Q: Why are management consultants/advisors so expensive?

A: Before answering, allow me to level set: I’m writing here specifically about experienced, strategic level management consultants and trusted advisors, not junior associates, staff augmenters or temporary staff.

Management consultants of all caliber cost money, for sure. But, for the right reasons and with the right advisor, that money is an investment in a future initiative your company will undertake to improve performance. It is not simply an expense. That’s the first advice I’d offer: you are investing in a partner to help you improve business performance.

The second counsel I’d offer is courtesy of a former consulting partner I worked for: You get what you pay for. He wasn’t suggesting that expensive is best. He simply would not arbitrarily reduce rates just to win a project and that cheap should be scrutinized for what you are NOT getting. He also meant that our fees reflected our capabilities (this isn’t always the case with high-priced consultants so ask about past experience).

This was sage advise. In the 17 years since I first heard my favorite boss utter those words, I have come across my fair share of cheap consultants who cared more about exiting quickly than about helping the client be successful, or who have created a ‘gravy train’ of revenue by extending or staff-loading the project unnecessarily. I have also seen clients end up with a cheaper alternative to my firm only to find their consultants were limited in ability and unable to help them think strategically about their problem.

Alas! I have come across many more gems in that time (I try to be one of them): reasonably-priced, trusted, strategic advisors who are accountable, creative, candid, get results and act as true partners to their clients. The key is to find (or create) and partner with one of the gems.

Here are 3 recommendations for how to manage costs and maximize the ROI from your “gems:”

 

Be sure you know why you want outside expertise. Good reasons to seek a consulting partner are:
  1. You are exploring a business area, subject matter, idea or effort that is new to you
  2. You are concerned about your organization’s ability to move forward or want a fresh perspective
  3. You need objective, unobstructed advice on a critical initiative or effort
  4. You want a partner to help you challenge the status quo
Choose the right consultant, not just the right price. In addition to needing the right skills, experience and capabilities, a consulting partner should –
  1. Have a style/personality that fits with yours. You aren’t looking for a new BFF but you are looking for a trustworthy, knowledgeable, self-possessed, candid and confident partner with whom you can openly discuss sensitive issues.
  2. Be transparent with how they charge fees. They should answer your questions to your satisfaction. That implies that you should be asking them questions about their fees – you have a responsibility in this.
  3. Be adaptable to your appetite for structure and rigor without compromising accountability for delivering what they said they would. Some of my clients like to meet to discuss the regular project status reports; some just need it emailed to them. No matter their preference, my job is always know what the client is expecting and be honest with them about what we can and cannot do.
No matter the type of engagement or how high up you are, manage to a formal Statement of Work (SOW).
  1. SOW’s are familiar to all reputable, experienced management consultants, and help client and consultant manage costs and expectations. I once hired a consultant (for all the right reasons) who said she did not use SOW’s; I regretted my lack of recourse when she did not deliver what was promised.
  2. A SOW should first and foremost outline the client’s situation and the scope of services that will be offered by the consulting partner to meet the client’s needs. What is shown as out of scope is as important as what is in scope, especially on larger consulting engagements. “Scope creep” is a huge driver of unexpected costs.
  3. The SOW should also clearly list how fees will be charged (by the hour, project-based/single fee, deliverables-based, outcomes-based/value contracts). When you sign the SOW, you are agreeing to that fee structure. Ensure you are comfortable with how any changes to fees will be agreed upon, which should be detailed in the SOW.

You’ll notice I used the term “consulting partner” throughout my response. That’s because the best way to maximize your return on consulting investment is to form a true collaboration with your management consultant or advisor. The best consultants want to help you and your company succeed and not return to solve the same problem – it is what drives us to do what we do. We want to be your partner in success.

There are many more critical success factors to effectively managing the costs of management consulting services, but these are my top three pieces of advice. What other suggestions do you have?

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How do I effectively manage the costs of working with a consultant?