consulting procurement-related topic, don’t hesitate to contact me directly on LinkedIn or by email because I’m always game for a chat.
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Happy Sourcing!
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