Consultants in business context
Last week within an advanced-study college course we talked about the different perspectives. Students who solve case studies can often meet strategic consulting firms. This is no coincidence as many case studies basically deal with top management-level decisions. But what does strategic consulting mean and what do those consultants do?
The primary role of strategic consultants is to prepare and support managerial decisions. There are many possible scenarios where the management does not have the capacity or the necessary background knowledge to thoroughly investigate certain questions. A company can employ external or internal strategic consultants based on the character of the strategic question or the availability of human resources within the firm.
External consulting firms
On the market, there are numerous well-known firms specializing in either strategic or management consulting. McKinsey, The Boston Consulting Group, Roland Berger, A. T. Kearney, Bain, just to mention the biggest ones. Besides strategic consulting firms, the so called ‘Big Four’ – KPMG, Deloitte, PWC and Ernst&Young – companies have consulting businesses (e.g. Financial Advisory, M&A) as well.
Employing an external consultant is advantageous primarily in situations where answering the question requires (1) an objective, outsider perspective and/or (2) an industry specific best practice. In all cases, the management is affected by the strategic problem, sometimes it is even the cause itself. Often there is a need to make tough decisions from a human policy perspective. In such cases decision making can be helped by a consultant who is independent from organization politics. The above mentioned big consulting firms possess an extensive international network along with industry and project specific experience. They can tailor those experiences and best practices to the given situations and corporations.
One of the main disadvantages of employing an external consultant is that once the project is over, they often do not take part in the implementation process. Due to the high reimbursements and the complexity of questions, projects are often about methodological preparation, situation evaluation, concept creation and preparation of implementation plans until there are no resources left for the complete coordination of internal implementation. In such cases the project’s success depends very much on the management of the ordering company and the person who is responsible for the project internally.
Internal consultants
On the other end of the consulting continuum are the internal consultants of firms. They are employees of a given firm (e.g. Shell, MOL, Magyar Telekom) and their primary task is to internally support the decisions of managers. The organizational presence of these consultants differs in every firm, at certain companies there are one or two people dealing with the above mentioned questions, at others there are complete strategic departments for that.
The main advantage of employing an internal consultant (or strategic analyst) is the benefit of their daily presence. As employees of the firm, they are present continuously in the everyday life of the company and due to that they possess a significant amount of industry specific knowledge. As they work embedded to the corporate structure, they actively participate in the implementation of projects as well.
The two major disadvantages of having internal consultants is exactly the two major benefits of having external consultants. As they are deeply embedded in the organization they are impacted by certain questions which deteriorates their objectivity. Over the years, besides their accumulated industry specific knowledge, they do not access other industry specific best practices. This latter disadvantage can be handled by appropriate trainings and in case of international companies by moving strategic analysts within the corporate group but it is undoubted that such effort requires a certain level of openness on behalf of both the employer and the employee.
Due to the economic crisis, many firms decided on cost cutting actions which led to radically decreased budgets dedicated to consultancy services. Many companies decided to employ in-house experts instead of more expensive external consultants. A significant part of these internal consultants are usually former external consultants who decided to move to the ‘client side’ because of industry or company specialization and more balanced work load.
Although the above described two actors have different roles and approaches to a given firm they somehow represent the same perspective. There is a given firm which is the client (or the principal) in one case or the employer in the other, yet the problem it faces is the same in both situations.