Management Consulting Essentials: The Quest for Certainty

If you are more busy than you appreciate you should increase your prices

The title of this post #13 can be rephrased this way:

Will the engagement of management consultants improve the probability of success?

Occasionally I get this question from potential clients, who do not have much experience, have bad experience or are otherwise skeptical towards using management consultants.

My answer always is: “I don’t know. As an independent management consultant I can only answer for myself. Call my other clients and ask them why they engaged me and what they achieved.”

It is not my job to convince anybody to engage a management consultant. That decision must be made separate from talking to me.

I sometimes face this scenario: “We do not have any plans for engaging a management consultant, but if you believe you can make a difference, we will be happy to consider your proposal.”

Proposal for what?

DEC is a good example of a company who paid a high price for ignoring changes in the environment

If everything is running according to schedule, you are ahead of your budgets, you are winning market share, you can find all the top qualified people you need, your margins are improving, your net profit is increasing, your customer satisfaction is increasing, your employee satisfaction is increasing and your market valuation keeps growing, then what would you need a management consultant for?

If it ain’t broke- don’t mend it

When all the lights are green there is a very good reason to call in someone external to take a check on the situation. Successful organizations have a tendency to suffer from megalomania and people in the organization believe they can walk on water. Complacency makes us blind and external changes in the market, in technology and in the environment get ignored. Success is the first step to failure. Often it is exactly the top management who suffer from megalomania. In this case they will not call in an external management consultant who might tell them something they don’t want to hear.

This post is about dealing with situations where a potential client wants some kind of assurance up front that the engagement of you as a management consultant will produce positive results.

Management consulting includes a very broad spectrum of services. This post is primarily focusing on “psychotherapist” type services.

Why engage a management consultant?

Why do CEOs use management consultants? Using management consultants is typically a CEO decision. In larger organizations the decision and budget may reside with Divisional Executives who have the full P&L responsibility for their operations. Line managers will often be reluctant to engage management consultants as they perceive this as a sign of their own inadequacy.

The are typically five areas where the need for external assistance is required:

To assist with strategic and business planning
To help identify, organize and manage change
To assist resolve issues
To help identify opportunities
Other areas where there is little in-house experience, too much in-house bias or no in-house resources available

The main characteristics of the five areas are “change” and “uncertainty.”

Mitigating risk

Will engaging a management consultant guarantee that the change will be successful and the uncertainty reduced?

The answer is no!

There is no “guarantee” when dealing with change and uncertainty.

No management consultant in this world could have guaranteed Apple that the iPod, iPhone and iPad would become successful.

Will engaging a management consultant increase the probability that the change will be successful and the uncertainty reduced?

The answer is: Maybe!

The role of the management consultant is to facilitate the process of describing the [slider title=”situation”] including gathering additional information from the organization and the market [/slider], analyze and present the issues, analyze and present the options, define the objectives, define the strategy, assess the organization’s capabilities for executing, develop the plan and identify the critical success factors.

Executing the strategy through the associated plan and budget is not the responsibility of the management consultant. Of course, you can ask the management consultant to perform the execution. If he accepts to do so then he is – by definition – no longer a consultant. He then becomes the CEO or one of the executives. He becomes an “insider”.

Nothing ever goes according to the plan

Business Plan — Nothing ever goes according to the plan

Irrespective of how you execute a plan I think it is fair to claim that nothing ever goes according to the plan.

Not even the set-up of a cost center, where we in principle have full control, will go according to plan. It always turns out that finding the people with the required skills is more difficult than expected, the learning curve is longer and steeper than expected and making people work together takes more effort that expected.

Strategies and plans where the outcome depends on potential customers making purchase decisions in our favor are associated with considerable risk and almost always under-perform.

Statistically you should expect that 50% of all outcomes were overachieving compared to the plan and 50% were underachieving compared to the plan.

That is not the case.

I do not have any empirical evidence, but my guess is that 99% of all new business plans underachieve and only 1% overachieve.

Why is it so?

I see two main reasons for this phenomenon

CEO’s and executives are driven by success to the extent that they systematically overestimate the opportunities and underestimate the obstacles, the competition, the expenses and the inertia.
The management consultant forgets his role as the impartial facilitator and the “devil’s advocate” and joins the “team of optimistic dreamers”.

I see this happening again and again: Independent management consultants who are talking enthusiastically about their client’s fantastic products and opportunities. Sometimes they even come across as cheap sales people.

We all want to be part of a success and the sooner the better. We identify the success of our clients with our own success, and that is ultimately also the objective. However, as management consultants we must stay detached. We must remain the “outsiders”. We must maintain our positions as the un-biased facilitators looking for the cheese as well as the holes in the cheese.

Auto-hyping and unconscious self-suggestion are the management consultants worst enemies.

Conclusion: Will the engagement of management consultants improve the probability of success?

If the management consultant maintains his role as the “outsider” and the un-biased facilitator, then the answer is: Yes!

But is also depends on how you define success.

My company was asked to help a German company expand their business in Sweden. After having interviewed 20 potential customers, some of the competitors and some other players in the eco-system, it became apparent that the value proposition of the German company was not very different from what the local competitors already offered. It also became clear that the German company only had less than 1% market share in Germany, and that customers were spread across several industries and sizes of companies. Entering the Swedish market would require several years of investment and “time-to-break-even” would be very hard to predict. Wouldn’t it make more sense to go for 2% in Germany than trying to bootstrap Sweden? Wouldn’t it more more sense to focus on a market segment in Germany and achieve a >10% share of this specific segment, before initiating international activities?

We recommended that our client stop the effort in Sweden and focus on Germany.

A client asked us to perform a review of their operation in the UK (which was unprofitable) and provide suggestions for improvements. After 4 days of interviews in the UK and a review of the pipelines we came to the conclusion that there was nothing wrong in the UK. The go-to-market approach applied in the UK was involving resellers. The resellers were all in the final stage of the learning curve and they all has solid pipelines of projects to be closed within the following 3 months.

Our recommendation was to do nothing. 3 months later the UK operation was profitable.

These examples show that management consulting assignments can lead to results that were not part of the initial mission.

Applying a set of trained and experienced external eyes on a situation will improve the probability of success. However, defining the success factors before commencing the assignment can be extremely difficult.

Recommendation

My recommendation is to never set the expectations that you can ensure a successful outcome of an assignment before you have sufficient insight to make that justification yourself.

What you can assure is that you will remain the trusted adviser who will provide an un-biased situation assessment at all times and that you will always speak your mind irrespective of the potential repercussions.

Increase your prices: Summary

I meet and talk with a lot of independent management consultants. 99% of them are extremely busy. They are so busy that they have little time to learn new approaches, keep up with the development in their area(s) and develop their business. Most of them even complain that they are too busy. They also use their busyness as an “excuse” for not being responsive and not meeting deadlines.

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and by how much?”

This series of posts will address the “many hours/low price” issue, explain the causes and provide recommendations for how you can remedy the situation. Applying the ideas should enable you to work less hours, make more money and have more fun at the same time.