Three questions to better appraise the value consultants offer

Three questions to better appraise the value consultants offer

Why would I need to hire an external consultant? Why rely on someone from outside the company? Aren’t I capable enough to handle the challenges on my own? Some of that thinking is ego driven and some is the fear of the unknown. In this insight I show you, through answering three simple questions, why relying on external consultants can support you in a constructive way.

Many companies, and especially middle level managers within those companies, have yet to figure out how they can benefit from resorting to external consultants rather than trying to address all opportunities and issues internally. Buying consulting services is often seen as admitting failure. This is unfortunately a short-minded and often incorrect view. It is not sensible to expect from a manager that he (or she) is an expert in all areas surrounding his area of responsibility, include those that are not core.

Before better understanding what an external consultant can do for you, let me start by defining what a consultant is. According to the Merrian-Webster dictionary,


a consultant is a person who gives professional advice or services to companies for a fee”.
Merrian-Webster dictionary

This definition outlines the three main characteristics of any consulting engagement:

  1. It is about people – You hire people to advise you or provide a service tailored to your needs. You do not buy a methodology, effort, or a generic solution.
  2. It is about trust – Drawing upon consultants is about accessing knowledge that you trust to be of value to you.
  3. It is about return on investment, sometimes called, return on consultancy – You invest today in advice or a service that will unfold its value only later. You take a financial decision under uncertainty today expecting a net positive contribution in the future.

It is important to understand that a consultant is different from a contractor [*]. Consulting is not about offering flexible resources (labor) or selling assets (material). Consulting is about providing value to the buyer through delivering professional advice or services that satisfy a specific need.

When should you hire a consultant?

You benefit from partnering with external consultants when trying to address any of the two types of challenges:

  1. You want to develop and / or pursue a new opportunity.
  2. You want or have to solve a complex problem.

Both types of challenges have one property in common: They require knowledge, whether experience or expertise, that is not readily available internally in sufficient quantity and with sufficient quality. In addition you do not considered is reasonable to build-up the required knowledge internally, due to a lack of sustainability, resources, and / or time.

Any external consulting engagement must always be finite in time. Otherwise the focus on results is lost.

Sample situations where external consultants add value

You have uncovered a customer need for which you want to offer a new investment solution. You could take advantage of an external consultant running an innovation process to develop an investment solution satisfying the identified need.

Gaining fresh insight on how to improve an existing business process or reduce client servicing costs with respect to regulatory requirements may be another example where reverting to external consultants will be worthwhile.

What kind of consultant suits your needs best?

Once you have identified a challenge where seeking advice from an external consultants will be of value, you need to decide who to hire. In addition to selecting an individual expert or a team that you trust and believe can provide a positive return on consultancy, you need to ask yourself what traits you are looking for.

Consulting traits can be characterized along three dimensions, as illustrated in Figure 1:

  1. Experienced resources – Consultants providing this trait support you by extending your pool of available resources with people that have experience in addressing similar challenges than the one you are approaching. Large consulting companies are successful in satisfying this trait as they can revert to a large pool of knowledge from past projects and of junior resources.
  2. Subject matter experts – Consultants providing this trait offer value to you through being experts in specific areas. Three categories of experts are relevant
    1. Methodology experts – They are skilled in developing, customizing, and applying frameworks and models to understand, structure, and solve business challenges.
    2. Industry experts – They know a specific industry or business area inside-out. They can provide best practice and benchmarking knowledge.
    3. Soft skills experts – They are skilled in techniques focusing on individuals, groups, teams, and their interactions. Such skills are moderation, negotiation, conflict resolution, to name just a few.
  3. Outside opinion leaders – Consultants providing this trait add value through a fresh, and possibly critical, perspective on the challenge to be addressed. Although outside opinion leaders are often subject matter experts, they are in addition renowned, independent and operate outside of any political corset.
Figure 1 - Dimensions of consulting traits

Figure 1 – Dimensions of consulting traits

Individual consultants as well as consulting companies generally have a core strength in one of these dimensions, but provide value along all of them.

Similarly as a small consulting boutique can rarely provide you with sufficient experienced resources, large consulting firms that have a high junior to senior consultants ratio, are often not the best subject matter experts. Consultants focusing on soft-skill value added services are rarely methodology experts.

What can you expect from a consultant?

Successful consultants provide you with results that lead to value creation for you and your company. The focus is never on deliverables and the unit of measurement is never time.

A successful consultant will …

Input oriented expectations

  • be thoroughly listening to you and understand your specific challenge,
  • be speaking your language and making complex interdependencies understandable to you,

Approach oriented expectations

  • support you with out of the box thinking and introduce non-consensus opinions,
  • deliver tailor made solutions adapted to your challenge and your organization’s characteristics, like your capacity for change,

Outcome oriented expectations

  • deliver results that lead to actions which in their turn lead to value creation in excess of the consulting costs, and
  • assure know-how transfer to assure sustainability of the proposed solutions.

It is important to understand that the success of any consulting engagement depends on your willingness to engage, that is, “get you hands dirty”. If you are reverting to consultants to “outsource” your challenge, you will not be provided with lasting value.

How Diderich Consulting fits into the consulting world

We at Diderich Consulting offer consulting engagements based on subject matter expertise focusing on business modeling expertise combined with in-depth wealth management industry knowledge. In addition, we provide outside opinion with a fresh and especially critical perspective. If you are looking for someone to challenge your thinking, we can be your partner.

In contrast to some of the larger consulting firms who have their senior people market the practice and junior people do the work, we at Diderich Consulting offer you first hand access to our knowledge maximizing the benefits for your organization and make it more successful.

[*] A contractor is a person that undertakes a contract to provide material or labor to perform a service or do a job.

  1. Comment by Claude Diderich on September 13th, 2014 | Reply

    An interesting article on the same topic, but from a different perspective:

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