Multinational corporations rely quite heavily on external consulting firms for a number of reasons. They need an outsider’s point of view. They need experts with specialist knowledge on areas that can’t be found in-house. They need to strategize privately and confidentially. They need someone authoritative to back-up and conduct due diligence on something they have already decided to proceed. They want someone impartial to make difficult and often unpopular decisions within the company.
No matter how many industry jokes there are about consultants (as if any profession is ever immune), one cannot deny the importance of at least one of the above reasons. Corporations do not need to take time to pitch the change or promote the upcoming initiative the way they would proceed without the appointment of a consultancy firm, at least when the project is barely at its infancy stage. Engagement is fast, cooperation is usually guaranteed much due to the fear factor, and in my opinion, much of the fees are also paid for the deflection of any future blame, should there be a failure of the deliverables.
So if there is money to spend that is authorized all the way from the top, it does sound like there is nothing to lose.
Well, that is rather a loose pre-requisite here, I admit. Corporations nowadays do not have that much money to burn anymore, and every cent they spend is under close scrutiny by the shareholders. Though consulting spend sometimes is considered untouchable or out-of-scope depending on the policies of specific corporations, I do get myself involved from time to time, as a procurement professional. I am involved in the analysis and souring of consulting firms, through to the finishing touches of negotiating the terms, fees, contracts and team members to be deployed. Realistically, procurement is only involved on engagements that are relatively less sensitive. I still look forward to having myself signing a sacred non-disclosure agreement in order to get myself invited to negotiating a top-level super-sensitive consultancy engagement deal.
Why? Consultancy engagements are lucrative, to say the least. Engagements I have involved with start from a few million US dollars, easily. No matter what the proclaimed return on investment is, it still constitutes a big percentage of discretionary spend to be forked out upfront. We can attempt to build in all the pay-by-performance metrics all we want, but the truth of the matter is, if there is no one involved to conduct at least the minimum due diligence on the costing formula and the engagement brief, the company only has itself to be blamed for being ripped off, big time.
It’s always a sensitive area for procurement to be invited to the table, and that pitch may very well come from the consulting firms themselves. In order to avoid the risk of conflict of interest, many consultancies could only embrace my presence to prove that they have nothing to hide – and that is the first and smart step. Internally, when senior stakeholders are adamant about their preferred consultancy partner, I position my value as one who helps build structure, transparency, fairness and accountability to the engagement contract. In more times than not, that equates to monetary savings, or at least money better spent.
Sam Reynolds wrote an informative article titled “Two Threats Facing The Consulting Industry” on vault.com. How do MNCs deal with the imminent pressures of cost control in their needs of consulting help? What is the future of the consulting industry in view of internal consulting units and consultant-managers? Whether you are a consulting or a strategic procurement professional, Sam’s article is not to be missed.
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