Show me the Money!

We noticed a growing trend by clients in the past four or five years to push back hard on consulting fees.  

We understand that most corporate clients are still fighting their way out of the financial crisis.  The fact remains that negotiating a fair contract is critical to the success of a project, and it is in the client’s best interest that this is the achieved outcome of a consulting engagement.  In fact, we would go further and say that it is the fiduciary duty of the executive who signs off on a consulting contract to ensure that they have negotiated a contract that makes sense for both parties.  Let us explain why.

At CCG we are deeply interested in understanding what leads to strategic change initiatives either succeeding or otherwise.  Research done by various parties conclude that at least the majority of change or strategy assignments fail either in their entirety or at least fail to delivery intended ROI (however this is defined).

We believe that a key reason for such a dismal failure rate is inadequate contracting between the client and consulting provider.

Let’s provide you with more detail on this thinking:

1. You get what you pay for in terms of the quality of the firm you hire.  This seems self-evident enough and we generally understand that a less experienced firm would either not be able to deliver at all on a particular assignment (because they might not have experience of delivery on every aspect of the value chain on a particular assignment), or they would certainly not deliver as efficiently as a more experienced provider.  Efficiency is this context refers to time a provider would have to spend in understanding a client problem or challenge, providing a solution to that problem, and then implementing a solution.  And this presumes that a new kid on the block even has the experience to provide all three legs of the stool, which is doubtful.

Efficiency also refers to the impact of fees on the level of incentive to really pay attention to your assignment.  In our experience it takes time to build trust with a client and it is only once a deep level of trust is present that a client will begin to share sensitive information and their real concerns.  This information is critical to consultants in order to build sustainable strategic solutions.

2. If a consultant is selling before listening long and deeply to a client sharing their concerns, then the best we can do is flog yesterday’s solution delivered to a client in perhaps a very different sector (and with very different concerns), and not be present to the current client’s troubles today.

Unfortunately this is a position that (in our view) we are often forced into as consultants, because it takes a lot of courage to tell a new client (that you hardly know, is often anxious to find a solution, and is often not sharing the full story) that they will have to engage in a series of conversations before you can deliver the goods.

Why is this important?

1. We believe we need to change the nature of the client-consultant relationship, from one of arms-length consultant, to close collaboration within a relationship of deep trust within which both parties run a mutual risk of failure (this speaks to the issue of fees and could be the topic of a future blog).

2. Clients need to manage their relationships with consultants more carefully, by engaging with and choosing consulting partners long before the need for their services arise, based on aligned values and a shared concern about a successful outcome.

If we can get these two things right, we believe that we will relieve a lot of pressure from both parties, and ensure a much higher level of successful strategy implementations than the current figures (research shows us that only 30% of such engagements are successful).

One more (contentious) point: It is our experience that clients are increasingly interested in consultants providing implementation solutions in addition to expert advice.  In my view, many of the big consulting houses have steered away from this (more risky) work, and focussed instead on delivering thick decks of well-constructed slides.

As a profession, we will build a lot more credibility, enjoy more satisfaction (and, dare we say it) secure an additional and lucrative income stream, if we are prepared to think through difficult problems, and then make the suggested solutions a reality.

In order to do this successfully, we believe that we need to be willing to invest in building relationships with clients from the get-go; and relationships that are based on rigorous engagement and honest reflection (both ways!).