On Consultants: Outsourcing Intelligence

Now that the distractions of March’s TPM container shipping conference are behind us, I can get back to completing what I started with my February column (“Rewards of Risk,” Feb. 27).

In February, I wrote about being a consultant — the motivations behind the decision to become and perform the work of consulting. But what about the details? Why hire a consultant? How are consultants selected, compensated and evaluated? How does the consultant find clients and projects? What about pricing and compensation? Self-evaluation?

Very interestingly, and surprisingly, that February column produced a diverse response from JOC readers.

While not as far down the ladder of respect as used-car salespeople or politicians, consultants aren’t exactly held up as highly regarded professionals. But considering many thousands of us work at it, there must be something positive about it — some value-added component to the work — or the field would gradually disappear.

Every engagement will be unique to the specific needs of the company and project, but here is a rough outline of what I have found to be a typical process.

The main factor motivating companies to seek out consulting services, it seems to me, is some recognition that some sort of knowledge or expertise or skill-set or talent or some necessary attribute is absent or in short supply within the company and that something isn’t being done or not being done well enough with existing personnel. A new full-time employee isn’t required or doesn’t fit within a restricted budget, but some unaccomplished work must be completed.

So Step 1 is recognizing an unfulfilled need.

Step 2 is the search. Are appropriate resources available to fill the requirement? This can take many forms: someone knows someone else who has done the work before; the project is a big one and several companies can provide the required skills, so a bid process is created and executed. Between these two extremes are many variations, none of which is better than any other, as long as they fit the need and the type of outside resource (consultant) required.

Step 3 is consultant qualification. This can be through a bid process, proposal submission or reference check. All qualifications should include a face-to-face interview. There is no time for on-the-job training, so the candidate must have all the knowledge of the project that you do not. Being open about the problem is essential, so don’t start the process if trust isn’t established; signing some form of non-disclosure agreement isn’t enough.

While this is occurring, a good consultant should be performing a similar evaluation of the client and the project. How bad is the situation? How do the internal politics feel? Do you have the knowledge to do the work, or will assistance be required, or do you just take a pass? Can you complete the work within the required time limits? What other distractions — other projects and marketing efforts, for example — do you have? Are there any conflicts of interest?

The elephant in the room is compensation. How does the consultant make this calculation? What are your costs, all of your costs? What can the client afford? Is this a long-term, retainer-based project paid monthly, sporadic work requiring only a daily or hourly rate, or some other approach? What about payment? Contractors (consultants) are typically paid monthly, but often are required to perform their own accounts receivable follow-up. Not being an employee, they’re not on the payroll, and payments are often slow and late. Can the consultant afford to carry the client?

All of this and more must be spelled out in some form of agreement or contract or engagement letter. The keep-it-simple concept is best here, but may not be possible.

So why bother? It’s clearly complicated and, especially in the case of sole proprietor-type consultants, not without a heavy dose of risk. Many people come to realize the problem-solving type of work they’ve been doing for their employers for years is just like consulting, but with most of the rewards going to the company.

For companies, why not take the time to find just the right person? But will this provide the independence of thought and introduction of methods outside the corporate frame of reference and ideas that can lead to solutions without long-term commitment?

Only you can decide, as either client or potential consultant, but either way can produce great satisfaction with many opportunities for creativity and innovative solutions.

Barry Horowitz is the principal of CMS Consulting Services. Contact him at 503-208-2232 or at barryh@cms-cs.com.

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