Why do companies hire consulting firms?

Consulting firms are brought on board by clients to help identify improvements and to support with solving their problems. When working with consultants, they expect a number of distinct characteristics and benefits that consultants bring to the table.

Identifying improvements

Businesses are often faced with needing to improve on poor performance. Often, even leadership and management emotionally invested in a business will have exhausted all avenues to help in this regard, without seeing results. A fresh pair of eyes can make all the difference in such circumstances.

For one thing, while having a personal attachment to a business may make for passionate and committed leadership, it can also act as a barrier to identifying problems with a firm. The very leaders who have devised business strategies can be blind to clear flaws within them, something which consultants have enough personal and professional distance to spot and flag up. Often, consulting firms are also familiar with problems being faced by other similar businesses, and can use that knowledge to seek out possible blockages to a business.

Improvements a consultant can identify are not limited to boosting performance, either. Companies that are developing or implementing growth strategies also find it useful to have a consulting firm on board for the entire process, as they can maintain that distance from start to finish and identity problem areas along the way.

Solving problems

Once a problem has been identified, consulting firms are also equipped with the expertise to help implement them. Businesses will often hire consulting firms that align with the problem being experienced. For instance, a business experiencing workforce and productivity issues would hire a human resources consultancy.

The diversity and versatility of firms in the consulting market ensures that there is a consulting firm for nearly every function: if there is a lack of ideas for growth, a consulting firm can help develop one; if the implementation of a strategy is not working, consulting firms can offer execution support; if there is a lack of clients for your business, specific consulting firms can be brought on board for sales and business development.

Specialised staffing

Sometimes a client will tap a consulting firm in order to ramp up capacity on a temporary basis. By bringing in consultants to fulfil a certain set of requirements on a short-term project, companies can ensure their permanent staff can concentrate on their day-to-day responsibilities. Whether it’s a cost reduction programme needing a dedicated team of six for one year, or a post-merger integration that requires a team of 100 for a few month only, businesses might often struggle to get the teams in place to do this critical work without sourcing external talent.

This can also help clients keep down their long-term costs. Hiring the specialist labour required for a transformation project on a permanent basis would expose clients to a host of charges, such as sick pay, holiday pay, pension contributions and so on. These payments would continue beyond the initial project which the new staffer was hired for, whether or not the company has further need for their particular skillset. In such a scenario, a consultant might be more expensive in the short-term, but offers much better value for the money beyond the immediate future.

By engaging a consulting firm, clients could get access to a group of professionals that have skills ranging from lean or six sigma process to strategy, acquisitions, supply chain and finance, among others. Thanks to consultants, companies can bring in that skill set on demand when they need it.

For what type of issues do clients hire consultants?

One of the leading business challenges that clients look to pay consultants for advice on is efficiency. A poll of industry decision makers across the public and private sector found that nearly half of all businesses still seek external expertise on efficiency. This suggests that despite the need to cut costs, many businesses still conform to the received wisdom that money spent on consultants is dwarfed by the amount they can earmark in long-term savings.

Beyond this, rapid change of any kind typically sees businesses call on the expertise of consultants. Technological and digital disruption continually pose a significant threat to businesses, meaning there is keen demand for consultants in relation to those challenges. For example, financial services, digital and technology, and manufacturing verticals across all kinds of businesses are posed a major threat by digital disruption, so in response clients in these sectors are rapidly tapping consultants for things like cyber-security systems, upgrading legacy IT infrastructure, or implementing data-driven working.

Change is not only technology-driven, however. Companies also regularly tap consultants for help adapting to rapid social changes, such as the increasing hunger for diversity and inclusion in firms, or the heightened pressure on firms to take responsibility for their environmental impact.

Hiring consulting firms versus independent consultants

When clients want to hire externally, they have two options basically: selecting an advisory firm or calling in an independent consultant. Both have their own pros and cons.

Picking an established firm can be tremendously advantageous. Companies with well-known track-records have demonstrated expertise in a wide variety of fields, and work with thousands of clients across the globe every year to solve various business problems and drive growth. There wide-ranging organisation can supply a multifaceted and holistic approach to problems, while professionals within these firms are familiar with the state of each sector, and can leverage knowledge and experience to help clients.

However, while a firm’s reputation can work as a stamp of quality to reassure clients they will get value for money, this seal of approval comes at a premium – one many smaller clients cannot afford. At the same time, established firms will have multiple other clients to tend to, making them less available for a project, while the standardised methodologies they bring to address problems may lack the flexibility or customisation some clients require.

Independent consultants often have similar backgrounds to established firms – many have been trained at one of the largest firms in the world, before looking to strike out alone – meaning they have the expertise and skill-sets boasted by top firms, while being considerably cheaper. Their smaller client portfolio and ability to define their own working methods may meanwhile allow for greater flexibility and tailoring of solutions.

The lack of standardisation in independent consulting may be considered as a risk by some clients, however. An independent’s track-record may be harder to pin down for clients, and in an industry which does not require chartered status (meaning theoretically anybody could call themselves a consultant) that is undoubtedly a worry for many businesses looking to ensure value for money.

To an extent, consulting platforms such as Consultancy.org can help address this, enabling smaller consultancies to demonstrate their reputation and affordability to potential clients. Similarly, matchmakers that vet freelance consultants can also ensure better quality control in the market for independents.