UK: WHERE IT'S AN INSIDE JOB. - Some companies still find a need for internal consultants.

Last Updated: 31 Aug 2010

Some companies still find a need for internal consultants.

At one time it was common for major companies - the likes of ICI and Unilever - to have internal consultancy resources available for deployment wherever they might be needed. Did subsidiary A have a manufacturing problem, or division B a distribution problem calling for mathematical analysis maybe? The fire brigade was standing by. Today, although some firms have their experts in 'change' - and myriad cross-functional teams are at work on projects of every kind - the consultants have all but disappeared.

In the enthusiasm for downsizing and outsourcing, they have been tossed overboard along with the rest of the head office top hamper. After all there are plenty of management consulting firms out there, eager for the call.

But here and there internal consultancy operations survive. It may be because of the particular nature of the industry. Since RTZ Corporation aims to be the lowest cost producer across the entire mineral range, it is seldom shy about retaining some of the highly specialised consultants that operate in the mining sector. But for the same reason, as head of public affairs John Hughes points out, the group also maintains its own centres of technical expertise both in the UK and in Australia. The Shell Group, which is an even more famous exponent of downsizing than RTZ, has similarly kept certain internal consultancy services intact.

Michael Goold of Ashridge Strategic Management Centre, who is co-author of a study of head office functions, accepts that internal resources of this somewhat rarefied nature are wholly justified: 'where you have a more cost-effective and skilful group than could be obtained from any outside source'. Nevertheless, he argues, 'the basic logic for putting work out to third parties is fairly strong ... If anything, people are tending to outsource more than they used to do.'

At the same time, there are clear signs of a counter trend developing.

Glaxo-Wellcome, for example, might reject the notion of an internal consultancy department but over in New York Bristol Myers Squibb has only recently set up a 'management consulting and innovation group'. Led by a recruit from McKinsey, this undertakes the usual range of logistical, marketing, organisational and strategic tasks, sometimes in association with external consulting firms.

Back in the UK, Legal & General's 25-strong development group performs much the same function, even providing an interface with outsiders - on whom the company spends more money. But John Harwood, who heads the group, claims that, 'We aim to cover our costs, and we do'.

It's usually argued in favour of internal consultants that they know the business, its language and culture. This can have a downside, as Harwood allows, since they can be mesmerised by its problems. But if the outsider is better placed to initiate radical change, his solution - as consultant Mark Thomas points out - is often based on information that is already available inside the organisation. In any case, the outsider may take his (considerable) fee and run, leaving the company with few additional skills and ill-equipped to bring about recommended improvements.

Thomas, who is one of the principals of a UK firm called Performance Dynamics, argues energetically (also in print, since he is co-author of a book called Supercharge Your Management Role) that people in support functions - such as finance, HR, IT and procurement - should strive to become internal consultants as well. They often possess technical expertise, he points out, but need to develop the interpersonal skills for dealing with 'clients'. This might even preserve them in the next round of downsizing.

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