Clients killing the consultant-client relationship

My recent comments challenging a scathing critique of the consulting industry have in turn generated a flood of feedback from our loyal readers. Many of you felt the original article was outrageously one-sided, whilst a few of you actually admitted that consultants’ clients can sometimes be taken for a ride.

The whole debate reminded me of a pertinent statement John Niland made at a recent Top-Consultant seminar. He said consultants should, at all costs, avoid situations where the client ends up receiving a bill based on a calculation involving day rates. His argument was essentially that the very concept of day rates puts the interests of clients and the short-term interests of the consultancy fundamentally in conflict. (As an aside, John will be speaking in London on 17th June – details here for those of you interested)

So if John’s theory is right, are purchasing departments shooting their organisations in the foot by forcing consultancies down a day-rates approach to pricing? Many consultancies would say they are…

Fixed Fee vs Day Rate billing

Given a fixed fee project a consultancy can deliver on the assignment as it sees fit and earn its profit by working smart and by creating a winning solution that turns the client into a lifetime customer. The consultancy is incentivised to achieve results quickly and cost-effectively, because it’s their margins that are eroded if they don’t.

What happens all too often in practice is that consultancies are engaged to provide a consulting team on a day-rate basis where there's additional profit to be made each day that the team remains on site. This creates an incentive for scope creep, where the boundaries of the agreed project are pushed further and further and cost overruns are passed onto the client.

In this kind of scenario, the essential challenge of completing an assignment on time and within budget is sidelined. The client 's interests are no longer aligned with those of the consultancy, pure and simple.

However where does this problem originate and are consultancies therefore really to blame? In my own experience, it is clients’ insistence on breaking proposals down into the component team members, their day rates and volume discounts that poisons the consultant-client relationship. Clients are scared of committing to a fixed budget - and therefore paying “excessively” for actual services delivered. The temptation to challenge the fee by breaking it down into its parts is just too much.

Oh for a world where consultants were paid an agreed amount for an agreed project deliverable and then left to run the project like the mini-business-venture that it is. Unfortunately the proliferation of purchasing departments and PSLs is driving the consulting industry further and further down the day-rates path – and away from this ideal. So the consultant-client relationship is increasingly poisoned and consultants take the rap, when actually we're on the receiving end of pushy purchasing departments. I kind of feel this is like the pot calling the kettle black!! Anyone out there agree with this sentiment or care to add additional thoughts?

Tony

Big firms cranking up recruitment drives

I've met with several of the biggest brands in consulting this last week and I have to tell you the news is all good - for candidates that is. Without exception consultancies are all talking about the need to hit recruitment targets that - in their words - are "scarily high". The combination of growing client demand and worsening staff attrition has elevated recruitment (and retention) to being firms' number 1 priority for the remainder of 2005.

BT's new series of recruitment evenings for consultants in the early stages of their consulting careers is just the latest in a raft of company careers events that add to the perception that recruitment drives are being accelerated. Such events were commonplace during the dot-com boom, but being costly to organise they are something you tend to only see taking place when firms are pulling out all the stops to recruit. It's telling that Accenture, BT, Ernst & Young, IBM and PA Consulting have all invested in such events during the first half of 2005.

We'll be revealing details of our October Careers Fair in the next 10 days and the number of top brand consultancy firms attending is a further indication of the buoyancy of the market.

What's happening in your firm? Do post your anonymous comments below - would be great to share reader insights from as many firms as possible.

Tony

A.T. Kearney sale to go ahead

The future of A.T. Kearney has been the subject of speculation for longer than I can remember. First ATK is essential to the future of EDS, then it's not...

... this weekend though it's looking more likely than ever that A.T. Kearney will be sold by EDS for several hundred million $s, following an interview between EDS CEO Michael Jordan and Reuters in which Jordan confirmed plans to sell the ATK business later this year - and through a sale of the business to the firm's senior executives rather than to a competitor. For the full story see Reuters

Anyone know of any reason this wouldn't go through this year?

Tony

Independent knifes consulting industry

I do believe I've just read the most shamefully one-sided article ever to be written about the consulting industry. The offending publication is The Independent and the article is entitled "Think outside the box: don't waste money on advisers"

The piece goes to great lengths to characterise consultants as dishonest individuals who charge outrageous amounts for their advice and singularly fail to deliver any value to their clients. We aren't quite referred to as criminals, but certainly our business activities and ethics are portrayed as being the lowest of the low. Reputable names like McKinsey, Accenture & Capgemini are all dragged through the mud and I struggled to find a single positive comment about the profession anywhere in the article.

I've nothing against consulting projects and firms being put under the spotlight when they fail to deliver - but surely a reputable publication like The Independent should at least be putting forward both sides of the argument??!

I hope plenty of you read this article and are outraged by the slander to your professional integrity. Then next time you are deciding where to spend your advertising budget, be sure to have this piece fresh in your mind.

In the meantime, keep busting a gut for your clients - mostly they will appreciate your efforts and initiative, despite The Independent's best efforts to demean what it is you do

Tony

Old boy network meets its match!

Ask any Partner at a consulting firm how important their network is and chances are you'll find it's an integral tool in how they go about winning new work. Small wonder so much is written about the importance of the "Old Boy Network" then!

So hats off to the Management Consultancies Association for organising a Young MCA networking group. I was invited to the launch event last week, kindly hosted by BT Consulting and Systems Integration at the magnificent BT Tower in London, with the guest speaker sponsored by Atos Consulting.

And what an event it was!

~100 young consultants were there from many of the World's leading firms including the likes of Accenture, Atos Consulting, BT, Deloitte, etc. During an excellent opening presentation we learnt how to "work a room", a skill seen as critical for all aspiring Partners. We learnt the importance of icebreakers, elevator pitches and how to extricate oneself from a dead-end conversation!

All valuable skills which we then got to put into practice during a networking / drinks session atop the BT Tower. A truly excellent initiative and can I say thanks to all those readers that came and sought me out during the evening. Very uplifting!

There are a whole series of similar events planned during 2005 and these will be open to consultants from any of the MCA member firms (to check if your firm is a member see: http://www.mca.org.uk/MCA/Members/MemberList.aspx). The objective of the Young MCA group is "networking, sharing of knowledge and best practice, in a fun environment with a fundraising element where possible."

To find out more about joining the group and the forthcoming events planned simply contact Natalia Kay at the MCA: natalia.kay@mca.org.uk

Hope to see you at a future event! Tony