press releases ST 3

When we carry out the research for our briefing notes, we usually ask consulting firms what – in their opinion – the main causes of underperforming consulting projects are. Having written 18 briefing notes so far we’re starting to see a few issues cropping up consistently, so we thought we’d share them with you. You won’t be surprised, given that we ask consultants for their opinion, that ‘terrible consultants’ doesn’t tend to feature very prominently (though, in their defence, consultants do often identify issues for which they’re to blame). Anyway, here are the top three issues overall:

1. Insufficient support from senior management. Across all consulting services this is, by some distance, the biggest single cause of projects failing to deliver what was expected of them. Tip for clients: be clear – by speaking to consultants if necessary – about what will be required of internal stakeholders (in terms of time, authorisation, commitment of human and financial resources etc) before starting the consulting project. Winging it and hoping they’ll jump on board once they’ve been dazzled by the success of your (already well-underway or even completed) project is a risky strategy.
2. Challenges relating to the existing culture of an organisation. Just as most people are theoretically keen to reduce their carbon footprint but would rather do so without having to change anything they do, so clients bring in consultants in the hope that they can make things better without anyone needing to break their stride. Tip for clients: encourage internal discussion with everyone that’s likely to be affected by a consulting project so that everyone is clear about what the consultants are being brought in to do (which will help to allay some of the suspicions people tend to have about consultants, too). Even if you can’t be certain what changes will be required (which is likely), opening a dialogue about change and allowing staff to voice concerns (and share ideas) will help. Above all else, accept that this applies to you, too.
3. Lack of a clear strategy. The trouble with consulting projects is that they’re often started in response to uncertainty or confusion within the client organisation. This leads to clients failing to discriminate between the questions they can answer, and the questions they can’t, and bringing in consultants too early to sort out the whole sorry mess for them. Tip for clients: our research suggests that more than 50% of eventual project over-runs (which themselves account, on average, for about 15% of project fees) are attributable to issues that occur before the consultant has even started work. Don’t be lazy: taking time to answer the questions you can (being clear about what you’re trying to achieve, why you’re bringing consultants in and what you want them to do for you) before the project starts will pay you back every time.

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I’ve been struck by how much the debate about differentiation has shifted from skills (for the reasons described above) to delivery. It’s now not the know-how of consultants that distinguishes them these days, but the fact they can get things done.
In establishing the difference between their and their clients’ ability to deliver, consulting firms face a choice:

They can denigrate managers’ ability to get things done themselves. Too embroiled in the day-to-day challenges of their job (the argument goes), managers can’t step back to see the “bigger picture” – a term, I suspect, entirely invented by consultants – and can’t cope with new initiatives. This is what we’re starting to see in the UK as the consulting industry faces up to the challenge of rapidly shrinking demand in the public sector. Attempts to demonstrate how consultants play an integral role in the modernisation of public services are rapidly giving way to assertions that the government’s attempt to survive without consultants will fail because civil servants can’t implement.

The alternative approach would be to demonstrate that, while managers are good at implementation, consultants are even better. But how? Know-how, experience and methodologies – the stalwarts of consulting – are important, but rely on assertions (“Our know-how, experience and approaches are better than yours”).

Critical here will be product, proof and performance. Winning firms will be those that are absolutely clear about what they’re offering (the process they proposing to take over) and can demonstrate they can deliver it more cheaply and to a higher standard. If they can do this, everything else in the marketing mix – position, place and, most importantly, price – pales into insignificance.

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It is tempting for large consulting firms to think they are immune from competition from independent consultants. The idea that a firm such as McKinsey might be threatened by a freelancer seems as laughable as a cartoon elephant standing on a chair above a tiny mouse.

But the truth is that competition has a domino effect – two domino effects, actually, depending on whether demand for consulting is growing or falling.

Let’s divide consulting firms into four groups:

•Tier One firms are distinguished not just by size but by virtue of the fact they have recognisable brands and a genuinely international (if not always integrated) structure.
•Tier Two is typically populated by mid-sized firms, but what sets them apart is their depth of experience and expertise – something you only acquire if you’ve been around for a while.
•Tier Three firms are the young pretenders. Often (but not always) new entrants, their lodestones are focus (they’re very specialised) and innovation (the only way they can make their mark among their bigger rivals).
•Tier Four is where the freelance consultants sit. While often experts in their field, the main advantage they offer clients is price.
As a consulting firm evolves and grows, it moves through these tiers, so that price gives way to focus and innovation (which reduce the need to charge low fee rates), and innovation eventually gives way to expertise and experience. At the very top end of the food chain, the biggest firm, always on the hunt for talent and keen to set themselves apart, acquire Tier Two firms. And, in a growing market (indicated by the green arrows in the diagram below), that’s exactly what you expect to see happening. Everyone competes by trying to move up the food chain, using their strength, whether that’s price, focus, innovation, etc, to take another firm’s market share.

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one thing that has struck me so far is the relentless rise of body-shopping, where clients define their requirements in terms of the skills they need rather than projects, and buy individuals rather than teams.

To be honest, I’ve been surprised. In the early days of the financial crisis (and this is now being repeated in the public sector as the latter cuts back its use of consultants) it looked as though “body-shopping” consultants were suffering most, as procurement departments, wise to their canny ability to slip into a line role and stay there for months or years, made it harder for middle managers to hire them. Yet here we are, a few months into the private sector recovery, and the demand for such consultants seems higher than ever before.

What’s driving this? One important, but short-term, reason is a lack of internal resources. Back in the autumn our research about the already-booming financial services sector found that many companies had made too many people redundant during the recession and were struggling to keep up in the recovery. But there are long-term causes. More sophisticated clients, many of whom are ex-consultants, are quite capable of managing their own teams, made up from a combination of internal staff and freelance consultants. Body-shopping consultants are usually cheaper (if not always in terms of their daily rate, then certainly in terms of the “baggage” they bring with them). Unless facing change on an extraordinary scale (post-merger integration, for example), most clients are still reluctant to commission lengthy consulting projects, the type that require a substantial team of people.

As a result, many countries have seen a significant rise in the amount of freelance consulting: bizarrely the Belgium consulting industry seems to have been particularly badly hit. So does all this herald the end of consulting as we know it?

Answering that question is complicated by the lack of information about the size of body-shopping consulting market. It’s also not clear whether it’s cannibalising conventional consulting or a growing market in its own right, i.e. whether clients are choosing to hire such consultants in place of projects or to outsource more line management work than they would have done in the past. My suspicion is that it’s a mixture of the two. And I don’t think we’re so much witnessing the end of the consulting firm so much as the clear bifurcation of two types of consulting, process consulting and content consulting. Body-shopping consultants may be experienced in a particular field, but it’s hard for them to maintain the depth and international range of expertise clients are increasingly demanding. Consulting firms, on the other hand, have become too complicated and expensive for process work (although I’d again exclude post-merger integration work from this).

And that’s all fine, as long as everyone knows where they sit. The problems come – and this is where cannibalisation is occurring – when they aren’t sure, or aren’t clear.

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Almost every consulting firm is laying claim to the space that lies somewhere between advice and execution / implementation.

Pure advice has been widely discredited by clients frustrated with the number of recommendations from consultants that are never acted on. Pure implementation would take consulting firms into outsourcing’s dangerous, low-margin territory. So most firms, like superpowers itching for battle over a rich but obscure Balkan state, say they do both. All of which is ironic when you look at the way they behave.

To be sure, there’s recently been a flurry of activity in terms of thought leadership analysing how organisations do – and don’t – get things done. But the evidence that some firms are starting to think about this subject more seriously pales into insignificance when we look at how most treat it in practice. On a typical project, implementation is something you get more junior, less experienced people to do. Interpreting data and deciding what to do require specialist skills – more so than ever with today’s sophisticated clients – but anyone can, by implication, implement. Although firms increasingly recognise the importance of “subject-matter experts”, execution doesn’t appear to be an area where they have experts: it’s not a specialist skill.

Why is that? You could argue that the issue has been railroaded by programme and change management. Both are seen to be fundamental consulting skills, so most big firms train everyone in them to some degree: ipso facto, they’re not area you have experts in. Some smaller firms do specialise in these fields but their model relies on having senior people who plan and manage programmes and change, rather than execute it. A less charitable explanation might be that senior people don’t want to roll up their sleeves or even – perish the thought! – that consulting firms have no clearer idea about how to get things done than their clients other than throwing bodies at the problem. Perhaps the problem even taps into deep-rooted prejudices among white-collar managers about blue-collar work: the more senior you are in an organisation, the less you actually “do” anything. Consulting firms may simply be holding up a looking glass to their clients in this respect.

Reversing this level of cultural bias would take time; moreover, there’s a debate to be had about what the role of a manager – and consultant for that matter – actually is. However, one thing is clear: by regarding implementation as something that happens after all the important thinking has taken place, we’re increasing the chances of failure. If consulting firms really want to give themselves an advantage in this crowded market, they could ensure they had as many experts in execution / implementation as they do in planning and design.