What is the value for a consulting project? Are procurement and business leaders talking the same language? Are we talking about savings? Cost avoidance? Or is it the impact of the project on the business?
On this week’s Smart consulting Sourcing podcast, I want to talk about the value created by consultants.
Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings. and we can add anything we want. And it is the same thing everywhere.
Consultants do bring in a significant amount of value for the project that they are hired! These values can be defined in two dimensions which are Technical values and Political values. The political value is more difficult to appreciate.
But anyone that has been around for a bit knows the importance of company politics. In troubled times, Executives can look for support to legitimate a decision, to enforce unpopular changes or be the scapegoat. It can also take the shape of facilitating the convergence between the stakeholders or acting as a sounding board.
Hello and welcome back to Smart Consulting Sourcing,
I am Hélène and today we will be talking about value. But before we get there, let me come back on last week’s episode.
Reverse auctions have become a hot topic in procurement. You’ll find reverse auctions anytime you need to buy something very specific and very quickly. It is used in hospitality for instance.
Moreover, reverse auctions work particularly well for commodities, when the requirements are not negotiable. But if you listened to my previous podcast on how to negotiate a consulting agreement, you know that, with consulting services, everything is open for negotiations: scope, timeline, budget, staffing…
And that makes reverse auctions almost counterproductive.
However, this week, I wanted to talk about the value created by consultants.
It is a tough time to be in charge. The pressure on OPEX is always increasing. And executives need to always deliver more with less. And now value creation is the new black, right?
But what is the value of a consulting project? Are procurement and business leaders talking the same language? Are we talking about savings? Cost avoidance? Or is it the impact of the project on the business?
So, if you want to understand the value consultants create for their clients, you are in the right place.
Sounds interesting? Let’s get straight to it!
So, the first question: Why work with a consultant in the first place?
There are many projects where working with consultants can help companies create value better and faster. As an outside vendor, a Consultant often can see issues that stakeholders and those too involved in your organization can’t.
So what are these occasions, exactly?
You are weighing strategic options
Our economic conditions and business environment are set at a fast-changing pace today. Many organizations often struggle with a lack of technical expertise in this new industry.
You already know that when revenues stagnate, or when a more powerful competitor threatens your market share and affects your sales and profitability, the most viable solution is to power up growth and expand. Consulting firms that specialize in these areas will be your best bet.
One of the strategic approaches for an organization can be to merge with or acquire a competitor. Consultants, who boast a wealth of experience in that capacity, can ease the process and provide invaluable advice.
You may need to increase your competitiveness
Product quality is a central concern for Companies. Consultants can help you break down your process in specific stages and identify potential product improvements.
Cost reduction is a major area of concern for all organizations today. Clients are often working with consulting firms to reduce costs and boost revenue and profitability by applying Lean Management, Lean Thinking, and Lean Processes.
Some non-strategic areas of operations that do not deliver expected results and are problematic are better off outsourced to other vendors.
Consultants can help you to identify what to outsource, how and to whom.
What about Human capital? Do You want to develop your organization and retain your talent?
Top performers and most skilled employees are commonly driven to achieve new goals. They are also the ones who are likely to leave to a more attractive position offered by other companies, be it for more responsibilities or better compensation.
It is not an easy task to understand, motivate, and inspire your top employees to stay with the company if they see opportunities elsewhere.
In the same way that a surgeon would have difficulties operating on himself, most companies tend to rely on external consultants to help them design and implement a new organization.
Finally, you can work with consultants because you need specific expertise or resources you don’t have in-house
Often hiring a Consultant is the most feasible option for a specific job. When there is extra work for a short period to be done and your organization lacks the proper resources, the Consulting firm can bring in much-needed support.
Second, Benefits of working with consultants:
Obviously, there are various number of benefits of working with consultants:
They have their technical expertise! The fact that they are independent and can be used as temporary workforce with their own expert problem-solving approach; they can also be a way to coach your internal workforce! And sometimes, the need goes beyond the company’s interest. Some Executives rely on consultants to increase their influence and manage their career.
Now coming to point for today’s podcast:
What is the value created by consultants?
The diversity of the Consulting providers in terms of size, and offerings is quite complex, and this makes buying Consulting services so tricky. However, we can identify and agree there are two dimensions of value created.
First dimension, Technical value:
This is brought through in-depth expertise. Most operational projects fall in this category whether the consultants provide outside knowledge, help diagnose a problem and its solution or assist in the implementation of the said solution.
The Second dimension would be Political Value
The political value is more difficult to appreciate. But anyone that has been around for a while knows the importance of company politics. In troubled times, Executives can look for support to legitimate a decision, to enforce unpopular changes or be the scapegoat. It can also take the shape of facilitating the convergence between the stakeholders or acting as a sounding board.
All projects should bring value to your company. But how do you measure this value? When a service is intangible like consulting, you cannot physically measure the results.
There is to date no standard in measuring the value created through Consulting. It sounds particularly ironic when we know that Consulting stemmed from the need precisely to measure performance.
But how do you measure the value?
The Direct value often comes with visible results such as savings, top-line improvement, etc. The technical value often falls in this category with tangible results such as cost savings, increasing revenues, and improving cash/work capital.
The long-term value is the impact on the valuation of the company for instance. It is more difficult to evaluate and is often linked to The political value of a project. How do you appreciate the impact of a culture and diversity project, or process and system optimization? Other fields have succeeded in measuring the intangible such as client satisfaction or employee performance.
Finally Cost Avoidance: It is a more complicated evaluation. However, it is often possible to calculate the avoidance of cost due to an improvement in reliability, a better focus, or a capacity increase (i.e. assets and workflow expansion).
Which brings us to another important aspect of value created, the Value Perception! If clients are overall satisfied working with a particular Consultancy, why would they take their business elsewhere?
Consultants can create significant value for a client’s organization. Too many companies are thinking about consulting as additional resources or through the lens of the project they are working on.
ery few executives have indeed a clear view of the value they provide. As an outside vendor, a consultant often can see issues that stakeholders and those too involved in your organization cannot provide.
The value created can be technical, providing expertise and solutions to various issues, cost savings, increased revenues, and much more, as well as political value helping clients make transitions, implement new policies, and successfully adapt to new environments and the Project performance can be evaluated through direct client feedback and satisfaction.
Do you work in supply chain management? Using a magic wand to discover containers, you protected your firm during the epidemic, maintaining flows from Asia while lowering stockpiles and free cash when revenues dropped. You've earned a rest.
Your company strategy reflects your vision, and your consulting projects should be fully synchronized with both. But how to ensure this alignment, while managing a consulting project? This article has an answer. #ConsultingStrategy
Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting. To find out more, visit the blog or contact her directly.
The scope of a project is a description of the work to be done, as well as what will not be done throughout the project — the items that are out of scope. There are seven reasons why you need an RFP to clarify the scope of your project.
This podcast comes back on the recent controversy reported by The French Senate and opposition on the French Government spending huge amount of money on consulting. The podcast looks into the report from a strategic and procurement standpoint to give the keys to decipher this controversy.