Consultants Manager\'s Perspective on Hiring

Consultants

Manager's Perspective on Hiring an Outside Consulting Firm

Hiring a consultant is often a costly endeavor for a firm. However, there are times when an outside consultant is necessary. When the job entails skills that are outside the core competencies of the firm, it is sometimes necessary to engage the services of an outside consultant. However, there are many questions involved in this decision that must be considered in the process. For instance, does one hire a consultant on a permanent basis and make them an inside consultant, or should one hire an outside consultant every time there is a need. This research will explore the pros and cons of the working managerial relationship with outside consultants.

Opinions differ as to the pros and cons of hiring an outside consultant, as opposed to taking on another staff member. Consultants are supposed to represent the best and brightest in their given field. However, for every positive experience, one will find a negative experience. Ultimately, the blame usually falls on the consultant when things do not work out as planned. However, more often failed consulting relationships are the result of miscommunication and a mismatch in goals. The most important aspect of the relationship between executive leadership and the consultant is the ability to communicate goals clearly. If executive management and the consultant are not clear on common goals and objectives, it is next to impossible to develop a positive working relationship.

When to Hire a Consultant?

The primary question that management must decide is when to hire an outside consultant and when to use internal talent. Another question is when to hire a consultant and when to hire a new employee for the job. There are positive and negative aspects to all of these various perspectives. As other business sectors crumble under high-energy prices and the credit crisis, the consulting business continues to grow. One of the key reasons for this growth is that as times get tough, businesses want to make certain that they are operating as efficiently as possible (Daks, 2008). This is a key reason why many businesses hire an outside consultant.

However, the question remains, why not just use inside talent to do the job? The answer is that an outside consultant has a different perspective and can see things differently from someone inside the firm. There may also be political factors within the company that would prevent an insider from giving their absolute honest opinion. For instance, they may not wish to criticize management's position on certain topics. Criticisms will be viewed differently if they come from a paid consultant. Comments will not be as likely to be taken personally from an outsider.

In a recent study, Koh, Detmar, & Straub (2004) found that meeting supplier obligations was the single-most important factor in building excellent customer relations for it outsourcing agents. In meeting these obligations, the consultant brings in a variety of experiences that go beyond those of someone who has worked at the same company for many years. They have seen many different situations and therefore, have a different view than an inside employee. They have seen what works and what does not work (Paris, 2008). Consultants can focus on the specific problem at hand, rather than having to handle the problem in the midst of other normal activities of the day.

Some managers question the real value attached to the consultant's performance. Consultants are expensive and managers question whether they received a good return on their investment, or if their money would have been better spent elsewhere. In a study involving practicing school psychologists acting as consultants, it was found that the presence of these professionals significantly improved the outcomes of students (Winn, Skinner, Allin, et al., 2004). This is only one example, and there are differences in individual circumstances and outcomes. However, it would appear that at least in some cases, the consultant is worth their fee.

Executive/Consultant Relationships

One of the most important relationships in the consulting experience is that between executive management and the consultant. These relationships have the potential to be volatile, particularly when it seems that the consultant wishes to undo some of management's best-made plans. Information Technology represents a field that has a tendency to hire a high number of outside consultants, usually on a project-by-project basis. Lee, Miranda, & Kim (2004) identified three dimensions of it outsourcing. They are the degree of integration, allocation of control, and the performance period. They also described consultants as independent and embedded.

Many times the sole selection criteria for the consultant is price. However, the ability to add value to the firm should be the key primary concern (Lee, Miranda, & Kim, 2004). The objective of the firm is typically to maximize profits. However, this cannot be done without minimizing costs. Managerial focus tends to gravitate towards maximizing profits. The consultant typically focuses on minimizing costs. Both of these operations are symbiotic, but management often feels as if the consultant is focusing in the wrong area (Lee, Miranda, & Kim, 2004). The resulting friction is simply a result of differing viewpoints and perspectives.

Another key factor in building a positive relationship between consultants and managers is that the consultant chosen must be matched to the goals and overall style of management (Panepento, 2007). The consultant chosen should be able to communicate effectively with management and to be able to envision similar goals. Personality conflicts between the consultant and upper management can be devastating to the project (Panpento, 2007). It is important to choose the correct consultant for the managerial style of executive management.

Managerial opinions of what consultants are worth are decidedly mixed (Cocheo, 2005). The bottom line is that all consultants are not the same. Managerial relationships with the consultant play a major role in perceptions of the services of consultant after the invoice for services arrives. The manager is more likely to view the services of the consultant in a positive light if the consultant was able to establish a good relationship with them (Cocheo 2005). Management must understand what the consultant will and will not do during the term of the relationship.

Managers often resort to hiring an outside consultant when they are in trouble. They often have high aspirations and view the consultant as a type of savior who will blow in and fix all of their problems. Often the consultant tells them things that they already know (Cocheo 2005). In this case, the manager may feel that they have not received their money's worth from the consultant. However, when this happens, it is often due to unrealistic expectations of management. The consultant is there to do just that, consult. Management and the rest of the firm must take the actions that will result in a better situation.

The most important factor in establishing a positive relationship that will result in long-term benefits for both parties is to make certain that managerial goals and expectations are clear from the beginning. Communication is the key to establishing a long and fruitful relationship. Understanding goals and expectations is the key to this relationship. Unless these goals and expectations are established, the consulting relationship is likely to fail.

Internal Consultants

The internal consultant represents a complex relationship. They are a type of embedded consultant, which often entails a longer-term relationship with the firm than the independent contractor. The internal consultant can have a long-term obligation by way of a long-term contract, or they may be directly hired by the company. Both of these circumstances have unique characteristics that differ significantly from the external consultant.

The first distinguishing characteristic is that the internal consultant may have only one or a few major contracts. Therefore, they have a higher stake in an individual firm than the external consultant that has a larger client base. The internal consultant is more dependent on the client for their sustenance. This increased stake has an impact on the functions and results obtained in the consulting relationship.

One key advantage to this type of relationship is that because the consultant has a greater stake in the client, they are more likely to work hard to please them. They will be more likely to work towards an answer that management likes and is willing to implement. This is positive, in respect to the establishment of a wholesome and lasting relationship. The internal consultant will get to know the company and the needs of the company more intimately than the external consultant does.

However, this relationship has several disadvantages as well. The internal consultant has a greater stake in pleasing management than the external consultant does. Therefore, this need to please may cloud their judgment or make them tempted to soften the blow when the news is bad. They have a stake in managerial reactions. For this reason, they may not be as brutally honest as the outside consultant may. Although the relationship with the internal consultant may appear to be more positive, it may have a detrimental affect on the ability to provide an objective opinion.

External Consultants

The external consultant can bring fresh ideas to the firm. However, they may also be at odds with staff, as they are not as familiar with the norms of the company. The external consultant is often with the firm on a short-term basis. As soon as the project is over, they will move on to the next client on the list. Of course, they hope to establish a relationship that will be fruitful in providing work later, but this is not always the case. Their focus with a particularly client is always short-term.

The external consultant may be focused only on the problem and not how the problem relates to the normal functioning of the business. They do not have this level of insight into the internal workings of the company. However, their opinion may be more objective than that of the internal consultant. They will not be biased due to fear of rejection by a key client. Objectivity is the key advantage to the external consultant. The external consultant brings with them the ability to look at a problem as an outsider would look at the problem, without the influence of company politics.

One of the key disadvantages of the external consultant is that they are often more costly than the internal consultant, but this is not always the case. According to Kulpa (2007), you get what you pay for and a good consultant will cost more than a less experienced one. Consultant fees are closely related to their reputation, the more happy clients they can conjure up, the higher they can charge.

However, there is another side to the sticker shock experienced when one hires an external consultant. It is true that their hourly rates sound ridiculously high, as compared to the hourly rate that managers pay their employees. Many do not consider the hidden costs of a full-time employee in this equation. With a full-time employee, one has to pay for medical insurance, dental insurance, 401K matching, worker's compensation insurance, and other out of pocket expenses for an internal employee. These benefits can add up to amounts that rival the hourly rate charged by a good consultant. Managers often do not acknowledge the hidden costs of an employee vs. A consultant, but the costs are real and do have an impact on the profitability of the company. If the consultant is the right match, they can offer many more returns than the internal employee can and the fees only accrue for the duration of the project. They will not accrue weekly, as with a full-time employee.

One of the key concerns with external consultants are the horror stories about bad consultants that are abundant. It is easy to become a consultant, just proclaim yourself an expert and open your doors. However, the ease with which one can enter into the field is alarming. Earlier in this section, price was mentioned as a key to finding a reputable consultant. However, Chin (2007) cautions that price is not everything and that there are unscrupulous people out there in the consulting business. Chin categorizes bad consultants into several types: the snake oil salesman, the lonely derelict, the self-proclaimed idol, the doomsdayer, the slacker, and the step lightly. These descriptions are self-explanatory and describe every manager's worst consulting nightmare. The risk of hiring one of these personalities is a key disadvantage to hiring an external or internal consultant.