“We no longer know who is running the place–management or the consultants” is an all too common refrain by many a jaded, disenfranchised bank employee.  Could there be truth in such a statement or does it simply reflect a lack of understanding and inability to see the bigger picture?

As outlined in the book “Extract Value From Consultants”, management in the U.S. will spend in the range of $400 billion ($100 billion by financial services companies) on consultants this year--typically on critical strategic and operational initiatives mandated by the CEO and their direct reports. But who in your bank is: providing the overall leadership on when to use consultants; responsible for total consulting spend across the enterprise; and most importantly, accountable for the business results achieved from using consultants?  If you are like the majority of public and private sector organizations–these roles do not exist.  Yes, you probably have a process for the executive team to approve each project’s budget (including those involving consultants), and most likely an executive is sponsoring each project. But actual project execution, including the hiring and management of consultants, is almost certainly fragmented and distributed across your organization. 

Do you know your total expenditure on each consulting firm across your organization?  As consulting firms complete their engagements, do you conduct an independent internal review comparing business results delivered to the original business case or the consultant’s proposal?  Do you capture internal feedback on experiences with various consulting firms and subsequently use this information to educate your personnel and improve your organization’s ability to extract value from consultants?  If the answers to these questions are predominantly “no” then no one in your organization is accountable for ensuring value is delivered from consultants. 

Consultants are highly educated--they are usually the top students recruited from the best business schools--and they get practice at managing clients all day, every day.  Given the decentralized nature of consultant engagements and that operational responsibilities consume most of your managers’ and employees’ time, most of them have little experience with managing consultants. Moreover, their formal education will not have included courses on managing consultants (business schools teach students how to become consultants), they will not have attended an in-house or external training course (few employers provide training or coaching), nor will they have read a book on the topic (practically every consulting book in the local bookstore is about ‘how to be a consultant’).

So it should be no surprise that consultants, particularly those within the large consulting firms, are more skilled at managing their clients than their clients are at managing them. Consultants receive formal training in this area, constant coaching, and have lots of opportunities to practice these skills. In addition, client relationships are centrally coordinated within consulting firms thus ensuring the relationship is actively managed.  So perhaps the employee’s question about who is running your business is not so rhetorical?  Murmurings and disparaging remarks have been heard for many years--the issue of value from consultants has been festering but little has been done--primarily because no one in your bank has overall accountability for this issue and therefore its impact is not measured.

How could this situation arise?  The fault lies as much with the banks that use consultants as with the consultants themselves. Bank executives can be easily seduced by the simplified, logically compelling, graphically mesmerizing propositions put forth by consultants, which are not always forthcoming from their own personnel.  Executives have a myriad of challenges to contend with and new issues are being continually being brought to them from within their organization--consultants have the knack of articulating simplified approaches for eliminating complex problems, which can be appealing to the busy executive.

Once a consulting project commences, internal personnel assigned to a project (whose performance appraisals are now influenced by the advertized success of a project) are motivated, along with the consultants, to ‘talk up’ the outcome of a project.  As independent post-completion project reviews are rarely conducted, under delivery is not highlighted when it occurs, especially if the project was visibly and publically marketed in advance.  And if by chance, the under-delivery issue is raised with the consultants, they will quickly attribute this to the organization’s failure to adopt the consultant’s recommendations.   Where an executive is an alumni of a consulting firm, they may even endeavor to downplay any underperformance and protect the interests of their former employer, and consultants in general, particularly if they were the champion for hiring the consulting firm in the first place.

At one time, ‘operations’ were the only activity taking place within an organization. Today, projects (often involving consultants) are continually being executed and comprise a material component of overall business activity.  However, skills required for managing the ambiguity of projects (and consultants) are quite different from managing what are optimally stable day-to-day operations.  Projects, and the accompanying use of consultants, necessitate leadership with accountability, and defined policies and procedures for using consultants.

The dilemma faced in assigning accountability for overseeing your bank’s use of consultants is who do you assign it to–your CIO? COO? CFO?  That has indeed been the crux of the problem–which has kept accountability from being assigned.  Many projects involve technology, so assigning accountability to the CIO may be perceived as a logical answer. However with the CIO there is a risk that the technical implementation (rather than the business outcome) may be considered the project objective.   The COO is another candidate--but their focus is on operations and thus they may not have the purview that encompasses the full span of consultant usage and the projects they enable.  Similar issues exist with assigning the responsibility to the Strategy Office or the Program Management Office—they may be too close to the decision regarding the use of consultants, and the selection of specific consultants, to be objective. The CFO, on the other hand, as an extension to his/her existing fiduciary responsibilities, is the guardian of business value for the enterprise and therefore could be a good custodian of the consulting budget and its value impact to the business.  In addition the procurement department often reports to the CFO, and some of its practices may be applicable to the engagement of consultants. However it would be a mistake to simply lump consulting expenditure into procurement as consulting services are not a commodity where the company will automatically benefit from lower prices.  Resource capability is the essence of consultant value, but specifying a standard capability associated with a standard price is impossible. Squeeze the consultants on price and you may also squeeze out capability, particularly as consulting firms can easily substitute resources between clients and sales opportunities.  The home for a ‘consultant review board’, or whatever you call it, can vary by organization, but the point is that there needs to be a home.

Some of the responsibilities of a ‘consultant review board’ could include:

· understanding the true capabilities of potential consultants across all relevant geographies and business functions;

· developing a corporate contract for the engagement of consultants rather than using the consultant’s preferred terms as a starting point;

· maintaining history on spend and performance for each consulting firm;

· capturing lessons learned from projects using  consultants and disseminating them across the organization to those assigned to projects;

· advising projects on how to use consultants effectively; and

· conducting an independent post-project review to assess  whether the maximum business value has been delivered. 

It takes strong leadership to recognize gaps in organizational capabilities.  For far too long consultants have nurtured their executive client relationships and enjoyed free rein within their banking client organizations--leading employees to question who is running the business.  Consultants seldom take accountability for business outcomes associated with their services–they regard the executives who hired them as accountable.  Coming out of the recession where stakeholders are demanding greater value for money, it is time that business leaders take responsibility for demanding greater value from their consultants.