How to Pay a Management Consultant

Perhaps you're seriously thinking of engaging the services of a management consultant or you know someone who has. If you've had little or no experience in this respect, then you could do with a bit of training on one very important issue, namely, how do you pay that person. Although this may seem blatantly obvious, things are seldom what they appear to be. Because you want value for money, you be interested in the rest of this article.

You'll find that the majority of management consultants charge by the day. The less confident will work for almost anything; the more confident and experienced will have immutable rates. But, it all amounts to the same thing: They'll bill you according to the time they spend working in your organization.

Here's a truism: Just because everyone is doing it doesn't make it the right thing to do. You should not pay anyone for their time, and here's why.

Before the Industrial Revolutions of the 18th and 19th centuries in England and the US, respectively, the only people who were paid for their time were the unskilled: day laborers who drifted from one farm to the next, digging ditches, mucking out, and anything else that anyone could do. Those who were skilled, however, were paid for what they did; not for how long it took them to do it.

The Industrial Revolutions changed all that. Quotas that formerly were the bailiwick of the skilled were applied to the newly hired factory workers, who themselves were largely unskilled; but everyone employed there was paid for their time. That means that the practice of charging for time is about 300 years old. Remember, however, that the criterion for payment was according to whether the workers were skilled or unskilled.

When you contract a management consultant, that person is saying in effect that he or she is not just highly skilled, but exceptionally skilled; yet in the same breath that same person is also insisting on charging for his or her time. Why? Because he or she has no idea where the custom came from. As far as consultants are concerned, it's always been that way. Don't fix what isn't broken, and all that.

This brings up another irony. Many consultants claim to specialize in changing the companies run their businesses or how to manage their people better. But these are the very same people who won't change the way they charge their customers..

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How to Hire a Management Consultant

It may be that despite being cautioned about using management consultants, you still feel that they could benefit your company; and you know what? That's perfectly okay. As long as you do it with your eyes wide open. But, if that's what you've decided to do, then you'll need to know how to do it.

Like many other services, it's better to get a referral from someone you trust than to make a choice through a directory or by surfing the internet. Professional associations can be a reasonable place to start, but all that membership in such an association will really tell you is if they've been disciplined for unprofessional behavior. Once they're in, their competence as consultants will seldom be called into question.

But, suppose you're at the stage where you're interviewing someone with a view to awarding a contract to a consultant. Now what?

You will need to decide what questions you will ask. Although interviews alone, whether for a job such as this or in an actual hiring situation, are no more reliable than asking a novice to throw a dart at a dartboard. That's because decisions on who to employ or contract are usually made within 30 seconds of the candidate walking through the door. In other words, that person doesn't have to say anything, which rather obviates the interview process.

There's one question that is seldom asked, and that is "How will you measure the impact of what you do?" This will scare a lot of those people who pitch for your business, because when it comes to dealing with non-financial issues, most people don't know how to measure what their results. So instead of telling you what they'll do, they'll tell you that there are so many things to consider and such a long time before the results will be felt, that it can't be done.

They couldn't be more wrong. The problem isn't that their efforts can't be measured; rather it is that they don't know how to do it. It's true that considerable skill in constructing questionnaires or gathering data in another manner is required; but that doesn't mean it's not possible; and it's equally true that some advanced statistical techniques will also be appropriate. For that sort of thing, a research-based Masters or quantitative PhD will provide the knowledge for how to do this.

So, from now on you can hold everyone who approaches you for consulting work accountable for their work.

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3 Reasons Why Firms Use Management Consultants

Why would a manager, a company, or any other organization use a management consultant? After all, wouldn't you expect that the people doing the job would know more about it than someone sitting on the sidelines? And, in any case, would you believe what a consultant had to say if that person had never managed a company?

The last question is more relevant than you think. The largest management consulting companies prefer to recruit those who have just complete their bachelors degrees so that they can instill their particular brand of consulting in them. You'd probably be surprised how many have had no experience whatsoever.

That said, you may be surprised to learn that there are three common reasons why management consultants are brought in: 1) the organization is looking for someone to blame; 2) the firm needs an extra pair of hands; or 3) they really do need help.

1. Who's to blame? This is a loaded question. Generally, it's asked when managers decide to do something they think will be unpopular, but don't want to be blamed for it. In other words, the decision has been made already; but because it will probably fly like a lead balloon, management consultants are brought in so that when they recommend the same unpopular policy, the management of the firm (they hope) can be absolved of the responsibility of following the advice they give.

You're probably wondering why managers would even dream that they could get away with such logic. Well, the answer is largely due to the perception of those who are not in the know. Think of it this way: Why would the management bring in an expensive bunch of consultants, and then ignore what they say? So, instead of doing that, they implement the controversial policy, and then when then the banana hits the fan, blame the consultants, even though the management had decided to do the same thing beforehand.

2. We need more people, but only temporarily. Sometimes, organizations just need an extra pair, or two, or three of hands. They know what to do, or at least think they do, but haven't the time to do it themselves. So instead they pay a premium for a relatively short period of time in order to accomplish whatever it is that they don't have time to complete.

3. Help! In these circumstances, managers recognize that they face a problem that they can't solve. Sometimes they know there's a problem, but can't figure out what it is. So, they draw on the expertise of management consultants to help them know what to do next.

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Management Consultants: Strengths and Weaknesses

Have you ever wondered how management consultants approach the challenges that organizations give them? For all the highfalutin language they use, you'd expect the methods to accomplish fantastic results. Sadly, this is seldom the case. For a decade at least, they've been the cousins of lawyers, charging huge fees which make them wealthy while impoverishing their customers. How could this occur?

To answer that, you need to recognize that there are two broad categories of management consultants, neither of which appreciates the whole picture. The first bunch goes in at the executive level, rearranges the company, and ignores the people.

You already know what this means. Any mention of the words reorganization, restructuring, or right-sizing invariably means a reduction in the number of people who work there. How are economic downturns defined? A recession is said to be in progress when your friend loses his or her job; but a depression is understood to be occurring when you lose yours.

The second group call themselves trainers. They usually work through the Human Resources office. They usually have little if any knowledge of the organization's short, medium or long term goals, they've never read a business plan, never mind written one, and they swear up and down that none of what they do can be measured.

Each group lacks a key component that the other takes for granted, and each is dead certain that they know it all.

There certainly are good reasons to begin improving companies by starting at the top of the tree. Management consultants have been taught to do this because they can command higher fees and the purse strings are usually held by those who work in the stratosphere. But, that doesn't excuse them from ignoring the people who have made the organization as successful as it is.

By the same token, the Human Resources office can be an equally effective place to start any sort of intervention because it does include the very people who often are the most effected by the policies that are created at the top. But, all such training needs to have its outcomes rooted in the objectives of the company. Otherwise, it just becomes a pricey junket for privileged non-executives.

A key part that is missing from what most trainers do is measurement. Here's a little secret: Just because trainers say that what they do can't be measured, doesn't make it true. The fact is that most of them don't know how to do it. That's all. Now you know.

Have you ever used management consultants where you've worked? Have you always been satisfied with their methods or their results?

By the way, if you're thinking of starting a business of your own, then you might be interested in http://www.terrydeaninterview.com.

Or, if you'd like to learn more about staying employed, then download my new FREE ebook. You can get it at http://www.p-advantage.com/freeEBook.html.

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