MASTERING THE ART OF CONSULTANCY
MASTER. THE ART OF CONSULTANCY
FT Prentice Hall FINANCIAL TIMES
THE MANAGEMENT CONSULTA T MASTERING THE ART OF CONSULTANCY
Learn the answers to the critical questions you need to ask to be a top management consultant such as:
• How should you identify and define the services you will offer?
• Why do clients buy consultancy and what are they looking for?
• How can you bring maximum value to the client’s organisation?
• How do you engage clients and win work?
• How can you deliver results that will be sustainable for your client?
• How do you establish long-term relationships that bring you repeat business with clients?
• When should you say ‘no’ to a consulting engagement?
• How do you navigate your way through the potential ethical dilemmas that face consultants?
Discover the ·client-centric approach to successful consulting
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Mastering the art of consultancy
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The management consultant : mastering the art of consultancy / Richard Newton.
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Acknowledgements / vii
Preface / ix
Introduction / xi
lImB Understanding consultants and consultancy Consultants and consultancy / 3
2 Why does anyone buy consultancy? / 23
3 Your consulting service / 41
4 The three core processes of client-centric consulting / 58
IImII Consulting engagements 5 Finding and winning work / 77
6 Delivering consulting engagements and satisfying clients / 108
7 The alternative approach – process consulting and facilitation / 132
8 Closing engagements and sustaining results / 147
9 Developing long-term client relationships / 169
10 The ethical dimension / 181
11 The language of consulting / 199
12 Knowing when to say no / 220
13 Key consulting tips / 234
14 The client’s perspective – buying consultancy / 251
Conclusion / 269
.aliII Additional resources for consultants A The tools, processes and materials of a consultancy business / 275
B References / 279
C Sample proposal letter / 281
Index / 285
I would like to thank five consulting colleagues who I started working with years ago in Coopers & Lybrand. Although our careers have moved on in different ways, we still work together from time to time. More often we meet up, share stories and enjoy laughing about the occasion- ally pretentious side of the profession. They are: Graham Jump, Peter Meredith, Perry Childs, Richard Ellis and Andy Macey.
This book is dedicated to my son Konrad for inspiring me to write the book, when he admitted that he really did not have the faintest idea what I did.
This book is a personal guide to the art of management consulting. It sets out to help new and experienced consultants to do one thing: to become better consultants. In simple terms, better means providing help that is of the most long-term value to your clients. The approach is also simple: to identify what it is that the best consultants do that their less effective col- leagues do not – and how you can do it, too. Underlying this is my belief in client-centric consulting.
The contents are derived from three sources. The first source is my expe- rience as a consultant (working for Coopers & Lybrand, A.T Kearney, Ernst & Young and my own company Enixus). Secondly, my experiences in industry as a client – negotiating, buying and managing consultants. Finally and most importantly, I have a network of trusted consulting col- leagues whose ideas have flavoured the book. Like a magpie I have picked up ideas and concepts throughout my career. I have shifted through them, throwing away most, keeping hold of the ones I like and think are precious. Many ideas in this book are my own, but of course I have learnt from others. I can’t remember the sources of all of these, so I am sure more credit is deserved than I have given.
There were several reasons for writing this book, but two of them stand out. Firstly, there are comparatively few books on consulting, unlike many other management disciplines. Look at the business book selection in a good bookshop or online, and you will find many on strategy, lead- ership, marketing, delivering change and project management, to name a few areas. But consulting books are relatively scarce, scarcer than an industry of its size justifies. There are a few good books on consulting, but they do not approach the audience in the way I want to.
The second reason comes down to my frequent frustration when I work with or engage other consultants. The simple truth is that the profession often does not live up to its own hype. This is not to deny that there are many brilliant consultants out there, and I have been lucky enough to work with and learn from a few of them. But there are many consultants who know they should be better to justify their fees. Worse, there are some very mediocre consultants who mistake being paid a lot with being good. As supposed experts in business, it is amazing how often consult- ants provide inadequate value to their clients.
Management consulting is a large and very varied industry. The range of skills and services that fall under this title are huge. The difference in the type of work of the most expensive strategy houses compared to a project management consultant is so great that they may not even recognise each other as being in the same profession. There are some books that set out to address components of this industry. They tend to describe various tools and techniques of consulting. The best tools and techniques are only applicable in some situations and even if you know them it does not make you necessarily an effective consultant. I wanted to write a book for all management consultants.
The book contains tools and techniques, but it is also intended to make you think like a consultant: how do effective consultants think about their work and their clients? Consulting experiences are varied, and each is unique. By thinking like a consultant, irrespective of the situation you are in, you will be able to deal with any situation in the most effective way.
Ask someone in business to define the title ‘management consultant’, and you will get a wide variety of responses, not all of them complimen- tary! The title covers an extensive range of roles providing a variety of services. There are no universally recognised standards for being a man- agement consultant and as a result there are very varying levels of quality. In addition, many people want to be management consultants but do not know what it entails.
There are many consulting success stories, and numerous people have become comfortably well off as consultants. Given this success, it might be thought that the world was full of praise for management consultants. Yet, if you ask many customers in the private and public sector about their feelings and experiences of consultants, you will often be met with sceptical and even highly negative comments. There are numerous causes for these responses, but they can be summarised into three major cate- gories. Firstly, too many consultants simply do not provide sufficient value to their customers and rely on churning out the same old work time and time again. Secondly, even good consultants with valuable knowledge often fail to understand true client needs. Thirdly, it is unfor- tunate to say, but there seems to be a number of very poor management consultants. This problem is compounded by the already mentioned lack of widely recognised standards for consultancy which can be used to judge or benchmark consultants against.
A key reason for the negative perception of consulting is the fact that too many consultants are focused on what they have to offer and how they make money, rather than what clients need. Too many consultants pro- vide context-free and generiC advice, whereas what clients need is advice that is tailored to their specific culture and context. Overall, too many consultants spend too much time trying to be clever, rather than asking themselves what actually makes a good consultant?
__ …. I;,;.;ntroduction
This book will describe those factors that make good consultants and how consultants can go about providing client-centric consulting. It describes consulting from the viewpoint of the client, and so will help consultants understand what will make them successful. The book will
, ‘ the book focuses on the skills of success- ful consultants , ,
help in deciding on how to provide the most appropriate services and advice to clients. Rather than considering the tools and processes of con- sulting, as most other consulting books do, it focuses on the skills of successful consultants –
what they do that makes them successful, success in this context being defined as client results, not only in terms of financial returns for the consultant. Finally, the book contains many tips from the author’s and his colleagues’ years of experience in consulting.
There is a huge number of management consultants and business advi- sors of one form or another. Management consultancies have been one of the great business success stories of the past 40 years, with some now employing tens of thousands of people in worldwide bUSinesses, deliver- ing significant profits to shareholders and partners. At the other end of the scale there are thousands of small consultancies and independent consultants. As employment patterns change, more and more people are choosing to work as consultants.
There are many attractions to a career in consulting. For some, consulting may seem the only choice following redundancy from a senior pOSition. There are many examples of initially despondent redundant managers finding not only a better income, but more enjoyable work in consultancy. For others, it is a lifetime career choice that starts from university, even though few students have any real concept of what being a consultant entails. Many people enter the consulting profession for a more flexible lifestyle, although this is harder to achieve in practice than it might seem. Whatever the reasons for considering it, consultancy is a great opportu- nity. Companies appear to have an increasing and insatiable demand for advisors and interim managers. Providing services can be very profitable and give consultants a high standard of living. But consulting also has risks. It’s an increasingly competitive environment as more people are drawn to the profession. Select the wrong services or sales approach, and consulting will be a stressful profession. There is also the constant uncer- tainty about what happens when the current engagement is complete.
Many people assume that simply because they have some speCialist expertise, they can be a good consultant . Certainly, expertise is an
essential foundation. This book assumes you have an area of specialist knowledge and can competently apply the techniques and tools of your specialisation. But specialist knowledge is not enough. It is not intended as a tautology when I say that the core competency of a successful con- sultant is the skill of being a consultant. It is not a profession for everyone _ there is a specific art to being a consultant.
Although the consulting industry is successful, that success is in jeop- ardy. Fee rates for many organisations, including some of the largest firms, are lower in real terms than they were previously. Clients are becoming more adept at controlling consultants and extracting the best value from them . More and more people are entering the consulting industry, meaning that to excel the standards are rising all the time. Consultants need to raise their game.
This book sets out to provide you with guidance to what makes a great consultant, irrespective of where you fit amongst the incredible variety of management consultants. It avoids the constraints of focusing on specific elements of consulting or approaches to consultancy, and instead takes a client-centric view of what is needed to provide expert consulting. Although this book contains approaches, the fundamental questions it seeks to answer are what makes a great consultant and building on that, how do you achieve this?
Contents and structure
There are 14 chapters and two short additional reference lists in the book. The book is broken into three main parts. In the first part (Chapters 1-4), I explore what it means to be a management consultant and how to go about setting yourself up as one. In the second part (Chapters 5-8), I discuss how to go about winning work and delivering value to clients. In the third part (Chapters 9-14), I discuss a range of broader issues which set the context for consulting and will give you some additional tips and techniques to being a successful consultant.
The book has been designed to be read from cover to cover, but you can dip into it as you require. If you want to reference parts individually, the detailed contents of each chapter are described in the following table:
Consultants and consultancy
2 Why does anyone buy consultancy?
3 Your consulting service
4 The three core processes of client-centric consulting
5 Finding and winning work
Delivering consulting engagements and satisfying clients
The alternative approach – process consulting and facilitation
Closing engagements and sustaining results
Developing long-term client relationships
10 The ethical dimension
Introduces the key terminology and concepts used in the book and provides an overview of what being a consultant means.
Explores how successful consulting starts by understanding the reasons clients have for buying consultancy. This is essential knowledge for anyone wanting to provide client-centric consulting.
Looks at the range of services you can offer as a consultant and how to position your skills and experience as a saleable client service.
Discusses the core engagement process and then puts it in context with the client’s change process, and the client’s operational process. Understanding this relationship is at the heart of client-centric consulting.
As a commercial business, consultants must find opportunities and sell their services to clients. This chapter discusses the processes and approach to winning work.
Investigates the central work of a consultant- delivering consulting engagements which add value to the clients.
Describes an alternative approach to expert consulting – process consulting – which can be used to deliver entire consulting engagements or as a tool on an engagement.
All consulting should result in some change in a client, otherwise it delivers no value. Often the change takes place and must continue after the consultant has finished their work. This chapter considers how to achieve change, and how to sustain it after a consulting engagement is complete.
Describes the advantages of having long-term client relationships and how to develop them.
Considers the ethics of consulting, and the potential ethical dilemmas that regularly face consultants and ways to deal with them .
11 The language of consulting
12 Knowing when to say no
13 Key consulting tips
14 The client’s perspective- buying consultancy
A The tools and processes of a consultancy business
C Sample proposal letter
The central tool ofthe consultant is language. This chapter describes some approaches to communications and explores the topic of consulting jargon.
Not all consulting opportunities are worth pursuing. This chapter describes the characteristics of engagements which consultants should avoid if possible.
A summary of useful key tips from experience.
A short review from a client’s perspective of issues to consider when purchasing consultancy.
A brief summary of the role of the management consultant and topics covered in this book.
A summary of the key processes and tools any consulting business requires.
A short list of references that have influenced the author’s thinking, and may be useful to readers.
A sample proposal letter for readers to adapt.
Un de rsta n din 9 consultants and consultancy
Consultants and consultancy
This chapter answers the questions: what is a management consult-ant and what is management consultancy? You may be an experienced consultant who wants to pick up a few new tricks. On the other hand, maybe you are new to consulting and want to gain a better understanding of what it is all about. This chapter is aimed primarily at the novice consultant, whether you are considering joining a major consultancy, are starting out as an independent consultant, or have been recruited as an internal consultant. It provides an overview of some of the fundamental concepts in consulting. Most of the book is about how to be a consultant. As an opening to the subject this chapter answers what being a consultant means.
To gain the most from this book it is important to understand what a management consultant is, to be familiar with some common consulting terminology, and to appreciate the difference between being a consultant and other roles. If you want to be a management consultant, it is helpful to recognise why you want to be a consultant and to think through whether or not it is a profession that can meet your desires. To achieve this it is useful to have at least a basic grasp of the economics of a con- sulting business. This chapter sets out to do all of this. There is nothing complex here, but it is impor~ant as it provides the foundations for the rest of the book. This chapter covers a disparate range of topicS that com- bined give a basic, but essential, picture of consulting.
__ :..U;;.;.nderstanding consultants and consultancy
One small, but noteworthy point: rather than write the phrases ‘manage- ment consultant’ and ‘management consultancy’ repeatedly, I shorten these to ‘consultant’ and ‘consultancy’. There are other types of consult- ants and consultancy, and many of them could find something useful in this book, but the focus is on the management variety.
What is a management consultant?
There is a large and growing band of people who call themselves manage- ment consultants. Some people are management consultants but do not use this title, preferring labels such as business advisor, strategy consultant, operational consultant or even leadership consultant. These and related job titles encompass a divergent and eclectic group of individuals.
The work such people do varies enormously. The fee rates range from low to very high, and the length a consulting project may vary from hours to years. Clients who use consultants can be the owners of firms, managers of one level of seniority or another, or the main board directors of major corporations. Clients can also be staff in the public sector and not-for- profit organisations. Some consultants are employees of the firms the
, , it is not easy to come up with a concise definition , ,
consulting takes place in, others are external but regular faces within an organisation, while many are individuals who appear in a client organisa- tion for a short time and never reappear again. Their areas of specialist expertise go from obscure
pieces of business to generalist management advice. Given this huge vari- ety, what is it that is similar that enables them to be bundled together as management consultants? It is not easy to come up with a concise defini- tion that covers this assortment of roles.
The problem with describing the role of a management consultant is compounded by the fact that some existing definitions have been writ- ten by people who are not consultants, and who do not understand fully what consultants do. But listening to professional consultants can equally be misleading. Those who are consultants have a vested interest in making the role sound majestiC and magical, and to bias any descrip- tion towards the type of work they specifically do. I have read definitions of management consultancy in sales brochures, books, dictionaries and various online encyclopaedias. A few definitions are the hopeless sum- marisations of people without any real understanding, some are correct but focus on irrelevant aspects of the role, many are good, but do not quite manage to encapsulate the role and its variations.
Consultants and consultancy
Given the wide variety of consultants, rather than starting with a defini- tion, I will list characteristics to provide an appreciation of the role of a consultant. As little in this world is absolutely black and white there are caveats with each one of these characteristics.
Consultants do the following seven things:
They provide advice and recommendations to managers, and may provide assistance with the implementation of the recommendations. Caveat: Consulting companies may provide a whole range of services, from pure consulting to training and outsourcing. Not all of this is consulting. Consulting is about providing useful advice, and helping managers to implement the advice.
2 They base their advice and recommendation on a set of skills and expertise, or intellectual property they have available to them. Caveat: This is what should happen. However, ask any experienced manager and they can probably tell you of the time they spoke to or even engaged someone who purported to be a consultant but who had very limited skills, experience or intellectual property.
3 They consult. This may sound obvious given the name, but it is often forgotten. What I mean by this is that consultants engage in dialogue with an organisation and its staff, and apply their expertise to develop recommendations, taking account of the specific needs and context of that organisation. Caveat: Some firms called consultancies do not consult. Such firms may be very successful in selling research, benchmarking data or other types of information. Consultants do not sell products or give the same advice to everyone. There is nothing wrong with selling a product, but irrespective of how it is branded, it is not management consulting.
4 They are involved with a given client on a temporary basis. Caveat: The length of a consulting project may be anything from hours to months. Occasionally, it may be years, although it is difficult to argue that someone who has worked continuously in one organisation for years is still working as a consultant. (Internal consultants work for one organisation, but they will be working on different projects across a range of departments or divisions.) It is not unusual for a consultant to work regularly for the same client, but each piece of work is of a limited duration.
S They are independent. A consultant should be providing advice or recommendations irrespective of the internal politics and vested interests of an organisation or the managers who are their client.
Understanding consultants and consultancy
Caveat: Consultants are human, have their own business interest to consider, and naturally have their own biases. But a consultant’s biases should be independent of a client’s biases.
6 They are not paid for from an organisation’s normal staff budgets. Caveat: A manager who wants to employ a consultant needs a budget for it. This is often true even for internal consultants who charge back their time, and if they do not, they remain an overhead to the rest of the business.
7 They add value to a manager and the client organisation by helping them to change. Value can take many forms, such as improved decision making, faster change implementation, reduced business risk and so on. Caveat: At least they should do! Reality is not always so clear cut.
If we take these seven characteristics of a consultant and take the most pertinent points it is possible to develop a definition of a consultant that is true in most situations:
A consultant is an independent advisor who adds value by helping managers to
identify and achieve beneficial change appropriate to their situation.
Essential consulting jargon
To get the most from this book it is important that we start with a common understanding of the basic terminology surrounding manage- ment consultancy. Some words, or pieces of consulting jargon, will be used repeatedly through the book, and if you are new to the industry then it’s important you become familiar with these concepts. I am not generally a big advocate of jargon (see Chapter 11), but there are words and phrases that are continuously used by consultants. Most of these may be obvious and intuitively understandable, some are not specific to the consulting industry, but they are essential to know.
Consultants tend to talk about clients, rather than customers. The con- cept of a client is explored in the next chapter. In general terms, the word is used both to refer to a specific manager who gives the consultant direc- tion on a consulting project, and the organisation in which that manager works . Hence a consultant may think of the client as Mr Peter Smith of the XYZ Company, or may consider it to be the XYZ Company. To
Consultants and consultancy
differentiate, when I refer to a client I am talking about a person (or group of people), when I am talking about the organisation the client works for I use the term client organisation.
Once employed by a client, the specific consulting project being under- taken is usually referred to as an engagement or sometimes a live engagement. A client is one of a larger group of stakeholders a consultant must deal with. Stakeholders form a set of individuals who consultants must take into consideration when delivering an engagement.
To win some work consultants engage in business development. Business development relates to time that is not (usually) chargeable to a client, and includes activities that are associated with marketing a business and
, , consultants must normally write a description of the service they will provide ”
pursing specific sales. The aim of business devel- opment is to identify opportunities, and then convert these opportunities into live engagements and hence have some chargeable time. An oppor- tunity is the situation in which a client has a need for some consulting support. To convert an oppor- tunity into an engagement and hence be able to
charge fees, consultants must normally write a description of the service they will provide to the client. This description is called a proposal. Chargeab le time is the time when a consultant is billing fees to the client. Once an engagement is complete, consultants often seek to sell on , that is to sell a subsequent consulting engagement to the client so the consultant can remain chargeable.
In order to sell regularly, and for proposals to be successful, consultants may have service lines. A service line is a specific area of expertise that a consultant or a consultancy company invests in (see Chapter 3). For instance, one consultancy may have a service line in improving the man- agement of IT departments, and another may have a service line to increase innovation in business . Service lines may be the informal labelling of expertise of individual consultants, but they can also be the formal documentation of processes and approaches to consulting by larger consulting companies . Service lines and any other knowledge or approaches are often called intellectual property or intellectual capital by consultants. Intellectual property has a specific legal meaning, but many consultants use this phrase in a looser fashion than the legal defi- nition requires (see Chapter 3).
One of the most important measures of a consulting business is utilisa- tion or chargeable utilisation. Utilisation is a measure of the proportion
of time a consultant is working on fee-paying work on a client site. Hence, a consultant who is billing three days a week is 60 per cent utilised. It is normally not possible for a consultant to be 100 per cent utilised because some time must be spent on business development, the creation and maintenance of service lines, and holiday.
How does consulting differ from other roles?
Developing a full understanding of the role of the consultant is helped by understanding the difference between a consultant and an employee, a manager or a business leader. The boundaries between being a consult- ant and, for example a manager, are grey, but there are important and definite differences.
Let’s start by considering the role of a consultant versus an employee in the organisation using consultants. The obvious point is that a consult- ant is not an employee of the organisation they are helping, but an employee of a consulting business. Why does this matter? Most consult- ants want to do a good job that satisfies a client, but their performance assessments, pay increases, promotions, ongoing praise and criticism are not done by the client organisation. All these are influenced by their per- formance with clients, but consultants have different motivations from client staff. Consultants are never fully part of a client organisation’s team. For example, a client may regard a consultant as having done a brilliant job by providing fantastic advice. A consulting company may judge the same consultant to have only done an average job because he did not manage to make any additional consulting sales.
A consultant can be part of a client organisation’s project team, and in doing this share some goals with other client staff, but consultants are always to some extent independent from the client organisation. Their incentives and performance drivers are different. This is true even for an internal consultant. Obviously, an internal consultant is employed by the same company as their clients, but is not employed by the same depart- ment or part of the same management hierarchy. This is not necessarily a bad thing – a consultant who is as much part of your team as any other employee will struggle to give truly independent advice.
What about the difference between being a consultant and a line man- ager? Like managers, consultants often are hard working and want to produce a quality result, but this is relative to the scope of a consulting engagement. They do not and arguably cannot deliver an end result in a
Consultants and consulta
client organisation, and do not live with the outcomes of their recom- mendations. If a consultant is providing advice, then, if the advice is accepted, a line manager has to implement this advice somehow. Even if consultants help with implementation planning or a change implemen- tation project, they do not end up working with the results following the implementation. Consultants are temporary visitors to an organisation – it is line managers who must live with the results of any consulting engagement.
There is another point about consultants compared to managers. Many consultants are ex-senior managers with a good understanding of the challenge of managing a department. On the other hand, whilst all con- sultants advise, some have never managed anything of any significant complexity. Even relatively senior career consultants, who became con- sultants from university, may never have managed a team of more than 20 people. For someone in an operational role with several thousand staff and a budget of hundreds of millions, a consultant’s understanding of the reality of dealing with this number of people and scale of budget will appear limited. The consultant’s response to this should not even attempt to be an expert line manager, but to provide focused specialist expertise beyond that of a normal manager.
Finally, what about a consultant compared to a business leader? Many consultants fancy themselves to be great leaders, and some have the potential. There are well regarded business gurus who have come from a consulting background, but a guru is not a leader – a guru is an influ-
, , you can be a very good consultant without having the ability to lead or inspire , ,
encer and a shaper of opinions. Sometimes you see a successful chief executive with a background in consulting, and they are probably a great leader. But on the whole I am sceptical about pro- fessional consultants as leaders. The consultancy profession encourages the development of a range of skills which sometimes can be mistaken for
leadership, such as strong communication and influencing skills. Normally though, consulting does not require significant leadership skills. You can be a very good consultant without having the ability to lead or inspire.
The fact that consultants are different from employees, managers and business leaders should not be taken as a criticism of consultants. Consultants are not employees, managers or leaders – because that is not what the role entails or requires. Consulting is a very different role from
Understanding consultants and consultancy
being an employee, manager or leader. Consultants must appreciate these roles, be able to work with them and be able to influence them . Some consultants may have a background in organisations which required them to manage or to lead, but this is not universally true. Consultants should not forget that the role of the consultant is to consult, not to manage or to lead.
Now, having said all this, comparing consulting to other roles does to some extent depend on the type of consultant being talked about. There are two dimensions of consulting we should be aware of and differentiate:
Internal or external consultants: An internal consultant is a full-time employee of an organisation who has a role as a consultant to the business. Typical examples include human resources (HR) or internal change management specialists. An external consultant is someone who is engaged for a specific consulting project, but otherwise is independent of an organisation. Internal consultants tend to have a greater understanding of an organisation’s culture and are familiar with many aspects of a business that an external consultant will take some time to learn or understand. External consultants will typically have a broader range of experience and have done work similar to their current engagement in other organisations.
2 Strategic, operational, implementation or specialist: Many consultants work in a wide range of roles and float between providing strategic advice, helping with implementing it and supporting operational managers. But generally we can differentiate between consultants (and consulting companies) who advise organisations at a strategic level – what direction a business should be taking; at an operational level – how the business should be run on a daily basis
. efficiently and effectively; or at an implementation level – how to deliver projects and changes (which may be derived from the advice of a strategic or operational consultant). There are also specialist consultants who focus on a particular area of advice. Arguably all consultants should be specialists, but what I mean here are, for example, consultants who focuses on very specific areas such as regulatory compliance advice or on minimising technology costs.
Another thing to consider is whether the work being done is consulting or another related profession. There are several job titles in common use which are often employed in relation to consultants, or in relation to people doing work that can seem similar to that of a consultant. The main examples are:
• Contractor: A contractor is a temporary employee who is usually paid a day rate to complete some work which is of a transitory nature, where it is not appropriate or not possible to employ a permanent member of staff. This covers a wide range of areas – from office cleaners to very short-term senior staff. The overlap with management consultants is that many projects require temporary staff, and these are often contractors. Organisations are often left with a choice of whether to use contractors or consultants. A rough difference is that a consultant is employed to advise or provide skills the client does not have access to, and a contractor is employed as an extra pair of hands to increase the capacity of an organisation beyond that available with existing permanent staff.
• Interim manager: An interim manager is a specialised form of senior contractor. An expert manager is engaged to perform a management role for a limited period of time – for example because a senior manager is ill or on maternity leave. Interim managers should be expert managers, who fit quickly into even the most senior management roles. It is really impossible to define hard and fast boundaries with consultants, as many consultancies offer interim management services and some consultants regularly work as interim managers – but when they do they are not working as a consultant.
• Coach/mentor: It is common to pay for professional coaching and mentoring, to help individual managers. Such work is normally done on a one-to-one basis. Coaches and mentors are slightly different, but they are both concerned with helping individuals to reach their full potential. A consultant may work as a coach or mentor to individual managers, but there are also professional coaches and mentors, who rightly do not consider themselves consultants.
• Facilitator: A facilitator is someone who uses facilitation skills to help a group or team resolve some issue or problem. Facilitation is one of the most misused words in business and is explored further in Chapter 7. Facilitation is often closely associated with workshops, but it is possible to use facilitation in other situations. Facilitators do not advise directly, but help clients to solve their own problems. I regard facilitation skills both as an expert profession in its own right, but to a certain degree also a core skill of all consultants.
It is worth understanding the differences in these roles, which can be real, but the boundaries are often exaggerated for commercial or personal
Understanding consultants and consultancy
reasons. Professional interim managers, facilitators and coaches have valid reasons related to the nature of the roles to differentiate themselves from management consultants, but it also makes commercial sense to do so as well. Many consultants have the necessary skills and often work in one or more of these roles, but you should not assume that all consult- ants can or even need to be able to perform such roles effectively. Put another way, you can be a successful consultant without, for example, having the capability to coach or be an interim manager.
Varieties of consulting organisations
There are many different organisational structures you can work in as a consultant, and the choice is important as it will affect the type of proj- ects you do, the nature of the day-to-day work, and the level of risk and uncertainty you expose yourself to. There are essentially four ways you can work as a consultant:
as a solo or independent consultant working for yourself or your own company
2 as an employee of a major consulting company
3 as part of an organisation offering a portfolio of services of which consulting is only one – the most common is the consulting, IT development and outsourcing company, but there are other variants
4 as part of a small consultancy company.
To some extent the choice depends on personal preferences, and what opportunities are open to you. I have worked in organisations in all these models.
The independent consultant is usually either someone who has worked in a larger consultancy but wants a more self-sufficient lifestyle, or an ex- senior manager who now wants to advise rather than manage. There are many reasons for choosing to become independent. I now prefer to work
, , organisations always need help , ,
for my own company as it enables me to max- imise my personal flexibility. The cost is that I am completely dependent on my own ability to find projects and generate an income. However, once
you have an established reputation this is not that hard. Organisations always need help. Additionally, as my business costs are comparatively low, and I have other revenues, should I choose not to work for a few months I do not need to generate significant revenues to cover my
business costs. I have access to a wide variety of work. I even undertake some very large engagements as I have a network of trusted colleagues, and we work together often to deliver larger engagements than a single consultant can manage.
At the other extreme are the major consulting companies. If you have little experience, are a recent graduate or like to combine consulting with a corporate culture these are the organisations for you. The big consul- tancies can be attractive places to work. For example, they tend to give great opportunities for professional development, international working and arguably reduce your personal risk as you have teams of people around you also helping to win and deliver engagements. Additionally, the larger firms often win massive projects which may require leading- edge thinking and techniques, although on the largest projects you can feel like a cog in the machine rather than a real consultant. If you become a senior manager (or partner) in such organisations the rewards can be high. But it does mean all the baggage that comes with corporate life such as annual appraisals, fitting in with company culture and worry- ing about things like brand risk. Big consultancies are also notoriously political environments. Some are focused on people who fit their specific organisational culture, which can give the consultancy a very defined feeling that will not suit everyone.
Companies offering a portfolio of services beyond consultancy provide a large variety of career options. However, if your firm is not purely a con- sultancy, there is always the tension over how independent the consulting advice is and whether it is really just a sales channel for other services. Some outsourcing firms have very successful consulting divisions, but there is always a doubt in some clients’ minds as to whether the consult- ing is impartial advice or a funnel to win outsourcing contracts.
Whilst I am happy not to work for a large firm any more it is fair to say that I probably could not do what I do now had I not learnt what I did working for the major consultancies I was employed by. It is by no means a bad place to start.
There are many smaller consultancies, which offer a compromise between the complete self-sufficiency of the sole trader and the corporate hierarchies of the larger firms. Some of the smaller consultancies are industry leaders in specific consulting niches. For instance you can find consulting firms who specialise solely in financial regulation, telecom- munications, customer services or cost control in manufacturing. If you
nding consultants and consultancy
have a particularly focused specialisation there may be a firm for whom you are a perfect fit.
Why do you want to be a consultant?
If you roughly understand what a consultant is, then it is time to reflect on whether and why you want to be one, and if your reasons have a real- istic chance of being fulfilled.
The best reason for wanting to become a management consultant is simply because you enjoy the process of consulting with clients. Of course, if you have never worked as a consultant what ‘consulting with a client’ means will be unclear. If you do know, and this is the reason for becoming a con- sultant, then you are well set for a successful career. However, most people have more pragmatic grounds for becoming a consultant.
A common reason to join the profession is the potential variety of the work. Although as a consultant you may work in a specialist area, you will work in many organisations. The context and culture of the organi- sations and details of the problems will vary significantly. I find consulting work highly varied. I have worked all around the world, for companies in a wide variety of sectors, with clients of differing levels of seniority, to help resolve a divergent range of problems. However, if the service you will provide to organisations is very specialised – for example, helping them to be compliant with a specific piece of industrial regula- tion – what variety you gain from different clients you may also lose in essentially doing the same piece of work again and again.
Some people join consulting for skills development. This typically arises from one of two sources. Development may happen because of the wide variety of challenging work you are involved in. And there is no quicker way of improving your skills than doing a wide variety of challenging work. Alternatively, and this is most true for graduates coming into consulting, it is because you join a company who understands that its key asset is people and hence is willing to invest significantly in their development. Consulting does provide a great way to develop a powerful set of useful skills, such as problem analysis, communication skills and influencing skills. One impor- tant exception to this is that if you want to learn how to manage people then you will be better off seeking an operational line management role.
However, this brings me to another potential advantage of consulting. If you want to, you can avoid much of the burden of line management that
Consultants and consultancy
goes with a corporate role. Some individuals love managing people, some hate it. If you work for a large consultancy you may still have staff whom you have to performance manage and motivate, but the teams tend to be small. As an independent consultant staff management is not something you have to worry about.
Graduates often want to join consultancies for the lifestyle and travel. There are a few professions which enable you to travel even more and to wilder places, such as mining and oil exploration, but generally there is a fantastic opportunity to travel as a consultant if you want to – especially if you are multi-lingual. Such travel can be exciting and rewarding. Working in foreign countries gives you a perspective that other travellers
, , working in foreign countries is a double- edged sword , ,
never gain, but it is a double-edged sword. Travelling all the time can be dull. You have to be a little shallow to be really interested in having gold frequent flyer cards with several airlines. Often the locations sound exotic, but an office is
an office wherever it is in the world. Continuous travel will also play havoc with your social life.
Some people want to enter consulting for the money. The money earned as a consultant can be good, but of course it depends what you are used to. Few consultants achieve the rewards of the chief executive of a major com- pany, unless they happen to become a senior partner in a big firm. On the other hand, most reasonably successful consultants earn more than senior middle managers and junior executives in most other industries.
There are much more down-to-earth explanations for becoming a con- sultant. Some people just fall into it. I was recruited by Coopers & Lybrand out of industry, and frankly I had no idea what consulting was but it was better money, which for a young man with a family seemed an attractive proposition. I was lucky in that it is a career that has suited me immensely. Other people come into consulting because they feel they have no other choice. Perhaps they have been senior managers who find themselves late in their careers having been made redundant and, irrespective of age discrimination laws, cannot find a suitable alter- native role. These are not necessarily bad reasons for entering the consulting profession . We are all, at times, hard-nosed about our careers, and just because you entered the profession as way of overcoming redundancy does not mean it will not be a huge success. On the other hand, simply because you have some business skills does not mean you will thrive as a consultant.
Understanding consultants and consultancy
A phrase that has become common recently is the ‘portfolio career’. This is a career in which you mix various different types of work together. This is definitely possible as a consultant, especially if you are self-employed. Some types of work can complement consulting very well. I know many people who manage to control this mix very successfully. I have several professions: as well as running my consulting business I write, deliver training courses and seminars and take regular time out to study.
Whatever your reasons for considering consulting, don’t fool yourself that it is always an easy ride, or that it will give you a completely flexible lifestyle. For example, as a self-employed consultant you may well be able to take more holiday, you may well be able to work part time – but, and it is a big but, within the constraints of your clients’ needs. You may decide to work only nine months a year, but that does not mean you can definitely choose the three months you don’t work to be 1 November to 31 January every year whilst you are in the South Pacific, and expect at the same time to be 100 per cent fee earning until 31 October, and have an immediate start again on 1 February of the following year. Clients won’t usually wait for a particular consultant: if they have a problem they want someone to fix it, and if you are not available they can usually find someone else to do the work just as well. Consulting opportunities cannot simply be turned on and off. They have to be searched out and won. Clients and engagements do not easily fit a predictable pattern. If you want flexibility you do need to have some flexibility yourself.
Whatever flexibility you want from consulting is effectively a constraint on your ability to service clients. If you are clever and pragmatic there is no reason why the constraints cannot be overcome and you can manage to balance your own and your client’s desires very well. But you cannot both maximise your income and maximise your personal flexibility (unless, perhaps, you really are a world renowned industry guru).
I know many people who love working as a consultant. But consulting does not suit everyone’s personalities. If you are constantly working in different organisations, it changes the relationship with the place you are working. To some extent you will always be an outsider, which does not suit everyone’s personality. Consulting can leave many people with an ongoing feeling of uncertainty and risk. As one project ends, where is the next and when will it start? If you are an independent consultant there is no career path as such – you may want to vary your work, and may over time increase your rates, but there is no management hierarchy to be promoted through. If you work in one of the large consultancies,
Consultants and consulta_n~ __ •
promotion is possible, but for most firms seniority beyond a certain level does not just depend on your consulting skills and expertise, but on your
ability to sell.
Consulting offers great opportunity, but it is different from other types of employment. It offers potentially high rewards and significant flexibility. If unmanaged, it can intrude into your personal life, but arguably so does any senior role. If you are pragmatic and flexible, then you can get a good level of rewards and flexibility in return.
The economics of consulting
The past few decades have brought an increasing stress on the work-life balance and less on the financial factors of employment. However, a key aspect in deciding whether to be a consultant is whether you will make
, , this is not a business plan for a consulting business ,
the income you desire. Whether a career in con- sulting can provide you with the money you want depends on your expectations (or income needs), your degree of success, but also the inherent eco- nomics of consulting. Before entering this profession you should understand your potential
income. I am going to look at this only very, very simply. This is not a business plan for a consulting business, but it does explain the basics.
Let’s start by considering the case of a single independent consultant as this is the Simplest to understand. I will only look at revenues. Costs for inde- pendent consultants are generally low, and most of those that are incurred are attributable to clients and can be recharged as expenses. So, I am going to ignore them for now. This is of course a gross generalisation, but it is fine to begin with as it will not change the overall outcome. There are two fac- tors that determine how much money you generate as a consultant:
the number of chargeable days a year you achieve
2 your daily charge-out rate.
(Not all consulting projects are charged on a daily basis, but this basis is accurate enough to understand the general economics of the business.)
It is really as simple as that. So how do you know how many days a year you will work for and what daily charge-out rate you will achieve? There are huge variations between different consultants. Taking account of fee rates and number of chargeable days it is quite easy to find two apparently
Understanding consultants and consultancy
similar consultants, one of whom has an income three or four times higher than the other. At the extremes, comparing the lowest to highest revenue-generating consultant then the multiples are much greater.
To estimate the daily rate you will achieve it is best to do a little research, but it is not straightforward finding accurate information. There is no easily available database of rates as there is no transparent market in con- sultancy, and it is generally not in consultants’ interests to make it transparent. A good place to start is the internet. There are websites dedi- cated to sourcing consultants and other temporary staff that will give you a rough idea of potential daily rates, but they do tend to focus on the lower end of the market. There are studies of the industry, but they are not always freely available. Even if you get hold of one, their categorisa- tions of consultants may give you some ideas, but generally are too broad to base your own fees on. A good source of information is your personal network. Ask a few friends who hire consultants regularly, and you may be able to get a feel for the sort of rates the big firms charge. These tend to be higher than independents achieve, although this is not always true. The best way to get a feel for rates is to find someone with some experi- ence of the industry and ask them what they think you will be able to charge. Never forget, whatever fee rate you expect or want, it actually depends on a client being willing to pay it.
Next you need to estimate how many days a year you will work. If you are new to consulting, do not be overly optimistic. Can you really work S days a week for S2 weeks a year? That gives you 260 chargeable days a year, but you should never assume that what you make is 260 times your daily rate. You will rarely be 100 per cent utilised – and even if you can be, do you really want to be? As a rule of thumb, assume you will be busy 100 days a year. You may well be a lot bUSier, but if you cannot afford to be a consultant working only this many days you are taking a significant risk. Many consultants make a very comfortable living on thiS, and many more are busy for considerably more than 100 days a year. But it is best to be conservative at the start of your career.
There are several other factors you must consider. There are possible tax efficiencies of being self-employed or running your own business. You
Consultants and consultancy
need professional advice to understand these fully, and tax legislation can change at any time. Remember, if you are becoming a self-employed consultant after a career in industry there are none of the benefits that you may have received in your previous job. There are no extra pension contributions, no bonus, no paid holiday, no health care or sick pay, no car allowance, etc. Additionally, you should not confuse income with cash flow. Consulting tends to pay big bills in dribs and drabs, and some clients can be very slow in delivering cash into your bank account. I am usually paid reasonably promptly, but some invoices have languished for six months before finally being paid. You need to have a float of money to cover for these periods.
For a consulting firm with multiple employees the economics are much more complex. Costs cannot be ignored. Business costs for
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