How and why large companies make use of consulting firms

For the most part of my professional career I worked for multi-billion dollar companies in both sales and equity terms. Such companies always knew how important could be the contribution of consulting firms for the improvement of their businesses. And, for that reason, they always made use of these firms in various forms and fields.

There is intelligence behind this logic, which may be summarized as such:

1. Specialization that is not available internally
Every organization has internal specialists; however, their degree of actualization is limited. It is difficult to have within a company the degree of granular specialization that sometimes is required. Besides that, most companies, as avant-garde they may be, will never be experiencing new techniques or concepts except if they have been already proved elsewhere. A good accountant of a large company, for some issues, may need a specialist in international accounting rules. A good – internal – engineer may need of a calculus specialist for a specific project. An internal lawyer may need the opinion and experience of another lawyer specialized in a specific field. A good HR may need to access an assessment specialist. A good manager may need the help of a specialist to elaborate a strategic planning. A good finance manager may need the opinion of a specialist in payment means.

Complexity demands accurate answers and the wrong ones may be very expensive.

Consulting firms fulfill this role of answering the questions that demand specialization, experience and a fresh and independent vision.

2. Non recurring expense
A consulting firm is used for specific projects only when is necessary and, yet, when it can be afforded. There is no recurrence, it is not in the payroll, and it does not create future liabilities.

3. Speed in implementation
A consulting firm brings focus, add resources that would not be available otherwise and, as a consequence, can accomplish the project in lesser time.

When bringing in a consulting firm, along with it, due to the involved cost, focus is attracted to the project and to the problem that is being addressed. It is a manner of giving publicity and attracting attention from the organization.

The resources allocated, in terms of intelligence, capabilities and leadership, allied to focus, can lead to results quicker than that if executed by the internal structure.

4. Fixed term
A consulting firm must be hired for a project that has a beginning and an end. Metrics, deliverables and deadlines are the basis of the relationship with any consulting firm.

Additionally, from time to time, a contract with a specific consulting firm must be ended and other opportunities be exploited.

There are other reasons to make use of consulting firm: (a) the company opts for paying an average salary compensating this by making use of consulting firm; (b) the company opts for saving in training; (c) the integration of specialized professional within the company could be difficult, thus the consulting firm; and (d) the company needs an approval “stamp” (the case of multinational or public quoted companies).

As to the manner of using and hiring a consulting firm, there are a few practical tips to be observed:

1. Define well the scope of the project
Time must be spent in the definition of the object and extension of the project. The problem definition will guide the work and, consequently, the resources allocation.

A suggestion is to request to the consulting firm to perform a quick diagnostic to certify that the defined problem to be addressed is correct.

2. Choose the most adequate consulting firm
There are innumerous consulting firms of different sizes and origins. The most important is that the firm is the one more appropriate for the project in question.

A few tips in regard to the consulting firm selection: (a) consider their knowledge of the industry; (b) size is not as important as the participants of the project; (c) value experience.

3. Identify the total cost of the project
Consultants may charge for time and expenses;  have a combination of fixed and variable value; be totally variable (“ad-exitum”) with a minimum retainer that will be deductible;  or yet, a fixed value for the project.

Besides the fees there are expenses reimbursements and, yet, other expenses associated to the time of company’s employees involved in the project, and eventually allocated equipment and space.

Besides that, never forget, when analyzing the received proposals that “who pays peanuts, get monkeys”, or, who pays little, receives little. This is not an excuse for not negotiating  fees, nevertheless, one may think that the cheaper is not always the most effective!

4. Formalize the agreement
Draw a contract that establishes what was agreed in terms of scope, fees, payment terms and, yet, delivery terms and clauses of confidentiality, of eventual additional work (how they are going to be treated and approved) and of termination.

5. Be prepared to participate (including of the success of the project)
Never leaves the job solely for consulting firm. The work is a joint one. The involvement of the company’s personnel is fundamental to, beyond dealing with logistics (of the project), follow up on it, and facilitate communication with the involved areas, including interviews.

Make use of consulting firms must not be faced as a recognition of failure or inaptitude but instead as an opportunity of gaining time (and money!). It is about act intelligently as large companies do!

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At 2B Partners Consulting we aim to help companies to address the questions or problems thru the services of advisory board, interim management, managerial applications and consulting focused on financial advisory, operations improvement and organizational efficiency. Contact us to obtain more information by sending an email to This email address is being protected from spambots. You need JavaScript enabled to view it.