Business of Consulting: Client Relationships

Business of Consulting: Client Relationships

The nature of consulting has changed a lot in recent years. Clients are more sophisticated and many[…]

(Published in the Financial Times on November 18, 2005. Read the original here. )

Organisations turn to consultants for a variety of reasons; some want a quick fix to a pressing problem, others seek a deeper, long-term relationship.

Irrespective of the type of engagement, both parties need to work hard at understanding their relationship if they do not want it to end in divorce.

“The best relationships are characterised by candour and the participants’ clear-eyed recognition of each other’s frailties,” says David Nadler, chairman and founder of Mercer Delta Consulting, a New York management consultancy.

But relationships between consultants and clients are often fraught with misunderstandings. One common problem is the gulf between what a client wants and what the consultancy believes it has been engaged to do.

Andrew Sturdy, professor of organisational behaviour at Warwick Business School in the UK, says consultants work in four main areas: they provide expertise, supply staff, facilitate change or legitimise – essentially “quality checking” a decision already taken.

Some engagements require the consultant to work in all these areas but today many clients prefer to use consultancies for specific projects in which the project’s scope and the role of the consultant should be clearly defined.

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For example, work in the “legitimisation” category has taken off in recent years because of the growing emphasis on corporate governance, according to Prof Sturdy. Nevertheless, few consultants like to see their role reduced to one of rubber stamping a chief executive’s pet project, so frictions can arise here.

Because of the potential for misunderstandings, experts say it is important to pick the right consultant for the job. “The process for picking the consultancy needs to mirror the type of relationship desired,” says Mr Nadler.

The obvious place to start is to look for a good basic fit between what the consultant proposes and what the client has specified. But this is far from the only dimension, cautions Mr Nadler, and usually this filter serves only to reject the more opportunistic proposals.

The client is then left to choose from a shortlist of consultancies that on paper look much the same.

Recently, Mercer Delta was in a “bake off” between three consultancies, each with “dramatically different” approaches, according to Mr Nadler. “But if you read our [competing] proposals, they looked like they were from the same firm,” he admits. Mercer Delta ultimately won the engagement, from publishing house, McGraw Hill.

Mercer Delta specialises in organisational change and leadership, and at this rarefied level it is particularly difficult for clients to put their finger on what exactly they want from a relationship.

Even for consultancies that do more run-of-the-mill work, such as IT projects or outsourcing, subjective factors still play an important role.

“Inevitably, there is a level of qualitative assessment as well as quantitative due diligence in choosing a consultant,” says Richard Walker, managing director of financial services at BearingPoint. The nature of consulting has changed a lot in recent years. Clients are more sophisticated and many now have consultants on their own payroll – one of the side effects of the dotcom collapse was that unemployed consultants went to work for former clients.

That means consultancy and client increasingly speak the same language – consultant speak. They may have similar social and educational backgrounds, and may even have been to the same business schools.

“Clients are becoming more like consultants. Indeed, it can be difficult to tell them apart these days,” says Prof Sturdy.

Companies are less deferential to consultancies and less inclined to believe they offer a “single version of the truth”. This change colours working relationships, as companies increasingly want to work with consultancies in a more collaborative way. “They do not want to hand over the keys and let the consultant make decisions for them,” says Mr Walker.

To avoid culture clashes when working together, companies now try to weigh up the “softer” attributes they are looking for when considering pitches; some even add a column called “client relationship” to their assessment matrix.

But this is not an exact science and, given the problems trying to assess objectively the merits of firms, subjective factors play an important role. This is particularly the case for high-level strategy consulting where the decision is often left to the chief executive.

At a practical level, that makes sense: after all, the chief executive will need to spend a lot of time with the chosen strategy consultant, so it is important that there is a rapport.

But there are obvious pitfalls if the consultancy is seen to be closely associated with the chief executive, not least the problem of “regime change”: if the chief executive is fired or leaves, the consultancy loses its principal sponsor.

Mr Nadler has seen a lot of changes in the chief executive role in the 25 years he has been running Mercer Delta. In the past, the chief executive and the corporation were seen as being practically synonymous, he says. Today, however, the chief executive’s power and autonomy have diminished due to shorter job tenures, more vigilant oversight by boards and more vocal shareholders.

The consultant’s loyalty to the chief executive is thus less than it used to be, and their relationship can become particularly strained if the consultant has doubts about the chief executive’s chosen strategy – or even competency.

“Do I have a responsibility to share the information with the board, even if the directors haven’t asked about it? Twenty years ago, the answer might well have been no. Today, it is probably yes,” he says.

There is much debate among management theorists about what the best role for a consultant should be. According to Prof Sturdy, a consultant is traditionally seen to be an “outside expert bringing alien knowledge” who is expected to remain professionally distant. But the reality today is consultants do not often present radically new knowledge to those who commission them – to do so would be seen as a threat. Their role has thus become more of a political insider, sometimes to the point of rubber stamping existing client ideas. This explains why, all things being equal, clients like to work with consultancies for which they feel most empathy.

Prof Sturdy says the best solution probably lies between the two extremes. Both parties need
to accept their inevitable differences and build a multifaceted relationship in which the consultant can don both “insider” and “outsider” hats – although not presumably at the same time.

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