The consulting company with the deepest pool of talent in the world doesn’t exist. It’s the collection of independent consultants and small boutiques scattered around the world, all operating independently. However, if this group were a single firm, it would dominate every category in the WhoKnowsAbout global rankings in terms of breadth and depth of expertise.
That there is very high capability in these small suppliers shouldn’t be a surprise.
Some of these consultants used to be senior staff in the leading global consultancies before setting up their own shop. Rene Gram was an Associate Principal at McKinsey before he left to set up Prokura, a highly respected Procurement and Supply Chain boutique based in Denmark. Similarly, Chandra Mouli Kotta Kota had experience at Tata Consulting Service and McKinsey before co-founding specialist analytics training company AnalytixLabs. Prior to founding Canback, a unique consulting firm working in predictive analytics and consumer knowledge, Staffan Canback was a partner in Monitor Deloitte and McKinsey.
The large global firms are a major source of independent consultants. Former staff of MBB (McKinsey, BCG, Bain) alone number about 18,000 consultants and many of these prefer to ply their trade in the smaller consultancies where they can better control their professional life and better focus on client issues, without the inevitable distractions of big firm operations.
Industry is also a major source of high quality independent consultants. Bill Kinney spent 29 years with Walmart where he led the expansion into 19 countries before setting up his own Retail advisory practice. Rob Chivers had more than 20 years’ experience in Fixed and Mobile Telecommunications, much of that time in senior roles at Vodafone, before establishing Atlantex Consulting. Bart Flaherty was a senior Marketer with Pepsi and has now established Optimization Partners, a data driven marketing agency that seeks “to make data very profitable for executives to use”. Paul Everitt uses his 30 years of experience in Lean Manufacturing with the major automobile manufacturers and suppliers to help other companies deploy this technology through their operations.
A third source of independent consulting talent is academia. Matt Ohlson is an Assistant Professor at University of North Florida who advises institutions on issues in the Education industry. Many other academics have deep specialist skills relevant to industry.
Finally, there are talented individual who simply prefer the freedom of self-employment. Ya'akov Yehudi, a self-described autodidact, worked extensively on Information Security issues for the Israeli government before establishing his own consultancy.
The table below provides examples of the types of talent available from smaller consultancies across each of WhoKnowsAbout’s 30 knowledge categories. Click through to read the profiles of these highly experienced consultants and see some of the deep expertise available.
|Primary Industries||John Ganser||www.linkedin.com/in/johnganser||Downstream Consulting|
|Energy||Arthur Berman||www.linkedin.com/in/arthur-berman-b188b01b||Labyrinth Consulting Services, Inc.|
|Power & Utilities Sector||Neso Mijuskovic||www.linkedin.com/in/neso-mijuskovic-36567a60||Independent Consultant|
|Chemicals & Basic Materials||Francis Mirabella||www.linkedin.com/in/francis-mirabella-2331585||Mirabella Practical Consulting Solutions, Inc.|
|Manufacturing Industries||Kurt Pickard||www.linkedin.com/in/kurt-pickard-6b66469/||Kurt Pickard & Associates|
|Transport & Travel||Desiderio Fernandes||www.linkedin.com/in/desiderio-fernandes-6a385336/||Logistics Consultant|
|Retail & Wholesale||Bill Kinney||www.linkedin.com/in/bill-kinney-308aba19||Kinney International Retail Consultants|
|Consumer Goods & Services||Alesia Bock||www.linkedin.com/in/alesia-bock-815a4a32||AgriSystems International|
|Pharmaceuticals & Biotech||Roy Bohenzky||www.linkedin.com/in/roybohenzky/||Independent Consultant|
|Healthcare Sector||Valerie Rinkle||www.linkedin.com/in/valerie-rinkle-83666037||Valorize Consulting LLC|
|Financial Services Sector||Clive Bastow||www.linkedin.com/in/clivebastow/||Eliptica Financial Limited|
|Telecoms & Technology||Rob Chivers||www.linkedin.com/in/rob-chivers-4b4bbb7||Atlantex Consulting Limited|
|Media & Entertainment||Lance Young||www.linkedin.com/in/lancelyoung/||Consultant Specializing in Entertainment & Media|
|Public Sector & Defense||Matthew Ohlson||www.linkedin.com/in/matthew-ohlson-ph-d-924b7830||Assistant Professor, University of North Florida|
|Social Sector & Nonprofits||Ferdousi Sultana Begum||www.linkedin.com/in/ferdousi-sultana-begum-aa958b6a||Social Development and Gender Specialist|
|Data Analytics & AI||Chandra Mouli Kotta Kota||www.linkedin.com/in/chandra-mouli-kotta-kota-09620713||Co-Founder, AnalytixLabs|
|IT & Security Consulting||Ya'akov Yehudi||www.linkedin.com/in/informationsecurity||Information Security Consultant|
|ERP & CRM Systems||Jason Rauh||www.linkedin.com/in/jrauh||JRauh Consulting|
|Human Resources||Jamie Ripman||www.linkedin.com/in/jamieripman||Practive Ltd.|
|Sourcing & Supply Chain||René Gram||www.linkedin.com/in/renegram||Prokura A/S|
|Sales & Channel Management||Steve Farfsing||www.linkedin.com/in/stevefarfsing/||Revenue Stream Caribe, LLC|
|Marketing & Branding||Bart Flaherty||www.linkedin.com/in/bart-flaherty-b0bb636||Director, PIIKU|
|Strategy & Planning||Staffan Canback||www.linkedin.com/in/scanback/||Managing Director at Canback|
|Transformation & Change||Louise Haris||www.linkedin.com/in/louiseaharris/||SToS Consulting Inc|
|M&A||Mauro Fiorucci||www.linkedin.com/in/mauro-fiorucci-1069252||Opportune LLP|
|Economics & Regulatory||David Stallibrass||www.linkedin.com/in/david-stallibrass-87340239||First Principles Economics|
|Financial & Risk Management||Robert Fiedler||www.linkedin.com/in/robertfiedler||Liquidity Risk Corp.|
|Corporate Affairs & PR||Sue Vey||www.linkedin.com/in/sue-vey-59b4385/||Reputation Management Consulting|
|Sustainability & Environment||Neil Franklin||www.linkedin.com/in/neilfranklin69/||Daemeter Consulting|
The key insight is that there are very high levels of expertise within smaller boutiques and among independent consultants. Consulting clients may find more capability in this sector than in the larger consulting firms, especially for very specialised skills.
Of course, the constraint to date has been one of efficiently identifying these hidden gems.
WhoKnowsAbout has now resolved this, mapping the capabilities and experience of more than 500,000 consultants in each of 7,000 knowledge areas. This makes it easy to identify the consultant with the specific expertise you require, and it means that smaller consultancies can more efficiently ‘transmit’ their expertise to a wider range of prospective clients.
While many of the larger firms in the consulting industry seek to be a ‘one-stop-shop’ for clients, offering a broad range of services, there are others who aim only be very, very good at a few things. Today we profile three of these firms that, while they may not have the scale of the Big 4 or an MBB, offer capabilities that can rival these larger firms in their individual areas of focus.
The first is MuSigma. Founded in 2004 by former PwC and Booz Allen consultant Dhiraj Rajaram, Mu Sigma is the number one ranked company in the WhoKnowsAbout Global Ranking in the Data Analytics category. MuSigma largely invented the role of the modern data scientist and now has more than 3,500 professional staff. More than a quarter of the Fortune 500 turn to MuSigma for assistance in capturing the value opportunities that derive from Big Data in production, sales and logistics.
Beyond its obvious strength in Data Analytics MuSigma also scores well in Marketing & Branding, driven by its expertise in Customer Analytics and quantitative Segmentation.
All the large consultancies are investing heavily to build their expertise in Big Data and Analytics, but MuSigma remains, at least for the moment, the firm to beat in this area.
Another ‘product’ specialist is TBM Consulting. TBM provides advice on Operations and does it very well, being the top company in this category in the WhoKnowsAbout Global rankings.
Based in North Carolina but with offices in China, Canada, Mexico, Chile, Germany and the United Kingdom TBM works with manufacturers to drive efficiencies in their operations and supply chain. TBM’s focus is on standardizing and optimizing production processes to drive productivity and safety. TBM’s consultants bring expertise in Lean Manufacturing, Quality Management and Continuous Improvement that cannot be matched by any of the mainstream large consultancies.
We also see firms with deep expertise in particular industry sectors. While Huron Consulting Group operates across several industry sectors, its deepest expertise is in the Healthcare sector, where it holds the number one position in the WhoKnowsAbout rankings. Over the last 15 years publicly listed Huron (NASDAQ: HURN) has worked with more than 450 health systems, hospitals and academic medical centers, primarily in the United States, to improve operational performance and respond to changing regulatory environments. It has made a number of recent acquisitions particularly in the areas of electronic health records and large-scale data processing.
Huron has leveraged its expertise to build strong practices in Pharmaceuticals and Biotech, in Financial Services and in the Education sector, but it is in Healthcare that it has distinctive competence and remains the premier consulting supplier.
There are many other examples of smaller firms who are very competitive with mainstream firms in their chosen areas of specialisation: ZS Associates in Sales and Marketing, especially for the Pharmaceuticals industry; YSC in Leadership Development; Partners in Performance in Operational Improvement, especially in the Resources industry. There are also firms that have regional strength - Roland Berger Strategy Consultants in Europe, ABeam Consulting in Asia - but which may not be well known to managers in other geographies.
The mainstream firms have strong capabilities in many areas, but the specialists offer strong alternatives. The ‘one stop shop’ offer clearly has appeal for many clients but we would advise that, given that consultant expertise is the key driver of consulting project success, it is worth understanding which firms and individuals have the strongest capabilities. Previously this was difficult but WhoKnowsAbout now makes it easy for a manager to search for and connect with the companies/consultants with the specific expertise required to deliver the highest value on the consulting investment.
Deloitte, EY, KPMG and PwC are the world’s four largest professional services firms and are often collectively referred to as the ‘Big 4’.
Each of these firms has a significant consulting division. Deloitte is ranked number one overall in the WhoKnowsAbout Global Management Consulting Rankings, ahead of KPMG, PwC and EY in positions 5th, 6th and 7th respectively (see Figure 1).
Figure 1 - WhoKnowsAbout Global Top Ten Management Consulting Companies
As these ratings suggest, all four firms have strong capabilities across all major industry categories and functional topic knowledge areas.
Figure 2 shows the Industry expertise map for each of the firms.
Figure 2 - Big 4 Industry Expertise
Deloitte has the highest average score of 84 (where 100 would represent best in class capabilities in every industry sector) while the others are clustered at scores in the low 70’s. However, there are some distinctive differences in capability that contribute to these similar overall scores.
Deloitte scores well in almost every category with particular strength in Public Sector & Defense and in Retail & Wholesale. Both KPMG and EY are stronger than Deloitte in Transport & Travel sector while PwC is the strongest firm in Power & Utilities Sector and is also very competitive with Deloitte in Telecoms & Technology sector.
Table 1 shows each firm’s strength in each industry sector, indexed to Deloitte’s score, allowing relative strengths to be easily compared.
Table 1 – Big4 Industry Capabilities (Indexed to Deloitte)
Similar analysis was also conducted for each firm in relation to each WhoKnowsAbout topic area. Here Deloitte scores 92, while the others are in the low 80’s. As a group, the Big 4 occupy the top 4 positions in terms of functional knowledge.
Figure 3 - Big 4 Functional Topic Expertise
Deloitte’s overall advantage stems from its strength in IT & Security Consulting, ERP & CRM Systems, and to a lesser extent, Marketing & Branding, however the other three firms are all rated stronger in Sustainability & Environment issues.
Table 2 summarises the firms’ strength relative to Deloitte in each functional topic sector.
Table 2 – Big4 Functional Topic Capabilities (Indexed to Deloitte)
So, the analysis shows that the Big 4 all offer strong capabilities across most industry sectors and functional topics but that Deloitte achieves the overall highest ranking through its consistent strong capabilities plus best in class capabilities in a few critical areas.
For many, three companies – McKinsey & Company, The Boston Consulting Group (BCG), and Bain & Company, often referred to as MBB (for their company initials) - represent the ‘three peaks’ of the Management Consulting industry. The consistently rank amongst the most desirable and prestigious places to work and there would be few Fortune 500 companies that do not rely on frequent advice from at least one of them.
In many ways, this is not a surprise: it was McKinsey’s Managing Director from 1950 to 1967, Marvin Bower, who largely defined the propositions and processes of the modern management consulting firm. BCG founder, Bruce Henderson, introduced important competitive concepts such as the ‘Experience Curve’ and ‘Growth Share Matrix’ which led to the emergence of ‘strategy consulting’ sector. Bill Bain evolved the consultant role from episodic, impartial advisor to long-term development and implementation partner who would pursue the interests of only a single client in each industry.
So what makes these companies successful? Where are their strengths? Do they have weaknesses? Let’s shine some WhoKnowsAbout analytical light on the MBB complex.
The first observation, which will come as little surprise to anyone, is that these three are very competent management consulting suppliers. In the WhoKnowsAbout Global Management Consulting Capability Rankings McKinsey & Company is placed second, BCG is third and Bain, despite its smaller scale (Revenues of $2.3 billion compared to McKinsey’s $8.8 billion and BCG’s $5.6 billion) ranks ninth. (see Figure 1)
Figure 1 - Top 10 Global Ranking
If we compare McKinsey and BCG in terms of Industry expertise, as shown in Figure 2, McKinsey is scored higher in 11 sectors – the largest advantage is seen in Primary Industries, Power and Utilities, Energy, Healthcare and Pharmaceuticals & Biotech – while BCG is stronger in 3 sectors, especially Retail & Wholesale and Transport & Travel.
Figure 2 - McKinsey vs BCG: Industry Expertise
On topic knowledge, as shown in Figure 3, McKinsey’s advantage is less pronounced. McKinsey leads in nine categories to BCG’s five, but there are only two each where the score difference is greater than ten: McKinsey has significantly more strength in Operations and in Sustainability & Environment, while BCG has greater depth in Strategy & Planning and Transformation & Change.
Figure 3- McKinsey vs BCG: Functional Expertise
When McKinsey is compared to Bain, the differences are more stark. As shown in Figure 4, Retail and Wholesale is the only industry category where Bain would outscore McKinsey. On topic expertise, as shown in Figure 3, Bain is also stronger than McKinsey in Strategy & Planning (where it is the top ranked firm, just slightly ahead of BCG) and Transformation & Change (where it just trails BCG).
Figure 4 - McKinsey vs Bain: Industry and Topic Expertise
Strong as these firms are in many areas, there are categories in which they would not be the ‘natural supplier’. Table 1 below lays out the categories where the MBBs trail the category leader by more than 20% in the WhoKnowsAbout competency calculations.
Table 1 – MBB Capabilities vs Best in Category Supplier
In Public Sector and Defence Booz Allen Hamilton is assessed as significantly stronger than the best of the MBB (in this case, McKinsey). Steer Davies Gleave in Transport and Travel, Deloitte in Healthcare and DAI in the Social Sector would all be firms that even habitual buyers of MBB should consider.
Similarly, Deloitte (in ERP Systems, IT Consulting, and Financial & Risk Management), ICF (in Sustainability), RBB (in Economics), FTI (in Corporate Affairs) and Korn Ferry Hay Group (in HR) all offer topic expertise that would match or exceed that offered by McKinsey, BCG or Bain.
So, the message is that these ‘three peaks’ all offer strong capabilities but that prospective clients should understand the differences amongst them and should also recognise that, for some issues, other firms outside the MBB group have more expertise and experience to draw on.
Figure 5 below provides a visual summary of how MBB expertise maps relative to each other and the best in the industry.
Figure 5 - MBB Industry and Functional Knowledge Comparison
If you could only hire one management consulting firm, that firm would be Deloitte.
In the WhoKnowsAbout global management consulting capability ranking, Deloitte is the top ranked firm overall. Deloitte is ranked first in seven of our 30 categories and ranked no lower than 13th in any category. Part of Deloitte’s strength is its breadth of coverage; Deloitte has a significant presence in every in of our topic and industry categories. Acquisitions have been a major contributor to this position. Some key transactions include: the acquisition of DOMANI Sustainability Consulting and ClearCarbon Consulting in 20111; the purchase of strategy consultants Monitor Group in 2013, and advertising agency Heat in 2016.
From its origins as one of the first accounting practices in London more than 170 years ago, Deloitte is now the world’s largest Professional Services firm with 225,000 staff operating across 6 main services areas: Audit, Tax, Consulting, Financial Advisory, Enterprise Risk and Legal. About 65,500 staff are involved in Consulting and Advisory.
Deloitte has best in class capabilities in 5 topic areas: IT & Security Consulting; ERP & CRM Systems; Sales & Channel Management; Marketing & Branding, and; Financial & Risk Management – and is included in the Top Five firms in 8 other of these categories.
Figure 1 - Deloitte Functional Rankings
Specific topic areas where Deloitte is particularly strong include:
Deloitte is the top ranked firm in 2 industry sectors - Financial Services and Healthcare – and in the Top Five in 10 others.
Figure 2 - Deloitte Industry Rankings
Some of the range of expertise available from Deloitte can be seen in the profiles below:
In part A of this post I observed that the returns achieved on management consulting projects are often disappointing, with more than 70% of projects assessed as not creating value for the client organization. However, successful outcomes on the other 30% of projects mean that the return across the full portfolio of consulting projects is positive overall.
This pattern of 'hits' and 'misses' can be seen across the performance of all the major consulting firms. The problem does not appear to be driven by 'good firms' and 'bad firms' since even the most reputable consulting firms deliver a significant number of projects that are deemed as unsuccessful by the client.
So, what is the problem, and how can the client organization improve the return on consulting investment?
Insight into this question can be found in what is probably the most rigorous study of the drivers of consulting project success to date: ‘Success Factors of Management Consulting’ carried out by Matias Bronnenmayer and others, published in the September 2014 edition of the Review of Managerial Science.
The study sought to identify how each of seven factors drove the success of consulting engagements from a client perspective. The seven factors identified were:
The authors surveyed executives from 255 major German companies who had deep experience with management consulting engagements to identify how these factors were associated with consulting project success and client satisfaction.
The key findings are shown below.
Figure 1 - Return on Fees
Perhaps unsurprisingly, but notable nonetheless, is that Consultant Expertise is far and away the largest driver of consulting project success. Process and organizational factors matter to an extent, but unless the consultant brings the specific expertise relevant to the issue at hand it is extremely unlikely that positive results can be obtained.
Another very significant finding of the study was that the level of Trust between the client and the consultant did not help bring about positive project outcomes. The authors notes that a high level of Trust with the consultant may “convince the client to waive special screening activities, such as investigations regarding the consultants’ skills, competences or expertise”.
We believe these findings go a long way to explaining the mixed performance of management consulting projects. Where clients ensure a good fit between the project requirements and consultant expertise, significant value can be unlocked. However, projects in which the consultants are engaged based on relationships, informal recommendations and other aspects of Trust will be much more varied in their results. This is notable as existing relationships are often relied upon by clients when considering which consultant to engage for a new project. Indeed, many of the major consultancies encourage this through the establishment of a dedicated ‘relationship manager’ who seeks to sell more consulting work to the organization on the basis of familiarity and trust. Companies sometimes go further and institutionalize these relationships into a ‘panel’ of suppliers, which not only limits the potential pool of expertise available to them but makes them much more likely to assign work to consultants without ensuring a strong requirements/expertise fit.
So, to drive improved return on their consulting investment, clients should:
Strong organizational support and disciplined project execution are also necessary, but to drive improved returns from consulting investment, consultant expertise is the king. We believe that organizations can improve their returns on consulting investment by 25% through the rigorous application of these principles.
This is the logic that has shaped the development of WhoKnowsAbout. We have identified the areas of strength for more than 500,000 individual consultants globally. We can aggregate these assessments to provide rigorous measures of capability at the firm level and team level (and, importantly, those areas where expertise is low or absent). Buyers of consulting services are now in a better position to identify and engage qualified consultants based on what really matters – the consultants’ expertise relevant to the issue at hand.
In 2015 I published an article (What are the 'hurdle rates' for management consulting projects?) that asked what rate of return managers were expecting when they invested in a management consultant engagement. One reaction to the question from some organisations was puzzlement - they manage external professional services as 'spend' rather than 'investment' and, to the degree that they have performance objectives, these are typically based in cost control i.e. set a budget for annual consultant spend and make sure it is not exceeded.
This is a bad way to manage consulting expenditure. Every dollar of consulting 'spend' should be managed as an investment and be subject to the same disciplines as capital and other investments.
A company should buy (what are typically costly) consulting services when they face internal capability bottlenecks – where the consultants can provide specialised expertise not available within the client organisation.
These bottlenecks are unlikely to be stable or predictable, so an annual budget for this type of activity will lead to either overspend or underspend: in the scenario that the consultants are not actually required, budgets will still tend to be spent (remembering that next year’s budget will almost certainly be reduced if this year’s is not fully consumed), while attractive investment returns will not be captured if the budget cannot accommodate engagement of the assistance required.
A better approach is to treat each consulting engagement as an investment. If the incremental value created by the consulting engagement (relative to the 'no-consultant' scenario) exceeds the organisation’s investment hurdle then the engagement should be funded; if not, make the best of the situation without consultant’s assistance.
Discussions with several managers who were managing consulting investment in this way led me to estimate that investment in consultant engagements was 'induced' when the expected return was in the order of 2.5-3 times the cost of the engagement.
However, managers were not expecting to achieve these returns; they recognise that they will have a series of 'hits' and 'misses' across their portfolio of consulting investments leading to a net return across all projects slightly above 2 times, implying a hurdle rate of about 50%.
I came across some data the other day which broadly supports this view, although it seems that my estimate of the net returns on consulting investment may have been optimistic.
Source Global Research, a research house specialising in the management consulting industry, "carry out large-scale surveys of CXOs and their direct reports, asking for their views of consulting firms". As part of their demonstration of their Client Perception System they reported on the perceptions of value by almost 1000 clients who had completed engagements in the United States with the major consultancies.
The data, which I have summarised in Figure 1 below, shows that these clients reported an actual return of about 1.7 times the project fees from their consulting engagements.
Figure 1 - Return on Fees
What was most striking for me about the data was the degree of variation in returns generated, with some engagements generating returns that were more than 10 times the consulting fees, while almost 10% of all projects failed to even cover their costs. What’s more, this pattern of varied performance was exhibited by almost every consulting company (all of whom are in the top 30 consulting companies in the WhoKnowsAbout global competency ranking).
To me this highlights the importance of the Client Requirement/Consultants Capability fit. All consulting companies have their areas of general strengths and weaknesses, and have varying capabilities across their consultants. Where a company engages consultants with deep competency in the issue at hand, high rates of return can be achieved. However, if the fit between client need and consultant capabilities is weak, either at the firm level or within the engagement team, then results can be disappointing. This is not to suggest that other factors can also influence a project’s success e.g. consultant-client trust, client consultant collaboration, top management support, etc. However, as we will outline in part B of this post several studies have demonstrated that consultant capability in relation to the problem at hand is the key determinant of project success.
These findings support the logic that led us to establish WhoKnowsAbout. By enabling clients to efficiently identify the consulting companies and the individual consultants who have the specific skills required for the task at hand the overall returns on consulting investment can be improved. In our next post, we will outline why we have focused, at least in the first instance, on experience and expertise and why we believe that this is the most critical factor in consultant selection.
We are pleased to release the WhoKnowsAbout global competence ranking of Management Consulting companies.
These rankings build on our analysis of the skills and experience of more than 500,000 individual consultants to provide a quantitative assessment of the competence of nearly 1200 consulting companies in each of 15 Industry and 15 Functional topic areas.
The overall top ranked company is Deloitte. It has the highest ranked competency in five Functional categories – ERP & CRM Systems, Financial & Risk Management, IT & Security Consulting, Marketing & Branding, Sales & Channel Management – and two Industry categories – Financial Services Sector and Healthcare Sector – providing an overall competency score of 87 (where 100 represents the leading company in each category). Its share of aggregate industry competence is 2.3%.
McKinsey & Company is ranked second with an overall competency score of 85, driven by best in class capabilities in six Industry categories.
Boston Consulting Group is ranked third, with a score of 80.
The top ten companies by overall rank are shown in Figure 1 below:
Table 1 below shows the leading company in each Industry and Functional Category.
Table 1 - Category Leaders
Research shows that only about 40% of consulting projects create value for the client organisation and that the specific capabilities of the consulting team are the key determinant of this. Until now, buyers of consulting services could only rely on the general reputation of consulting companies when sourcing a project team.
The WhoKnowsAbout rankings allow buyers to identify the firms and individual consultants that have the specific expertise required, offering a much more reliable track to securing value through consulting projects.
 - Companies with greater than 20 employees
Despite the scale of the Management Consulting market – about $250 billion of sales annually – corporate purchasing practices in this sector are surprisingly casual. Managers often rely on their relationship with the few suppliers they know well or select consultants based on brand attributes. Some companies have established a panel of preferred consulting firms whose overall capabilities they have assessed, but this approach ignores capability variations across the consultants and teams provided by the panel firm. It can also have the perverse effect of limiting the range of expertise available to the manager.
Unsurprisingly, results are mixed. Research shows that less than 10 % of consulting projects fully achieve their objectives and that the average project scores only about six on a ten-point scale of success. The specific capability of the consultants involved, which is identified as a key determinant of project success, generally becomes clear only when the project is well underway.
WhoKnowsAbout has been designed to help large organisations quickly identify the management consultants who have the specific experience and expertise to assist with the issue at hand.
We have ranked more than 500,000 consultants, from the large global brands to local boutiques and independents, against 12,000 topic and industry knowledge areas. A simple search interface allows users to quickly find potential suppliers and efficiently develop a high quality ‘shortlist’
Let us know what you think.
Originally published on December 12, 2016 in LinkedIn Pulse.
I’ve been thinking a lot lately about how companies buy management consulting services. This has led me back to a slightly more fundamental question as to the economic incentives that underpin the decision to buy these services i.e. what is the economic rate of return that needs to be on offer to ‘induce’ a manager to engage consultants?
The economically rational manger will spend/invest in anticipation of an economic return that exceeds her ‘hurdle rate’. In considering whether to engage consultants she will need to form a point of view as to whether the expected benefits arising from the consulting engagement – e.g. better operating performance, a more effective organization, better understanding of an existing risk or a perceived opportunity – provide an adequate rate of return on the fees that she will need to pay the consultants for their work. (note: in considering this, she should only recognise the incremental value that the consultants will bring relative to the ‘no-consultants’ scenario; consultants are often engaged to support high value opportunities and commonly make claim to ‘delivering’ the full value of the situation. In fact, their value relates only to the acceleration and/or improved capture of the opportunity associated with their activities).
From my own observation, I have postulated a target project NPV of about $2.7 per dollar of consulting spend ( based on a simple model where each dollar spent on consultants today provides the company with a dollar benefit in each of the following five years).
This target is set in anticipation/recognition that some projects will fail to deliver the anticipated benefits and that the net return of the consulting project portfolio will be significantly lower than the project target. For example, if ten percent of projects fail to deliver their expected return, the portfolio return drops to about $2.3 per dollar of consulting spend.
Again, my observation would suggest that the he average 'success' of projects is only about 60% (a mix of failed projects and/or projects which only partly meet their objectives). This leads me to calculate an expected net return on the consulting project portfolio of around $1.2 (basically, double your money across the portfolio of projects) and an implied hurdle rate in the 50% range.
Any views on this out there? I know that most managers wouldn’t explicitly do these types of calculations as part of the decision to hire consultants, but do these numbers ‘feel’ right? What is the ‘risk free inducement rate’? What proportion of projects fail to deliver on their target? By what amount? What is the ‘net return on consulting’?
Originally published on December 12, 2016 in LinkedIn Pulse.