How to avoid being ripped off by Management Consultants

There are many reasons for buying in consulting expertise. You may need an extra pair of hands or a particular technical expertise you don’t have in house. However, some organisations engage consultancies before understanding the issue or problem they want solved. This inevitably leads to disappointment and accusations of being ‘ripped off’ by the consultancy. Taking a responsible role when contracting with a consultancy will avoid this disappointment and mean the consultancy delivers real value for money.

First Step: Decide whether you need a consultancy or not

To decide whether it’s appropriate to engage with a consultancy or not, consider the following:

What is the need or problem you want to address and why do you think this need or problem exists? Will it be solved by this intervention or will the underlying issue still exist? What skills are you looking for? What value might a consultancy bring to your business? What risks are there to your business in using an outsourced resource?

Second Step: Draw up the initial brief

Once you’ve convinced yourself and the business that it is appropriate to engage a consultancy, draw up a brief. Your brief should be jargon free and contain:

1. A summary description of your organization: its purpose and values, what it does, its size and structure

2. The need or problem and why you think this problem exists

3. What you want the consultancy to deliver in terms of outputs and deliverables

4. What role you want the consultant to play

5. Who will be managing the role of the consultants and what reporting you expect to take place – weekly, monthly etc

6. A provisional budget. To decide on a budget think about the impact of the problem and potential value of the solution. Basing buying decisions purely on cost is not always effective. An hourly or daily rate will not tell you the whole story – a consultant with a high hourly rate may produce value faster than one with a lower price. Experience suggests that forcing consultants to quote daily rates means you get charged for every single project meeting, conversation or trip. An overall fee for the project may enable a more productive and flexible working partnership.

7. A description of the kind of person(s) you want to engage: their experience and skill set. Industry experience can be a massive plus factor but you have to trade this off against the actual project demands that may not be industry specific. A specialist software consultant may be more suitable for a software project in the oil and gas industry than an oil and gas specialist.

8. Timetable for the work

Third Step: The Pitch

After shortlisting your potential suppliers you will want to meet them face to face.

During the pitch don’t be impressed by techno babble. Attempts to impress you with an extensive list of acronyms and niche industry speak often hides a superficial understanding of the real issues to be addressed. Instead, look for a company that listens to you and makes a presentation or pitch that is both specific and sympathetic with your company’s objectives, not just one where they have performed a “find and replace company name” from a previous document.

Assess the individual and the consultancy. Remember big consulting companies are not always the best in every situation. Larger companies can lack flexibility in both internal processes and the way they handle clients. Larger companies also have costly head office functions to support – these costs will be passed on to you through higher fee rates.

Smaller niche consultancies can provide specialist advice in a particular expertise area. They can often be more cost efficient than larger consultancies. The disadvantage is that they may not have the breadth of experience in house to service a large scale change project. The same can apply to ‘one man bands’ or sole operators.

Fourth Step: Reference Checking

Your original brief gives the basis for assessing which consultancy you should hire. When deciding who to work with review your personal contact through phone calls, meetings; written information such as research reports, websites, CVs and the written proposal; and referrals or references from others.

Fifth Step: Contracting

Your fifth and final engagement step involves drafting a formal contract which should include:
– The work to be done

– The person(s) who will be delivering the work

– The person who is the lead contact in the organization

– The timescale and deadlines for the stages, if relevant

– The fees to be paid and the schedule of payments

– What expenses will be charged for, and at what rate

– Whether VAT is charged and on what

– Any required insurances (such as professional indemnity insurance)

– The work to be done by your organization eg arranging meetings, room hire

– Copyright of written and other creative materials (unless agreed otherwise, copyright belongs to the creator, ie to the consultant/trainer)

– How and when the work will be reviewed and what will happen if either party is dissatisfied

Copyright (c) 2008 Chiswick Consulting Limited