Many bankers tap consultants and consulting firms because they offer expertise, experience, specialization, and resources not available within their own organization. Leveraging consulting resources to assist in meeting business objectives is often a cost-effective way to reach business goals. Consulting engagements can bring credibility, innovation, and know-how to a business initiative.
That can be in the best of times, which these aren’t. Regulatory orders are a growth industry at the moment for many of us in banking. Many orders, agreements, Memorandum of Understandings, and other actions require management studies, audits, loan review, or other projects as part of their fulfillment. These requirements need to be completed while bankers are simultaneously performing their normal functions and often while addressing other regulatory concerns. As the complexity of banking increases, many banks will turn to consultants as a practical solution.
Of course, the folks with such expertise like to be paid for it. Extract Value from Consultants: How To Hire, Control, and Fire Them represents a guide, from experienced consultants, to the ins and outs of using outside help in good times and bad.
Balancing need and costs
Managing a consulting engagement requires different levels of skill, depending on the complexity and uniqueness of the project. Managing a financial audit or loan review engagement requires a degree of independence and autonomy to avoid perceived conflicts. The management of these projects is not “hands on” command and control, but collaborative. Using a consulting engagement to help lead a new technology initiative, for example, might require more direction and leadership. Extract Value from Consultants shows how to wring out efficiencies and get the most of your investment of time and money. By applying the broad suggestions in the book, a bank consulting project will have a better chance for the best outcome at a just cost.
The book is segmented into three parts and an appendix.:
Part 1, “Understand How Consultants Make Money from You,” describes the consulting business model and how it works.
A consulting firm needs to build business, so great care needs to be used to withstand a natural tendency of consulting firms to self-perpetuate and extend their engagements.
The authors point out that consulting groups have a strategic advantage over the client. Few client organizations manage consultants as an exclusive function, while the consulting firm does not exist without managing client relationships. So the outsiders tend to have the upper hand. There is no accreditation process for consultants, so anyone with enough courage and a shingle can call themselves one. Further, not every consultant or firm is a good fit for every project.
The economics of consulting are a simple function of two major factors: the hourly rate and the number of hours. Consulting costs rise with hours billed and the use of more talented and more expensive consultants. Expenses paid by the client also affect the profitability of the consulting engagement. These include travel, accommodations, and other ancillary services. All of these factors can and should be managed.
The authors point out that the big-name senior partners or name consultants are often very involved in the sales process, but less visible for the execution process. This is not necessarily bad, but should be kept in mind in negotiating price.
A consultant once told me consulting has a caste system of “finders, minders, and grinders.” Finders get the business. Minders tend the business. And grinders do the actual work. A “finder” is probably not going to mind or grind. Knowing that from the beginning may sway the choice of consulting resources, and is addressed in the next part of the book.
Part 2, “Sourcing Value from Consultants,” explains to the reader their obligation to clearly define the project. The reason: You must avoid having the consulting firms define the project for which they will be paid.
The authors provide detailed instructions for devising consistent Request For Proposal (RFPs). These documents serve as a basis of comparing the approach and costs of various consultants and their firms. Avoiding the undue influence of branding and existing relationships allows the client to not allow a consulting firm to rest on their laurels, but deliver a superior solution at a competitive cost. Readers are warned against the “halo effect” that prior successful engagements, branding, and marketing seek to create.
A key factor in the effectiveness of any consulting engagement is acquiring and managing a consulting firm with the capabilities to perform the task that needs to be done. The book gives valuable tips on evaluating the firm’s people and capabilities. A key issue: Knowing which consultant(s) will really be assigned to your project and their capabilities, expertise, and experience.
Part 3,“Successfully Realizing the Value,” consists of six chapters to leverage the consulting project for all it’s worth. Among the suggestions are using the engagement as a method to develop your own people, their capabilities, and internal resources. Working with talented, highly experienced consultants can create a dynamic for change in the future. Learning the consulting methodologies may be a transferrable skill to be applied in future projects, whether internal or externally with another consulting engagement.
An interesting chapter is devoted to how to not undermine the effectiveness of your consultants, and how to avoid self-limiting success.
The appendix contains helpful references, covering such matters as the structure of an RFP, key components of consulting contract, and consultant Evaluation.
Well worth your reading time
Consultants often get a bad rap. Many managers have a pride of ignorance and feel threatened by people who may know more than they do about an area they manage.
Then there’s the old saying, “A consultant is a person who borrows your watch to tell you the time.” For me, if you need to know the time; don’t know how to use your watch; and are paying a consultant to tell you the time—don’t be critical of the consultant for understanding how to use your watch. The project becomes useful if only for that brief instant.
Keep in mind that by managing the consulting engagement, you may discover how to use your watch, which will benefit you for the rest of your life. Consultants have the potential to help your business achieve greater results, but like employees of your bank, are a resource that performs best when properly managed. Extract Value from Consultants is a book that will help you manage the consulting process from beginning to end.
Tagged under Books for Bankers,