Hello and welcome back to Smart Consulting Sourcing, the only podcast about consulting procurement.
I am Hélène, and today we will discuss “How to build an efficient organization structure to source the right consultants?”.
However, before we get into today’s episode, let me first give you a quick recap of what I talked about last week.
In last week’s episode, I talked about “Spend Analysis for the consulting category“.
Spend analysis is the practice of examining your company’s spending to find areas where you may save costs. Although it’s a time-consuming process, organizations must devote their time to maximize their profits and reduce their costs!
The most important thing to keep in mind while analyzing your consulting spend is that you need to have the right sets of data organized neatly for it to make sense and to know exactly where you can cut costs.
Implementing Demand management, Make-or-Buy strategy or even streamlining your supplier panel can make a lot of difference in saving you some extra bucks!
A brief audit of your consulting costs might reveal considerable opportunities for rapid wins and value generation.
Also the question to how long should you go back to analyze your spend? That will depend on how much you are buying every year. Well, to make the right call, you need to have the accurate facts. It is all about the quality of your data.
So, these were some of the things we discussed and if you want to learn more about how you can analyze and get the most out your spend, you can listen to our Podcast on Spend Analysis and much more on all your streaming platforms.
But this week, I want to discuss about building an efficient organization structure for your consulting sourcing capability.
So, what’s the right organization to source consultants?
Let me begin with an analogy. Think of it like this: if you were looking for a new car, would you go to a used car dealership or a new car dealership?
The answer is obvious. You would go to a new car dealership, right? Why? Because they specialize in selling new cars, obviously. The same principle applies when you’re building an organization to source consultants.
You want an organization that specializes in sourcing consultants. That way, you can be sure that you’re getting the best possible service.
But there’s a harsh truth to this. There is no one-fits-all organization that will give you all the benefits in an instant.
Depending on how many projects you work on in a year, how centralized you want to be, or how you think your strategy will change in the years to come, you have different options that could work for you.
Now let’s talk about how to build an organizational set-up to source the right consultants!
As a company, you want to source the right consultants. Right? So why am I talking about building an efficient organization structure and not RFP or sourcing processes. Let me tell you why.
Well, one way to think about it is like building a house. The first thing you need is a good foundation. That’s going to be your organization. Once you have that in place, you can building the right processes and methodologies to source the right consultants.
Now there are many ways to build a strong organization structure, and I am going to jump into those in just a bit. But before that, let’s be clear. None of these solutions will work 100% for your company. But these are the high-level options that can help build the right organization for you. So let’s get to it.
Do it yourself
First, you can simply do it yourself. This is the easiest solution for small to medium-sized businesses. But I must tell you, it may not be the best one.
This method is more likely recommended to organizations with very little money to spend. Executives will take care of all aspects of procurement on their own, without help from the procurement function.
The few strategic projects can be handled and decided by the top management team, while projects under a certain threshold will be in the hands of the project sponsor. If you want to avoid surprises, your rules need to be clear and well-written.
Obviously, this is the fastest option. But there are some serious downsides. When you rely on your executives to procure anything, you are taking the risks of having less thorough procurement processes. I don’t have to convince you guys that procurement is a necessary function that brings value to the organization, right? I mean, unless all your executives are former procurement. Yeah, I think you get the point.
Add some demand management
Second, I would say, do it yourself but with a pinch of demand management. You might want to use demand management when the number of projects is more important.
For strategic projects or projects worth more than a certain amount, the decision to move forward is confirmed by a key person or a certain forum. After that, operational teams find consultants and run projects on their own.
This solution is a tad slower than a pure do-it-yourself but is quite efficient to keep consulting expenses under control. You can focus on strategic projects and identify synergies.
Define a dedicated consulting procurement person
The third option would be getting support from a dedicated consulting procurement focus point. What do I mean by that? You could hire someone whose main job would be to help with consulting projects.
You could hire them for a part-time role or even full-time. Especially if managing consulting is your organization’s strategic goal and there are enough projects in the pipeline.
And if you choose this option, you will also have more say over how projects are evaluated and run. And your consulting procurement person will be able to grow their expertise and give better advice to your business lines.
For instance, they could master the performance-based fees, and guide executives in building them into the consulting agreements. Or they could have enough time to screen the market and identify potential candidates for the supplier panel.
If you don’t have enough consulting projects to justify a dedicated team, this set-up might be a good choice.
Make sure that your consulting procurement point of contact knows a lot about how a business works. Buying consulting projects is a very specific task that requires a much stronger business sense than most other indirect categories.
Your procurement might also be limited if the projects are too hard or complex. Now that’s when you should consider putting together teams of people with different skills to look over the RFP and the proposal.
In this set-up, you are sacrificing a bit of the speed for better collaboration and process efficiency. You might meet some resistance. For this option to work, procurement and business leaders must have very clear processes and work well together as a unit.
Keep in mind that there is a thin line between giving procurement too much power and giving business leaders too much power.
Have a specialized team for consulting projects
The fourth option, I would say is to simply take the best of both worlds. What I mean by this is, companies which have a large consulting spend, the best thing for them to do is to put together a team that only works on consulting. And at the same time, build in some way to decide on the key projects.
Mixing profiles of former consultants with those of procurement experts can give you a very solid place to start and help you avoid some common mistakes.
A dedicated consulting team can also start to measure performance, negotiate MSAs, get rebates based on volume, make improvement plans, and much more. At the same time, if you start putting decisions in one place, it will let you focus your time and money on the projects that have the most impact.
Some dedicated consulting procurement teams have a tendency to follow traditional procurement practices. Now don’t misunderstand me here because this is actually a good thing. But if you use the best methods on the wrong ideas, you’ll get the results you deserve.
Let me give you an example. Now let’s imagine that you want to improve the quality of your suppliers but your teams don’t know much about consulting. So, what would they do?
Well, they would roughly divide the needs into a few capabilities and find a few consulting firms that fit the profile. You’ll end up with about 4 to 5 large one-stop shops that are the only consulting firms that can cover the whole segment. This sounds familiar, right?
Now adding consulting expertise to the process will make the capabilities more specific. It will help with your sourcing too, and will also make your consultants more knowledgeable. This will also improve your ability to negotiate better.
It’s not rocket science, but the skills needed are quite specific and need to be known and understood.
The organization requires a certain critical mass to be a profitable investment for the company. You cannot build a low-cost version. The profiles you need are experienced and often expensive, in particular former consultants. Don’t get me wrong, you will get the return on your investment, but you will need to pay to see.
Leverage external experts
Fifth, and the final one would be leveraging external experts. Some companies are outsourcing their Organizational Effectiveness Function to outside consultants. And you can do the same thing by using niche firms with consulting procurement practices.
These companies can help with everything from finding people to work on certain projects to setting up a full performance management system. Depending on the situation, they can work with existing procurement teams to help with sourcing and scoping. All of this while the procurement teams handle the relationship and negotiations.
This option is great for companies that have growing needs in consulting, but not yet enough volume to justify a permanent consulting procurement person. But it can also be used as a complement to an internal procurement group that would focus on the recurring needs while the outsourced team would work on everything else.
So, to wrap up today’s episode, it’s important to say that there’s no such thing as the right organization for consulting sourcing. Some organizational structures will work really well for some companies, while for others, it might not work at all. So, it really depends on your existing organization, your culture, and your strategy.
And when it comes the organization set up, it needs to be strongly built, in order to support your consulting sourcing capability. That’s how you will be able to source the right consultants.
As I said before, there are several ways to do it, from do-it-yourself to outsource consulting procurement completely, but which one you choose will depend on your resources, of course, your culture, your existing organization and what you want to achieve. And the right solution for you might be a mix of these different options. Who knows?
So give it some thoughts. Do you have the best set-up to procure consulting services? What are your constraints? What is your ambition? What is the volume of projects you handle now? In three years from now? That’s how you get started.
And that marks the end of our podcast. So, keep an eye out for me next week when I return with another fascinating topic.
Till then, stay safe and happy sourcing!
If you have other questions on how to build the right organization to source consultants, remember you can always contact me directly on LinkedIn or by email. As you know, I am always game and up for a fruitful chat!
Bye and see you next week! Au revoir!
See you in the next episode. Till then, stay safe and stay connected with us through our community at LinkedIn and follow our Twitter handle ConsQuest.
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