How to turn consulting spend analysis into value?
Analyzing your consulting spend is an excellent place to start putting your expenses under control. Besides, it is a mandatory step if you implement category management for the consulting services category
How to turn consulting spend analysis into value?
You now know how you spend and with whom, how you make decisions, how you buy and how your consulting providers perform on your projects.
“An organisation’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” – Jack Welch
But what you do with this data is what separates the champions from the average players…
We have great news for executives that are considering outsourcing a project to a top consulting firm. There’s a new way to evaluate the value of a consultant partner.
Your first move? Capture Quick Gains at an Early Stage –
Most organizations, even structured and monitored, will at some point in time create outliers. Human nature leads us to play the system and find workarounds. That is why regular analyses are so important to identify these outliers and nudge
- Leverage your data – Slice, Dice, See Patterns
You are now ready to define several corrective actions that will get you immediate results and savings.
Slice, dice, find patterns and identify outliers. For example, is there a Function or a Business Unit spending way more money on consulting?
You might also find that some Consulting Providers are 2 times more expensive than others on similar projects or that the same Consulting Firm is charging more in Europe than in North America.
Understanding your portfolio of projects gives you the cards to define the basis for improving your sourcing. You can identify segments and thresholds.
For example, if you have an Internal Consulting Group, you can explore how your teams work with this group. Why do your teams work with them (or not)? How is their pricing compared to External Providers? Do they collaborate properly?
- Know Your Panel of Consulting Firms Well –
It’s essential to look at both the Demographic and the Performance Components. You can improve this panel by getting rid of the low-performers, bringing in new blood, playing on supplier diversity, and identifying potential synergies across groups and business units.
Next, buy better –
Among the critical success factors for a project, being outsourced or not, is the clarity of the scope and objectives and the team’s talent.
To maximize the chances of success of your project, you need to make sure that you have a great RFP that clearly states the project’s context, goals, and deliverables of the project. Be careful to describe the results you are expecting and not necessarily the means to get them.
Another important aspect is to put your consultants in competition when it is relevant (hint: most of the time). For example, one Consulting Firm can be great on a project but not the best choice for the next project. Besides, you might want to look at new ideas or compare other approaches.
Tame your expenses –
You will need to control your expenses, particularly when you have a decentralized procurement process for Consulting Services.
Loud statements of intent are very rarely efficient. Instead, you need to have a clearly defined, objective decision-making process to ensure you spend your budget for Consulting on your priorities.
Demand Management will help you balance and strategically align demand with your consulting budget. The trick is to set the right thresholds to ensure the system remains flexible and business units have enough room to hire consultants for urgent, less strategic projects.
Define what performance looks like –
You now have more efficient buying and decision-making processes. Yet, you are not managing the performance of your providers, which can be particularly pregnant if you handle a large volume of expenses.
Making a post-mortem analysis of your projects gave you a sense of your priorities and the strengths and weaknesses of your providers. Your next step is to measure the performance longitudinally to enter a virtuous circle of continuous improvement. But what is success for a consulting project?
Knowledge and experience in the field – Most complaints about consultants come from their lack of expertise or experience. When you look at your projects, do your consulting providers have enough relevant expertise to solve your specific issues? Or do they lack such expertise? How do you rate their ability to adapt knowledge and experience to the assignments in your case? Do they complete all tasks as per your standards and satisfactory?
Initiative and Proactivity – Working with consultants can bring you out-of-the-box thinking and focus on the project. Do they propose any valuable innovations? Are they proactive in solving issues?
Productivity and Efficiency – Another critical element is the ability to deliver on time and quality. Do your consultants complete all the terms and the deadlines set out in the agreement?
Cooperation and Teamwork Attitude – It’s essential to establish a positive and cohesive work environment for all team members, to set the tone for a smooth and productive process. Do your consulting providers build trust with your teams and your leadership?
Quality of Work and Services delivered – Carefully and honestly assess the quality of work performed by the Consultants. You should have a clear, objective basis for evaluating growth, benefits, and improvement they provided and are responsible for. If there is any area or aspect of the performance you are not happy about, communicate that in a constructive manner beneficial to both parties.
Don’t work with just anybody –
Make sure the consulting firms you are hiring have the qualifications for your project. First, collect information on their structure, particularly the partner and/or the project manager in charge. Next, check references from former clients. Here are a few questions that you can use to build your reference checking process.
Are they qualified to do the job? A qualified consultant for a project has the right functional expertise – also called capability – and has led or participated in several projects with a similar scope. S/he also has the right experience: similar industry, management levels involved, …
Do they understand the problem you are trying to solve? One major cause of failure in consulting projects is the lack of clarity of the objectives and requirements. And the issues can come from the clients that do not explicitly define their needs and from consultants who do not admit they don’t understand or lack expertise.
Can they work well with your teams? Again, the human element of consulting success is crucial and nonetheless the most overlooked. Project managers know the importance of harmony and alignment within their teams. However, bringing an outsider is often complicated, and you need to make sure to put the consulting teams in the best conditions to deliver.
Are you confident they can deliver the impact and ROI you expect? Impact and ROI must stay front and center in your evaluation. After all, the reason you hire them is to solve an issue. Ask their former clients with they were satisfied with the impact delivered. The value for money is often a good proxy to the ROI, especially for projects when the value is more difficult to measure.
As you can see, it is not that complex to be on top of your Consulting spend. Once you have understood it and assessed the performance of your Consulting suppliers, you can start generating Quick gains.
Last, you can refine your analysis and focus on the elements that are crucial for your Company. And, this regular analysis can become long-term monitoring of your Consulting Expenses.
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