Small business owners often want to hire external help and advice in order to grow their business or fill an identified skills’ gap. Engaging a suitably qualified and experienced consultant can frequently result in both short-term process, and, longer-term, financial benefits to a business. yet many SMEs may be hesitant about hiring consultants because of concerns about whether they provide value for money, and questions as to how that value can be recognised.
There are numerous reasons why a small business may want to hire a consultant. These include:
- To impart specialist knowledge or expertise;
- To implement new procedures and practices, or improve existing processes;
- Facilitating organisational change;
- To lead a specific project;
- Introducing new, or tightening existing, controls; and
- To provide a fresh voice and an objective view of the business, or a part of it.
Chosen wisely, a suitable consultant can provide an immediate benefit to your business, as well as offering a very cost effective alternative to a full-time hire. In addition, hiring a consultant gives you flexibility, as they will normally be on short-term contracts. This means it is easy, when you have no longer need of their services, to terminate their contract. Contrast this with the financial and legal challenges encountered in hiring, or terminating, a full-time employee.
However, there is a perception in some quarters that consultants are “over priced” guns for hire, and that they frequently fail to deliver the anticipated value. Undoubtedly, there are examples of consultants who deliberately seek to cheat their clients, or who lack the skills that they claim. These are the exception, not the rule, however. The main reasons why consultancy engagements fail lie elsewhere – with poorly defined project scopes, a misalignment of objectives, unrealistic expectations and inadequate communication. And, whilst the consultant no doubt has their part to pay in ensuring the engagement operates within the right framework, the business owner/contractor must also take responsibility in this area.
How do you know the consultant has the expertise they claim? There is no need to take this on trust. Ask about their background, qualifications and experience. Do they belong to a professional body or associations? If so, which ones? Look at their CV and/or Linked-In Profile. Request references from other clients – and if these can’t be provided for confidentiality reasons, from fellow professionals. It should be easy enough to gather enough evidence as to whether they do, in fact, have the skills, expertise and experience that they claim (and if the consultant is not prepared to share at least some of this evidence with you, we suggest finding somebody else).
Having satisfied yourself that the proposed consultant has the necessary skills and expertise, how do you judge the fairness of their cost? Most consultants will charge at an hourly rate (although some might charge by the day, month, project etc). Again, how do you form a judgement as to what is reasonable? Clearly, you will start with a budgeted cost in mind. However, the best way is to make a market comparison, so you can compare the costs of a number of consultants offering similar services before making your decision.
However, there are some important provisos to bear in mind. Remember you are looking to hire skills and expertise that you do not have, and that you should be expecting to pay market value for that service. This is not like buying baked beans in the supermarket. Going for the cheapest will, almost certainly, not mean the best in this case.
Equally, do not be beguiled by “big names”. For example, if you are looking for an accountant or auditor, hiring a Big Four firm, or one of their mid-tier competitors, may sound impressive but does not necessarily give you value for money. Their charge-out rates will be higher than a smaller firm – how do you think they pay for all those fancy glass offices? – and you may well find yourself paying more for one of their junior staff members than an experienced partner in a smaller firm.
Try and find somebody with both skills and experience who offer their services at a reasonable rate, really want to work with you, and can add value to the engagement.
Having satisfied yourself that the proposed consultant has the right skills and experience, and is reasonably priced, now it is time to define the objectives and scope of the engagement.
One of the primary reasons a consultant can appear to fail to deliver value is because of a failure, in advance, to clearly define what is expected of them. By failing to set initial objectives and defining the scope of an engagement, there is a substantive risk that the project will not succeed, and/or overrun in terms of both cost and time.
Failure to agree the scope of a project can have a number of consequences, all of which can be serious, both from the viewpoint of the contracting party and the consultant. These include:
- Scope creep. The consultant becomes involved with areas that are outside the specific remit of their engagement. This not only means that the project objectives are not met but also that the consultant becomes an operational resource of the business – like a standard employee.
- Failing to plan for knowledge transfer to existing staff. This means that once the consultant leaves, their knowledge goes with them, so the organisation gets no long-term benefit from the engagement.
- Blurred or indistinct objectives. The consultant provides solutions where there was either no issue or pressing business need, whilst problem areas remain “unfixed”.
Therefore, it is vital, from the outset, that the terms and the scope of the engagement are clearly defined and agreed with the consultant. This ensures that both the objectives, and the expectations, of the engagement are mutually aligned, and that any ambiguity is eliminated. A well scoped engagement also provides a measure of value. If the defined objectives are achieved, then value has been added (of course, this does not preclude objectives and expectations being adjusted once the project has started, provided that these updates are mutually agreed with the consultant).
The other major reason why a consultancy engagement can be seen as failing to add value is due to poor or inadequate communication. This can take a number of forms. For example, the objectives of the engagement may be well defined but if there is no agreed mechanism for communication of progress or end results, then the project will be doomed to fail. Or a business owner or manager may engage a consultant for a specific project, yet fail to adequately brief those staff who may be affected by their work or who need to cooperate with the consultant to ensure the project’s success. As a result, those staff either may not be able, or be willing, to devote the time and resource necessary to collaborate with the consultant.
Therefore, it is very important that the means and form of communication – verbal or written, email, report, formal meeting etc. – with the consultant are defined in advance, as well as their frequency. In addition, all those who may be impacted by the hire of a consultant should be briefed, at least in broad terms as to the objectives of the engagement and how they are expected to facilitate it. Team buy-in is critical to ensure the consultant delivers the value expected.
A suitably qualified and experienced consultant, if chosen well, can add considerable value to your business, through their knowledge, expertise and skills. By all means check that they have the skills and experience that they claim, and that their fees are competitive and reasonable. However, choosing the right consultant is only part of the challenge. To ensure that they really deliver what you want, it is critical at the outset that the terms and objectives of their engagement are properly defined, and mutual expectations aligned. It is also vital to ensure that the right communication strategy is in place, both with the consultant and with all those who will be impacted by their work. This will help ensure that the value provided by the consultant is maximised.