What is Internal Consulting 101: A Beginners Guide

In the last 20-odd years, more and more companies have started creating their own internal consulting teams instead of hiring external consultants. This has been a significant change in the fast-moving consulting industry.

It’s difficult to determine the exact scale of internal consulting, but big companies such as Bayer, American Express, Google, Airbus, Samsung, Dell, SNCF, BASF, Deutsche Post, and others have established their own consulting groups. These groups can range from small teams to large groups with over 100 consultants.

Even though internal consultants are permanent employees of a company and usually work with a single “client” within the organization, they often offer similar services and may have previously worked as external consultants.

Some argue that internal consulting is the ultimate form of specialization in the consulting industry, while others believe that companies are losing the benefits of best practices and independence.

The debate about the advantages and disadvantages of internal versus external consulting can go on for hours. However, one thing is clear: the number of internal consultants is increasing. So, let’s take a closer look at this trend, as internal consulting is here to stay.

The Emergence of Internal Consulting: What’s Driving this Trend?

The emergence of internal consulting groups in companies can be attributed to several factors that are driving this trend. Here are some key drivers:

Cost Efficiency: The Rise of Internal Consulting

It’s no secret that many companies are turning to internal consulting teams to save money. In fact, CEOs cite cost as the top reason for creating these teams. As companies continue to grow and consolidate, the prices of external consulting firms have steadily increased, causing cost-conscious CEOs to take a closer look at their consulting expenses.

By professionalizing procurement, many large companies have realized just how much they spend on consulting and want to cut back on hiring only the biggest players in the industry like McKinsey or Boston Consulting Group. Fortunately, internal consulting groups offer a more cost-effective solution.

Employees in these teams are compensated on the same grids as internal employees, making their full cost two to three times lower than external consultants. And if they can achieve performance outcomes similar to external firms, companies make a beeline towards creating and growing more internal consulting teams.

Nurturing a Robust Talent Pipeline: Internal Consulting as a Strategic Move

Internal consulting groups are not only valuable to the company, but can also be an excellent career accelerator for high-potential individuals. Inspired by the successful black belt concept developed by GE, trainees are immersed in the world of consulting problem-solving and managerial concepts.

They acquire the structure and discipline of consultants and have the opportunity to work on highly strategic projects and interact with senior management, giving them invaluable, broad perspective on the company and its overall objectives.

After a few years in consulting, these trained individuals are well equipped to take senior positions within the company. This methodology ensures that organizational talent can be kept in-house and developed to its full potential.

Alternatively, for those just starting out in their career, internal consulting is a smooth entry point into a large organization. They get to work on a wide range of projects and gain an understanding of the company from a unique perspective, while also building a professional network. It’s a win-win for both the company and employees.

Confidentiality and Discretion: The Appeal of In-House Consulting

Maintaining confidentiality is of utmost importance in some projects, especially when it comes to highly strategic decisions or intellectual property. This is why some management teams prefer to limit outsider involvement for fear of a breach in confidentiality.

The desire for benchmark information on competitors is understandable, but clients are understandably hesitant to share their own data. While consulting firms may argue that they operate with strict information barriers, it can be difficult to disconnect one’s brain when working with multiple clients.

Internal consultants can provide a level of security and trust in utilizing collected information as benchmark without the risk of sharing it with others.

Streamlined Processes: Simplifying Consultancy through Internal Expertise

In the not-too-distant past, working with consultants was often viewed as an unavoidable inconvenience, with the clichéd joke about consultants and watches being a familiar punchline. However, over the years, executives have come to recognize the benefits of collaborating with external experts.

The perception of consultants has shifted from being judgmental to being supportive, and this change has been aided by the increasing presence of former consultants in executive positions. Companies have realized the value of dedicated teams that operate independently on specific projects, separate from the rest of the organization.

They have identified the potential for improvement by creating teams that adopt the same focus and work methods as external consultants. Furthermore, there used to be a noticeable gap in experience and impact between internal and external consultants.

However, as the value chain continues to evolve, internal consultants now have access to superior talent and methodologies. In certain mainstream projects such as commercial excellence or lean management, the impact made by internal consultants is now on par with that of external consultants.

Finally, organizational structures have been optimized to foster synergies and maximize the utilization of existing talents. By combining the requirements of all business lines and support functions, most companies can assemble a critical mass of similar projects that justify the formation of dedicated teams.

Leveraging Existing Resources: Unveiling the Hidden Potential of In-House Teams

Internal consulting may be referred to by many names, but at its core, it’s about internal teams comprised of experts coming together to boost their company’s effectiveness and efficiency through project-based work.

What’s striking is that a wide range of functions fall under this umbrella: from the commercial or purchasing excellence team to the customer experience task force to the internal audit team. Setting up improvement teams isn’t a novel idea, but they’ve undergone changes worth exploring.

You can bring improvement teams together as a single community to standardize their way of working or create a flexible system to optimize resources across teams. Ultimately, regardless of what you call it, the benefits of successful internal consulting are clear: better outcomes for the organization.

Maximizing Success: 6 Key Factors for Working with Internal Consultants

#1. Analyze Your Organization’s Recurring Consulting Needs

When it comes to setting up an internal consulting group, careful planning is key. It’s not just a matter of creating a team and hoping for the best – you need to really drill down into your organization’s specific needs.

Take a good, hard look at what kind of consulting services you’re going to require over the next few years. By doing this, you’ll be able to figure out whether an internal team makes sense, and, more importantly, where that team should be focused.

Ultimately, this will allow you to deliver more tailored expertise to key areas of your company, which will help you stay one step ahead of the competition.

#2. Create a Clear Value Proposition

Effective consulting requires clear communication and a deep understanding of your organization’s goals and unique challenges. That’s why it’s critical to establish a clear value proposition for your internal consulting group.

By defining their core expertise and focus areas, you can ensure their knowledge will have a significant impact where it’s most needed. Equally important is being explicit about what they won’t handle.

This clarity not only sets expectations but also ensures that their work is always aligned with your broader organizational goals. With a clear value proposition in place, you can confidently rely on your internal consulting group to deliver the sustainable results you need.

#3. Showcase Value to the Organization

If you want your internal consulting group to be recognized as the backbone of your organization, then you need to put your money where your mouth is. In other words, you need to actively demonstrate your team’s value to the rest of the organization.

Let your expertise, methodologies, and problem-solving capabilities shine through. The more superior impact and tangible results you can deliver, the more likely you are to win projects and gain credibility.

Don’t be afraid to showcase the value that your group brings to the table. If you do this right, your contributions will be recognized and appreciated throughout the organization.

#4. Avoid Imposing the Group’s Involvement

When it comes to working with the internal consulting group, it’s important to remember that they’re not a one-size-fits-all solution. Forcing them into projects where they might not be the best choice won’t do anyone any good.

In fact, it could end up being counterproductive. Not only could it lead to negative attitudes toward the group, but it could also prevent them from being able to help where their skills are truly needed.

Instead, the internal consulting group should be viewed as a resource that can make a big impact, but only when used strategically and collaboratively.

#5. Establish Sustainable Funding

Starting an internal consulting group is a great way to leverage the collective knowledge of a company’s employees, but it’s important to think long-term about funding.

Sure, the initial setup might require some financial support from the company, but after that, the group needs to learn to stand on its own two feet. One solution is to consider charging internal clients for the consulting services provided by the group.

By doing this, internal clients will fully appreciate the value that the consulting group provides and make sure that the group continues to be financially sustainable. It may take a little effort to set up, but it’s well worth it to ensure the group’s long-term success.

#6. Select the Right Fit for Each Project

When it comes to consulting, every firm has its own unique consulting DNA. And when it comes to an internal consulting group, that DNA is especially important. It’s shaped by the group’s creation and the profiles of its managers.

If you’re working with an internal consulting group, chances are they’ll have a few key areas of expertise. This is great news because it means you can really lean on them for those specific capabilities. But there are also times when you’ll want to use them for an extended project or something that requires more of a personal touch.

Think: connecting with teams, blending in to create buy-in, or managing sensitive issues. When it comes to these types of projects, an internal consulting team can be just what the doctor ordered.

Further Thought

In today’s ever-changing world, internal consulting has emerged as a growing trend. Companies are beginning to realize the many benefits of having an in-house team of consultants.

Internal consulting groups provide organizations with a level of privacy and trust that they can’t get with external consultants, especially when working on sensitive projects. Not only that, but having an internal team can also lead to cost-effective solutions and the opportunity to lower expenses as compared to hiring external consultants.

However, it is worth noting that external consultants tend to have more independence, which allows them to provide a more objective point of view. Plus, they often possess a higher level of expertise and skill.

When making a decision about your next project, be sure to evaluate all the elements and choose the team of consultants that is best suited for the project and is prepared to deliver the best results.