Hello and welcome to episode 27 of our podcast: Smart Consulting Sourcing, THE podcast about Consulting Procurement.
My name is Hélène, and I’ll be your host today.
Each week I’ll give you the keys to better use, manage and source consulting services. This week, I’ll discuss Why should you develop an internal consulting group?
Last week, I explained how to tackle the tail spend in the consulting category.
We saw a few levers to get started with the infamous tail spend. The tail spend is a Tail Spend Management is a well-known source of savings for Procurement groups.
and with the constant pressure on cost reductions and sustainable savings, mI am sure that you are starting to notice your tail spend in the Consulting Category.
But this week, I wanted to look at internal consulting groups.
Over the past 20 years, the growth of in-house consulting groups has been one of the most notable elements of change in the fast-moving Consulting Industry.
It is hard to evaluate the extent of internal Consulting. But large companies such as Bayer, American Express, Google, Airbus, Samsung, Dell, SNCF, BASF, Deutsche Post, etc. have built internal consulting structures that can go from small ad hoc teams to fully-developed groups of 100 consultants and more.
Even though internal consultants are permanent employees of an organization and typically only consult for one single ‘client,’ they provide in many cases equivalent services and are quite often former external consultants.
One could argue that Internal Consulting is the ultimate form of specialization of the Consulting Industry. However, another could counter that in doing so companies are losing the best practice dimension and independence.
But what do they bring exactly?
Costs are often cited as the first reason for creating an internal consulting team according to CEOs.
When most companies were growing and consolidating, the prices of consulting firms have been steadily increasing. Large Companies have professionalized their procurement, and they now realize how much they spend on Consulting. Cost-Conscious CEOs want to decrease their Consulting Costs and stop hiring only the large strategy players such as McKinsey, Bain or Boston Consulting Group.
Employees in internal consulting groups are most of the time compensated on the same grids than internal employees. Their full cost is, therefore, two to three times lower than external consultants. Indeed it does not include the cost of the partners or the cost of the beautiful office in central Manhattan. If internal consulting teams can provide performance close to the external ones, the trade-off will almost always lean in favor of the internal team.
Internal consulting groups can also be used as a career accelerator, inspired from the black belt concept developed by GE. High-potential individuals get trained in consulting problem-solving and managerial concepts.
They also acquire the structure and discipline of consultants. They also get exposed to the top management and highly strategic projects giving them a broader perspective on the company.
After a few years in the Consulting Group, they take a senior position in the organization. Talent is, in this case, kept in-house and developed. Alternatively, a few years in an internal consulting role can be a smooth entry point within a large organization.
The newly hired employees can work on a broad range of projects, and in return share their experience acquired in prestigious firms with other internal consultants. At the same time, they gain a precious knowledge of the company and build a professional network.
What happens in Vegas stays in Vegas
There are some projects where the management does not want any outsider’s view. It can be because it is a highly strategic decision or very touchy Intellectual Capital. The more people to the party, the higher the risk of breach of confidentiality.
Besides, clients love to have access to benchmark information on the competition but are not that keen when it comes to sharing their data. Of course, most consulting firms will argue that they have established Chinese walls and that all information stays private.
However, it is at times difficult to disconnect the right and left sides of one’s brain.
Working with an internal consultant decreases the risk of using the information collected as a benchmark or reference with another client.
It is getting easier to accept the help of consultants.
Not long ago, working with consultants was seen as a necessary evil, and we all know the joke about the consultant and the watch. However, Executives have seen the benefits over the years to work with external experts. Their image has shifted to a more neutral position, from judgment to support. As you can imagine, the growing population of ex-consultants in the Executive ranks helps as well.
Companies have understood the interest of dedicated teams working on projects independently from the rest of the organization. They have indeed identified a potential lever for improvement in creating teams with the same focus and ways of working as external consultants.
Also, there used to be an experience and impact gap between internal and external consultants. However, as the value chain is evolving, internal consultants have now access to better talent and methodologies.
On some mainstream projects such as commercial excellence or lean, the impact from internal consultants is now equivalent to the one brought by external consultants. Last, organization structures are now optimized to get synergies and make the most of the existing talents.
If you put together the needs of all the business lines and support lines, most companies will be able to get a critical mass of similar projects that could justify building a dedicated team.
Interestingly, Internal Consulting goes by many aliases.
Only a handful of companies are now “calling a cat a cat.” If you want to simplify the debate, you can reduce Internal Consulting to its core characteristics: internal teams, experts in their domains, and working on project mode to improve the effectiveness and efficiency of the company.
You will then realize that many functions in the organization fall under this umbrella. What about the excellence functions newly created to work on commercial or purchasing excellence? Or the customer experience task force? The internal audit team working on processes? The business process management group?
Setting up improvement teams is not a new concept. But it is worth exploring the evolutions.
You can organize them as a single group or community to professionalize the ways of workings. Or manage the demand and optimize the resources by creating fluidity across the teams. Afterward, you can decide to refer to it as Internal Consulting or to keep it stealthy.
Internal Consulting is a growing trend today.
Internal Consulting groups offer organizations plenty of advantages starting from increased privacy and trust when working on sensitive projects, to the most significant one – cost-effective solutions and the opportunity to lower expenses in comparison to hiring External Consultants.
When comparing Internal and External Consultants, we saw a few more distinctions: External Consultants having bigger independence are able to provide a more objective point of view, and they often possess expertise and skill set edge too.
When making a decision about your next project it is worth evaluating all the elements and picking the team of Consultants that is best suited for the project, and who is prepared to deliver the best results.
That’s it for today. Next time, I’ll answer the question How to make my internal clients trust me for consulting sourcing?
In the meantime, if you have any questions, or want to learn more about what we do at consulting quest, just send me an email at firstname.lastname@example.org
You can also have a look at our website smartconsultingsourcing.com to know more about our book and download free templates & guides to improve your consulting sourcing.
Bye and see you next week! Au revoir!