A consulting firm – how to choose one
Many companies believe that consulting services are mainly for large companies, because they have more complex problems and, at the same time, large budgets for solving them. In my view, this is a completely unjustified way of looking at it. The fundamental question is not whether to use a consulting firm, but how to do so in a way that pays for the client.
The added value of working with a consulting firm
There are many reasons why it is worth hiring a good consulting firm:
Even the best company has some problems that get in the way of its smooth development and that cannot be put down to external factors.
An outside view of a company is always valuable feedback, provided it is turned into further corrective action. An experienced adviser is able to learn a company and the rules governing its industry quickly, bringing to it a fresh, independent perspective.
Managers’ excessive egos are one of the main causes of company failures. An adviser is a “mirror” that lets managers understand what mistakes they are making.
The return on the investment in an experienced consultant can be estimated before their work begins and measured precisely once it is finished.
The work of recognised consulting firms or reputable consultants at a client lends credibility, in the eyes of owners and shareholders, to the action taken as a result.
Why companies do not use an external consulting firm
An external business adviser is a way of solving many of a company’s problems. Managers rarely use one, for the following reasons:
They do not see, or do not even want to see, the problems in their own company.
They believe it will be cheaper to solve the problems with internal resources.
Managers’ egos do not allow for the possibility that someone from outside might notice something they cannot see.
They think their problem is too complicated for anyone from outside their company or industry to be able to help.
They believe that the quality of help from an outside consulting firm is too low relative to the value of the benefits, so that the investment in consulting services will not pay for itself.
What makes it hard for a company to choose the right consulting firm?
Consulting firms’ marketing, with its empty promises
The consulting industry, like coaching, legal advice or motivational speaking, struggles with a credibility problem. In each of these professions there are known cases of abuse, of “extracting” money from clients, of unreliability, or even of outright fraudsters at work. We all know the saying that a consultant is someone who takes your money to tell you what you already know. All consulting firms present themselves as competent and experienced. It is very hard to establish how their offerings differ.
The price of consulting services
The high prices charged by the big firms are an insurmountable barrier for SMEs, which may well need help but do not even want to consider whether, by engaging a consulting firm, they would receive a service worth the money spent. There is also the temptation to hire cheap consultants of limited competence instead of finding out what mid-priced consulting firms have to offer.
Brand recognition among consulting firms
While the names of a few global (expensive) consulting firms are easily recognised by potential clients, the brands of most smaller consulting firms are unknown, even though their owners or key people are often former employees or managers of the well-known names in the industry.
Many decision-makers in large companies prefer to engage a well-known consulting firm so as not to be accused of insufficient diligence in solving their company’s problem. A well-known consulting brand is the decision-maker’s proverbial “cover-your-back” insurance in case the implementation of change fails.
An imprecise diagnosis of the problem to be solved
A prospective client looks for a consulting firm to solve a problem that it defines on the basis of its own diagnosis, and chooses a suitable adviser accordingly. Sometimes, however, the client’s diagnosis is wrong, and so the chosen consulting firm is unable to solve the client’s real problem. The big consulting firms have teams that can deal with every aspect of a business’s activities, but their services are expensive. With small, too narrowly specialised consulting firms, the risk of choosing the wrong one to solve a client’s complex problems is greater, and in that situation a lower hourly rate is irrelevant.
Which type of consulting firm should you choose?
One specific problem, or many problems at once?
Consulting firms are often hired to solve specific problems in a particular area of a company’s operations. For example, a business wants to introduce a CRM or an ERP system, or to prepare transfer pricing documentation. For specialist tasks, you can consider engaging a smaller firm or an individual specialist in the field.
Sometimes, however, the client wants to launch a new product, explore a new market, design and implement radical change in the company, or get out of a difficult situation. These are comprehensive tasks, which are often entrusted to large, all-round firms or to very experienced individual consultants who are able to look at the client holistically.
An operational efficiency problem, or strategic growth opportunities?
It is typical of many companies to turn to advisers for tactical, short-term reasons – that is, to improve the company’s current situation, with a time horizon of a year at most. Few companies think strategically about their future, and few advisers are able to create genuine strategies. The latter is usually the domain of large consulting firms or of specialist strategy consultancies.
A local, regional or global problem?
It can be taken almost as a certainty that the big international consulting firms are best placed to serve global clients. They have not only offices in many countries around the world but also a base of projects from which they can draw experience. When it comes to serving a single market, small and large consulting firms are on a more equal footing.
Serving B2B or B2C customers, traditional or online sales, products or services?
Many consulting firms concentrate not only on industries but on groups of customers, because these can differ considerably. Selling toothpaste is one thing; selling nuclear power stations is quite another. Many companies are present in several channels at once, for example wholesale, retail and e-commerce. A consultant who cannot help with an omni-channel approach, that is, in all three distribution channels, is not sufficiently equipped to help a company comprehensively. Many companies also tend to offer their customers both products and services. Traditional BTL and ATL marketing is gradually being displaced by online activity, social media and performance marketing. This means that a consulting firm has to be competent in many areas if it wants to help its clients comprehensively.
On the basis of the four criteria above, consulting firms can be divided into:
tactical or strategic
specialist or comprehensive
local, regional or global
The consulting market is dominated by small or medium-sized firms that are tactical, specialist and local. Combining all seven of the types above is possible only for the big consulting firms, although there are some “gems” among advisers who, for example, combine tactics, strategy and a comprehensive approach on a local market, for different channels, industries and types of client.
Is the company ready for an independent diagnosis and for implementing a plan for change?
This fundamental question is the key to success for anyone commissioning consulting services. Clients may ask it of themselves when their problems have them “backed into a corner”. It may also come from the adviser, before or during the assignment.
A company that is actively looking for an adviser usually declares that it is ready to hear an independent diagnosis, but this may change when it comes to carrying out the recommendations.
That is why businesses should work with consulting firms that are not afraid to give a true diagnosis, even at the risk of the contract being terminated. But when a freshly graduated consultant at a big firm presents hasty, simplistic, academic theories to the client’s chief executive, it undermines their own credibility, that of their consulting firm and even that of the consulting industry as a whole. The key to fruitful cooperation with a client is the consultant’s authority, founded on experience and a considered approach, together with the consulting firm’s ability to give a true, often painful, diagnosis.
Where to look for consulting firms
There are several places to look for a consulting firm:
a) Searching for well-known consulting brands in search engines and comparing what they offer on their websites
The firms of the “big five”, such as Boston Consulting Group, PwC, Deloitte or EY, are brands that readily come to mind in connection with consulting services. Renowned consulting firms are, however, expensive for smaller companies, so simply finding them does not solve the problem.
b) Recommendations from people you know who have used consulting firms
Recommendations work extremely well, although, for various reasons, a consulting firm’s success with one client does not guarantee success with the next.
c) Searching on keywords for consulting, mentoring, training and advisory services in a search engine such as Google, Yahoo or Bing
It is worth looking through the paid adverts at the top and bottom of the first page of search results, but above all at the first and second pages of the results themselves after entering the right keyword. A noticeable presence on the internet speaks well of a firm’s SEO activity but, above all, of the large number of visits to its site, thanks to how well it is run, its reviews, the uniqueness of its offering and so on. It should be remembered, however, that whoever advertises aggressively is not, by definition, always the best adviser.
d) Looking through the proposals that consulting firms send to your company
Many consulting firms actively look for new clients. Their proposals are worth considering, especially if they are made in person and you have the chance to test the content of the proposal against the actual person presenting it.
e) LinkedIn search, and consultants’ posts and comments on LinkedIn
The activity of consulting firms and their representatives on social media can be an opportunity to see how they think and what, specifically, they offer – provided you can separate the substance from empty self-promotion.
f) Portals such as GLG, Catalant, Expert360 and Poland’s Redegate, which are “marketplaces” for individual consultants and for companies that need and offer advisory help
Consultations arranged through consulting “marketplaces” tend to be short and are commissioned by other consulting or investment firms, which treat individual consultants as subcontractors on their own projects. Interim management projects and project-based assignments may also be found there.
Researching consulting firms remotely – what to check
It is very hard to assess consulting firms’ marketing material, because it shows only the advantages of using their services and carefully hides their shortcomings. In an initial selection, it is worth assessing the following aspects:
Specialisation and breadth of services
Depending on the client’s needs, it is worth looking at the range of services each consulting firm offers. Sometimes it makes sense to use a specialist, but I know from experience that once you touch one issue, other, interrelated ones appear, which suggests it is worth working with advisers who look at the company as a whole.
The experience of the firm and its consultants
The experience a consulting firm boasts of in its marketing does not mean that the client will be looked after by a consultant with the right experience. You need to consider the individual experience of the consultants assigned, which is almost impossible with the big consulting firms. That is why it is worth checking smaller, or even one-person, consulting firms for their list of past clients. You can check which sectors they have worked in, which specific companies, at what stage of development, what breakthroughs they actually achieved, how many leaders they have brought on, which functional departments they know in practice, and so on.
Blog
Studying a consulting firm’s blog is a good way of understanding how it thinks and works. A blog should not be merely a way of displaying keywords for search ranking, but should present real knowledge to its readers.
Prospective clients can assess a consulting firm by reading its entries, articles and posts. Even if consultants’ presence on LinkedIn serves only to sell consulting services, many genuine experts in the industry share their knowledge there, which may inspire you to use a particular adviser’s services.
Client list and references
Formal references and client lists posted on a website lend credibility to a business adviser, but they are usually too general. Even the fact that a consulting firm displays the logos of the clients it has served does not settle whether it carried out breakthrough projects for them or only minor ones. In general, a substantial list of client references is a great help in choosing a consultant, because it means you are not dealing with a fly-by-night outfit.
The geographical reach of consulting services
It is in the nature of consulting services that, within one country, the client and the consulting firm can be located anywhere. It is only a matter of including the consultant’s travel and accommodation costs in the price. There is no doubt, however, that being close to each other encourages more frequent and more intensive contact, even if a large part of the consulting work is done online.
When a client has a problem of a global or regional nature, consulting firms with experience abroad and a network of foreign offices are much better placed. There are also some consulting firms in Poland that specialise in particular foreign markets.
The request for a proposal
The time a consulting firm takes to respond to a prospective client’s enquiry is the first indication of how the adviser responds to signals from existing clients – and from future ones, like you. If you receive replies several days late, it may be better to strike that firm off your list of candidates. If there are problems at the getting-to-know-you stage, they may well grow once the consulting contract is under way. In this industry, speed of response should be valued.
A separate matter is the substance of the consulting firm’s response to the client’s enquiry: how thoroughly it is able to understand the client’s situation, clear up initial doubts and quickly propose next steps. The best way to find out is at a meeting, in person or online.
Meeting the advisers on your shortlist
“Chemistry” between the parties
Quickly establishing a relationship of trust at the first meeting is the first sign that the client has, in all probability, found the right adviser. It must be remembered, however, that appearances can be deceptive. The consultant’s aim is to sell, and they will do a great deal to leave the client with a good impression. “Chemistry” without substance is empty marketing. You can go for a beer with a consultant like that, but you would not necessarily entrust them with difficult tasks in your company.
How quickly they get to the heart of the matter
The questions a consulting firm asks, and the way it turns the answers into its initial conclusions, are a very good indication of whether the consultant is able to make the right diagnosis quickly. Even in a one-hour meeting, a good consulting firm can put a name to many of the client’s problems, and will even mention something that surprises you with its insight. You should also watch whether the consultant is trying to impose tools or areas of work that they know well but that the client does not necessarily need.
Honest communication
Pay attention to how openly the conversation at the meeting flows, whether and how the parties naturally become less formal with each other, whether they are frank about the areas in which they cannot help, and so on. It is very important to outline the stages of cooperation precisely, because many firms deliberately leave unsaid that the agreed scope and cost of the consulting are only the beginning, and that there should be a continuation, which costs extra.
How do you measure the effectiveness of working together?
This is one of the key issues in choosing a business adviser. Working together makes sense when the measurable benefit, preferably in the form of net profit, is much higher than the cost of the consultant. The benefit of a consulting firm’s work can be measured by a planned increase in sales or, better still, in product margin; by the reduction or optimisation of a particular cost; by an increase in KPIs; by a reduction in staff turnover of x%; by faster stock turnover and a better stock age profile; by a higher profit percentage and amount as a result of comprehensive action; by freeing up the owner’s or manager’s time, resulting in better concentration on strategic matters; and so on.
In many cases the “effectiveness” of an adviser’s work means, for the client, simply the completion of the project, or the evaluation scores for a training course rather than the results of putting it into practice – or even the mere fact that the training budget was used up by the end of the financial year. These are not enough for the work between client and consulting firm to be counted a success. Let us remember that in the training industry, for example, around 80% of training does not translate into better company results.
If a consultant gets to know a company’s financial and business indicators and cannot roughly estimate which results they can improve, how, and to what level, it is not worth wasting time on further talks with that consulting firm.
Price and value for money
Companies would most like to pay consultants on a “success fee” basis. Such an arrangement is most often accepted by consulting firms that have a knife at their throat or are certain they will achieve the intended result. The other approach, and the most common, is payment for hours worked plus reimbursement of expenses. Sometimes the two approaches are combined.
Price is a barrier that keeps most SMEs from using the big consulting firms, which want to concentrate on large clients, often under global agreements. Even potentially very good value for money is not enough for SMEs if the consultant’s rate is, say, EUR 250 an hour.
A low hourly rate in consulting often does not reflect the quality of the advice. It may signal a “consultant’s” desperation to win a client, combined with a low standard of advice.
On the Polish market, a reasonable price for a consultant’s time ranges between PLN 300 and PLN 500 net per hour.
It is also worth being wary of the exorbitant prices charged by celebrity consultants, which do not always reflect their real level of knowledge but merely a personal brand, sometimes shaped artificially by the media. All that glitters is not gold.
What really matters is not the price but the total cost of the service compared with the measurable improvement in results achieved. The value of a consulting service depends on how fast the adviser works, which rests largely on their experience and their willingness to share it with the client. There are consulting firms that deliberately ration the knowledge they pass on, in order to generate as much value from the service as possible for THEMSELVES.
The scope of the project
Every consulting project must have a contractually agreed scope. Sometimes the initial scope is later widened considerably, but additional costs must then be expected. On the other hand, it is typical for the client to go beyond the scope of the project while expecting not to pay extra for it.
A diagnostic report only, or joint implementation?
In many business consulting engagements, the consultant diagnoses the situation together with the client’s people and then prepares a report on how to solve the problem. An adviser’s nightmare is to work intensively on a client’s project and deliver a report, which the client pays for and then puts away in a drawer – for later, one hopes. It is also an undesirable situation for the client, who pays for a service and then does nothing with it.
It also happens that the actions proposed by the adviser are implemented jointly, but with the consultants playing the dominant part. The opposite also occurs, where the consultant’s role is merely to support the client’s people.
The duration of the consulting contract
The client would like the consulting contract to last for as short a time as possible, until it is fully able to stand on its own feet, whereas the consulting firm’s aim is the longest possible cooperation, which guarantees a steady inflow of cash. The typical contract period is the duration of the project the contract concerns. Far less common are framework agreements (a flat fee, a retainer and so on), which may be for an indefinite period, with the option of ending them, but subject to a notice period. When comparing consulting firms’ proposals, the client should look at how flexible the terms for ending the contract are, at the notice period, and at the duration of the contract, which depends on the intensity and scope of the work and on the client’s needs. A consultant’s flexibility in this respect is a big point in their favour.
The consulting firm’s account manager
The person who looks after the client during the engagement is one of the key factors in choosing a consulting firm. No business owner would want to sign a consulting contract with a leading consulting firm only to be served by an assigned account manager with three months’ experience, fresh out of university. Unfortunately, such cases do occur. Despite the fairly rigorous rules by which the Big Five firms recruit people with the right potential, consultants’ experience comes with age and with the number of projects completed, not from the mere fact of being employed by a renowned consulting firm.
A separate problem is the subcontracting of consulting services by a consulting firm to other firms, because the former is overloaded with work or lacks competence in a particular field. In principle there is nothing wrong with this, but it is easier and safer to work with a consulting firm that serves the client comprehensively, without time lost on additional communication with a subcontractor.
With good one-person consulting firms, the problem of the quality of the assigned consultant does not arise. You work with the owner, who has the skills they claim to have – skills you can verify directly.
What does WK Profit Consulting offer its clients?
The purpose of posts like this one on a website’s blog is not only an altruistic wish to share knowledge, but also self-promotion and a desire to improve the search ranking of the author’s website. That is the case here too. Without prejudging which consulting firm is best for you or your company, I would like to describe my consulting services precisely:
Increasing short-term operational efficiency, and strategic consulting
A comprehensive (holistic) approach to the client
Any industry – I can learn any of them quickly
The contract can be terminated within one day, without giving reasons
Working directly with the client, with no subcontractors or employees
20 years of experience as a CEO, including at Nike
13 years of experience in consulting, around 230 clients
A combination of mentoring, coaching, consulting and training in my work with the client
Working with the client, not instead of the client
Measurable results from working together
Throughout Poland, although I have also had clients in eight countries around the world
All types of client, product/service and sales channel
Monthly billing, with invoices payable within 7 days
Clients of every size, from small companies (SMEs) to global corporations
Support in “raising” leaders – I have personally helped many managers become leaders
Full confidentiality of client data
When I describe the above to business people or other consultants, I sometimes see doubt in their eyes as to whether it is possible to provide consulting services so comprehensively. Apparently it is, since I have been doing it without a break for 13 years and already have more than 230 such interesting and varied clients in my portfolio. If you still doubt it, let us arrange an hour’s conversation and you can see for yourself.