Improving Returns from Management Consulting Investment (Part B)

Photo credit - Bonnie Natko

September 25, 2017 12:45

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:

  1. Common Vision – client and consultant have clear, shared view of the specific project objectives, deliverables and outcomes.
  2. Top Management Support – top management clearly signals its commitment to the consulting project in the organisation.
  3. Trust – Client has high level of trust in consultant based on prior experience and/or strong recommendations from trusted advisor
  4. Consultant Expertise – there is a good fit between the capabilities needed to reach the defined project objectives and the expertise (specialist knowledge, industry know-how and project experience) of the engaged consultants
  5. Provided Resources – Client makes high quality team members available to consulting project (and they are not distracted with other competing commitments)
  6. Intensity of Collaboration – client makes required internal resources (information, feedback, etc.) available to consultant and provides opportunities for feedback and alignment.
  7. Project Management – project is established with a rigorous project management framework including plans, coordination meetings and performance monitoring

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 note 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:

  • Put consultants' expertise at the top of their evaluation criteria when engaging consultants
  • Actively search out expertise and not rely on the consultants with whom they already have a ‘relationship’
  • Rigorously evaluate the capabilities of the individual consultants nominated for the project team, and not rely on broad firm-level reputation.

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.

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