Global revenues in the consulting industry — including HR, IT, strategy, operations management and business advisory services — were about $330 billion in 2008, according to estimates by Plunkett Research. With so much at stake, how can companies do a better job of controlling consulting costs?
For starters, companies need to know what does not work. Common strategies to control consulting costs may be a mirage.
“Fixed bids benefit the consultant, not you. And low hourly rates may not translate into results,” says Diane Valenti, a veteran consultant. Valenti has seen too many companies overspend on consulting. She recommends that you:
1) Hire a consultant, not a vendor. A vendor is focused on developing a deliverable. A consultant is focused on achieving results. When money runs low, a consultant can help you figure out how to achieve your results with the budget that remains. A vendor will be looking for ways to cut corners, a practice that can hurt quality.
2) Do not treat consultants like employees. Consultants are on the clock even when you are late, distracted, disorganized, or in an unproductive meeting. Make your time with them sacrosanct.
3) Know the scope, and stick to it. “Scope creep” is the biggest culprit behind high consulting costs.
4) Consider small consulting firms or independent consultants. You often can get the same or better results for a fraction of the cost of hiring a larger or more popular consulting firm.
5) Avoid schedule delays. Schedule delays are costly because they result in additional project management to revise the schedule and to get the team up and running again.
6) Watch the budget closely. See where you are in relation to your budget every week. Strategize with the consultant about how to reach your goal if funds are evaporating faster than the work is progressing.
7) Shield the consultant from internal politics. At best, political squabbles absorb the consultant’s time and your budget as he or she attends unproductive meetings. At worst, they can nullify the consultant’s work, which means you are spending a lot of money for zero results.
8) Know what you want to accomplish. If your goals are not clear, you will waste time and money figuring things out, and you could even end up hiring the wrong consultant.
—Valenti has more than 20 years of experience in performance consulting. She is president of Applied Performance Solutions, Inc. Her clients have included Genentech, Nike and Starbucks. Valenti is the author of “Training Budgets Step-by-Step.”