The hidden costs of management consulting

25 June 2018

10-minute read.

Management consultants with an excellent track record of performance and reputation don’t come cheap. Whilst the profession has been around for many years, business owners and executives still aren’t 100% sure what justifies the premium and costs that go into consulting. We demystify the realities around the 'hidden costs' associated with consulting fees.

Why do companies need management consultants?

Most management consultants have a specific focus area of expertise (marketing, finance etc) or an industry in which they specialize. Companies identify a need for a management consultant when significant change has to be facilitated to reach business goals, or to solve complex business problems. These skills may not exist inside the business, or full-time employees do not have the capacity to facilitate the change or solution. Consultants therefore ‘lease’ their expertise to a client for a defined period of time with set outcomes and goals to help the organization move forward. Kriel & Co adopts the Supertemp model of consulting, whereby we serve as acting or part-time executive for the time the company requires the expertise.

A consultant worth his or her salt is an executive who has deliberately chosen a career as a consultant, and combines their skills and work experience into a structured set of ‘approaches’ to help clients tackle challenging business problems. One article describes a management consultant is all about having a "Swiss Army knife of different solutions”, frameworks or methodologies that have been tried and tested in solving complex business problems. The consultant’s real value lies in how successfully these approaches can be applied to the specific business context or problem to drive meaningful change or new solutions to reach the desired outcome.

Most consultants charge by the hour or set retainers, reflecting a clear scope and parameters of service. The consultant may be supported by a team from the consulting firm, usually by associates which is also factored into the cost depending on the client’s timeline and expectations – mostly dependent on how fast results need to be achieved.

So what do management consultants do all day?

Much of the consultant’s time at the start of the project is invested into understanding the business, observing the context and doing research being both qualitative and quantitative before even suggesting a solution. At Kriel & Co, our Supertemp model of consulting with long term involvement in the client’s business means we generally spend enough time to familiarize ourselves with the company, listening to concerns, and building relationships with the client’s staff before working on change. Understanding the ‘why’, setting realistic goals or outcomes with everyone involved and securing buy-in from senior executives are crucial steps at the start of a project, otherwise the consultant will set him or herself up for failure. The combination of both quickly understanding the business context and quickly implementing solutions to challenging problems is why management consulting is recognized as a demanding occuptation with its fair share of stress.

Assuming the role of an acting or part-time manager inside the company and representing the client on the Kriel & Co approach, the change or work gets underway after a good understanding of the organization has been achieved. Nicknamed ‘Agents of change’, consultants have to spend most of their time on-site with their client to do their work – devising strategies, implementing the strategy in the form of day-to-day management with staff and design of feedback/reporting mechanisms to measure the impact of change. Whilst clients generally offer consultants dedicated offices or desks, the consultant generally wants to spend time among staff and teams moving around the office in managing change. Whilst a constantly changing work environment appeals to consultants, it is an element of the job which requires a lot of travel and sacrifice on the consultant’s behalf. At the premium, the consultant’s life is generally determined and structured around their client’s needs and location.

A common complaint among most consultants is that too much time is spent on emails, texts, calls and impressive powerpoint presentations in the request for feedback to justify the consultant's value or fees. The irony is that all this time spent giving feedback to the client is also billable by the hour, and therefore dilutes the time the consultant could be spending on doing the actual work. The approach of working as part-time executive on the Kriel & Co model overcomes this conundrum whereby the consultant has more opportunity to build trust and feedback loops, cutting out unnecessary reporting requests.

What are the hidden costs?

Above and beyond the consultant’s technical expertise and ability to deliver a business solution, much of the ‘hidden’ costs in consulting arise from personal sacrifice or emotional stamina that is required for the job. Consider the following:

As a result from much of the traveling required in form the job, many consultants are often away from their families for extended periods of time on assignments, or have difficulty maintaining personal commitments in the context of an ever-changing work environment or client demands. ‘Living out of a bag’ with no-one day looking the same is a reality for most consultants. In an interview with one consultant, The Guardian suggests that consulting is very appealing to professionals in their late 20s into their 30s given that careers are often prioritized in the professional’s life stage. Consultants generally ‘retire’ in full time executive or advisory roles in companies on the client side in their later years. The Kriel & Co model of consulting however allows professionals to choose their parameters and client involvement carefully around their lifestyle needs, so to best balance professional and personal goals.
Successful consultants have stellar communication skills and a superior level of emotional intelligence. The best consultants never get flustered or appear stressed in conflict or demanding situations, and will put the client ahead of the consultant’s ego. At the premium charged, the consultant is expected to be the calm in the storm and the sound of reason in any tough situation. The ability to regulate one’s emotions and to act professionally in the inevitable conflict or challenging situation means the consultant has to ‘absorb’ a lot of emotional stress on the job – putting out fires diplomatically with a quick solution instead of aggravating them. Whilst there is no line-item on an invoice or retainer that covers ‘emotional stress’, the sacrifices consultants tend to make in this regard are significant.
The emotional stress is compounded by the work-related stress of actually getting the job done and reaching the desired outcomes relatively quickly. As opposed to full-time employees, consultants do not get a formal induction program of the company. They need to understand the business and the problem at hand swiftly, and need to navigate their way in a new office environment within a couple of days. The decisions consultants make or recommend could very well break a company if poorly planned or executed, and the accountability and resulting impact on reputation is significant.

Consultants bring a valuable external perspective towards a company and its culture. Successful consultants build and prioritize strong relationships, and it is therefore no surprise that the consultant often becomes a soundboard and advisor to the client being a business owner or C-level executive. With an advisory or mentorship approach, consultants absorb the client’s stress, demands and business problems and act as a soundboard to the client. No price can determine the value of the business owner overcoming executive isolation during a time of change, having a supporting ally with a different perspective – always willing to go the extra mile.