Chartered Management Institute: In my opinion

Demonstrating added value and striking a better balance with managers are critical for the future of business consulting, says KPMG's Alan Downey, a CMI Companion.

Last Updated: 09 Oct 2013

More often than not, consultants get a bad press. Some years ago, the Independent ran a feature on consulting under the headline: 'Think outside the box: don't waste money on advisers'. In January, a Conservative consultation document, It's Your Money, complained of 'a massive overuse of external consultants' by government departments. Some commentators have been barely able to suppress their delight at the thought that the recession might hit consultants particularly hard.

The reality is that consulting is a hugely important industry for the UK economy, generating as much as £9bn a year in fees. It covers a wide range of disciplines and activities, from strategic advice to the implementation of IT systems and the outsourcing of services. The value it adds is publicly acknowledged by many of its customers. And it continued to grow even during the difficult trading conditions of 2008.

However, it would be foolish to deny that consultancy has an image problem, and it will face a real challenge as clients tighten their purse-strings and review their need for external support and advice. In my opinion, this will prove to be a good thing, for both the consulting profession and business generally. It will lead to a shake-out of those consultancy services that fail to offer value for money and to a clearer and more satisfactory distinction between services that should be provided in-house, by managers, and those that should be contracted out, to consultants and advisers.

There's no doubt that, in some cases, the balance between managers and consultants has been struck in the wrong place. This is perhaps most obvious in parts of the public sector, where consultants have been brought in not to provide scarce professional or technical expertise for a limited period, but rather to undertake tasks that might be better undertaken by permanent managers and staff. Some of the larger government programmes, such as ID cards and the National Programme for IT in the NHS, have at times relied on external support to a degree that is unsustainable.

Manpower substitution, as it is known, can sometimes be justified for a short time while an organisation recruits the people it needs, but it is often a waste of money. Worse, it can create a vicious cycle in which managers become demoralised and unsure, and habituated to the use of consultants. It's much harder to object to the use of external advisers if they bring specific skills and knowledge that the client organisation wouldn't wish to recruit on a permanent basis, to address a clearly defined business problem.

Of course, the acid test is whether consultants demonstrably add value. In the current economic environment, clients increasingly expect value to be measured in hard financial terms: did the project lead to an improvement in the bottom line, whether through an increase in revenue or a reduction in costs, or both?

Consultants are also increasingly expected to 'put some skin in the game' - to place part or all of their fee at risk, depending on a successful outcome. Risk-reward deals require consultants to think long and hard about the benefits of the service they provide and about their ability to deliver on their promises.

So who will be the winners and losers among the many different types of consultants and advisers? I expect there to be an increasing emphasis on professional expertise. Advisers who are recognised as genuine experts in their field will always find a good market for their services. In future, they may prefer to dispense with the 'C' word - to refer to themselves not as consultants but, for example, as financial advisers or technology delivery partners. The Institute of Business Consulting has an important role to play as the professional body for the industry. I am confident its focus on developing, promoting and recognising professional standards will continue to benefit both its members and the buyers of consultancy services.

The other side of the coin is that consultants who cannot demonstrate value in straightforward, tangible terms will struggle. Few clients will want to buy generic services and solutions, particularly if they are presented in the impenetrable jargon for which consultants are sadly infamous. Clients want robust opinions and clearly articulated solutions to their problems, presented in plain English. They want solutions that will work in practice, in the particular circumstances of their organisation and the environment in which they operate. They want to work with consultants who will see the job through to a successful conclusion - and that means consultants will need to demonstrate their track record in implementation, not just in devising strategies and writing reports.

If I'm right in my prognosis, we'll end up with a consulting industry that is both stronger and more highly valued. The days of double-digit year-on-year growth for consultants may be at an end. But if clients spend their money more wisely, and are happier with the value they get as a result, that can only be in the long-term interests of both managers and consultants.

CV - ALAN DOWNEY is a partner with KPMG. He leads the firm's public sector business in the UK and is also its global head of healthcare. He has worked with a wide range of clients, mainly in the public sector, but also in the financial, transport and leisure sectors. He is the immediate past chairman of the Institute of Business Consulting.

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