Management Perspective: Selecting A Consultant  

One of the most troubling issues to business management is, "How to select a Consultant?" All of us in the consulting profession are aware of this concern. Most of us have, at one time or another, tried to address it.

Some clients want to know what size of firm can best meet their needs. What do the large mega-firms do best, and what can better be accomplished by a smaller, focused firm or a sole practitioner? Fortunately the size questions have straightforward answers. In general, small is good for custom. In general, big is good for standard.  Size tradeoffs.

It is harder to know who to choose for your consultant, as the best consulting engagements are relationships. My standard contracts with clients acknowledge this issue.  Looking back over a decade of consulting, I think my best engagements were those where I helped a manager or business owner to improve not just their business prosperity, but also their lives. I insist on an early review point to gauge satisfaction (the client determines "satisfied") and allow adjustment or disengagement.

The issue of consultant selection can be difficult, if not perplexing. In today's world, clients can often get better service -- not just more cost effective, but better -- from the smaller, boutique consulting firms provided that they select the right consultant. However, today's market is also swamped with downsized job seekers, temporary contract workers, and others of dubious qualifications or ethics who still may term themselves "consultants."

Getting Started. While most managers are experienced in hiring employees, retaining a professional consultant is not the same thing. Unless you have recent experience in retaining an attorney or firm outside your organization, you could probably use advice in how to hire a consultant. For example, there are many regulatory agencies (including the IRS) ready to pounce if you mistakenly use "employee like" practices or nomenclature to retain an independent contractor. Mistakes in this area may create significant liabilities for both the client and the consultant as some major firms are discovering. Professional consultants have standard contracts and practices to help prevent such problems by preserving the independent contractor relationship. IRS Guidelines.

The practice of downsizing and then hiring back workers has created a lucrative opportunity for regulators. The IRS loves to nail corporations for "misclassified employees" and then collect millions in penalties and interest. Microsoft case.

Innocent use of the wrong words can get you into big trouble with regulators. While you can fire or layoff employees, you discharge independent contractors by "terminating their contracts." (All my contracts have simple termination clauses.) While you direct or manage employees, usually consultants and independent contractors work against mutually-agreed-to statements of work. These SOW addendums focus mostly on "whats" (deliverables), not "hows."

Example: You might retain an attorney to secure intellectual property protection, but you would not normally direct him at a detail level in how to do his job.

Seemingly logical attempts at courtesy or economy are also being exploited by regulators. Simply furnishing an office or Internet access to a consultant can bring "misclassified employee" charges. In many engagements, travel is a major cost element. Resist having your travel department make bookings for consultants. So doing, however well intentioned, can bring on those costly federal or state charges of "misclassified employees."

I use my computers to find economy rate business-class airfare for my clients. I also pass on any travel discounts that I get through my professional organizations. I maintain a corporate aircraft as a business tool, and when we use it I charge my clients the lower of  the aircraft rental rate or what the airfare would have been if booked at the time the trip was scheduled. (To hub cities, airfare is usually less if booked three weeks in advance. To non-hub cities or on an on-demand or urgent basis, the aircraft often costs less.) Naturally, if travel can be scheduled early, I may be able to find other business in that locale. If so, everyone wins as I can share these costs between clients. (Two contemporaneous clients in one city may = half the air travel cost!)

Compensation arrangements and fees should always be discussed with the consultant. While employees are paid salary or hourly wages, consultants are paid fees. These fees may be tied to project scope when that can be defined. (That may necessitate a small "phase zero" engagement to scope the work.) Alternately, consultants could be paid monthly retainers, daily or hourly fees, etc. Regardless of the size of the consulting firm, such fees embed the normal costs of doing business. For example, if working on an hourly fee basis, the bulk of the fees go to the consultant's firm (to cover business costs), not in his or her pocket.

When possible, I prefer to avoid hourly fees for my clients' protection. I don't want them reluctant to call or meet "because the meter is running." Still, with that said, hourly fees remain by far the most common arrangement in the profession.

A friend and colleague, Curt Kampmeier, CMC, wrote an article in the May 1996 Journal of Management Consulting that set forth what he thought were the characteristics of the best Management Consultants.

It was an excellent article, and it was well accepted. Another colleague, Dana H. Shultz, CMC, summarized it into 7 key points in his newsletter. Curt and Dana suggest that business owners and managers should look for the following when selecting a consultant:

1. The Straight Shot -- a consultant who has the freedom and courage to challenge client perceptions and the strength to bring another point of view. That's how clients gain the benefit of the consultant's experience.

2. Breadth and depth of experience -- knowledge of what many organizations have done, rather than just one or two.

3. A long-term orientation -- interest in a relationship rather than a single project. It takes time for the consultant to understand the client's situation and for the client to trust the consultant's judgment.

4. Seasoned judgment -- insights rather than facts. The right flash of understanding allows the client to act with confidence and purposefulness.

5. A focus on the client's goals -- not the consultant's. Certified Management Consultants pledge to a code of ethics that says that the client comes first.

6. Knowledge of the basics -- how to solve problems and make decisions.An experienced consultant can use proven techniques and tools to move a project ahead efficiently and effectively.

7. Help -- not dependence. By encouraging the client to participate effectively in decision making and implementation, the consultant ensures that the client will be better positioned to solve the next problem that comes up.

                                                                   John D. Trudel, CMC

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