When it comes to engaging a consulting firm for help, client expectations are all over the map. Some see the consultant as a great change agent who will bring new insights and dramatic results. Others see a consultant as a threat. Still others see a consultant as a tool to leverage their agenda, even if that agenda does not align with the companies goals.
- Technical skills. Whether it is information technology skills with your SAP implementation or technical accounting skills with the latest FASB pronouncement, consultants are often brought in to fill a specific technical need that your staff doesn’t currently have. The best scenario is to utilize a consultant for technical knowledge that is needed now but won’t be needed long term or, if needed long term, to help your train your team.
- Additional manpower. The second instance of bringing in help is when an organization just needs additional manpower. This model works best for companies that have a short-term need and need to ramp up staffing quickly. By bringing in temporary help, the company can avoid the overhead associated with bringing new resources on-board and the political baggage that may result from letting those people go when the job is finished.
- Management skills.The third model for bringing on talent is when additional management skills are needed. This can be in the form of management consultants to help you complete your post-merger integration work or can be to vertically integrate into your organization and to serve as leadership to staff in areas of the organization where you are weak. Like hiring consulting talent for technical skills and additional manpower, this should be seen as a time-boxed exercise with an end date in mind.
- Time and materials. This fee structure is an hourly rate or a daily rate with potential provisions for minimum and maximum number of hours per day. This works best in a model where there are multiple deliverables, the deliverables are undefined, or you are augmenting existing staff.
- Fixed fee.This fee structure is typically aligned with a well crafted scope for a known deliverable. The advantage of this fee model is that the buyer knows the costs upfront. The disadvantage to this model is that without scope modifications, you are locked in to a specific time and deliverable. The fixed fee structure may not be ideal if you want flexibility. Fixed fee arrangements work in scenarios where you need the consulting firm to accept part of the delivery risk.
- Success fees.This fee structure ties payment for services to financial or other measurable results. The fees are typically structured as a percentage of cost savings. This type of fee structure can be a double edged sword; if the cost savings are large, clients can feel that they are being taken advantage of. Choose a success fee arrangement with caution. A best practice is to include a success fee as part of the overall fee structure with the rest of the fee structure coming from either fixed fee or T&M.
- The scope of the assignment: what is included and (more importantly) what is not included
- The benefit you hope to achieve
- The timing, effort, duration and any other assumption you have
- Roles and responsibilities, which key staff will be involved and how much of their time will be needed
Hiring a consultant need not be a painful process for your organization. If structured in the right way, it can help your company enhance shareholder value in a shorter timeframe.