Financial Consulting Consulting Firms
The consulting firm the corporate entity is under attack: not a full-scale assault perhaps
, but a war of attrition.
Clients are questioning the value a firm adds. When they can choose from an extensive market of independent consultants, many of whom earned their spurs in well-known, established firms, and all of whom are prepared to work at rates way below corporate charge-out levels, clients are inevitably asking why they should pay a premium for involving a firm.
A firm is an intermediary, putting them in touch with the people they want to work with; at worst, it is an overhead. Increasingly, clients are voting with their feet. Rather than assuming that one firm has world-class skills in every area, clients prefer to multi-source or create virtual consulting teams with individual experts drawn from a range of different firms. Employees, too, are questioning the role of the firm.
In an industry which, on some estimates, laid off one-fifth of its workforce between 2001 and 2003, the image of the paternalistic employer whose people are its greatest assets rings somewhat false. For people wanting to travel, work more flexibly and start their own businesses, the constantly-oncall working life of a consultant appears increasingly unattractive. Even the money is not what it used to be.
Priorities for success If the consulting firm is to survive, its role must be reinvented to suit a changing market. Managers of consulting firms should ask themselves what value the corporate entity can add to clients and employees who now have a range of options to consider. What can a consulting firm do that individual consultants cannot do by themselves? What will successful consulting firms do better than others?
Other parts of this book have focused on the challenges and opportunities facing consulting firms in the environment in which they operate; this chapter looks at the attitudes and capabilities required internally if the consulting firm is to capitalise on its existence. Integrity Corporate scandals and a plethora of failed consulting projects reported in the media have cast a pall over the reputation and ethics of the consulting industry.
Clients have reacted by establishing more complex procurement processes and drawing up more draconian contracts. Such processes and contracts have their place (and will continue to do so for the foreseeable future) but are by no means watertight. Successful consulting firms recognise that their culture and values play the most important role in driving the behaviour of their consultants.
When a project runs into difficulties, resorting to the fine print in the contract only exacerbates the problem, but having people who are predisposed to doing the right thing as opposed to doing the thing right makes all the difference. Consulting firms have been extraordinarily successful at attracting bright people who genuinely care about making a difference to their clients; they have also been equally extraordinarily cavalier in assuming that those values will survive the pressure of a corporate machine that wants them to work ever harder and sell ever more work.
We recruit eagles and train them to be turkeys, is how one senior partner put it. Successful consulting firms appreciate that those values need to be protected. They link client feedback and satisfaction directly into their appraisal systems and will not allow people to be promoted who cannot show they put clients first. They will not reward people simply for selling more work.
The test of success is whether firms make a positive difference to their clients. Successful consulting firms invest time and effort in clients in order to understand the incremental value they can add, as external consultants, over and above the resources already available to a client internally.
They walk away from work where that value is not clear. They also know that integrity cannot be manufactured. Processes and procedures may drive compliance, but they do not instil the values on which integrity depends.
Honesty
The image of consulting as a black management art has faded, but many clients still find it hard to understand what consultants do and be optimistic about what consultants can achieve. Consulting firms have made many efforts to improve transparency, but they often lack the confidence to open their entire working process to clients scrutiny. They are usually prepared to discuss only successful projects, not the lessons learned from failed ones.
It has therefore become hard for clients and consultants to talk about the issues that really matter and to acknowledge that many of the issues consultants are expected to resolve are intractable, without any easy or obvious solution. The problem is endemic. While clients continue to look for an easy way out, there will always be consulting firms that do not challenge their expectations; and those that do will always lose business to them.
Successful firms recognise the seriousness of this dilemma. They put enormous effort into trying to change clients perceptions, making them see the problems rather than glossing over them. They run seminars for clients to help them better understand the consulting process and hire outside experts, at their own expense, to provide objective feedback to both sides. Quality The firm has always been the backbone of quality assurance and credibility in the consulting industry.
Unlike medicine, law or accountancy, there is no qualification that consultants must have in order to practise. Instead, consulting firms, because of the way they recruit and train their employees, have played a critical role in reassuring clients that their money is being well spent.
But where is quality management on the corporate agenda of the consulting firm today? With memories of total quality management initiatives a decade ago and the bureaucracy in which some firms mired themselves in trying to apply quality standards originally developed for the manufacturing sector, consulting firms are reluctant to talk about quality.
Successful consulting firms recognise that they have an important role to play in giving clients confidence that they will be getting a thoroughly professional service. They set the bar high and communicate to their consultants what the expected standard is in unambiguous terms.
They will not tolerate work that does not match the desired performance, and consultants who repeatedly fail to meet it will be asked to leave. Alongside other like-minded firms, successful firms work to develop a means of measuring, in an intelligent fashion, the quality of the contribution consultants make while also recognising that consulting projects vary widely and that no one system can measure every instance meaningfully.
Research
Independent consultants find it hard to stay at the leading edge. Without the collegiate environment and sophisticated knowledge databases found in the best consulting firms, their ideas quickly lose currency. One of the major advantages a consulting firm has is its ability to bring together up-to-date information about trends in different sectors. It is far better positioned than most business schools to know what is happening where. But this is an advantage that has been largely squandered. Although most consulting firms produce articles, white papers and reports, little of the output can be said to be innovative, and most is poorly researched.
This scattergun approach to establishing thought leadership is rejected by successful consulting firms, which invest more money in a smaller number of better thought out projects, designed to identify genuine insights. They recognise that the most valuable research takes time and do not demand instant gratification. They will involve other consulting firms, business schools and, above all, clients.
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