Demystifying Management Consulting
Tampa Bay Business Journal - Aug 3, 2012
Other than the old joke about a consultant being anyone from out of town, there’s not a lot of understanding of the functions and roles of a management consultant. It’s probably fair to say that few of us as children said we wanted to be management consultants when we grew up!
The role of the management consultant is as simple as it is important. One quick definition is that consultants improve people, process and/or product-related issues. A definition we’ve used is that management consultants help business owners grow, operate and sell their companies more profitably.
This keeps the focus on outcomes, particularly shareholder value. By helping clients go from point A to point B, consultants involve themselves at both the strategic and the tactical levels to increase the chances for success.
Who is most likely to benefit?
The need for management consulting exists for companies of all sizes and industries, although the type of consulting varies based on the level within the organization.
Consultation at the top tier of an organization is typically strategically oriented, working with C-level executives and board members on developing strategy, including M&A, increasing market share and driving shareholder value.
The middle tier of the organization, VP or general manager level, is more P&L focused, looking to drive revenue or reduce costs.
The last tier, the mid-management level, focuses on functional fixes such as IT system issues or addressing gaps in reporting.
Over the years, there’s been a shift from the traditional “Big 4” consultation that large international firms provided to large clients, to an increase in the number of smaller or “boutique” consulting firms that provide services to family-owned and non-regulated businesses. These businesses may lack internal, top-tier management skills, yet share the same problems encountered by their much larger counterparts.
When a consultant can help
There are a number of trigger or transitional events – whether positive or negative, strategic or tactical (or both) – that may create the need for consulting services. These include:
Growth events, including a sudden increase in business, perhaps accompanied by the lack of infrastructure to handle it or stress on the supply chain; acquiring capacity and/or acquiring customers from competitors
Anticipated sale of the business
Opportunistic moves such as buying other businesses in the existing market and identifying new market opportunities
Loss of key personnel or lack of management bandwidth
Significant loss of clients
What to look for
Business owners who have decided they need help often wonder how to evaluate the qualifications of various consulting firms. Here are a few pointers to guide the selection process.
Consultants ideally have a Big 4 background, accompanied by operational experience. They should have been responsible for running the ship themselves, not just telling others how to run it.
Consultants are industry-agnostic. They should bring best practices from all industries, rather than confining themselves to what they’ve seen in just one industry.
Work programs should include definable segments and deliverables with measurable results. This keeps the emphasis on providing value, not just billing time.
Consultants listen to and understand the client’s needs – even if the client cannot communicate them well. Consultants can communicate solutions effectively.
It takes two…
The consultant/client relationship is most effective when both parties work at it. Here are a few tips to maximize the relationship with a management consultant.
Set the tone from the top. If the CEO or chairman is supportive of the engagement, the results will be better.
Require measurable deliverables. Agree in advance on performance expectations.
Have a clear understanding of compensation.
Ensure that time frames for delivery are realistic.
And probably above all – be partners. The consultant is only as good as the client’s willingness to open up and share its issues, goals and information. Welcoming the consultant as a real partner and communicating throughout the process will almost always yield successful results.
Group125 is an executive services firm made up of seasoned CFO's, CIO's, and COO's who understand the strategic thinking required for ambitious growth, as well as the operational need for fiscal efficiency. For more information, visit www.group125.com.