First i have to come clean.  I spent just under 5 years with global management consultants McKinsey & Co in the late 90′s and do have a new consulting business, Classified Ad Ventures, that provides online classified businesses with advice and guidance on what to do next.  That said … on with the discussion!

There are two types of consultants – those that are there to help management think through problems by bringing in specific expertise and those that are there to work with existing staff for a a specific project (e.g. customise SAP).  My comments are really around the first group – the strategic and operational advisors to management.

Management walk a fine line when they use consultants.  When used well, consultants can help a management team see clearly what they need to do.  When not used well, they chew up time, resources, set unrealistic expectations and merely restate what the management team already knew – but in a neat story and with nice charts! 

The best use of consultants usually involves a clear problem that needs solving, the problem being the most important to the business, and a management team that has knows what it wants to do and has the ability to do it.  The consultants challenge the current thinking with a goal of delivering a more robust outcome.  The consultants need to have strong subject matter expertise to make sure that the management team doesnt spend heaps of time bringing them up to speed. 

However, uing consultants has downsides and often it is the downsides that eventuate.  One downside is that consultants become a crutch for a business.  The management team relies on them more than the internal team as they are the “experts”.  It can get to the more ridiculous situation where management cant make a decision without consulting the consultants first – i have seen it!

Another downside is that once the consultants are in a business, management tend to rely on them rather than the team who are employed there.  This can create a division and a perceived lack of trust between the management team and the empoyees.  As the employees often have to implement the recommendaions of the consultants (if they get implemented), this can lead to “white anting” of a series of recommendations.

Another downside is that expectations are raised to unrealistic levels.  The consultants present to the Board – either directly or indirectly – what a business could in theory do and the Board latches on to these opportunities and then starts to think that the management team should be able to achieve them.  The problem is that most management teams that are good dont use consultants – they just get on with it. 

A final downside with using consultants is that they are often very smart people who have strong logical minds but have not actually run a business of the size they are consulting to.  They are passionate but not necessarily qualified in some of the things they are making recommendations on.

So when should you use consultants?  That is clear – use them on specific projects that need some sort of change implemented that the current management just cant make happen.  For examle, they can be used at the mid-manager level on projects such as cost reduction.  The discipline they bring to the problem will help achieve greater results than if left internally. 

They should also be used when management is entering unchartered waters and know that they are out of their depth.  The consultants should have deep industry expertise and experience and should focus on short and sharp recommendations.

The bottom line is that if the management team knows what it is doing and is tight knit, they probably wont need to use consultants – they will intuitively know what to do and will just get on with it!