Caution: Consultant Ahead

This month's topic is on the use of consultants. Being provocative and controversial, we always run the risk of somebody taking our advice personally. That is not our intent. Our comments should be taken as food for thought, not as a comment on any individual.

We should say up front: We are wary of consultants, particularly those whose deliverables are elusive, the quality of whose results is subjective and whose effectiveness is immeasurable.

Quoting the old cliche, do consultants simply borrow your watch to tell you the time? Consultants come in varied types, providing a variety of services. We offer a taxonomy of three types of consultants.

The first type is Talent for Rent.

You need a specific talent - a web designer to build your web pages, a lawyer to write a contract, a tax preparer to prepare your taxes, etc. Your choice is to hire or rent. This is purely a financial decision. You decide that you do not have long term needs for this talent, or enough need for the talent to hire a full time person, so you decide to rent the services on a fee for service basis. Typically, these are very specialized skills and the product of their services (a web page designed, a contract prepared, tax papers filed) is usually mostly objective. The decision to hire such consultants is purely a financial decision between hiring and renting.

The second type of consultant is a Teacher - essentially, a walking, talking, book.

This is somebody who has extensive knowledge on a specific subject matter. You hire them to give a talk, a course, a seminar, a workshop, etc., so that you can get a lively experience of that book. The book, whether written or unwritten, does not change based on the audience. The consultant might choose to focus on specific chapters in their book based on your needs, but the pages of the book were already written before they walked into your facility.

Examples include a project management course, a safety seminar or a leadership workshop. Since they know the book in great detail, and since they have infinite capacity to index into that book, they can answer questions on the spot. But they are merely drawing from the pages of that book. The decision to hire such a consultant is essentially a decision to buy a live performance of the book.

The third type of consultant is an Advisor - somebody who studies your situation and gives you advice on what you should do.

The assumption is that, even though you and your colleagues have an in-depth understanding of your situation and have examined the issues in great detail over a long period of time, this consultant can walk in, examine your situation over a limited period of time and provide you with advice that you might not have considered.

The premise with these consultants is that their advice is useful for one of two reasons. First, even though their understanding of the situation is likely to be more shallow than yours, their breadth of knowledge and experience allows them to come up with ideas, suggestions and solutions of which you might not be aware. Second, because you are so close to the situation, you might be too constrained in your thinking to entertain certain solutions that might be more obvious to an outside consultant. We question the first premise and provide alternatives to the second.

We question whether, in most realistic business situations that are usually quite complex and deeply constrained, an outside consultant can gain enough of an understanding to offer you advice more meaningful than you could have created.

Is the consultant's breadth of experience and depth of general knowledge so vast that it will compensate for their more shallow understanding of your situation? How about the advantage of their outside perspective? We agree that an outsider will have a perspective that might be overlooked by the insider. But there are other ways of making yourself more open to thinking out of the box that would help you in the long run. We think that by developing the ability of you and your organization to constantly question why you do things the way you do, or think the way you do, creates a more long term solution for the need for an outside perspective, than hiring a consultant to provide that perspective on individual instances.

Another problem we have with the "advisor" consultant is that the quality of their advice is often difficult to measure and they get paid before the results can be measured.

So, if you choose to hire such a consultant, we suggest that you compare the cost of their advice against the cost of a guarantee. Understand how much it would cost to get the advice you are seeking. Ask the consultant how you could measure the results of their advice should you choose to implement it. Then ask the consultant how much risk premium the consultant would need to charge should you structure the payment contingent upon achieving the results. Their response gives you a measure of their confidence in their advice. With that information, you can then choose to hire the consultant on a fee for service basis, on a contingent payment upon deliverables basis, or not hire them at all.

We have explored similar models for the workshops we offer.

What if we offered people the option of paying for the workshop after they have attended it based upon their satisfaction? To be fair to the people who pay up front, those that choose to pay later would have to understand that they would have to pay a premium amount after the workshop if they were satisfied with it. We would love to hear your thoughts on this idea if you care to share.

Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.1